I'm in the Fall issue of National Affairs with an essay on the China Shock and America's globalization-driven political realignment
Give'er a read:
Conversation
The US manufacturing sector suffered a severe trade shock following the passage of "permanent normal trade relations" with China in 2000, and their entry into the WTO in 2001.
I discussed the economic effects of the China Shock in depth here:
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In this new essay, I discuss the China Shock's political ramifications.
PNTR passed with strong support from Republican lawmakers. But today, many conservatives decry "neoliberalism" by name, as if they've dusted off their Chomsky Readers.
What's going on?
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Let's start by reviewing the classic Ricardian theory of trade, ie. comparative advantage.
When two or more countries trade, they can specialize in what they do best according to their opportunity cost, and produce more together than they can alone.
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The intuition for comparative advantage is sometimes taught in using the Lawyer and the Secretary example.
A lawyer may be strictly better at being a secretary than anyone she could hire. But by hiring a secretary, they are freed-up to specialize and produce much more value.
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Lawyers and Secretaries stand-in for "high skill" and "low skill" occupations.
If we, a high-skill country, open trade with a low-skill country, "specialization" on this model suggests we will all become Lawyers and they all Secretaries.
This isn't too far off from reality...
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Countries that adopted the World Bank / "neoliberal" advice did indeed specialize.
They grew a lot as a result, but in so doing entrenched their low skill / low wage "specialization" β South Asian countries remain hubs for call centers, garment factories, and so on.
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Replying to
Thatβs more SE Asia. South Asia is too huge population wise and the domestic economy of India for example utterly swamps the sectors tied to global neoliberal specialization. The call center/bpo industry was never more than a middle-class easy-money sideshow.
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Garments is bigger but textiles have always been a historic Indian specialization, even pre-colonization.
These larger countries respond differently to neoliberal forces. The forces matter primarily as distorters of domestic economy rather than defining elements.

