Needed: A New Paradigm

In this last part of an important recent article from the Wall Street Journal, China, originally heralded by us as the great new breakthrough market for American produce, turns the tables on us and makes us the dumping ground for all its cheaply manufactured goods–another serious miscalculation by our elite which, as usual, ends disastrously for our workforce.

1f9a8c29-5993-418b-9e7b-dd98e748c691QQ截图20130202154509Shanghai today

“The Great Unravelling,”  by Jon Hildenrath and Bob Davis continues:

Part Four

China, more than any other issue, shows the disillusionment with globalization.

At the 2000 White House conference, President Clinton said expanded trade with China would “open their markets to our goods and services.”

Reality has been rougher on American workers. Hillary Clinton, who pushed a Pacific Rim trade deal as secretary of state, now positions herself as tough on China and opposes that same trade deal.

Mr. Trump has made China-bashing a campaign centerpiece. Of America’s 100 counties with industries most exposed to Chinese imports, 89 voted for him in Republican primaries. Of the 100 least-exposed counties, before all of his competitors dropped out, 28 gave him the nod. Mr. Sanders takes a tough line on China.

Economists long recognized import competition hurt some workers but generally dismissed the costs as small relative to benefits such as cheaper goods. Research from widening trade with countries such as Japan and Mexico confirmed that theory, despite activists’ targeting the North American Free Trade Agreement as a job-killer.

Economists were blinded, though, to the scale of potential downsides, says Gordon Hanson, a University of California at San Diego economist. His work shows how soaring Chinese imports, which picked up after Beijing joined the World Trade Organization in 2001, magnified technology’s impact on jobs. “We were the high priests protecting free trade,” he says. “There was a little bit of intellectual insularity.”

Chinese competition, goosed partly by a currency China kept cheap, had far greater effects on U.S. manufacturing than any country since World War II—a finding MIT labor economist David Autor has helped make mainstream with Mr. Hanson and David Dorn of the University of Zurich. The trio studied 722 communities around the country and how they responded to import competition.

Their conclusion overturned conventional wisdom. China was simply different, they found in a 2013 paper. Its workforce was so vast, wages so low and productivity rising so fast, it caused greater disruptions in the American labor market than any country before.

“Washington and we in the establishment spent too much time celebrating the efficiency gains of trade,” says Timothy Adams, U.S. Treasury undersecretary under President George W. Bush, “and not enough time thinking about the people who were impacted.”

Between 2000 and 2007, import competition from China accounted for 982,000 manufacturing jobs lost, about one-fourth of all manufacturing job losses. Between 1999 and 2011, work published this year found, China accounted for 2.4 million jobs lost, including manufacturing and service jobs.

That loss might have been less damaging if U.S. workers were shifting from declining industries and towns and into growing ones, as they once did. However, fewer workers are willing to move, Mr. Autor and his co-authors wrote. Moreover, America is producing fewer fast-growing startups.

“We in this country have to worry about those who have been left behind in this country, and we have to worry about our role in the world and the vote in China in the next several months will be a crucial test of our country’s international sentiment.”           —Lawrence Summers, Treasury Secretary, April 2000

Surveying U.S. economic prospects, former Clinton Treasury Secretary Lawrence Summers invokes a Depression-era idea, “secular stagnation,” to argue a dearth of investment opportunities is holding back spending and growth while the income gap has created an overabundance of savings pushing down interest rates.

In the slow-growth world he foresees, global trade becomes more fraught as competitors grab for pieces of a pie that isn’t growing rapidly. Tensions over currency policies mount. Central banks have limited tools to cushion blows, putting pressure on fiscal policy—taxes and spending to boost investment—to spur demand.

That wasn’t what Mr. Summers argued at the 2000 White House conference, where he said the private sector was so abundant “with staggering high quality investment opportunities” it was the government’s job to get out of the way.

Today he says the government must help. “The world has changed,” he says. “So my views have changed.”


Trade with China and other nations would have a net positive impact on the economy as it would expose the world’s largest population to U.S. goods and services, while those hurt by trade in America would adapt and be supported.


Trade with China turned out to be a bigger shock to the economy than anybody expected, and the adjustment of the workforce slower.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s