Monday, September 13, 2004

It's nice when the Free Trade Consensus can openly admit that their policies are rooted in exploitation.
Despite the possibility that foreign competition can hurt, in practice it usually spurs changes that enrich everyone. Indian programmers take over the routine tasks, while Americans reorganize themselves to focus on the creative ones -- which are also the most lucrative.

But the insight of the 1950s is an especially strange basis for U.S. protectionism toward China. If China floods the world with cheap clothing, rival producers may suffer -- think Pakistan, Mauritius. But the United States, a net importer of cheap clothing, is bound to benefit if China drives the price of T-shirts lower.

The same is true of most things China makes. China is a low-wage, low-capital economy; the United States is a high-wage, capital-intensive economy; China is unlikely to make the same things we make. Instead, it will make the stuff we want to purchase. If it makes lots of it, forcing down prices, we may want to boost assistance to other low-wage countries, which may genuinely suffer. But we should hardly fear for our prosperity.
We see here the same old New Economy re-tooling eco-babble characteristic of new middle class intellectuals. So what if even the "creative" US economy has millions of textile workers, furniture producers, security guards and hotel cleaners. Sebastian Mallaby lives in Dupont Circle and all his friends are writers, software engineers, economists and advertising executives! So what if South Carolina has lost 17% of its blue-collar manufacturing jobs since January 2001 and North Carolina 22% -- the two states most affected by Chinese textile and furniture exports. Sebastian Mallaby saved $10 at Pier 1 this month!

But at least Mallaby recognizes that China's low-wage manufacturing economy is putting an end to the hopes from Central America and Africa and South Asia of climbing the development ladder via textiles. After all, getting the retail price of that Wal-Mart shirt down from $8.63 to, say, $8.58, is worth shutting down plants in coddled over-wealthy Bangladesh, not to mention in Columbus, GA.

When it comes to economics, there is no national "we". But capital and the new middle class is more than happy to sacrifice willing red-state Carolinians on the altar of free trade.


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