Sunday, Nov 2, 2025
By Devin Savage
There’s a bitter irony in reading David J. Lynch’s recent Washington Post piece about America’s desperate scramble to break free from Chinese rare earth dominance. The Trump administration is now deploying “big-government tools” – ownership stakes, price guarantees, purchase commitments – to undo decades of what Lynch correctly identifies as “the sanguine approach to globalisation that Republicans and Democrats once supported.”
But rare earths are merely one tentacle of a much larger creature we’ve been feeding for decades.
The Mythology of Mutual Benefit
Beginning in the 1990s, Western corporations and politicians sold their publics a seductive fiction: that moving manufacturing to China would create a win-win scenario. Consumers would get cheaper goods, corporations would get higher profits, and somehow – through the mysterious alchemy of free trade – everyone would benefit. China would democratise through economic integration. Western workers would move up the value chain to better jobs. The rising tide would lift all boats.
This narrative required ignoring several inconvenient truths:
-Labor arbitrage is zero-sum at the worker level. When a factory job paying $20/hour moves to China to pay $1/hour, that $19 difference doesn’t evaporate – it flows to corporate profits and executive bonuses. The American worker who lost that job doesn’t magically ascend to a $30/hour position; more often, they end up in service work paying $12/hour.
-Technology transfer is a one-way street. Every factory built in China, every joint venture formed, every Western engineer sent to set up production lines represented a permanent transfer of knowledge and capability. As Lynch notes about rare earths: “Chinese companies account for 91 percent of global rare earth refining capacity.” That didn’t happen by accident – it happened because we taught them how.
-Authoritarian regimes don’t democratise through trade – they weaponise it. Just as Putin weaponised Europe’s energy dependence, China has systematically weaponised manufacturing dependence. The assumption that economic integration would liberalise China was perhaps the greatest delusion of the post-Cold War era. The Chinese Communist Party is designed to hold on to power at all costs. Building up a rival working class is not on the menu.
The MAGA Misdirection
The political exploitation of this manufactured crisis reveals another layer of cynicism. The MAGA movement correctly identifies that American workers have been betrayed, but deliberately misidentifies the perpetrators. They point fingers at “Democratic elites” while conveniently ignoring that:
The push for NAFTA and China’s WTO entry was thoroughly bipartisan
The primary beneficiaries were the ownership class – traditionally Republican donors
The same politicians now decrying the “China shock” enabled China, and looked the other way when it became clear that China could become a threat to the West
You can’t be the hero when you create a crisis, then blame your political opponents for the consequences of policies you championed!
(That’s called being a hypocrite.)
The Real Cost Accounting
What did the West actually purchase with its manufacturing exodus?
We thought we were buying:
-Cheaper consumer goods
-Higher corporate profits
-Chinese democratisation
-Permanent competitive advantage
What we actually bought:
-Hollowed-out post-industrial communities
-Opportunity for drug dealers and deaths of despair in the Rust Belt
-A militarised authoritarian rival that threatens to swallow up Taiwan, the source of our chip manufacturing
-Supply chain vulnerabilities that threaten national security
The parallels to Europe’s energy dependence on Russia are unmistakable. In both cases, the mercantile hand pursued the cheapest option while the security implications were rationalised away. See my blog post on Europe and cheap energy from Russia: “The mercantile classes convinced themselves that economic integration would democratise Russia, that buying gas somehow conveyed Western values eastward.”
The Billionaire Beneficiaries
Here’s what never gets discussed in polite company: this wasn’t a policy failure – it was a policy success for those who designed it. Consider:
The Walton family (Walmart): Net worth increased from ~$20 billion in 1990 to over $250 billion today
Jeff Bezos (Amazon): Built a trillion-dollar empire on mostly Chinese supply chains
Apple shareholders: Watched the company become the world’s most valuable by manufacturing in China
These fortunes weren’t built on innovation alone – they were built on labor arbitrage, on the difference between what an American worker used to earn and what a Chinese worker would accept.
Thanks to JibJab for their very apropos commentary- years ahead of its time.
The Security Bill Comes Due
Now, as Lynch’s article demonstrates, we’re discovering that the true cost of those “cheap” goods includes:
-Hundreds of billions in military spending to counter Chinese expansion
-Massive government interventions to rebuild strategic industries
-Economic disruption as we attempt to “reshore” or “friendshore” production
-The existential risk of depending on a strategic rival for critical materials
The Pentagon becoming the largest shareholder in MP Materials isn’t a sign of strength – it’s an admission of catastrophic strategic failure. Short-sighted quick profits won out.
Breaking the Cycle
The pattern is clear across both Russian energy and Chinese manufacturing:
-Short-term profits override long-term security
-The American mercantile class captures the gains (Including the Russian oligarchs and the Chinese elites on the other side of the equation.)
-The working class bears the losses
-Authoritarian regimes accumulate power and leverage
-Crisis eventually forces expensive government intervention
-The cycle repeats with the next “cheap” option
We will watch Western companies now scramble to resuscitate American manufacturing. Or, will they be forced set up shop in Vietnam, India, and Bangladesh- due to labour shortages? One has to ask: are we learning anything? Or are we simply starting the cycle again, building up the next generation of strategic rivals? Will India be the next power to assert itself on the global stage? Who will pay to deal with China? I don’t think Bezos or the Walton family will be asked to pony up. The GOP will see to that.
The Lesson We Refuse to Learn
Karl Friedhoff’s observation in Lynch’s piece is particularly apt: “Well, we should let the free market decide this,’ and well, the free market did decide it. That’s what got us into this position.”
The free market is amoral. It doesn’t care about national security, worker dignity, or democratic values. It cares about the next quarterly earnings report. When we allow the mercantile hand to guide strategic decisions, we shouldn’t be surprised when we end up strategically compromised.
The hundreds of billions we’re now spending to counter China, to rebuild domestic manufacturing, to secure supply chains – these are the hidden costs of those “cheap” goods we bought for thirty years. The bill always comes due; it’s just that those who profit from the transaction are never the ones who pay it.
Did America’s southern slaves obtain a toe-hold on any freedoms due to their cotton going to Liverpool factories? (Hint: no.) We’ve convinced ourselves that buying from authoritarian regimes somehow spreads freedom, when history shows it only strengthens the chains – both theirs and, eventually, our own.
The question isn’t whether we’ll repeat this pattern – I’m afraid we’re already doing it. The question is whether we’ll admit what we’re doing while there’s still time to change course, or whether we’ll need another crisis to force another expensive, painful correction.
Humans seem incapable of preventing Titanic copy-and-paste disasters – we only respond after the ship starts to sink. The American manufacturing base was our Titanic. The question now is whether we’ve learned enough to avoid the next one, or whether we’re already booking passage while admiring the pretty icebergs and ignoring the lack of lifeboats.
Kindest Regards,
Devin Savage
Tübingen
