by HAN FEIZI
Reversing globalization would massively derate US assets, dislocating the professional class for re-industrialization that won’t work
All the things I could do
If I had a little money
It’s a rich man’s world
– ABBA
“Pay them off,” he said. Over two decades ago, that was the plan for globalization’s losers coughed up by a junior priest of the Washington Consensus then teaching at one of America’s august indoctrination asylums.
What he meant was that the gains from globalization would be immense – more than enough to compensate Ohio factory workers whose jobs would be outsourced to China.
This junior priest founded a consulting company, rode the globalization wave to its peak, reversed course with perfect timing and now advises American companies and state organs as a China hawk, ascending to high priest status in the New Washington Consensus.
“Pay them off.” We all bought it then. So simple, so elegant, so logical, so easy. Democracy and capitalism would surely figure out a mechanism. It wasn’t our problem. Our problem was getting past round one of the Goldman Sachs interview.
Of course, we now know that there was not going to be a pay-them-off mechanism. The winners of globalization – those who passed rounds two and three – were going to fight tooth and nail for every last cent the Washington Consensus threw our way.
If we really sat down and thought about it, it should have been patently ridiculous from the get-go. Pay them off? Like with welfare checks and food stamps? Or teach them computers? Unfortunately, nobody actually sat down and thought these things through.
In the end, globalization’s losers in America were kept afloat – just barely – by debt and lower inflation for consumer products while the shock troops of the Washington Consensus hoarded vast sums of newly created lucre. And I mean vast.
So here we are. There is a New Washington Consensus and its tenets are just as well thought through as “pay them off.” You might not be interested in industrial policy, but industrial policy is interested in you.
This new catchphrase is meant to drive home the point that we all have to grow up – America especially. The era of industrial policy is now upon us.
Because China has been an enthusiastic practitioner of industrial policy, free trade puts open economies like the US at her mercy. Yes, Japan, Germany, Korea and Taiwan have practiced industrial policy for decades but given China’s scale and ambition, the economic distortions threaten to swamp the world, if they haven’t already.
That’s the story, anyway. While nobody’s hands are clean, let us, for argument’s sake, accept the gist of the story – China has been subsidizing manufacturers at the expense of households for decades, simultaneously suppressing consumption while juicing production – all of which ultimately results in China’s exports flooding global markets, deindustrializing America through recalcitrant trade deficits.
So far, American efforts to tame China’s exports while stimulating domestic manufacturing have yet to be effective. China’s exports have grown some 50% since the Trump tariffs of 2018. While vast sums are being spent on the CHIPS Act and the Inflation Reduction Act, early signs have not been promising.
Asia Times for more