James Delingpole

Letting China join the WTO was the worst decision the West ever made

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It’s not often that you come across a book that completely transforms your understanding of the world. Just recently I’ve read two. One, Tom Holland’s Dominion concerns the debt we all owe — not just vicars and popes but atheists and social justice warriors — to Christianity’s revolutionary (and frankly still shocking) message that the last shall be first and the first shall be last. The other, China, Trade and Power by Stewart Paterson, is about a seismic event in 2001, three months to the day after 9/11, which shook the world to a degree few remotely comprehend.

Almost none of us is familiar with that epochal moment, yet it changed everything and explains everything: the Blair/Brown spending bubble; Australia’s prosperity; Mexico’s gangland hell; the 2008 crash; the rise of Donald Trump; Momentum, Antifa and the only problem with communism being that it hasn’t been tried properly yet; Brexit; your smart phone; protectionism; the price of houses; the crowds at Bicester Village; the riots in Hong Kong…

All these happened partly or mainly because on 11 December 2001 China was admitted to the World Trade Organisation. The consequences have been mostly great for the Chinese, with millions lifted out of abject poverty. But they have been little short of catastrophic for the West, where, for the small gain of cheaper white goods and toys, we have endured 18 years of industrial stagnation, falling real household incomes, wealth inequality, asset bubbles and political instability.

Consider how different the global economy looked at the beginning of this century. Its core comprised the US, the EU and Japan (the G3), with 900 million people and an income of around $30,000 for every man, woman and child. This bloc — roughly 20 per cent of the world’s population when you add places like Australia, Canada, New Zealand — was responsible for 80 per cent of its economic activity.

China, meanwhile, accounted for another 20 per cent of the world’s population but only 3 per cent of its economic activity. Income per capita was less than $1,000 a year — one 30th of the developed world average. Now imagine what happens when these two vastly disparate economic blocs meet on equal terms. You really shouldn’t need to be an economist to appreciate the massive deflationary effect of all that cheap Chinese labour. Suddenly, by outsourcing its production to China, big business can produce stuff for a fraction of what it used to cost. Corporate profits rise; commodities boom (benefiting places like Australia, Canada and the Gulf States); consumer goods — often bought on tick — become ridiculously  cheap. But all those folk who would previously have earned a reasonable wage in low-skilled, labour-intensive manufacturing are out of a job. Communities from Mexico and the rust belt of the US to the Brexit-voting regions of Britain outside London stagnate; people lose their self-respect, while looking enviously at the haves in the big cities, making like bandits, as their property values and share portfolios rise and rise.

All this might yet have been manage-able were it not for a fundamental flaw with the western socioeconomic model: profligate governments need perpetual inflation in order to prevent their debt becoming un-affordably vast. As Paterson puts it: ‘Democratic politics, in its modern form, has become little more than an auction for the support of vested interest groups by promising state-funded assistance in the provision of life’s necessities and indeed sometimes luxuries.’ This overgenerous expenditure can only be financed by running deficits.

What makes this model increasingly unsustainable is that, thanks to the deflationary effects of Chinese labour, western economies are experiencing very little real growth. All those tricksy experiments conducted by central banks — such as the ultra-low interest rates which have destroyed the value of savings and the quantitative easing which has created asset bubbles — were supposed to make things better. But they haven’t really worked, leading to a growing sense among the public — not exactly unjustified — that governments and economists and financiers (‘experts’) haven’t a clue what they’re doing; and, worse, that free-market capitalism has failed and we should be trying more interventionist alternatives.

But at least by bringing China into the global economy we’ve defanged communism, improved the Chinese’s human rights record and seduced them into the benign consumerism of the capitalist free West. Right? Well that was certainly the argument put forward by western advocates of Chinese admission to the WTO — corporate lobbyists from companies like Boeing being the most egregious offenders — which eventually persuaded President Clinton (and later George W. Bush) that it was a good idea.

Unfortunately, as Paterson notes, ‘the much-hoped-for rule of law, advancement of human rights and move towards a pluralistic, free and open society has failed to materialise in China’. Instead, prosperity has consolidated the hegemony of an increasingly intransigent Chinese Communist party, whose stupendously rich leaders have a strong vested interest in maintaining power by whatever means necessary. In the US, the top ten lawmakers have a combined net worth of $1.9 billion. Their top ten Chinese equivalents are worth $185 billion.

Chinese economic and business methods, meanwhile, remain stubbornly resistant to the principles of western best practice. Industrial espionage, bribery and corruption and product dumping are rife; state currency manipulation has kept the yuan artificially low (as should have been foreseen — and prevented — before China was admitted to the WTO on lax terms); and western business has failed to penetrate China’s opaque and complex export-driven markets.

Paterson stresses he did not intend to write a China-bashing book — merely to set out the facts as they are. China, and its triumphant Communist party, can hardly be blamed for having looked after their own best interests. The real fools in this scenario are idiot liberal westerners who made it possible and helped hasten the ruin of western liberal democracy. As Paterson asks at the end: ‘What good is a cheap washing machine if one cannot afford a home to put it in?’

Written byJames Delingpole

James Delingpole is the host of the Delingpod - a weekly conversation with some of the world’s most interesting people.

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