Wherefore China?

This is not going to bring a smile to your face. In truth, it will undoubtedly incite some harsh scowls. The question is China. The author is David Goldman. More specifically, the question is how it happened that China engineered a massive amount of wealth production and poverty reduction. 

Should we blame American policy? Should we blame ourselves for having fed the dragon? The Trump administration insisted that it was all our fault, that we had coddled China by buying what it was producing, thereby putting American workers at a disadvantage. We had offshored prosperity and had allowed China to take over world manufacturing and industry.

Or else, was there a different reason? Now, Goldman points out that while China was exporting massive amounts to the United States, in the years following 2008, it exported far more to the global south than it did to the United States.

We didn’t bring about China’s spectacular economic growth — from less than $200 in GDP per person in 1980 to $12,500 in 2020. In inflation-adjusted 2010 dollars, that’s a 26-fold jump from $430 to $11,200 in forty years. Access to the U.S. export market helped, to be sure, but it didn’t help nearly as much as China’s exports to the world’s poorest countries….

Before the Great Financial Crisis of 2008, China was exporting about $20 billion a month to the U.S. and the same volume to the so-called Global South. In the subsequent 15 years, China’s exports to the U.S. grew to about $40 billion a month (and continue to grow in spite of the 2019 Trump tariffs, which I predicted would fail). But exports to the Global South were nearly $140 billion a month, or seven times higher in March 2023. For the first time in March 2023, China’s exports to the Global South were larger than its exports to all developed markets.

So, we are wringing our hands and launching rhetorical attacks on China. We are defaming China because it seems to make certain politicians feel strong. 

As for what China has been doing around the world, Goldman summarizes:

China is building 5G broadband networks in Brazil, Bangladesh, and Indonesia, railroads and mines in Africa, and ports in a dozen venues. Its largest automaker BYD just announced an $11,300 electric vehicle with a 200-mile radius, maybe the Model T of the 21st century. 

But then, we are against communism. We are up in arms about the Chinese Communist Party. As it happens, if China has enjoyed so much economic growth and poverty reduction, do we really want to give Communism the credit?

As opposed to the shrieky schoolgirls who are out denouncing China’s Communist Party, Goldman explains the truth of the matter.

…. China is Communist in the same way that the Mafia is Catholic. Karl Marx would have looked at today’s China with astonishment. Artificial Intelligence, 5G broadband, and Cloud computing are crushing manufacturing costs in China, and China is assimilating the Global South into its economy.

According to Goldman, and he has been saying this for ages now, the Trump policy of sanctioning and tariffing China has failed:

Trump and his advisors, including the estimable Matt Pottinger, thought we could contain China by fencing off the United States and denying China access to US technology. The tariffs didn’t work, and the Chinese are working around our tech controls, as the Wall Street Journal reported earlier this week. China’s 5G broadband and applications to manufacturing, mining, and logistics run off older chips that China can produce itself.

It is always a good thing to shed the light of reason on our emotions. Rather than engage in a rhetorical war against China we would do better, Goldman thinks, to engage in more rapid industrial modernization on our own. Of course, that assumes that we have the human capital to do so, which is obviously in some considerable doubt.

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