James C. Banks

It’s Not the Economy, Stupid (The Real Chinese Threat)

In Uncategorized on April 16, 2011 at 4:05 am

I heard it again: That is, another prediction that the United States’ economy is about to be eclipsed by China. This time, the prediction came from a friend who pointed to the arbitrary fact that China has just become the world’s largest English-speaking nation. “You could transplant all the jobs from the United States to China,” he said “and you’d still have people who were unemployed.” While I am willing to admit that the United States is in the midst of a budget crisis that it is a significant threat to its future well-being and leadership, I have never found it convincing when prophets of doom assert that this fate will come about through the ascent of the Chinese economy.

Misguided population control policies which China has no desire to change have created dysfunctional demographics which will leave China with too many retirees and not enough young workers, and this is not even China’s greatest worry.  Increasingly, China has become a nation divided into a class of cosmopolitans and peasants in a country in which the people at the very bottom of the social order struggle to make subsistence. 

No doubt, some Chinese official or apologist would point out that wealth disparities are even greater in the United States.  I would be willing to concede that this is probably true, but it is not relevant to the problem. The difference between making $300 per year versus taking home $1 million is inordinately more significant than the difference between making $1 million per year versus making $1 billion. It is life quality rather than income quantity which dictate class barriers. The disparity of income between America’s superrich and its middle class is pronounced, but the standard-of-living, based on health care, housing, leisure and other factors is hardly noticeable when compared to where it stood one hundred years ago.

More important than any of these factors, though, is China’s crude political authoritarianism.  While China used to be a communist country it has remade itself over the years—playing on its people’s resentments—into something that more closely resembles a fascist nation.  But this political order threatens Chinese growth particularly in advanced technology sectors.

While the Chinese government is happy to welcome companies interested in opening factories for athletic shoes and plastic cups (since these manufactured goods are unlikely to cause political unrest) it is less likely to have entrepreneurs who develop cutting-edge technologies. The example of Google is representative of the reasons why.  Manufactured goods and innovations can be revolutionary without being subversive, but it will become increasingly difficult for authoritarian regimes to deem which to regulate and which to permit.  

Doomsayers will likely point to China’s investment in fields of study like science and engineering as a sign of their ascent.  This is a claim I hear often among researchers in science and technology, but I have never found it convincing.

It is true that nations which are economically prosperous often do have a research and development establishment, but there are also many nations with a research and development establishment which are not economically prosperous.  The USSR valued science and technology education above all other fields of study and placed and had an inordinate number of Ph.D.’s in these fields (and famously imprisoned Josef Brodsky for writing poetry instead of having a “useful” occupation), but this did not prevent the empire’s economic and political demise.  Many of these Ph.D.’s can be found wandering around America’s institutions of higher learning, from lab to lab and postdoctoral fellowship to postdoctoral fellowship.

Again, this is not to say that scientific research is unimportant, but it is the ability to organize, market and leverage scientific developments which is more important. The internet had been invented more than thirty years—and had been made available on all continents for more than half-a-decade—before Sergey Brin learned how to make his first billion dollars off of it.  To find an entrepreneurial edge requires an intimate experience of what average people desire.

This experience, however, is limited under a repressive regime, because people’s desires are always being contorted by the weight of the political influence. The Chinese government might be able to create their own version of Google, but there is no question that any rational consumer would prefer the alternative product which is not censored or monitored by the state.  China has potential for exorbitant growth in high-technology sectors within its own borders, but this potential is limited by its borders.  This brings me to the real threat posed by the Eastern ascent.

While China has opened to a somewhat pluralistic economy since communist party members decided that getting rich was glorious, their government has never accepted a capitalist framework. It is possible to experience economic growth while repressing the population if the government adopts a system which is neither capitalist, nor communist but rather mercantilist.  Because China can only have full control over potentially subversive technologies and innovations within its spheres of influence, it is incumbent upon China to increase its spheres of influence. While it is difficult to speculate where this will end, it is likely to lead to a China which is more belligerent and, because of its geographic orientation, looking to expand eastward rather than the westward.

Chinese militarism is on the rise, but still comparatively weak when placed alongside the military strength of the United States. Even its military innovations—such as a land-based missile which could destroy an aircraft carrier—suggest that Chinese military prowess still measures itself in relation to a nation with a navy powerful enough to exercise its strength on China’s front porch. But the will to power is not always rational, and, as males increasingly dominate the younger demographics, the irrationality of Chinese nationalism is likely to increase.

While countries are as likely to go to war during times of prosperity as they are during times of hardship, they are less likely to turn their sights on countries of comparable strength. This is more likely to occur during a time of recession, when the government scrambles for a scapegoat for public anger. If Chinese nationalism continues to grow as it has in recent years, I will not be afraid of an expanding Chinese economy, but I will be terrified of a contracting one.

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