Western Political Liberation: 'Made in China'

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As consumers
in the West, we love China. We are not so fond of India, since we
seldom see "Made in India" stickers on the goods we buy.
But "Made in China" stickers are everywhere.

Wal-Mart in
1998 posted banners saying the company bought American. Apparently,
someone in management thought shoppers cared. They didn’t. Wal-Mart
took down those banners years ago. Nobody protested. The parking
lots did not empty. Companies in China began stocking the shelves
at Wal-Mart, K-Mart, and Target.

Call it the
Bob Barker phenomenon. The price is right. Bob has retired, but
the show goes on. So does its message.

So, if we buy
"Made in China" items, we don’t hate China.

As customers,
we love China.

But if a person
is employed in manufacturing, he fears China. If he has just been
laid off, he may hate China. If the plant where he worked is closed
for good, he blames China.

We all wear
two hats: a consumer’s hat and a producer’s hat. As consumers, we
want producers to compete. As producers, we want protection from
unfair competition. What is unfair competition? Successful competition.

People vote
with their money as consumers. They often vote in a polling booth
as producers. As consumers, they want liberty. As voters, they want
controls, or more to the point, control. Control over them. You
know. Competitors.

Spending is
about liberation from controls on us. Voting is about the imposition
of controls by us.

We are schizophrenic.
It shows.

LIBERATION
FROM TRADE UNIONS

When I was
in my teens, I was interested in national politics. I no longer
am. I used to think we could make things better through national
politics. I no longer do. St. Paul commented on this change of mind.

When I was
a child, I spake as a child, I understood as a child, I thought
as a child: but when I became a man, I put away childish things
(1 Corinthians 13:11).

Back in the
1950’s, there was a political movement called the right-to-work
movement. "The right to work" meant the right to work
without joining a union. It was a great slogan, although it was
bad economics and worse jurisprudence. There is no right to work.
There ought to be a right to make an offer to work. There is no
right to a job. There should be a right to bid on a job. But "the
right to work" was a great political slogan. When explained,
it made an important point: trade unions were limiting the right
for an employer to accept bids from people who wanted to work at
wages lower than what trade union members wanted to match.

Trade unionism
in America in 1955 was limited to about 25% of the work force, but
the manufacturing sector was heavily unionized, especially in the
industrial North. If you did not belong to a union, you had to seek
employment elsewhere. It was illegal for unionized businesses to
hire you as an independent.

As government-protected
producers, union members could demand and receive above-market wages.
They could not legally be fired if they went on strike. People who
crossed a picket line were taunted. They were called scabs.

There are still
scabs today. They are called Asians. There are over three billion
of them. They don’t cross picket lines. There are no picket lines
in Asia. There are few unions. Asian workers produce goods, which
are offered for sale to Westerners. There is no phrase more beloved
by American consumers than "Let’s make a deal." If American
manufacturers cannot beat Asian prices, they go out of business.
Result: no more picket lines. No more jobs.

Union members
should have seen this coming. The process began in the 1950’s. But
"Asia" back then was located south of the Mason-Dixon
line.

In the South
in the 1950’s, right-to-work bills became laws. Employment steadily
moved south, reversing half a century of emigration out of the South.
The South benefited from two things: right-to-work laws and air-conditioning.
The North could not compete, and still can’t.

Right-to-work
laws were passed in the deep Midwest. From Texas to North Dakota,
and from Texas to Virginia, the country is liberated from unions.
Twenty-two states have passed these laws.

The liberated
states are in turquoise
.

If states in
the North abolished state income taxes, and if the Federal government
revoked all "labor legislation" — laws forcing businesses
to bargain with unions that get a 51% vote of employees, just once
— the North would rise again. The North’s economy would start booming,
the way that South Dakota — no state income tax — is booming. But
this is unlikely to take place. The North’s economy is bloated with
bureaucracy, hostile to economic liberty, and aging fast. When you
think "North," think "Senator Kennedy."

Trade unions
fought back in the 1950’s. They could not keep businesses from building
plants in the South, where wages were lower, regulation was weaker,
and politicians could be bribed cheaper. So, they got Congress to
pass a series of minimum wage laws. The first result of these laws
was to keep black teenage males unemployed, thereby reducing competition
in the labor markets. The other result was to keep Southern workers
from being able to bid their labor below the minimum wage. This
made it less profitable to build plants in the South.

But then price
inflation under Johnson, Nixon, Ford, and especially Carter forced
down real wages. The dollar bought less. The legal minimum wage
did not keep pace with price inflation. The Federal Reserve System
did the bidding of four Presidents — debauched the dollar — and
that gutted the minimum wage law.

At the same
time, Japan started exporting low-cost, high-value products. Americans
started buying them. The 1970’s was the decade of the Japanese invasion.
The 1980’s solidified the market share of products manufactured
by Japan, Hong Kong, and South Korea.

Then, in 1978,
Deng Xiao Ping liberated China’s agricultural sector. Output soared
within a year. This made more food available in cities. More rural
Chinese could then move to cities. The joint phenomenon of agricultural
revolution and urbanization, which had begun in the West in the
sixteenth century and has kept accelerating, had at last reached
China. Agricultural output always increases under liberty. Efficient
farmers out-compete inefficient farmers, who then move to cities
or into local trades.

Today, China
must build the equivalent of Houston every month to accommodate
the flood of immigrants from the farms.

Initially,
Japanese goods undermined American manufacturers. Here was the basic
strategy: price competition (1950’s), product improvement (1960’s),
marketing (1970’s), credit (1980’s). Then Chinese manufacturers
got the liberty they needed to compete, when the Communist Party
freed up the economy. China began where all newcomers must begin:
price competition. It caught up with Japan in less than two decades.
Capital flowed in. Technology was either stolen or purchased. Output
soared.

Wal-Mart took
down its "We buy American" banners. That visibly marked
the end of American labor union movement. It exists mainly in the
auto industry, which is approaching bankruptcy, and government,
which is also approaching bankruptcy.

In 1958, I
dreamed of the end of the labor union movement. Because of the Federal
Reserve and Asian manufacturing, my dream has pretty much come true.

EUROPE
FALLS BEHIND

The trade union
movement in Europe is still strong. China is now undermining Europe’s
unions. They are still politically powerful, but consumers like
good deals, and China offers good deals. The French socialists failed
to win last month. China is in the World Trade Organization. The
internationalists’ goal has always been to cut trade barriers and
extend bureaucratic control over the international economy. But
the plan has backfired. The Chinese, with India close behind, have
used the WTO’s managed trade system to breach the Great Wall of
Europe — trade unionism — without surrendering an inch on the question
of adopting European rules regarding pollution, wage negotiating,
and safety.

The internationalists
worked for almost a century to get their system accepted in North
America and Western Europe. Their dream has almost come true. But
they didn’t foresee what Asians would do to their plans. Always,
Asia had been looked at as a market for European and American goods.
Asian farmers would export food to us. We would sell them manufactured
goods.

America now
sells its farm products to China — our only big export success in
China — while "Made in China" stickers are everywhere.

In short, Keynesian
economic planners in the West, who adopted a post-World War II strategy
of imposing government controls on Japan to prepare the West’s economies
for a grand invasion of Asia, knocked down the Asian drawbridges
that had kept out Western goods for centuries. As soon as the drawbridges
were down — in Japan, South Korea, Hong Kong, and Singapore — the
flood of goods started flowing: from East to West. The planners’
grand plan completely backfired. Ludwig von Mises was correct when
he argued that the results of government economic planning will
always be the opposite of the official policy of the planners.

The United
States succumbed first. We were Japan’s primary export market. Then,
nation by nation, Japan’s exporters established a foothold. Western
consumers started buying. The other Asian tigers followed Japan’s
lead.

It is now Europe’s
turn. Bureaucracy is vastly more entrenched in Europe. The welfare
State is more extensive. Taxes are higher. Mobility is less. Europe
is sclerotic economically and biologically. It is aging rapidly.

The European
internationalists have centralized power through the European Union.
They are about to do an end run around voters, who have rejected
the 300-page constitution. The deal will be sealed through treaty,
with no opportunity for voters to register a veto.

The Eurocrats
think they can gain control over the economy by means of faceless
bureaucrats who answer neither to politicians nor businessmen. But
they have no power at all over Asia. They are committed to low tariffs
and managed trade. But the Eurocrats will not terrify China’s politicians.
China’s politicians will smile, bow politely, and do nothing.

China’s politicians
have a unique way of dealing with China’s bureaucrats, as Zheng
Xuaoyu was reminded this week. He ran China’s equivalent of the
Food and Drug Administration. He was executed for taking bribes
from companies that then released drugs that killed ten people.

In 1968, George
Wallace’s third-party presidential campaign had a slogan: "Send
them a message!" They take message-sending seriously in China.

Message to
the WTO: "China will not comply."

China, India,
and the rest of Asia will take advantage of the European Union’s
low tariffs and reduced import quotas. Europe’s main import quotas
are on agricultural imports. Asia imports food, so those restrictions
will have no effect on Asia. As for the WTO’s guidelines on labor
relations and safety conditions, who will enforce them on 200 million
Chinese workers, just off the farm, who earn about $350 a month
for a 12×7 work week?

Heads, Asia
wins; tails, Eurocrats lose.

Europe is going
to find that its government-protected industries suffer a fate similar
to Mr. Zheng’s. It’s just a matter of time.

Europe’s century-old
tradition of social democracy — Marxism without bloody revolution
— will not survive another 25 years. It’s as sclerotic as the rest
of Europe is. If the Eurocrats don’t allow the European economy
the freedom that China now enjoys, European manufacturing is doomed.
Labor unions control manufacturing and government. All over the
West, China’s free market economy is bankrupting both.

THE GREAT
REVERSAL

The West after
World War I began imitating ancient China. Not since the days of
Egypt’s pharaohs has there been a bureaucracy to rival China’s,
which lasted for a thousand years. Entry was based on mastery of
Chinese poetry. Even military officials had to pass this exam. It
was rigorous. Smart people with a gift for poetry passed. This eliminated
nepotism. Sons could not follow their fathers unless they could
pass the exam.

By 1900, the
failure of the old system was visible even to the rulers. The West
had sent theologically liberal socialist missionaries to China in
the 1890’s. The result was revolution: first organized by Sun Yat-sen
in 1913, then under Mao in 1949. China’s leaders had been trained
by liberals in missionary schools and denominational colleges in
China. Mao speeded up the process of social revolution by destroying
old families and old wealth.

India experienced
a similar system of secular evangelism. Its best and brightest were
sent to study at Oxford and Cambridge in 1900. They came back confirmed
Fabians. They became bureaucrats.

Japan had become
Western in 1868, by top-down decree. It went militaristic. It also
went bureaucratic.

All roads were
heading West in 1900: to Marxism, Fabianism, or militarism, but
surely to bureaucracy.

Then came Japan’s
defeat in World War II. The old guard lost face. Industrialists
invited W. Edwards Deming to teach them about quality control in
manufacturing. They were under the impression that Deming was influential
in Western manufacturing circles. He wasn’t.

There was also
Hong Kong’s experiment in liberty after 1945. Deng saw what happened
there. Then he came to power. He imitated Hong Kong.

Next, India
began to follow China’s lead after 1995.

The East has
generally abandoned Western economic theories of protection of labor
unions. It has adopted wage competition and labor mobility. It passes
the savings along to its trade partners.

Under pressure
from Asian imports, the United States has been forced to abandon
the New Deal in the field of labor relations. Now it is Europe’s
turn.

The tide has
turned. Asian politicians have loosened government control over
their economies. The result is enormous productivity. Anyone in
the West who gets in the way of this avalanche of production will
be crushed. Consumers will be crushed with bargains. Producers will
be crushed with competition based on four major factors: unprecedented
price competition, an unprecedented savings rate, an unprecedented
work ethic, and unprecedented labor mobility.

Asia learned
well: first from left-wing teachers, then from Henry Ford.

THE COST
OF LIBERATION

At the beginning
of any revolution, leaders call their followers to a life of self-sacrifice.
For the sake of the revolution, men must sacrifice their lives,
purses, and sacred honor.

That call to
sacrifice doesn’t sell well these days. What sells well is a call
to go to the mall.

If today’s
revolutionary youth leader were as symbol-oriented as yesterday’s,
he would have a large photo on his wall of Sam Walton. Beneath the
photo would be these words: Sam lives!

The West today
is facing a different kind of political revolution: an imported
revolution. It was one exported by the West after World War II:
free trade. Now it is being sent back, embodied in low-price, high-quality
goods.

Those of us
who grew up fighting the Fabians, who were dominant in American
academia after World War II, are at long last seeing the bastions
of Fabian-Keynesian power being bankrupted. The labor unions are
the symbol of this process. They are dying.

They will die
soon enough in Western Europe.

Businesses
that relied on government protection, such as tariffs and import
quotas, are also dying.

Even the public
schools are in trouble. Home school curriculum materials, which
cost a fortune to design and print in 1980, can be bought for $200,
once per family. The program’s
CD-ROM’s are run on a $500 Chinese-made computer.

There will
be more pain for people who were trained to work in government-protected
industries. There will be less pain for consumers.

There will
be great sacrifices made by retirees who trusted their labor unions’
leaders when the leaders negotiated fat pension promises from companies
that can renege simply by declaring bankruptcy. There will be fewer
sacrifices for people who spotted the scam and stayed in the labor
force.

There will
be great pain for taxpayers who have trusted similar promises about
government pensions, Medicare, and drug payment subsidies. There
will be less pain for those who spotted the scam and stayed in the
labor force.

Every revolution
has winners and losers. The winners will be entrepreneurs and consumers.
The losers will be politicians and their victims, who believed political
promises of protection.

Government
today is a gigantic protection racket. Now the "family"
is under assault by products bearing these stickers: "Made
in China."

The revolution
is being made in China. It is not Mao’s revolution. It is Deng’s.

CONCLUSION

My children
will live to see the destruction of the cartel-creating, tax-extracting,
bureaucracy-expanding, sclerotic Fabian Establishment that has had
its way in the West since about 1933. As surely as its evil twin,
Marxism, went the way of all flesh by 1991, so will Fabianism perish.

The cutting
edge of the revolution is a sticker: "Made in China."

In
my mind is a life-sized photo of David Rockefeller. (If I were a
European, it would be Jean Monnet.) Every time I buy something made
in Asia, I mentally stick a pin into the photo.

So, buy something
made in Asia. Support the revolution.

July
16, 2007

Gary
North [send him mail]
is the author of Mises
on Money
. Visit http://www.garynorth.com.
He is also the author of a free 19-volume series, An
Economic Commentary on the Bible
.

Gary
North Archives

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