How the West invited China to eat its lunch

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There were two events in late 2001 that shook the axis of the world. The world was preoccupied with the immediate aftermath of 9/11. But exactly three months later, on 11 December, the World Trade Organization (WTO) was at the centre of an event that was to cast as strong a shadow over the 21st century, changing more people’s lives and livelihoods around the world than the attacks on America. Yet few know it even happened, let alone its date. China’s admission to the World Trade Organization changed the game for America, Europe and most of Asia, and indeed for any country in possession of industrially valuable resources, such as oil and metals. It was a largely unnoticed event of epic geopolitical and economic importance. It was the root imbalance behind the global financial crisis. The domestic political backlash against the outsourcing of manufacturing jobs to China has reverberated around the western G7 nations. The promise, suggested by the likes of former US President Bill Clinton, was that “importing one of democracy’s most cherished values, economic freedom”, would enable the world’s most populous nation to follow the path of political freedom too. “When individuals have the power not just to dream, but to realise their dreams, they will demand a greater say,” he said. But that strategy failed. China began its ascent to its current status as the world’s second biggest economy – and is on a seemingly inevitable path to becoming the world’s biggest. Indeed the US trade representative responsible for negotiating China’s WTO deal, Charlene Barshefsky, told a Washington International Trade Association panel this week that China’s economic model “somewhat disproved” the Western view that “you can’t have an innovative society, and political control” “It’s not to say that China’s innovative capacity is enhanced by its economic model,” she added. “But it is to say that what the West thought were incompatible systems may not be necessarily incompatible systems.” Up until 2000 China’s global economic role had been principally as one of the world’s biggest manufacturers of plastic gubbins and cheap tat. Important, yes, but neither world-beating nor world-changing. China’s accession to the top table of world trade heralded a massive global transformation. A powerful combination of China’s willing workforce, its super-high-tech factories, and the special relationship between the Chinese government and Western multinational corporations changed the face of the planet. An army of cheap Chinese labour began to produce the goods that underpin Western living standards, as China seamlessly inserted itself into the supply chains of the world’s biggest companies. Economists call it a “supply shock”, and its impact certainly was shocking. Its effects are still reverberating around the world.


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