US Presidents, European leaders and their academic spokespeople
have attributed China’s growing market shares, trade surpluses and
technological power to its “theft” of western technology, “unfair” or
non-reciprocal trade and restrictive investment practices. President
Trump has launched a ‘trade war’, – raising stiff tariffs, especially
targeting Chinese exports – designed to pursue a protectionist economic
The China-bashers of the western world ignore the developmental
experiences of the past two hundred and fifty years, starting with the
post-revolutionary United States policy of protecting ‘infant
In this essay we will proceed to criticize the model underlying the
current western attack on China. We will then turn to outlining the
experience of countries which overcame backwardness in the course of
successfully industrializing their economies. Development in Historical Perspective
Western ideologists claimed that ‘backward economies’ should follow a
development path originally established by successful countries, namely
They argued that ‘stages of development’ begin by embracing liberal
free market policies, specializing in their ‘comparative advantages’,
namely exporting raw materials. Economic ‘modernization’ would lead,
stage by stage to a mature high consumption society.
The advocates of the liberal stage theory dominated the economic
departments of major US universities and served as the planning strategy
advocated by US policy makers.
Early on, dissenting economic historians pointed out serious
anomalies. For example the ‘early developers’ like the UK secured trade
advantages, products of a world-wide empire which forced colonies to
exporting raw materials under unfavorable terms of trade, an advantage
which ‘later countries’ lacked.
Secondly the post-revolutionary US led by Treasury Secretary
Alexander Hamilton successfully promoted protectionist industrial
policies to protect US “infant industries” from the established UK
Empire. The US civil war was fought precisely to prevent US plantation
owners from linking their exports to British liberal free traders and
In the mid-19th and early 20th century, developing countries like
Germany, Japan and Soviet Russia rejected the ideology of free trade and
open markets in favor of state-centered protected industrialization.
They succeeded in overcoming backwardness, competing and overtaking the
‘early developers’ like the UK.
In the post-World War 2 period, after unsuccessful attempts to follow
the ‘western free market’ model, South Korea, Taiwan and Malaysia
successfully pursued statist, protectionist export models of
Regions and countries which followed western free-market policies
specializing in primary goods exports like Latin America, Africa, the
Middle East and the Philippines failed to overcome stagnation and
A leading economic historian Alexander Gerschenkron
argued that economic backwardness provided emerging countries with
certain strategic advantages which involved systematic substitution of
imports by domestic industries leading to dynamic growth and
subsequently competitive export strategies. (Economic Backwardness in
Historical Perspective: A Book of Essays)
The successful late developing countries borrowed and acquired the
latest productive techniques while the early developed industrializer
remained with the existing outmoded methods of production. In other
words, the developing countries, guided by the state, ‘jumped’ stages of
growth and surpassed their competitors.
China is a superb example of Gerschenkron’s model. Through state
intervention, it overcame the constraints imposed by the monopoly
controls of existing imperial countries and rapidly advanced through
borrowing the most advanced technology and innovations and then moved on
to become the most active filer of advanced patents in the world. In
2017 China surpassed the US filing 225 patents in 2017 while the US
lagged behind with 91 (FT 3/16/18 p. 13).
An excellent example of China’s advances in technological innovation
is the Huawei Group, which spent $13.8 billion on research and
development in 2017 and plans to increase its annual R&D budget to
$20 billion a year. Chinese companies will lead standard setting in
next-generation technologies, including networking (FT 3/31/18 p 12).
Washington’s resort to excluding China from US markets has nothing to do
with China ‘stealing’ US patents and secrets and everything to do with
Huawei’s R&D spending directed at obtaining talent, technology,
equipment and international partnerships. The White House’s
protectionist Sinophobia is driven by its fear of Chinese advances in
fifth generation high-speed data networks, which are undermining the US
ability to compete in cutting edge technology.
China’s competitive excellence was the result of the state’s
systematic substitution of advanced technology, which allowed the
economy to gradually liberalize and out-compete the US in global and
China has followed and exceeded the example of earlier late
developing countries (Germany and Japan). It combined advanced
industrial export growth as the leading sector with a relatively
backward agricultural sector providing cheap labor and low-cost
China is now moving up the development ladder, deepening its domestic
market, advancing its high technology sector and gradually reducing the
importance of the low value consumer and rust belt industries. Cry-Baby Economies Revert to Protectionism
The US failure to compete with China and its resulting trade deficits
are a result of its inability to incorporate new technologies, apply
them to domestic civilian production, increasing income and upgrading
and incorporating the labor force into competitive sectors which could
defend the domestic market.
The state has surrendered its leading role to the financial and
military elites which eroded US industrial competitiveness. Moreover,
unlike China the state has failed to provide leadership in identifying
priority targets compatible with intensified competition from China.
While China exports economic products, the US exports arms and wars.
The US has a surplus of arms exports and a growing commercial deficit.
China has multi-billion-dollar infrastructure investments in over
fifty countries that enhance trade surplus. The US has
multi-billion-dollar expenditures in over 800 overseas military bases. Conclusion
US charges that China has emerged as a world-economic power by unfair
trade and theft of US technology ignores the entire history of all late
developing countries, beginning with the US rise and eclipse of the UK
during the 19th century.
The US attempt to turn back the clock to an earlier stage of
protectionism will not raise US competitiveness nor increase its share
of the domestic market.
US protectionism simply will result in higher prices, unskilled
labor, war debts and financial monopolies. A US “trade war” will simply
allow the Chinese state to divert trade from the US to other markets and
re-direct its investments toward deepening its domestic economy, and
increasing ties with Russia , Asia, Africa, Latin America and Oceania.
The US ‘blame game’ with China is misplaced. Instead it should
re-examine its reliance on a laissez faire economy with neither plan nor
reason. Its resort to tariffs will increase costs without raising
income and improving innovation.
Current US protectionism began ‘still born’. The White House has
already downgraded its tariff which targeted competitors. Moreover its
$60-billion-dollar tariff on China affects less than 3% of its exports.
Instead of seeking to blame outside competitors like China it would
be wiser to learn from its experience and absorb its technological
advances and its strategic investments in infrastructure and domestic
consumption. Until the US reduces its military spending by two thirds,
and subordinates its finance sector to industry and domestic households
it will continue to fall behind China.
Instead of returning to the strategy of backward countries relying on
protecting infantilized industries, the US should accept its
responsibilities to compete through state directed development linked to
upgrading its labor force, raising skills and expanding social welfare.
Prof. James Petras is a research associate of the Centre for Research on Globalization.
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responsibility of the author(s). The Centre for Research on
Globalization will not be responsible for any inaccurate or incorrect
statement in this article.
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