The Middle Class Myth, China's Future, and What Really Happened in 1971

This week, Noah Smith and Erik Torenberg debunk myths about the American middle class and globalization, analyze historical data on wage stagnation and trade, assess China’s technological rise, and discuss U.S. economic resilience and policy responses to protectionism.

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RECOMMENDED IN THIS EPISODE:

Globalization did not hollow out the American middle class: https://www.noahpinion.blog/p/globalization-did-not-hollow-out

Noahpinion: ⁠⁠https://www.noahpinion.blog/⁠⁠

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TAKEAWAYS:

Debunking the Middle Class Hollowing Myth: Noah challenges the common narrative that trade and globalization hollowed out America's middle class.

Manufacturing and Economic Shifts: Noah explains that while manufacturing employment did decline significantly (about 3 million jobs in the 2000s), this didn't correspond with overall middle class decline.

The China Shock Reality: The "5% truth" in the middle class hollowing narrative relates to what economists call the "China Shock" - a period in the 2000s when Chinese imports surged rapidly.

America's Globalization Status: Contrary to popular belief, America has never been highly globalized compared to other countries. Import penetration (imports relative to GDP) is much lower than in countries like China, France or Germany.

Energy Crisis Impact: Noah suggests the oil shocks of 1973 and 1979 had a more significant impact on American manufacturing than trade policies.

Sino-Futurism and China's Future: They discuss "Sino-futurism" - the idea that China represents the technological future. Noah argues this perspective is overblown, noting issues with China's rapid infrastructure development (like the durability of construction), urban planning problems, and the cyclical nature of technological leadership.

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