Julian Switala presents an interesting, if ultimately misguided, narrative of the reasons behind the current U.S. economic state in his Jan. 24 column âÄúAmerican tale: Prosperity goes east.âÄù
While he is right in pointing to the numerous problems the U.S. economy faces (e.g., high unemployment, declining industrial competitiveness), these issues have less to do with the rise of China and more to do with how the U.S. has mishandled the challenges of globalization over the past 30 years.
Indeed, the stagnation of workersâÄô wages in the U.S. began in the early 1980s, far before China had begun to impact the world economy. In addition, the recent rise of the unemployment post-financial crisis is due to a number of complex factors including an underfunded and crumbling primary education system, subsidies and protective tariffs for industrial producers and meager worker retraining programs. Switala is also wrong in positing that recent gains in trade âÄúwill not benefit American workers or America as a whole.âÄù American consumers have consistently benefited from trade with China via the lower costs of Chinese imports; U.S. pensioners will also benefit from robust corporate performance in the form of dividends and capital gains on equity.
One may argue that the U.S. governmentâÄôs initial strategy to integrate China into the world economy via the World Trade Organization was mistaken, but that genie is already out of the bottle. If the U.S. is to bravely confront its future, perhaps it can draw on analysis presented nearly 200 years ago by economist David Ricardo: Countries benefit in the aggregate from trade with other countries, but governments must redistribute (and wisely invest) the spoils to make sure that all citizens benefit. In other words, the main challenges the U.S. currently faces are largely based within rather than from China.