Several studies show the correlation between China’s growing impact on the world’s economies and political populism in the US and European societies.
When industrial workers in the West lose their jobs, the bogeyman is usually China. Earlier this year, steelworkers from all over Europe took to the streets in Brussels to protest against cheap Chinese steel imports. They had the backing of powerful lobby groups and populist politicians who accused China of damaging the global steel market and succeeded in pressuring governments across Europe to demand concessions from China.
Beyond street protest, fears of globalisation play a central role in the American presidential election campaign, the Brexit debate as well as in domestic political disputes in other European countries. But can we establish a relationship between economic competition with China and the rise of populism in the West? The argument that China’s success as an export-oriented nation is a root-cause of the current political polarization in Western societies is not as far-fetched as it may sound. China’s rapid economic rise has triggered structural changes in industrial employment around the world, and these changes indeed influence the views of large groups of voters. Their reactions to these changes might contribute to the destabilisation of established political parties and the political balance of power as currently witnessed in the United States and a number of European countries.
Are fears of globalisation triggered by China?
There is strong evidence to suggest that progressive ‘de-industrialisation’ and pressure on labour markets in manufacturing industries in many advanced economies are related to ‘import shocks’ since China assumed a growing role in the global division of industrial labour.
On the one hand, greater trade integration can lead to a surge in innovation, to new opportunities for exports and growth, and to lower consumer prices. On the other hand, globalisation regularly causes job losses, particularly in manufacturing industries. Recent studies show that China’s integration in global supply chains has indeed put pressure on industrial employment world-wide. The closure and relocation of factories in the United States because of competition from China is now well documented. In some cases, entire towns were devastated by the demise of a local industry.
Measuring the China shock’s impact on the US
Apart from looking at the economic and social impact of globalisation, recent analyses have also focused on the political consequences of China’s expanding exports and the shock that traditional industries have experienced due to cheap Chinese imports. David Autor, an employment researcher at MIT, has pioneered academic work on this subject and heads a research group investigating the political impact of the ‘China shock’ in the US.
From 2000 to 2010, China’s share of global exports in finished industrial products rose from less than five per cent to more than fifteen. Autor found striking parallels between the strong rise in imports from China and the political and ideological polarisation in US congressional elections since 2002. The more exposed local industrial sites were to competition from Chinese imports, the more likely voters were to support candidates who promised simple counter-measures and turned on the political establishment by accusing it of ‘selling out’ to China. A recent report from Banque de France presents similar findings for France.
Italo Colantone and Perio Stanig, two researchers from Milan University in Italy, compared the political effects of the China shock in regional elections across Western Europe: in towns where local producers and workers were strongly affected by Chinese imports, a growing number of voters chose to support political parties that favoured nationalistic, protectionist policies. The Front National in France and the Lega Nord in Italy have both benefited from this change in the electorate’s mood, but they are not the only ones. The number of Brexit proponents in different regions in the UK seems to correlate more closely with the extent of long-term industrial job losses than with the number of foreign migrants in a community.
Germany is an exception
In Germany, a team of researchers led by economist Christian Dippel studied effects of the ‘Chinese shock’ on employment at the Landkreis (district) level. Their research revealed that regions where right-wing parties such as the NPD, DVU and Republikaner succeeded in local elections had been the hardest hit by the relocation of low- and medium-tech manufacturing industries as a consequence of Chinese competition since the 1990s.
Yet Germany is an exception. Overall the country’s strong export sector has been able to innovate and to compensate for these pressures caused by Chinese imports. This had a stabilizing effect on the political system. At least up until 2015, Germany’s established political parties remained unchallenged on the national level and the country did not experience the same level of political polarization that was visible in the UK and in the US.
The fact that German voters have drifted towards populists in recent local and regional elections can be attributed to fears about the fate of the euro and the unprecedented influx of refugees rather than by fears of China. As long as its industrial players remain competitive, the situation in Germany is still a long way from the US where it has become a staple of presidential election campaigns to put the blame for all of America’s economic woes squarely on China.
A German-language version of this article was first published in Frankfurter Allgemeine Sonntagszeitung on 25 September 2016.