In 1989-1990, the Soviet Union collapsed. With it went the credibility of autarkic, centrally-planned economies. Determined to maintain its monopoly on power, the Communist Party of the Peoples’ Republic of China hastened to adopt a new course. It opened China to the global market and capitalist methods. Essentially, use foreign-supplied capital and technology to become the workshop of the world. Start by making cheap simple stuff, then climb up the ladder. Pull its people out of impoverished rural life into urban prosperity. Pull China out of Developing Country status into global power.
American business and political leaders took an optimistic view of these developments. China would be a cheap producers of consumer goods for Western markets, raising living standards for Western peoples by lowering costs. China would become a consumer of high-end Western products and expertise. An economic revolution in China would create a growing—and increasingly assertive—middle class. This would nudge China toward political democracy.[1] Naturally, there would be some job losses suffered in the West. Experience with the rise of Japan in the 1970s and 1980s showed that displaced workers would shuffle into new jobs.
In 2001, China won admission to the World Trade Organization. Many restrictions on Chinese exports were removed. Things did not work out as planned. China moved much faster than expected and on a much larger scale than had been expected. “Many U.S. manufacturing towns couldn’t compete.”[2] Factories downsized. Manufacturing shrank as a source of employment in many towns. Some workers were laid off, but most were attritted through retirement. They were not replaced. Most of the displaced workers were White and Black men without a college education.
Then, it seemed, the hard-hit areas bounced back. They didn’t return to the original state. Instead, “affected areas recover[ed] primarily by adding workers to non-manufacturing who were below working age when the shock occurred. Entrants are disproportionately native-born Hispanics, foreign-born immigrants, women, and the college-educated, who find employment in relatively low-wage service sectors such as medical services, education, retail, and hospitality.”[3]
Readers may question the argument that “towns” came back, while “workers” did not. “Those communities experienced higher unemployment, lower wages, higher use of food stamps, higher disability payments, higher rates of single parenthood and child poverty, and elevated mortality.”[4] Would make a good movie if John Sayles was still working.[5]
The natural response is to connect all this distress to the rejection of globalism and—eventually—to the rise of Donald Trump. What stands out, though, is the failed hopes of the people who set China policy and their failed sense of social solidarity when the choices they made had a harmful impact on ordinary people. Now US AID is on the block.
[1] That’s how it had worked in Western Europe in the 18th and 19th Centuries. Why wouldn’t it be the same with China?
[2] Justin Lahart, “How ‘China Shock’ Upended U.S. Workers,” WSJ, 5 February 2025. Lahart is reporting on a National Bureau of Economic Research working paper by David Autor, et al.
[3] Places versus People: The Ins and Outs of Labor Market Adjustment to Globalization | NBER
[4] Justin Lahart, “How ‘China Shock’ Upended U.S. Workers,” WSJ, 5 February 2025.
[5] See: “Sunshine State” (2002) and “Casa de los babys” (2003).
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