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Real steel
April 2018

The world changes fast. In the heyday of Jean-Paul Sartre and the Frankfurt School (and Gosplan and Sputnik), China had a steel industry and Chairman Mao had a famous Little Red Book. Silly Cambridge economists such as Joan Robinson could be found to extol the virtues of Maoism, but they were not in a majority. In truth China was poor and irrelevant, and did not engage in international trade and finance. It was not just inward-looking and protectionist, but autarkic. No one in the American rust belt complained about Chinese cheating.

After Mao died in 1976, the very different Deng Xiaoping emerged as the dominant figure. Never an ideological Marxist, he was acutely aware of China’s backwardness relative, for example, to both Hong Kong on its doorstep and Singapore not far to its south. Deng visited Singapore, and was stunned by its prosperity, modernity and order. Only a fool could overlook that the economic systems in Hong Kong and Singapore were utterly different from the Maoist template. Private property and freedom of contract were protected under the rule of law, while free trade was the defining feature of the city-states’ international economic relations. Astonishingly, in the late 1970s exports from the tiny British colony of Hong Kong exceeded those from the People’s Republic, the nation with the world’s largest population.

Deng decided to imitate Hong Kong and Singapore, and in 1980 set up Special Export Zones as virtual replicas. This was a major step towards one of the most radical trade liberalisations the world has ever seen. China lowered tariffs and abolished quotas over a 30-year period, in order to welcome products from the rest of the world. In other words, it pursued a policy the exact opposite to Trump’s today. Whereas Trump seems to believe that economic greatness comes from blocking imports and cutting domestic producers off from foreign competition, Deng realised that progress would follow China’s opening-up to foreign goods, investment and ideas. Nowadays incomes per head in China are 20 times higher on average than 40 years ago, China’s exports of goods are the largest in the world, and “Made in China” is the most common three-word phrase in the English language. Free trade is good for you, and protectionism is bad; it’s as simple as that. Trump’s ignorant and foolish protectionism belittles and marginalises America, and must be condemned unreservedly.
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