In California, at the Long Beach and Los Angeles harbors, more than a third of the cargo coming in from overseas – a huge portion of that from China – has traditionally flowed smoothly into the nation. In 2021, that suddenly changed for a variety of reasons either directly or indirectly traceable back to the pandemic. There are currently huge lines of container ships lined up as far as the eye can see. Some are waiting in line for up to three weeks before they have a chance to unload their cargo. This is driving up shipping costs massively and those price increases are being passed on to consumers in the form of steadily rising inflation.
As Joel Kotkin points out at Quillette, this situation is wiping out wage gains that were seen as the country reopened from the lockdowns. It’s an effect being felt globally, not just in the United States. Great Britain and Germany are dealing with the same thing, and this should serve as a wake-up call to all of us. The current shortages are explainable by a lack of workers and infrastructure, but they also highlight just how dramatic the impact of a disruption in the supply chain from China to the rest of the world can be. And if it can take place by happenstance as is happening today, it could happen intentionally in the future.
The supply chain disaster has also revealed the existence of crippling economic dependence, particularly on China, in high-income countries. Today, whole industries in the West—from medical equipment to chip and car makers to food—rely on China for finished products and key components. When China cannot (or decides not to) supply these parts, whole industries suffer debilitating supply chain shortages. The notion of a rational, self-regulating market system is unraveling and may yet presage the demise of the prevailing neoliberal era.
For generations, business consultants have persuaded businesses large and small to move their production to China in search of cheaper costs. This has had a devastating effect, particularly in the United States, where between 2004 and 2017, the share of world manufacturing shrank from 15 to 10 percent while reliance on Chinese inputs doubled. The trade deficit with China, according to the Economic Policy Institute, has cost as many as 3.7 million jobs since 2000.
The idea of a nation weaponizing its control of the global supply chain shouldn’t be looked at as something unthinkable or even new. We saw the same thing with oil in the 70s when Arab nations squeezed off the supply through the Strait of Hormuz. The resultant gas lines and spiraling fuel prices caused a tremendous amount of disruption in America even though the OPEC nations still had seemingly limitless supplies of black gold. Under the Trump administration, the United States oil and gas industry waxed until we were a global leader in energy production, removing that threat. (Though the current administration’s energy policies seem to be pushing us back in the opposite direction.)
The fact that we now find ourselves under China’s thumb in this fashion speaks less to threats from the Chinese Communist Party than the reality of a long-festering weakness of our own creation. Going back several generations now, we have consistently evolved a culture that devalues hard work and manual labor, insisting instead that everyone should have a job with a corner office where you never get your hand dirty. Families were indoctrinated to believe that sending their children off to receive a college education was the only true marker of “success.” Anyone finishing high school and going into the trades was viewed as somehow being a failure, despite the fact that many people who take up a profession working in plumbing or heating and air conditioning (just to name two examples) earn far more than many college graduates. Just ask the person handing you your burger and fries at the drive-through window how that bachelor’s degree in women’s studies is working out for them.
Manufacturing work grew to be seen as being “for the lower classes” and those without elite college degrees. This attitude matched up quite well with industry trends toward outsourcing work to foreign nations and a preference for importing cheap Chinese goods and components for the remaining things we still manage to manufacture at home. By the early 2000s, people who spoke out in favor of a preference for products with the “Made in America” label were called out as xenophobes or racists by their elite betters.
So what was the result of these trends? We gutted our manufacturing sector and now we’re paying the price. I’m not suggesting that we only use products made in the United States, but for areas where imports are required, shouldn’t a preference be given to nations that have traditionally been our allies rather than our adversaries? Even if that means some prices will be slightly higher, the long-term security that would provide should be worth the cost.
Taking all of this into account, we should be able to admit that we created the monster that China has become. This ill-founded belief that if we just threw enough money at China and coaxed them into trade relationships they would eventually embrace democracy and capitalism was a fool’s errand. Today they sit at the top of the food chain while still being the same abusive, communist thugs they have always been. And they used a lot of that money to build a nuclear-enabled military that also threatens the rest of the free world. We need to learn from our mistakes and develop a very different relationship with China when it comes to both fiscal and military policy.