Globalization Here and in China, Part Two

  img_4632_a         Detroit today

This is Part Two of an article from the New York Times on the comparative effects of globalization here in the US and in China.

By ANDREW BROWN, October 22, 2016

Deindustrialization in Dongguan looks very different from its historical counterpart in New England or in the smokestack cities of the American Midwest and South, which have emerged as Mr. Trump’s political base. There, communities disintegrate, skilled factory workers bag groceries at Wal-Mart, and many of the unemployed succumb to the opiates plague. In Dongguan, blue-collar armies simply melt back into the countryside, and many are able to pick up work in urban areas closer to home.

There are jobs available in China’s emerging services sector. Even in depressed Dongguan, employment agencies advertise positions at $1,000 a month for motorcycle couriers who deliver office lunches and packages. And, so far at least, the Chinese public’s faith in their government’s economic management remains solid. Almost 90% think that the economy is in good shape, according to a recent Pew survey, and 60% believe that their country’s involvement in the global economy is a good thing.

But Mr. Xi sees the clouds gathering. He speaks with a shrug of the “new normal” of slower growth, and his assertive nationalism—he popped up on television recently in combat fatigues and has used reefs in the South China Sea to create military-style fortifications—betrays deep insecurities.

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Mr. Xi has a daunting problem on his hands: The consumer economy isn’t expanding fast enough to make up for lost manufacturing. GDP growth has been slowing every year since 2011. E-commerce may be booming, but bricks-and-mortar shops are shedding staff. Mass layoffs loom in “zombie” state enterprises that crank out products in massive oversupply, like steel rods and cement, and survive only on government-directed handouts. . .

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Premier Li Keqiang is pumping money into high-tech manufacturing, like semiconductors, while promoting “mass entrepreneurship and innovation” to create jobs; 4.4 million startups got off the ground last year, with generous government help. Daniel Lin, a serial entrepreneur, runs a business incubator with a $7.5 million grant from the Dongguan government. Its first candidate: a team promoting a smart bra that monitors for cancer.

There is no knowing whether such ventures will ever succeed. Meanwhile, Beijing is keeping the economy buoyant by inflating an already massive property bubble and adding to a mountain of national debt. . .

In this context, Mr. Trump’s anti-trade agenda is incendiary. It is also too late. The damage to the American workforce is done. Slapping a 45% tariff on Chinese exports to the U.S., as Mr. Trump has threatened to do, won’t return jobs to places like Lowell, which is the ostensible reasoning behind his plan. Rather, it will hasten the outflow of Chinese jobs to lower-cost destinations such as Cambodia and Myanmar. Mr. Trump’s promises to bring back jobs, says Robert Forrant, a former factory machinist who is now a history professor at the University of Massachusetts Lowell, are “beyond ludicrous.”

America largely wrote the rules for global trade after World War II. Successive U.S. administrations treated trade almost as a gift that they bestowed on the world; free movement of goods and capital would bind the U.S. more closely to its friends and allies in a liberal global order. This generosity, however, failed to take account of China’s game-changing potential.

Between 1991 and 2007—the 16-year period when Dongguan was on a roll—the value of U.S. goods imported from China increased by a staggering 1,156%, according to research by the economists David H. Autor, David Horn and Gordon H. Hanson. U.S. exports to China grew much less.

To be continued

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