America Competing against China

Three decades ago our intellectuals were agog over the fact that liberal democracy had won and that history had ended. Dare we say that it was slightly arrogant for Westerners to declare themselves the victors. They wanted to encourage the world to join us, to adopt liberal democracy, with its free enterprise, free elections, respect for human rights and license for unbridled free expression.

If anyone in those halcyon days had evidenced the least perspicacity, and had been willing to get down off his moral high horse, he would have noticed how China, at the time a rising hegemon working its way out of its Cultural Revolution, had dealt with student pro-democracy protests.

When student demonstrators occupied the central square in China's capital city, Chinese leaders did not see Woodstock. They did not see the dawn of a new democratic era. They saw a return to the Great Proletarian Cultural Revolution… and mowed down the student encampment with tanks.

We do not now how many students died, but it was not an insignificant number. Of course, compared to the number of people murdered by the Red Guards during the Cultural Revolution, to the number that died as a result of Mao’s Great Leap Forward, it was relatively insignificant.

At any rate, it should have told us that China was not going to adopt our liberal democracy. It was not about to empower student mobs and to let them run wild. It has been happy to adopt capitalist free enterprise reforms, but is not about to hold elections. Considering who we elect to public office, do you honestly believe that our own practices have made free elections look like a sociocultural panacea.

These notes to introduce Gerald Seib’s astute analysis of the current showdown between the United States and China over trade. Seib writes some of the best news analysis available today, so we pay close attention to his views.

He theorizes that the impasse between the two hegemons has been produced by a misreading-- though it would be more accurate to say, two misreadings. From the American side, we are still bedevilled by the notion that China is going to become a liberal democracy. And thus, we are misreading China.

According to Seib, and as hinted in this blog on several occasions, China sees America as a failing system, politically, economically and culturally. They see a weak, decadent nation led by fanatics and zealots. Why, it was just yesterday that the Supreme Court let stand a local law allowing children to use whatever restroom conformed to the gender they believed they are. When you sacrifice biological reality to ideology you are heading off a cliff. Not enough Americans see it. The Chinese seem to see it clearly.

Seib opens his analysis with this observation:

Since the great opening to China in the 1970s, successive U.S. administrations have operated under the belief that China wanted to update its economy and then become a full, card-carrying member of the international economic system of the First World. The question was simply what that transition would look like, and what rules China would follow along the way.

China is comfortable with its authoritarian capitalism. After all, it sees what happens when school teachers have no control over their classrooms, can exercise no authority, and it does not want the consequences of such dereliction. That’s not all. China is also rejecting the Western financial and trade systems:

As China’s economy has grown, and its global reach has expanded, it no longer feels the need to adapt simply to be accepted into a Western-led financial and trade system.

Instead, it has developed an alternative to that system—its own kind of authoritarian capitalism—that it believes is at least as viable, and perhaps the better model for others to follow.

China wants to expand its influence. It wants to build and construct. America seems less interested in doing the same. Consider the simple fact that when America has a financial crisis it tries to solve it by ballooning the national debt. One day, the debt will come due. One day, the dollar will cease to be a reserve currency. And we will all be screwed. It will not be a happy day.

Seib continues:

“China sees itself less as slotting into an existing system and more as a creator and shaper of a new system,” says Keyu Jin, a professor at the London School of Economics and an expert on the Chinese economy. “It finds the so-called Western financial wisdom and the liberal democratic model unappealing and unconvincing, and in the process of breaking down.”

While America’s infrastructure is crumbling and while Congress seems ill-equipped to do anything about it-- any more than it seems willing to change immigration laws that China must see as self-destructive-- China is working to establish a worldwide trading network. Naturally, the initiative has had its problems. Some countries have taken on too much debt and are at risk of defaulting. And yet, America, in the person of its bored billionaires, seems more concerned with giving alms to the poor and with fighting against the climate.

China’s Belt and Road Initiative, a massive infrastructure development project undertaken with Chinese financing in countries stretching from Southeast Asia across the Indian Ocean and into East Africa, eventually may create an entirely new economic bloc under Chinese influence—and perhaps in debt to China, literally and figuratively.

As for the current trade negotiations, America wants China to change its system, to decouple government from industry. As noted on this blog, even though America has less government interference in business, it has far more bureaucrats, lawyers, environmentalists and diversity activists gumming up the works. Anyway, China is not buying the American way:

American negotiators are trying to force the Chinese to make systemic changes in their system, particularly in the dominance of state-owned businesses and the ability of the government to extract technology and intellectual property from the business sector.

But such components of the Chinese system no longer appear to be simply temporary structures as China matures, but rather pieces of the new model. Chinese officials are more interested in making temporary changes to their buying and selling patterns to satisfy the U.S. than they are in changing a system they now consider the wave of the future.

We are not prophets and do not know the future. And yet, it is sobering to think that China believes authoritarian capitalism to be the wave of the future. They believe that it will prevail over what they see as a decadent liberal democracy, a system of government that cannot even control its borders, that has homeless encampments in its major cities and whose House of Representatives cares more for destroying the president of the United States than for getting anything done:

Yet even a trade deal in coming months will represent only a pause in what appears to be an inevitable, and lengthy, period of competition between the U.S. and China.

To be sure, China has plenty of work to do. Millions of Chinese peasants still aren’t sharing in the country’s prosperity, and China has to show that its Belt and Road projects can actually advance other nations without weighing them down with debt.

Meanwhile, though, Chinese officials have had a change of attitude, experts say. They see a Western financial system that led the world to the brink of depression with the 2008 financial crisis, and Western democracies trapped in debilitating paralysis, and aren’t sure that is the model for them.

Some sobering thoughts.