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We warned about the first China Shock. The next one will be worse
The Trump administration is fighting the last war while China marches towards dominating the industries of the future.
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China Shock 2.0, the one that’s fast approaching, is where China goes from underdog to favourite, say the writers.
PHOTO: REUTERS
David Autor and Gordon Hanson
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The first time China upended the US economy, between 1999 and 2007, it helped erase nearly a quarter of all US manufacturing jobs. Known as the China Shock, it was driven by a singular process – China’s late-1970s transition from Maoist central planning to a market economy, which rapidly moved the country’s labour and capital from collective rural farms to capitalist urban factories.
Waves of inexpensive goods from China imploded the economic foundations of places where manufacturing was the main game in town, such as Martinsville, Virginia, and High Point, North Carolina, formerly the self-titled sweatshirt and furniture capitals of the world. Twenty years later, those workers haven’t recovered from those job losses. Although places like these are growing again, most job gains are in low-wage industries. A similar story played out in dozens of labour-intensive industries simultaneously: textiles, toys, sporting goods, electronics, plastics and auto parts.
