I’m reading ‘Paper Soldiers: How weaponization of the dollar changed the world’ by Saleha Mohsin. I am most grateful to the author, for it has taken me until now to learn the history behind what led to Globalization being caused by a short mantra perpetuated by Treasury Secretary,  Bob Rubin, under the Clinton administration, 1994: “A strong dollar is very much in this nation’s economic interests.”

All our trials and tribulations go back to that effort to maintain a strong dollar.

Yet, I realise our time has come as the UK, the First industrialised nation, and America, the Second, must finally be philosophical about this benefit to other developing nations. We have been replaced in our standing in the world yet we kick and fight to resist. This is difficult for us to live with.

The 2008 financial crisis during Treasury Secretary Hank Paulson’s time, under George Bush’s Presidency, was to result in bailing out the banks who had caused the crisis through excessive risk taking.

The goal was to maintain confidence in the dollar globally – and Paulson (with help from long time beauracrat Mark Sopel) did that.

However, a strong dollar equals cheap imports but also destroys jobs and livelihoods within the US. The cheap imports came from developing nations like China and India who had grasped the opportunity to build competitive and subsidised manufacturing. Labour was cheap and no unions meant easy exploitation and disregard of harmful work environments.

The UK had been a developing nation before it became a rich country, with eventually bringing in laws to create safer working conditions, allowing unions to negotiate for improvements and higher standards for workers, plus education and training. The UK eventually cleaned its grime out of rivers, buildings and drinking water and health care became free at the point of need, for every citizen.

Similarly, the USA had built its strength on industrialization and was also able to combine energy found not just from coal and gas, but oil too. Many people toiled in unsafe smelting furnace and other toxic work environments, emulating the British innovations but building bigger and more productive capacity. WW2 created a boom of manufacturing and millions of jobs, enabling new homes for many and a feeling of security which lasted until Globalization bit them.

Then China was accepted into the World Trade Organization. The final poisonous bite of the snake saw the manufacturing  industries tumble into closure, accelerated by the financial crash of 2008.

Open trade borders help foreign competitors. They raised the quality and standards during their learning phase until their goods were not only cheaper, but better made, than many goods first designed and built in America. American industries moved their manufacturing to those nations who offered cheap labour (no questions asked) and higher productivity (no limit on working hours). This offshoring was endemic amongst corporates whose profits boomed as a consequence. But it also enabled host countries to directly learn about modern technology, techniques and design. Now they don’t need the First World to teach them, they innovate without assistance. They have transitioned away to a “command economy.” They have lifted millions of their own populations out of poverty, just as the UK did, then America did, and now it is their turn.

There was the combination of China being admitted to the WTO and the North American Free Trade Agreement which further opened trade with Canada, Mexico and China which Mohsin calls a “seismic shock” in middle America. Between 2000 to 2007 40 percent of manufacturing job losses occurred, that’s around 2 million jobs.

David Autor has produced ground-breaking research revealing the deep scars of globalization across middle America:

https://economics.mit.edu/people/faculty/david-h-autor/publications-topic

He reveals how an entire generation of blue-collar workers have been left behind despite other economists having lauded open markets and free trade as benefits for all. Their suggestion was to simply retrain such workers into a computer related industry.

I witnessed this myself when I, being experienced in IT in the 1980s, was offered a job training ex-miners in Durham, England to retrain in using computers in the service sector. When I saw the miners situation, I realised asking them to adapt to such an alien environment as a Call Centre compared to the camaraderie of going down a mine, was unthinkable.

So it was with these forgotten workers in middle America. And to add more insult to injury, inward investment was encouraged to restart closed factories by Chinese investment and Chinese run operations. A similar situation happened in the mill town of Hawick, Scottish Borders, famous for its quality woollen goods. The famous brands were bought out by a Chinese company who took all their machines to China and the skilled workers trained the Chinese to produce the garments. Hawick quality of life plummeted when the mills closed, just as it did in towns and cities in middle America.

https://www.famouslyhawick.co.uk/post/a-famous-manufacturing-town

It might be easy to see China as the ‘villain of the piece’ but that is simplistic. They really are not to blame for seizing opportunities we handed to them.