On Intellectuals and the ‘China Shock’

by Don Boudreaux on September 11, 2022

in Myths and Fallacies, The Economy, Trade, Truth-seeking & ideology

Here’s a letter to Reason:


While he identifies several problems with Karl Polanyi’s criticisms of the free-market order, Daniel Drezner nevertheless gives Polanyi excessive credit (“Goodbye, Globalization?” October). Unlike F.A. Hayek and Milton Friedman, Polanyi failed to fully understand that the public’s responses to economic developments are heavily influenced by intellectuals who comment on and interpret these developments. If intellectuals’ commentary and interpretations are hostile to markets, as they mostly are, then the public will be more prone to harbor hostility to markets. And even when the public isn’t as hostile to markets as are intellectuals, intellectuals will interpret any apparent uneasiness in the public as evidence that the public’s unhappiness is with markets.

Consider the alleged “shock” of the U.S. liberalizing trade with China that Mr. Drezner describes as a source of “a lot of social disruption.” Intellectuals and politicians, left and right, certainly claim that Americans’ increased trade with the Chinese was so cataclysmic as to create major dislocations and despair among working-class Americans. But in their famous “China Shock” paper – the results of which continue to be cited in support of this alleged economic cataclysm – David Autor, David Dorn, and Gordon Hanson estimate that the total number of American jobs destroyed by trade with the Chinese over the 13-year period 1999-2011 is 2.4 million, for a monthly average of 15,385. This scary-sounding number was immediately seized upon to explain why blue-collar Americans, apparently feeling the burden of these trade dislocations, are justly receptive to populists peddling protectionism.

But a fuller set of facts reveals that this explanation of blue-collar discontent is untenable. As I wrote in the New York Times in March 2018, data from a November 2016 Bureau of Labor Statistics report show that from September 2006 through September 2016 – and excluding the Great Recession months – the monthly average number of workers in the United States who lost their jobs was around 1.75 million. Even allowing for the fact that the average monthly size of the labor force and employment were a bit larger during the 2006-2016 span than they were during the 1999-2011 span, the “China Shock” was responsible for the destruction of no more than about one percent of the total number of jobs that are routinely, month in and month out, destroyed by the mighty economic churn that’s inseparable from America’s dynamic economy.

It’s therefore utterly far-fetched to blame any growing hostility toward globalization among middle Americans on U.S. trade with China. Blame for any such hostility instead falls on peddlers and spinners of ideas – that is, on intellectuals and politicians. It is they who, out of ignorance or cunning, told an incredible tale that not only reinforced their own priors but also misled many others to mistaken conclusions.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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