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Different forces drive views of China in the US and Australia

Posted By on July 14, 2020 @ 14:50

The polarisation of politics in the United States, where belief in the danger of coronavirus has become the latest partisan divide, has been fuelled by the impact of Chinese competition on traditional manufacturing districts.

The economic basis of US political polarisation has been demonstrated in a new paper [1] from leading economist David Autor which shows how the middle political ground has disappeared in the districts most affected by Chinese competition. Non-Hispanic whites have veered to the right of the Republicans, while African Americans and Hispanics have swung to the left of the Democrats.

Autor’s latest paper, written with a group of co-authors, builds on his pioneering work showing that the economic principle that trade benefits everyone doesn’t hold true when individual districts are examined.

Economic theory going back to Adam Smith and David Ricardo in the 18th century contends that the jobs lost to import competition will be made up by new jobs generated elsewhere. However, Autor found that [2] the inroads made by Chinese exporters into the US market following China’s accession to the World Trade Organization in 2000 were accompanied by rising unemployment, lower labour force participation and lower wages in US manufacturing districts.

His latest study shows that the economic shock has had major political effects. Although the gains in support to the right of the Republicans have broadly matched the gains to the left of the Democrats, the Republican gains have come from swing seats, whereas the Democrat gains have come in districts they already held.

The overall result has been an increase in the number of conservative Republican representatives in Congress. The study emphasises that ‘trade shocks appear to catalyze support for more extreme actors in both parties, at the expense of moderates, indicat[ing] that we are not simply capturing a general rightward shift in US politics’.

However, the electoral impact has been heavily in Republicans’ favour. Between 2002 and 2016, the probability of moderate Democrats getting elected more than halved, while the probability of a conservative Republican winning office rose by 85%.

There was also a statistically significant impact on US presidential elections, with trade-exposed districts more likely to vote Republican. The study found that voter turnout and political donations were both higher in the most trade-exposed districts, suggesting this phenomenon increases the intensity of election campaigns.

Although the Republicans have traditionally been the ‘free trade’ party, Republican representatives in trade-exposed areas tend to be protectionist. The protectionist sentiment was captured by Donald Trump’s ‘America first’ slogan in his successful 2016 election campaign.

While Chinese competition has been far from the only cause of structural change in US industry, the study argues that the impact of technology has been felt in both wealthy cities populated by white-collar professionals and factory towns populated by blue-collar workers, whereas only the latter group has been displaced by import competition. It’s in the factory towns that political polarisation has been most acute.

The primary indicator of the polarisation in US politics is partisanship: the extent to which people like their own party and dislike the opponent. A study [3] by the Pew Research Center showed that US voters felt more warmly towards their own party in 2019 than they did at the time of the 2016 election and had become much more hostile towards the opposition.

The survey ranks how warmly people feel about a party on a scale of 1 to 100, and found that among Democrat voters, the score for their own party rose from 67 to 82 between 2016 and 2019. There was a smaller rise from 77 to 84 among Republicans.

The shift in views about the opposition, measured on a similar scale tracking ‘coldness’, is more extreme: Democrat views of Republicans went from 56 to 79, and Republican views of Democrats went from 58 to 83.

Around half the voters for both Republicans and Democrats say voters for the other side are more immoral than other Americans, and large majorities say the other side is more close-minded. The division is evident everywhere: recent surveys show Republicans think the worst of the coronavirus pandemic is now history, whereas Democrats believe it still lies ahead.

None of these trends is evident in Australia. A new study [4] of political polarisation across nine countries found that the US had become much more polarised than other nations, though there was also an increase in polarisation in Canada, New Zealand and Switzerland. By contrast, the level of polarisation fell in Australia, Germany, Norway, Sweden and the United Kingdom.

The Australian result may surprise those who recall the bitterness of political division during the governments of Kevin Rudd, Julia Gillard and Tony Abbott. It draws on the findings of the Australian election study [5] conducted by Australian National University researchers showing that voters have become less firmly committed to their own party and less hostile towards the opponent.

The big political trend in Australia over the past 20 years has been the growing share of the vote captured by minor parties, amid disaffection with the two major parties.

The manufacturing sector in Australia has not suffered the squeeze from Chinese competition to the same extent as in the US. The big hit to Australian manufacturing occurred in the 1980s and 1990s in response to the lowering of tariffs and the floating of the Australian dollar.

By the 2000s, much of the surviving Australian manufacturing industry was in subsectors where there was a comparative advantage, such as food or resource industry supplies, or where there was natural protection, such as building materials which are too bulky or heavy to ship.

Although areas of Australian manufacturing did suffer during the 2000s as the resources boom drove the Australian dollar to its 2011 peak of US$1.10, there was a clearer positive effect on the Australian economy from engagement with China, with the resources boom contributing to gains in household living standards across the income distribution.

While the latest Lowy Institute poll shows that Australians are increasingly disenchanted with China, this reflects what they learn from the media and political leadership, rather than being a visceral reaction to their own lived experience, as has been the case in the US manufacturing heartland.



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URLs in this post:

[1] new paper: https://economics.mit.edu/files/11559

[2] found that: http://economics.mit.edu/files/7723

[3] study: https://www.pewresearch.org/politics/2019/10/10/how-partisans-view-each-other/

[4] study: https://www.brown.edu/Research/Shapiro/pdfs/cross-polar.pdf

[5] Australian election study: https://australianelectionstudy.org/wp-content/uploads/Trends-in-Australian-Political-Opinion-1987-2019.pdf

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