Communist China, the misbehaving superpower
On the back of the Google – China standoff, I am taking the liberty of recycling content from the oft brilliant Mark Anderson at SNS. This is a short digest of the excellent article that you can find at: www.abrightfire.com. Whilst I think we have to watch the Western tendency to take advantage of the rule of law when it suits our purpose but neglect it at other times (recent wars come to mind…), I do think this article raises the stakes on the China debate in a smart way. Whilst China is trying to gain moral kudos and intellectual leadership on issues like global emissions (whilst sabotaging part of Copenhagen), it is healthy to take a slightly cynical view of who we are dealing with here.
Over to Mr Anderson:
It is time to look at China, not for what it says, but for what it does, and to judge it accordingly. China, [which] Nobelist Paul Krugman calls “a misbehaving superpower”, is not what we hope it could be. China is what it is.
Sloppy Western optimists assume that China is just a Big America, or a Big Vietnam, or a Fast India – or their Next Big Business Partner. In fact, China has designed an economic model designed to gut its trading partners.
Although the politics of China remains communist, the economics might be called Advanced Mercantilist. China has taken the lessons of Japan and South Korea in dealing with the West and modified them with “Chinese characteristics.”
Basic tenets of the Chinese Model
- Steal Intellectual Property.
- Use Slave Labor Rates to Become the Low-Cost Producer of All Goods and Services
- Sell Stolen IP Back As Global Exports
- Industrial Policy: Subsidize Key Industries
- Prevent (or Restrict) Unwanted Imports
- Use Currency Manipulation
- Price for Export, Suppress Domestic Consumption
- Create the Appearance of Free and Fair Trade, Without the Fact. The global community somehow allowed China to join the World Trade Organization, although, in fact, China has not signed off on all of the WTO requirements
- Encourage Foreign Direct Investment – But Don’t Allow Controlling Ownership.
Does this combined policy set sound anything like free markets, or free trade? Not at all. Is there any part of this that is legal in international terms, or that should be applauded by the world community? Not that I can determine.
When will the world catch up to this kind of charade? The answer just might be: now.
The danger of a command economy in the modern world.
The global outcome of a fast-growing command economy has been the government-determined explosion of asset bubbles all over the world – not because China is growing, the cause assumed by most economists, but because the government is buying resources (and their future options) on the global market, forward for 5-20 years. The result: instant commodity asset bubbles, worldwide, and further destabilization for non-Chinese consumers of these commodities. Of course, if the Chinese play the bubbles wrong, they will lose even more as prices collapse.
Could the Chinese create a global catastrophe by commanding all of this leverage into the wrong assets at the wrong time, by deflating the value of high-IP goods, by forcing global competition against unsustainable cost bases, and destroying non-Chinese business infrastructure? Sure. In fact, this is almost a “when,” and not an “if,” question. What could possibly be more dangerous to the world than a command economic system run on a global scale?