August 4, 2008

THEY ASSEMBLE STUFF CHEAP. PERIOD.:

China as the Antidote to Oppression and Exploitation?: So envisions a new book, never mind the facts (GREGORY CLARK, 3/14/08, The Chronicle Review)

In Adam Smith in Beijing (Verso, 2007), Giovanni Arrighi, an economic sociologist at the Johns Hopkins University, sees the rise of the East as representing an opportunity to escape an international order based on oppression and exploitation. In the Arrighi cosmology, a ruling class of capitalists, first in Britain, then in the United States, has dominated the world since the Industrial Revolution, having their wicked hegemonic way with the weak. The riches of the West were created by the oppression of the rest.

Arrighi, along with Samir Amin, Andre Gunder Frank, and Immanuel Wallerstein, is one of the leaders in world-systems theory. This school has extended Marx's idea of exploitation within societies to international relations. Trade between rich and poor countries is not equal exchange, according to this view, but instead systematic exploitation of the poor. [...]

How plausible is Arrighi's interpretation of the current juncture of West and East?

A crucial failure in Arrighi's thinking is his obsessive misconception that all economic growth in the West since the Industrial Revolution has been provided by the brains and brawn of the dispossessed of the developing world. Yet generations of research by economic historians — David Landes, Deirdre McCloskey, and Joel Mokyr, among others — show that the wealth of the West was homegrown, the result of a stream of Western technological advances since the Industrial Revolution.

Arrighi, for example, reflexively assumes that in the 19th century "Indian workers were forcibly transformed from major competitors of European textile industries into major producers of cheap food and raw materials for Europe." In fact, technological advances in England, not any compulsion by colonial profiteers, drove out the much cheaper Indian workers from the cotton-textile industry. The East India Company, the ruler of much of India until the end of the Industrial Revolution, had every interest in maintaining the export of Indian muslins, one of the most valuable Indian exports in 1760.

Similarly the United States became an industrial colossus in the early-20th century through advances in technology that included an ability to extract from American soil all the raw materials needed for its growth. Only in the late-20th century did imports of raw materials become of any importance.

Arrighi's basic misconception leads him to conclude that growth among the rest must imply decline for the West. But the last 20 years, when significant growth has occurred both in China and in India, have been prosperous ones for the United States as well. Real income per person in America has increased by 50 percent in those years, despite the rise of China and India. That rate of increase is similar to the rise between 1950 and 1987, when China and India stagnated. There is no sign that the rise of the East is clawing back the growth of the West. That is because the overwhelming source of growth in the United States is technological advance within the U.S. economy.

The growth of the Chinese and Indian economies will exert pressure on U.S. incomes through the increased demand in the world economy for commodities — most important, oil. If everyone in the world were to consume as much oil as Americans do now, then world oil output would have to be more than five times greater than at present. As Chinese demand for oil has risen, China has been aggressively seeking supplies of oil in Africa and the Middle East, doing deals with countries hostile to the United States such as Iran and Sudan.

But even in that regard, the Chinese impact on American incomes through higher commodity prices will be modest. Even at current prices of roughly $100 per barrel, annual U.S. imports of oil are still less than 4 percent of national income. A further doubling of oil prices, to $200 per barrel, assuming we used just as much oil per person as at present, would consequently reduce U.S. income by less than 4 percent. But since technological advance is increasing income by more than 2 percent per year, that hit to the American economy would be compensated for by less than two years of normal growth.

And there is plenty of room for economizing if oil becomes permanently much more expensive.


Here's all you need to know: none of the innovations with which we replace oil will come from China.


Posted by Orrin Judd at August 4, 2008 11:05 AM
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