Belmont Club

U.S. Versus China

U.S. Versus China
(AP Photo/Andy Wong)

The competition between the United States and China for the leadership of the 21st century is basically a contest between social and economic systems. While there is often talk of war between the two countries, such an event would be so damaging that WW2 in the Pacific would pale by comparison. In 1941 the U.S. had 12 times the war-making industrial power of Japan. By contrast, the U.S. economy in 2019 is only 1.5 times bigger than China’s, which, with more than 4 times the population, could conceivably exceed it. Armed conflict would be so prolonged and catastrophic that neither side would war on the other except by accident.

The purpose of military forces in deterrence is to drive conflict to the arena of economic and social competition and the winner of the U.S.-China struggle will be the society that manages to unleash the creativity of its population. Will it be the dictatorial Communist Party of China (CPC) or the sclerotic Western elite? That the contest is even close is testimony to how stagnant the West has become. As George Gilder noted in his book The Scandal of Money: Why Wall Street Recovers but the Economy Never Does: “China today is a Rorschach test of American leadership.” With the news cycle dominated by charges of white racism, climate change and gender identity who even talks about China?

When asked what would happen in 1997, when Great Britain was to transfer control of Hong Kong to the People’s Republic of China, I said, “1997 is the year that Hong Kong will begin to take over China.” At the time, I had no real sense of how this would happen. But the mayor of Shanghai and later PRC president, Jiang Zemin, and Premier Deng Xiaoping led a movement to duplicate the success of Hong Kong in “free zones” all along the coast of China. Beginning with Jiang’s Shanghai, these free zones, modeled on Hong Kong, produced what we all know now as the “Chinese miracle.”

Now China could garrison Hong Kong, reversing the process by which it rose to riches to preserve the power of the CPC. A crackdown in China’s “Greater Bay Area”, encompassing Hong Kong, Macau, and the nine major cities of Guangdong province would effectively slaughter the golden goose. Beijing’s problem mirrors the Western ruling class dilemma exactly. The price of saving the Party’s institutionalized mediocrity is to outlaw entrepreneurial risk-taking. It’s a price Western elites have long been willing to pay. This is most clearly expressed in the system of political quotas.

A school-diversity panel created by Mayor Bill de Blasio wants to junk the gifted-and-talented programs … in city schools … arguing that such programs perpetuate racial inequality because they’re comprised mostly of white and Asian students.

Every school in the city should be engineered to match the exact racial mix of the city, and there should be no sorting by academic ability, an education panel handpicked by Mayor Bill de Blasio and Schools Chancellor Richard Carranza said. Productivity is sacrificed to political correctness. The system intervenes not only to save institutions “too big to fail,” but also political voting groups too valuable to give an “F.”

In the process, both the Chinese and Western elites destroy information. As Gilder notes, “In a just system of growth, business must be open to bankruptcy as well as to profit. When government puts its thumb on the scales of justice, manipulating money through guarantees and other exercises of power designed to stimulate economic growth or protect assets, it stultifies this learning process.” He says that like it’s a bad thing — which it is — but politicians are falling all over themselves to do it.

Such a system can determine who gets a bailout from the Fed and who gets a diploma from de Blasio’s diversity schools, but generates little information about who can turn a profit and which students will be the next Einstein. By destroying the measuring stick, defining money as a function of government decisions and competence as a consequence of political correctness, the Western elites have created an artificial, gradually shrinking world.

In a dismal account of the limits to growth, Gordon foresees productivity’s running into six “headwinds”—demography (slowing of workforce growth), education (diminishing returns of learning as schooling spreads), inequality (with 52 percent of income gains siphoned off to the “One Percent”), globalization (the worldwide reach of U.S. technology pushing down U.S. pay), energy and the environment (“global warming” halting the huge historic growth contributions of fossil fuels), and an overhang of consumer and government debt, perhaps epitomized by the crisis of entitlement liabilities, $120 trillion in the United States alone.

Such luminaries as the former Treasury secretary Lawrence Summers sum up the result as “secular stagnation”—a near-permanent retardation of growth. The Frenchman Thomas Piketty, demonstrating that not all his countrymen share Alexis de Tocqueville’s admiration of American exceptionalism, has extended the essential argument into a new Marxian “central law of capitalism.” Free markets have reached the end of the line of accumulation and growth, ushering in an era of redistribution and zero-sum reshuffling of wealth.

Spreading this pall of pessimism in American politics is the Democratic Party. In a signature appointment, President Obama named as his chief science advisor John Holdren, a population and climate catastrophist who once called for poisoning the water with sterilizers to halt population growth. Importing the Marxian-Malthusian theories of Piketty, Democrats see inequality as stemming from an oppressive and conspiratorial accumulation of wealth. The cause of poverty, the Left tells us, is wealth!.

This manipulation may work in a closed political system, but at the level of international competition it must fail. Holdren notwithstanding, China produced ten times more steel over the last twenty years than did the United States and Japan together and used more cement in the last three years than the U.S. used in the entire twentieth century. The Chinese don’t care who the de Blasio diversity panel brand as “racist.” They are beyond his power. Against such a challenge the Western elites must either raise their game or fall behind. Shaming editorials, denunciation on talk shows or academic brainwashing are helpless against 1.4 billion politically incorrect competitors who can only be bested by superior excellence. It’s as if the PC system has run into a force of nature, like an earthquake or an asteroid, that it can’t command.

China is a corrupt totalitarian state worse in many respects than the Western establishments it threatens. Its triumph is hardly to be desired. But the Communist Party of China faces exactly the same limits to its power its counterparts do: competition from the outside. It is the fear of American innovation, not the vapid declarations by politicians that they “stand with Hong Kong,” that really prevents the commissars from plunging the dagger into it. The instinct for survival keeps Beijing from crushing the rebellious Hong Kongers. One wonders whether the complacent rulers of Western capitals are similarly constrained or whether they have been in power too long to feel threatened.

Ultimately the leadership of the 21st century will go to whichever society fixes the problem of information corruption first. If the West can rebuild its system of monetary and civilizational accounting then it can regain its vitality. Alternatively, China, with the memory of poverty and humiliation still vivid in living memory, may pay greater homage to the facts. If Western civilization fails, this epitaph will be chiseled on its tombstone: “We thought the facts didn’t matter.”

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The Scandal of Money: Why Wall Street Recovers but the Economy Never Does, by George Gilder. In this book, Gilder unveils a radical new explanation for America’s economic woes and shows how a small cabal of elites have manipulated currencies and crises to stifle economic growth and crush the middle class.

Scipio Africanus: Greater Than Napoleon, by B.H. Liddell Hart. The classic biography of Rome’s greatest general and the victor over Rome’s greatest enemy, Hannibal.

On Desperate Ground: The Marines at The Reservoir, the Korean War’s Greatest Battle, by Hampton Sides. This is Sides’s version of this epic clash at the frozen shores of the Chosin Reservoir, based on fresh research, unpublished letters, declassified documents, and interviews with Marines and Koreans who survived the siege. Faced with probable annihilation, and temperatures plunging to 20 degrees below zero, the surrounded, and hugely outnumbered, Marines fought through Chinese enemy forces with ferocity, ingenuity, and nearly unimaginable courage as they marched their way to the sea.

Ottolenghi Simple: A Cookbook, by Yotam Ottolenghi. 130 streamlined recipes packed with Ottolenghi’s signature Middle Eastern–inspired flavors, all simple in at least (and often more than) one way: made in 30 minutes or less, with 10 or fewer ingredients, in a single pot, using pantry staples, or prepared ahead of time for brilliantly, deliciously simple meals.

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Did you know that you can purchase some of these books and pamphlets by Richard Fernandez and share them with your friends? They will receive a link in their email and it will automatically give them access to a Kindle reader on their smartphone, computer or even as a web-readable document.

Open Curtains by George Spix and Richard Fernandez. Technology represents both unlimited promise and menace. Which transpires depends on whether people can claim ownership over their knowledge or whether human informational capital continues to suffer the Tragedy of the Commons.

The War of the Words, Understanding the crisis of the early 21st century in terms of information corruption in the financial, security and political spheres

Rebranding Christianity, or why the truth shall make you free

The Three Conjectures, reflections on terrorism and the nuclear age

Storming the Castle, why government should get small

No Way In at Amazon Kindle. Fiction. A flight into peril, flashbacks to underground action.

Storm Over the South China Sea, how China is restarting history in the Pacific.

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