China is being made a scapegoat for rising inequality in the United States. While US trade relations with China have been mutually beneficial over the years, some US workers have been left behind, notably Midwestern factory workers facing competition due to rising productivity and comparatively low (though rising) labor costs in China. Instead of blaming China for this normal phenomenon of market competition, we should be taxing the soaring corporate profits of our own multinational corporations and using the revenues to help working-class households, rebuild crumbling infrastructure, promote new job skills and invest in cutting-edge science and technology.
We should understand that China is merely trying to make up for lost time after a very long period of geopolitical setbacks and related economic failures. Here is important historical background that is useful to understand China’s economic development in the past 40 years.
China’s rapid development on a market basis therefore started only in 1978, when Deng Xiaoping came to power and launched sweeping economic reforms. While China has seen incredible growth in the past four decades, the legacy of more than a century of poverty, instability, invasion and foreign threats still looms large. Chinese leaders would like to get things right this time, and that means they are unwilling to bow to the United States or other Western powers again.
China has roughly followed the same development strategy as Japan, Korea, Taiwan, Hong Kong and Singapore before it. From an economic standpoint, it is not doing anything particularly unusual for a country that is playing catch up.The constant US refrain that China “steals” technologies is highly simplistic.
Countries that are lagging behind upgrade their technologies in many ways, through study, imitation, purchases, mergers, foreign investments, extensive use of off-patent knowledge and, yes, copying. And with any fast-changing technologies, there are always running battles over intellectual property. That’s true even among US companies today — this kind of competition is simply a part of the global economic system. Technology leaders know they shouldn’t count on keeping their lead through protection, but through continued innovation.
Trade with China provides the United States with low-cost consumer goods and increasingly high-quality products. It also causes job losses in sectors such as manufacturing that compete directly with China. That is how trade works. To accuse China of unfairness in this is wrong — plenty of American companies have reaped the benefits of manufacturing in China or exporting goods there. And US consumers enjoy higher living standards as a result of China’s low-cost goods. The US and China should continue to negotiate and develop improved rules for bilateral and multilateral trade instead of stoking a trade war with one-sided threats and over-the-top accusations.
The most basic lesson of trade theory, practice and policy is not to stop trade — which would lead to falling living standards, economic crisis and conflict. Instead, we should share the benefits of economic growth so that the winners who benefit compensate the losers.
Yet under American capitalism, which has long strayed from the cooperative spirit of the New Deal era, today’s winners flat-out reject sharing their winnings. As a result of this lack of sharing, American politics are fraught with conflicts over trade. Greed comprehensively dominates Washington policies.
The real battle is not with China but with America’s own giant companies, many of which are raking in fortunes while failing to pay their own workers decent wages. America’s business leaders and the mega-rich push for tax cuts, more monopoly power and offshoring — anything to make a bigger profit — while rejecting any policies to make American society fairer.
Unless some greater wisdom prevails, we could spin toward conflict with China, first economically, then geopolitically and militarily, with utter disaster for all. There will be no winners in such a conflict. Yet such is the profound shallowness and corruption of US politics today that we are on such a path.
A trade war with China won’t solve our economic problems. Instead we need homegrown solutions: affordable health care, better schools, modernized infrastructure, higher minimum wages and a crackdown on corporate greed. In the process, we would also learn that we have far more to gain through cooperation with China rather than reckless and unfair provocation.