What the World Should (and Won't) Learn From China About Capitalism

China's embrace of free international trade and mostly un-hindered capitalism since 1978 has led to the greatest economic boom seen since we began recording such things. China has averaged a titanic 9% GDP growth over the past 30 years--last year, it hauled 10.1%. The Chinese love it, and all that I have talked have no shame about embracing capitalism (even though they do not care about the individualistic moral arguments, only the gritty practical ones). They often wonder why more countries haven't adopted a similar thing.

I spoke to a lot of folks--coworkers, random street-goers, laborers and white-collars alike, talking about the doubts of other countries against Chinese adoration of the free market. These are their responses and my research:

Trade Gap: Countries like the US worry about a large trade gap between China and the US, and therefore shy away from free trade with countries like China, whose economy is hot. Trade restrictions can slow a trade gap by forcing, with law, a country's citizens to not be allowed to acquire certain goods or services, but this is clearly not a great way to do things--the government forces denial, forces scarcity. The Chinese bring up 2 points in response to this problem for the US: 1) If the US did not regulate its economy so much, more business would emerge, and would be able to lower operating costs, therefore lowering the prices of exported goods, making them more competitive on the open market. US Regulation, not a failure of the market, is to blame for the US' lackluster exports. 2) Even if the US is too afraid to let its economy fly free, great restrictions on exports to China have existed since the 1989 crackdown in Tiananmen--not just weapons, but manufacturing equipment, precision machinery, computing technology--China wants to buy from us, certainly, but we are denying ourselves the ability to sell our most competitive products. We have nobody to blame but ourselves for the deficit, and trade restrictions will not fix the problem, only change our problems from one of trade deficit to one of scarcity. The US government must make its economy more friendly to business if it wishes to compete--it cannot both crush its own businesses with excessive regulation and expect Americans or foreigners to buy from said businesses. Westerners believe some myth that one must protect its own industries--but China has neither been crushed from above by Japan or the US, nor had its industry stolen from below by Vietnam, Indonesia, Philippines. Some Chinese industries are certainly moving to Southeast Asia, but that is good for China, as it would be for the US--these industries run more efficiently elsewhere, and Chinese consumers and businesses can access these goods at cheaper prices, where China's open capitalist market means that the job market can respond extremely quickly to a factory closing or outsourcing, and create new jobs. China has managed to create this growth and lower its unemployment by opening as it did--why most Americans think the opposite would happen here baffles me.

China is still impoverished. Sure, it's got a long way to go. But in the last 30 years, the number of people under the UN's poverty line has gone up from 1.2 billion to 1.3 billion. The number of people under that line in China has reduced by 500 million. China is the only country in the past 30 years to reduce poverty by nearly that extent--and the only other countries reducing it at all are other Asian countries that are jumping on China's free trade bandwagon. We westerners believe a myth that free trade causes poverty, hurts the poor the most, but all of our noble efforts of foreign aid, of the IMF, the World Bank, they have done nothing to reduce poverty elsewhere, where China's cold capitalism has spread money, extremely quickly, to its most impoverished areas. Xinjiang and Tibet, China's two most impoverished regions, have seen a 26-fold increase in their local GDPs in the last 30 years. China is solving its poverty problem in a rather obvious way; Deng Xiaoping realized in 1978 that one cannot solve poverty by redistributing wealth that barely exists... the best way was to create new wealth, and that all would have a share.

China has a large income gap. It's imperfect, sure. But both the poor and the rich are getting richer, quicker than anywhere else. Trying to stop the gap from growing could only slow the whole economy down. Of course investors and managers are going to benefit more than laborers during a growth boom. But could you look a poorer man in the eye and say "we're going to make you less wealthy than you could be, so that we can make the rich even less wealthy than they could be, because we elites don't like this thing called an 'income gap?'" Nobody's saying capitalism is going to, on its own, solve the world's problems. The Chinese claim only that it is significantly better than the alternative, and a bunch of wealthy people with a large income gap is certainly better than poor with a small one.

China is hurting the environment. Yup. But it can clean it up with the wealth it is creating. Environmentalists have come up with a new scheme called the "Green GDP," which subtracts the economic cost of the environmental impact of a country's growth. China's "Green GDP" is still over 7%/year over the past 30 years, giving it the by-far highest Green GDP growth of any country on earth. So economically, it still makes sense to go full tilt, and pay for the mess. The environment is certainly an important issue, don't get me wrong. But environmental concerns and human concerns conflict, and I believe China has its priorities right--first, establish wealth in the country, bring the poor out of poverty, give the Chinese a standard of living that is acceptable to them, then allow the economy to be slowed down by economic growth. Pristine lands mean nothing if your people are too hungry and diseased to enjoy them--they are not a good in and of themselves, only a good in so far as humans can use them and appreciate them.

China is Neocolonialist. Sortof, but this is also a good thing. It's starting to move much of its own very dirty industry overseas, in part because its workers' salaries are getting too high for such industry to be efficient in China (one of the lessons we westerners most persistently refuse to learn), and because China does not want to deal with the environmental impact. Is China just moving the problem elsewhere? Sure. But two points: 1) When we create technology that means we don't have to go through the messy process of mining, casting, smelting, etc, then we can avoid it. Until then, these are necessary industries, and the cost must be paid elsewhere. 2) More importantly, China's trade agreements with SE Asia and especially East Africa have led to investments that these countries would not have otherwise had, because Western countries are too righteous to allow their own people and companies to open sweatshops or dirty factories in these countries. But in a country where people are starving and dying of diseases like malaria and aids, they are desperate for a beachhead of industry, and western states condemn them to die of malnutrition or disease by feeling too morally superior to be the ones to establish that beachhead. China has, out of purely selfish desires, been the frontier force in many of these countries, and has given them a hope they have never had--jobs, industry, infrastructure. It's not something that aid can create, it's something that investment can. When a company drops a sweatshop, it has an interest in the sweatshop's success. It will pay for roads, for electricity, for ports--as long as the profits are good enough. If we make it too hard for those first dirty, heartless, inhuman industries to get a foothold in countries like Africa because we reduce profit margins (with tariffs, overseas working restrictions, etc), then industry will still stagnate. China's neocolonialism is improving the lives of the people in these countries, and because of that, China's conscience can ignore the shrill screams of Westerners that tell them to leave these people to die unmolested.

Taboo Tibet

Well, I finally found a topic my colleages at work were unwilling to discuss much: Tibet. We were talking about Scottish history (they think I look Scottish), and we mentioned the Articles of Union, etc, and someone (not even me) made a reference to Tibet. I thought: "perfect opportunity," and pitched my Scotland Model.

I was barely starting, and I got interrupted. "No, won't work. Can't work."
"Why?"
"England is a very different place, for one. It's democratic."
"But you have Hong Kong, and they have a local democratic government."
"Well, Hong Kong is different from Tibet."
"Certainly, but what parts of Tibet make it impossible to have a working local government?"
"Well, China is not a democracy."
...

It was a very frustrating conversation. I kept asking "what can be done? It's clearly broken."
I kept getting answers like "The Tibetans have to..." nothing that China could do to make it a better place. There seems, at least among these coworkers, to be no care to making it better, as long as China's territorial integrity remains unchallenged.

An Inkling of Democratic Thought?

Talked to a few coworkers at lunch today, and they asked me, among other things, about American views of the Iraq War, the structure of American Government, and American Elections (they were more surprised than I'd think they would be that Americans are "angry" about Iraq). In case anyone's curious, I didn't say most of this in Chinese, it was a bit beyond me.

Anyway.

When I got to talking about elections, they got pretty excited. These three, at least, follow the US elections pretty closely, and are rooting for the Democratic party because they think the Democrats will be "nicer to China." I am not quite sure how true that would be, given the Democrats' postition on imports/tariffs/"jobs," etc, but it's up in the air which party would try to beat on China harder.

Anyway.

The interesting part of this all, of course, was we started talking about Chinese village-level elections, and how my three unnamed friends secretly hoped that someday, democracy would come to China. They said "there's nothing we can do," and predicted that it would take decades--probably after they died.

I provided a devil's advocacy of the position, mentioning the village-level, city, and experimental provincial-governor-level elections. If these do become widespread (and the trend is upward, and the Party supports it), there may be some unintended consequences for the Party. While every candidate must be approved by the Party, there is a potential for divergence. If every provincial-and-lower election has two candidates, they are likely to polarize to some degree (by Duverger's Law). For example: in a Shanghai election, there may be a candidate supported by Labor, and one by Business... this may happen in Chengdu, Beijing... and if this becomes persistent, if there emerges a common thread that divides two candidates in each city, province, village, then they may begin to try to support each other. A Pro-Business Mayor may support a Pro-Business village-head, etc. Then you've got organization, and then you've got quasi-Parties. And as long as they keep pretending to be the Communist Party, there's not much that can be done (in the sortof passive-aggressive tradition of Chinese politics).

Then, China would be one bold stroke, one schism, one terrible argument away from a two-party system. Then, like Taiwan, like Korea, the whole dictatorial system would come crashing down.

But that's the optimistic perspective... there are others. And even this would take decades. But the trend is good, and there is hope. As long as people keep secretly wanting democracy, as long as they quietly and cleverly express their desires and their criticisms, as long as the proxies past the Great Firewall keep working, as long as the Sino-US travel keeps increasing, ideas will flow, and spread. The CCP can stop people from talking, but they can't stop people from thinking, even if it is just an inkling of Democratic thought.

Checking In With My Loyal Readers

Don't worry, I can read the comments--they get emailed to me. Keep the comments coming.

The PLA hasn't picked me up yet, so don't worry. If they do, well--there will be a conspicuous silence around here.

A Very Quiet June 4th.

I knew it would be this way. Everybody told me it would be this way. It still hurts to see it this way.

I woke up today and almost forgot it was June 4th, the 19th anniversary of the crackdown of the students protests in Tiananmen Square. I haven't been to the square, and I don't want to go--I very much don't want to go. Not because of fear. There's nothing to be afraid of. I don't want to go specifically for that reason--there is nothing to be afraid of, because there is not a pebble of thought in the minds of the Beijing people of dissent. I have not turned on the television, hoping to see hundreds of troops in the square. I know they're not there. They don't need to be. On my walk to work today, I saw fewer PLA soldiers than I'm used to. There's no tension. I think there are probably a lot of people here that don't even realize what today means.

In Hong Kong and Taiwan, they're holding a candlelight vigil. But here, in Beijing, the citizens of China are resolutely standing behind their government. The thought of opposition is untenable. The Chinese government has prevailed. The propaganda machine is ubiquitous, and it is perfect. Compliance with mass campaigns is automatic. State slogans are repeated daily. But all passively. People do not do this out of fear, they do it out of adoration. They want to support the Chinese government, they want to enhance its ability to control and affect, so that their lives can improve.

Today, because of the Olympics, dissenters had the last best hope to hold the Government's reputation hostage and protest. This opportunity is gone, not because of government repression, not because of failed action, but because of failed will. The Chinese Communist Party is here to stay for a very long time.

Iraq is Very Quiet

You know what hasn't been in the news in the past many weeks? Iraq. I'm sure you can guess exactly why:

That's right, because there's nothing bad to report. Finally, today, BBC published an article (which hasn't made the front page), noting that coalition troop deaths in May were their lowest since the war began in 2003. Civilian deaths have dropped by half from the months of March and April--much of this is due to a truce signed with Al-Sadr and other Shiite Militias. I'm not sure it will hold, but every day of calm gives the Iraqi government more time to solidify its daily civil functions--power, water, trash collection, etc.

Elections in the fall will be critical--whether they lead to better power-sharing in the government (the Sunnis have been underrepresented due to their own boycott) or to voilence as Shiites try to resist losing power is unsure.

I don't have too much analysis about these figures that I haven't already given you before. But in this particular post, I just wanted to report the news as I've seen it, because CNN sure as hell won't.

As a post-script, icasualities is a pretty reliable source for death trends in Iraq, should you want it: http://icasualties.org/oif/