China’s misgovernance is our problem, too.
China’s misgovernance is our problem, too.
Y ou’ve seen the lines of ships parked outside of California ports. You’ve heard the wait times quoted for a new appliance or a new car. You’ve seen the new prices. And you know, in your heart, it can get worse.
The current Shanghai lockdown, like the one in Wuhan before it, will stall goods and orders across the modern economy for weeks and months. Tim Huxley, a chairman of a Hong Kong shipping-container company was quoted in the Wall Street Journal on the depth of the problem: “It’s anything from electronic goods, domestic goods, furniture — you name a household brand or chain store in the U.S. or Europe and you can bet they will have something stuck in a factory on a truck coming out of Shanghai.”
These delays and shutdowns mean fewer goods in the market and lower productivity overall. Combine them with the gushers of money meant to get people through the past two years, and you have one large factor in the wave of inflation we’ve experienced.
Unfortunately, this isn’t just a blip; it’s the world order, and it doesn’t unwind itself overnight. What do you get when you combine the capital-rich American economy with labor-rich but capital-poor Chinese? You get what Niall Ferguson and Moritz Schularick called “Chimerica.” As they put it, Chimerica was “a world economic order that combined Chinese export-led development with US over-consumption on the basis of a financial marriage between the world’s sole superpower and its most likely future rival.”
It has led to an astonishingly intimate marriage of fortunes, and it is not quite over. In a speech in 2020, Wang Yi, the foreign minister of the People’s Republic of China, said, “We are still willing to grow China-U.S. relations with goodwill and sincerity.” He added: “In the past 40 years and more since the establishment of diplomatic relations, China and the U.S. have made the best use of their complementarity, and their interests have become highly integrated.”
While the initial burst of prosperity helped to fuel fantasies of a long peace dividend, and the End of History seem credible, the costs of Chimerica have become more obvious in the past decade. A famous paper by David Autor, David Dorn, and Gordon Hanson showed that Chinese-driven American job losses contributed to falling household earnings and the break-up of marriages across interior regions of the United States. These misfortunes probably correlated with other social pathologies such as child maltreatment and drug abuse.
And even where Chimerica produces benefits — cheap consumer goods — there are diminishing returns. As Chairman Xi Jinping continues to undo the reforms of his predecessors and reasserts the primacy of the Chinese Communist Party, America’s economy becomes partly subjected to every idiocy cooked up in the CCP’s ideological hot house, including China’s latest attempt to control the Covid-19 pandemic via state surveillance and coercion.
We are also hurtling headlong into a serious decline of the Chinese workforce, which peaked in 2011 at nearly 925 million. Estimates in 2021 had the Chinese workforce shrinking by 35 million over the next five years alone. That is a loss of more people than are full-time workers in the United Kingdom, almost as many as are in Germany.
Economic growth is driven by gains in productivity and population growth. With China heading for serious, almost catastrophic population decline, the Chinese economy can grow only by making technological leaps. This seems unlikely when its economic strategy is still built more on theft than innovation. America is going to need another workshop and soon.
Endless op-eds have warned of the coming geopolitical crackup of Chimerica — supposedly a contest over the resources and relationships available in the Pacific. I’m not so sure.
America remains attached to this geopolitical mummy, and the mummy doesn’t want to let go of the living partner.