The Ideals and Reality of the Pennsylvania Plan
The United States’ vision for the Pennsylvania Plan essentially centers on achieving economic revitalization through the reshoring of manufacturing, aiming to replicate China’s path of high growth, high inflation, and high income from the 1990s. The core logic behind this vision is that restoring manufacturing capacity will enable the replication of China’s economic miracle of that era.
However, whether analyzed from the supply side or the demand side, this goal is simply impossible to achieve. The global economic landscape of the 1990s was entirely different from today’s: the world before 2008 was an era of extremely robust demand and severe supply shortages. In particular, after China’s reform and opening-up, the entry of one billion people into the global market generated an unprecedented surge in demand. At that time, a large portion of the population had not yet achieved a moderately prosperous life, and demand for industrial goods such as home appliances and automobiles was in an explosive growth phase. The scale of this growth is something the current world cannot replicate.
Artificial Demand Under the Fiat Money System
Global economic growth since 2008 has essentially been driven by artificial demand stimulated through money printing. The increase in GDP generated by printing one U.S. dollar no longer equals one dollar, indicating that the effectiveness of quantitative easing has reached its limit.
This raises a thought-provoking question: During the First and Second Industrial Revolutions, significant increases in productivity led to a general decline in prices; however, since the Third Industrial Revolution, despite the accelerated pace of technological progress, prices have continued to rise. The core reason lies in the shift in the monetary system: during the Industrial Revolutions, the gold standard strictly constrained money supply; today, under the fiat money system, the rate of money printing far exceeds the rate of production.
The demand generated by this excessive money supply is merely an illusion of money; once the bubble bursts, the economy will immediately enter deflation. The market performance following the collapse of China’s real estate market is the most typical example: high mortgage burdens have suppressed the public’s real consumption demand. The situation in the United States is essentially the same; the massive monetary easing of the past few decades has ultimately led to a collective contraction in consumption.
Economic Distortions Caused by Western Subsidy Policies
In recent years, Western countries, including the U.S., have been using public funds to forcibly distort markets in an effort to suppress China. To sever the connection between Western markets and China’s new-quality productive forces, they have been forced to use public funds to heavily subsidize domestic industries: massive subsidies have been poured into sectors such as electric vehicles, semiconductors, shipbuilding, rare earths, and 5G base stations, and all of this spending ultimately translates into government debt.
These subsidies essentially amount to spending money unnecessarily. Originally, Chinese products were high-quality and affordable, and free trade could have fully facilitated the optimal allocation of global resources. However, the United States, Europe, Japan, South Korea, and Southeast Asia are now all duplicating the same industries: everyone is investing in rare earths, steel, and semiconductors, leading to severe global overcapacity and a significant decline in the efficiency of resource allocation.
This debt-driven economic growth model is inherently unsustainable, and the result of all nations simultaneously ramping up production will inevitably be a continuous rise in global deflationary pressures in the future.