Two Tales Of Subsidies – OpEd


The Secretary of the US Department of the Treasury, Janet L. Yellen visited the People’s Republic of China (PRC) from April 3rd to April 9th, 2024, for bilateral meetings aimed at strengthening healthy economic relationships and engaging in other diplomatic discussions.

During her visit, Yellen expressed concerns about Chinese state subsidies, stating in a press conference that they “pose significant risks to workers and businesses not only in the United States but also globally.” While on a subsidies boat cruise along the Pearl River in the southern Chinese city of Guangzhou, Yellen further criticised China for its industrial overcapacity and unfair trade practices. These comments underscored the ongoing economic tensions between the two countries and highlighted the importance of addressing these issues through dialogue and cooperation.

US Treasury Secretary Janet L. Yellen goes further to say that “China is too large to export its way to rapid growth”. European leaders have been echoing Yellen’s views for a while now. So, she is not acting in isolation with her criticisms aimed at Chinese economic growth and human development. Her Sinophobic views are part of a broader political and economic campaign to undermine Chinese model of alternative post-colonial developments. This perspective is influenced by long-standing colonial legacies and Eurocentric knowledge traditions that have shaped the worldviews of American and European policymakers. These traditions often guide the strategies of their governing bodies, which prioritise protecting their hegemonic interests even if it comes at the expense of people and the planet. The criticisms and concerns expressed by Yellen reflect a historical context where Western powers have sought to maintain their dominance in global economic and political affairs. Such colonial, imperialist, and hegemonic mindset often draws its justifications from Eurocentric knowledge traditions. These traditions have historically positioned themselves as the sole arbiters of scientific truth and morality, aiming to assert dominance globally. This perspective sometimes employs what can be perceived as half-baked philosophies and science, tailored to serve market forces to expand the pyramid of capitalist profits.

Historically, the United States has benefited from state-led protectionist industrial and trade policies that played a significant role in its post-war economic growth in America. However, American policymakers and politicians have often urged countries like China and other post-colonial nations not to adopt similar strategies. Likewise, European nations have frequently employed discriminatory protectionist policies to safeguard their economic interests. While practicing protectionism themselves, both American and European leaders advocate for what they describe as “free trade” to post-colonial countries. This so-called free trade is often neither free nor fair, as it tends to favour the economic interests of the developed Western nations at the expense of developing countries. This double standard in trade policies highlights the complexities and contradictions inherent in global economic relations. It underscores the need for a more transparent, equitable, and mutually beneficial approach to international trade. Developing countries should be given the space to pursue policies that best suit their economic development needs, rather than being pressured into adopting one-size-fits-all capitalist solutions that is not in the best interest of people living around the globe.

The colonial and imperialist plundering of people and their resources laid the foundation for European and American industrial overcapacity and capitalist development, leading to deindustrialisation and underdevelopment in Asia, Africa, and Latin America. Similarly, corporatisation and hegemonic trade practices by Americans and Europeans, and their wars continue to destroy livelihoods around the world. This historical plunder and its continuity have had lasting effects, contributing to deindustrialisation, unemployment, and poverty in regions like Asia, Africa, and Latin America. As a result, many of these regions have struggled to develop their own industries and economies on an equal footing. The corporatisation and hegemonic trade practices in the name of so-called free trade championed by Americans and Europeans, and their neo-colonial policies continue to pose challenges for people around the globe. These practices often prioritise profit over people and the planet, leading to the displacement of local industries and the destruction of livelihoods.

Similarly, Americans and Europeans provide different forms of subsidies and tax reliefs to their farmers, industrialists, bankers, corporates and even to fertiliser and defence manufacturers to be competitive in global market. The European agricultural subsidies are destroying agriculture in Africa. The American federal government spends massive amount on subsidies for farm businesses and agriculture. The corporate agriculture receives the lion shares of subsidies in US. Despite of unequal subsidies distribution, the policies of subsidies have positive impact on production, price and on environment in US under the Environmental Quality Incentives Program (EQIP), Conservation Stewardship Program (CSP) and Conservation Reserve Program (CRP).  

European and American policymakers often leverage institutions like the World Bank, IMF, and WTO to label subsidies as non-merit goods and oppose it, particularly when dealing with post-colonial countries in Asia, Africa, and Latin America. This approach promotes unfair trade practices that benefit Western economies at the expense of developing nations. While European and American farmers and corporations receive subsidies to remain competitive in the global market, these same benefits are frequently denied to farmers in post-colonial countries. This selective application of subsidy policies serves to protect and expand American and European food and agricultural markets, industrial and manufacturing sectors, while hindering the growth and competitiveness of agricultural and industrial sectors in developing countries. Such practices perpetuate economic disparities and contribute to the dependency of post-colonial countries on Western markets and technologies. They also undermine efforts to achieve food security and sustainable agricultural development in these regions.

China’s approach challenges the double standard often employed by Western nations regarding state subsidies. China provides subsidies to promote the production of essential goods and services, aiming to support economic growth and human development while remaining competitive in the global market, much like American and European practices. However, this stance taken by China is often viewed as untenable by American and European policymakers. The capitalist insecurities stemming from China’s rapid economic development and its challenge to Western economic dominance contribute to the emergence of Sinophobia, or a fear and hostility towards China. The Western narrative often portrays China’s economic policies as a threat rather than a legitimate strategy for development. This portrayal overlooks the historical and ongoing subsidies provided by Western nations to their own industries and highlights the selective application of free-market principles. The reality is that state subsidies have been and continue to be an integral part of economic development strategies for many countries, including Western nations. China’s use of subsidies to support key industries and promote economic growth should be understood within this broader context. 

There two contradictory tales on subsidies, trade, industrialisation, and development define the hypocrisy of the capitalist Western nations and their governing elites. The postcolonial countries must unite and reject such a narrative, working together towards an egalitarian international economic order that benefits both people and the planet.

Bhabani Shankar Nayak

Bhabani Shankar Nayak works as Professor of Business Management, Guildhall School of Business and Law, London Metropolitan University, UK.

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