Libertarian economist Walter Williams jumped for joy when a Federal Reserve Bank study found that imports from China amount to “only” 2.5% of US GDP. Finally! Some solid evidence that our libertarian open-borders policy wasn’t destroying America!
But should libertarians and other globalists really be breaking out the champagne? I don’t think so. While 2.5% of GDP sounds pretty small, remember that our GDP is rather gigantic at $15 trillion. So, the Chinese bite amounts to $375 billion.
What does that translate into jobs-wise? Hard to say, but let’s calculate a rough estimate. In 2010, Walmart’s US sales were $258 billion. So, we can say that China has bitten off about 1.5 Walmarts. And since Walmart has 1.4 million employees in the USA, we arrive at a rough estimate of 2.1 million jobs lost to Chinese imports.
That’s not small potatoes.
Do we have 2.1 million jobs to burn? Not hardly. Would President Obama like to have those 2.1 million jobs in his pocket as he seeks re-election? He sure would.
And of course, when I rant about China, I am only using it as an example of our larger policy of free-trade with low-wage nations. So, countries like Mexico and India would have to be added in. Not only that, but the Fed’s calculation doesn’t consider collateral damage.
What happens to local businesses when you pick up the 250,000-strong US shoe industry and move it China? Do we only lose 250,000 jobs? Of course not. Just imagine all the restaurants, dog-groomers, and accountants who no longer have those 250,000 shoemakers as customers. The Fed report did not consider that, but the truth is that imports of sweatshop goods and services have cost the USA several million jobs.
Is it a coincidence that strong US economic growth is a thing of the past, and rapid Chinese growth is now the standard?.
Is it a coincidence that “jobless recoveries” began shortly after the gates were thrown open to cheap imports?
Is it a coincidence that the number of Americans on food stamps has nearly tripled since China was admitted to the World Trade Organization?
I don’t think so.
People like to blame Alan Greenspan for keeping interest rates too low, blowing up the housing bubble, and destroying the financial system. But I hold that Greenspan kept his foot on the gas peddle too long because he was unknowingly trying to fight the massive tide of offshoring. The real root cause is the libertarian, free-trade dystopia that was constructed at the end of the last century.
When you look at a product stamped with “Made in China” on a Walmart shelf, you are really looking at the tombstone of an entire American industry. See this story for how China targets small American manufacturing companies. Ironically, if an American company fights back against the mafia-style tactics of the Chinese, they are attacked by American retailers too. You see, retailers want those cheap Chinese products on their shelves, and actively try to destroy American producers.
Of course, American exporters are selling to China. Back in the day, the globalists used to argue that those new exports would create enough new jobs to offset the jobs lost. But that has been completely debunked. Not even Larry Kudlow will make that argument now!
History will prove my view correct. Wait and see. The USA topped-out when we brought China into the WTO. Short of trade-reform, it’s all downhill from here.
Note: China was admitted to the WTO in December of 2001. However, nations like Mexico and India were admitted earlier. See the list here.
Note: The Fed study linked above was conducted in response to the charge that the Fed’s QE2 policy would create inflation in the USA. The Chinese peg the yuan to the dollar, so they had to print huge amounts of currency to maintain the peg. That caused inflation in China, and the prospect of it propagating to the USA via higher-priced imports. I’m not saying that the Fed’s study is flawed. However, it is important to consider the context. The study would likely have not been done if the Fed didn’t feel the need to justify QE2. So, they did have an axe to grind.
Note: I was a supporter of QE2, and took much delight in the squealing of the Chinese, and their globalist fifth column here in the USA.