Rebuilding economy and society
Armstrong Williams | 4/30/2020, midnight
The massive economic destruction being wrought by the COVID-19 epidemic and the government’s attempt to mitigate the impact on American families and businesses raises a fundamental question: Is the sum total of America’s greatness measured by its markets or by its people?
Americans have served the world, and particularly the developing world, as the largest consumers of goods and services of any nation on earth. Entire civilizations have risen from the dust—notably China—on the back of the American consumer. In return for opening its markets to foreign goods and services, America has been able to consistently borrow money from abroad to finance its insatiable appetite for more stuff. Most Americans, in fact, equate consumerism with the American way of life.
To put the notion of America as a market in some historical perspective, it bears mentioning that today’s America started out as a group of mercantile colonies of England, France, the Netherlands and Spain. Traders, in search of foreign markets for resources and labor, engaged in a triangular trade for slaves, sugar and rum, as well as textiles, spices and other staples of the time. The mercantile class became so successful in colonial-era Europe, in fact, that they ultimately supplanted the royal classes in both wealth and power. Modern America and modern Europe are the direct result of the rise of global commerce.
Over the past decades, American politicians have perfected the language of “free markets” as synonymous with “freedom.” In fact, the two have become so intermingled in the American lexicon that one tends to conflate capitalism with democracy. Both the Republican and Democratic parties alike championed “free trade” as a global wealth builder, with America’s free markets leading the way.
But there has been a growing disconnect between the notion of nation and markets. President Trump’s election marks the first time in over a generation that a Republican president has urged trade protectionism rather than global expansion as a cure for stagnant domestic growth. To many, Trump’s call to close the borders and cut off trade seemed weirdly alarmist given America’s interdependence with both its immediate neighbors, notably Mexico, and its distant trading partners, notably China.
As if to further illustrate the problem with confusing capitalism with democracy, China has become increasingly more capitalist over the past 30 years, while also becoming increasingly autocratic. When President Nixon initiated the cold-war détente with China, his primary aim was to reduce the Soviet Union’s influence on Asia. But in opening up relations with the world’s most populous country he was also seeking markets for America’s goods and services, assuming that trade between China and the U.S. would be free and fair. However, China has proven to be a tough market for U.S. businesses to enter, while on the contrary, the U.S. is flooded with Chinese goods—including those most critical during the COVID crisis, medicine and medical supplies.
While America became the world’s largest consumer, China became its largest producer. In 2002, China’s middle class constituted a mere 4% of its population, but in 2020 over 30% of its citizens—over 420 million people—enjoy middle class incomes. Over the same time period, America’s middle class has stagnated and declined. Real wages in the U.S. have stagnated, labor force participation contracted, and the wealth gap has widened to the largest it has ever been.