THE CHINA SYNDROME IS NOT VIRTUAL…BUT REAL
(a classic case of economic acid reflux combined with divisive internal political power plays)
We make no pretense of being an expert about history (although it’s been a very strong area of interest of ours), but it is a very important collateral subject to that of economics, because, as our old economics professor at Georgetown’s School of Foreign Service once explained it…if history is the mother of civilization…economics…is the father. That is, the two go hand in hand, so whenever one tries to understand the why’s and wherefore’s of any country one needs to have a very broad combined range of perspectives about both to do so.
What follows is our view about what’s happening in China today, and the multiple layers of factors which are driving that. For that reason this will necessarily be a somewhat longer piece than usual so as to present as comprehensive and coherent picture about it as possible. Given the long track of China’s history it will also have to be a somewhat cursory and superficial overview of it. We’re not attempting to produce a thesis here but only to try and refine our better understanding of what makes China…tick. Any errors of specific fact are simply a reflection of our lack of detailed knowledge about it.
Our analysis is attached in annex. Please keep in mind that it is our…opinion…about it all, so to quote the Roman Emperor Marcus Aurelius: “If it is good to say or do something; then, it is better to be criticized for having said or done it.”
CENTURION
ANNEX –Vol. X – Issue No. 76 – Sep 2015
AN OVERVIEW AND SUMMARY OF CHINA’S SITUATION TODAY
Despite its apparent size, power, and strength of capabilities, in many ways China is a fragile entity, susceptible to a number of disruptive elements, many of which derive from its long track of history. Simply put, China is a conglomerate composed of a wide array of disparate elements which, without a strong central authority to hold them all together, could violently break apart into chaos and destruction. Far back in its history it was that way, in what was called the Warring States era. For nearly four hundred years it suffered through that condition until its first imperial authority was able to put an end to it, to create what became…China.
That era, and its extremely negative impacts, has never been forgotten in the Chinese cultural psyche, and while all those long ago cultural and regional divisions which caused that era were later submerged by the history that followed from imperial dynasty to imperial dynasty, these yet linger on today as deeply covered tectonic societal fault lines ever ready to erupt. Which is why a system of strong central authority has always been the model of choice to ensure those fault lines are kept in check; and, the fundamental guiding principle for such authority has been legalism. That is, absolute discipline and obedience to the dictates of authority emphasizing the collective need over that of the individual. The sole ameliorating element to that sort of societal structure has been to allow economic and social mobility based upon… merit. Thus, anyone, no matter how humble of origin could rise to become part of the elites, and that ideal of meritocracy still prevails with it today.
Thus, whenever a central authority was strong, efficient, and responsive, everything flourished and prospered, along with great explosions of creativity and dynamism in every conceivable aspect of the arts and sciences. Conversely, whenever such central authority became weak, corrupt, and non-responsive, chaos and conflict followed. It is this pattern which has governed throughout what we might call China’s historical period.
China eventually lurched out of that historical matrix into the Modern Era, when the remnants of the corrupt and decadent Manchu dynasty collapsed in the revolution of the 1920’s, brought on by Dr. Sun Yat Sen and his Kuo Min Tang, with its well-intentioned aims of creating an open and democratic society. But those intentions were short-circuited by both cultural resistance and the violent ravages of WWII, further followed in its aftermath by the Kuo Min Tang’s devolution into a corrupt and incompetent warlord kleptocracy, led by Chang Kai Check, ultimately bringing it into conflict with the populist mass of the PLA led by Mao Tse Tung, which had borne the brunt of the WWII fighting against Japan, and had adopted Communist ideology to secure its reach for power, eventually driving the Kuo Min Tang literally out of China to seek refuge on the island of Taiwan.
Once established as the new central “imperial” governance (wearing red underwear rather than yellow silk robes), the Maoist/PLA authority then imposed one of the strictest and most ruthless order of discipline and obedience ever conceived or applied by any of China’s previous imperial regimes, and that endured for nearly forty years until after Mao Tse Tung’s death.
It’s at this point in its history that three factors converged to bring China to where it is today.
The first of these was the imposition of a common language, that is Kuo Yi (Mandarin), to replace the many long standing provincial disparate dialects, further “homogenizing” and bringing its people into a stronger sense of “national” identity, and thereby reinforcing centralized authority and control.
The second, during the Nixon presidency, was America realizing that thirty years of pretending that nearly two billion Chinese did not exist, no longer made sense, regardless of the ideological divide between them, and that a resumption of normal relations and restoring commerce and trade with it would be of mutual benefit. For their part China’s Communist hierarchs also concurrently concluded, from their Korean War experience, that direct military confrontation with America was a losing proposition, and that such a development would help modernize its otherwise moribund economic machinery. A win-win proposition for both because at that moment there was a world-wide hunger for mass produced, cheap, consumer goods, so once opened for commerce and trade, foreign capital poured in to help fuel China’s capacity to produce those goods for that demand, expanding and revving up its economic machinery to a level never before known in its history. That, in turn, caused a surging economic tide which raised a lot of small personal boats, besides the “luxury” yachts of the Party elites; and, in that process it also radically shifted masses of its population from agrarian poverty into new urban-dwelling relatively affluent working and middle classes.
So for some thirty years the emphasis has been on expanding and maintaining that export-driven economy to sustain both. But the side effects of that have caused a terrible environmental degradation, a decline in agricultural productivity, and a worsening matrix of corruption and abuse of power at all levels, threatening the country’s social and political stability.
The third of these factors has been the advent of digital technology which, because of the global reach of its applications, has leapfrogged China even further forward because, unlike in the West, there were no obstructing interests to be overcome, so it has readily latched on to these new technologies much more rapidly than the Western world, bringing it to the very top levels of the cyber universe we see today.
Which is where China is today, but now, it faces a two-pronged dilemma, one economic, the other political.
The recent signs that its economic machinery is slowing down is because its export-driven model has been much too successful, and world-wide demand for its cheap low quality goods is fading away, or at least diminishing in intensity. Thus it must now shift its economic model to produce for an internal consumer-driven economy. Not an easy task, especially because that now more affluent consumer population, conditioned to acquiring imported high-end quality brand goods, is not likely to readily accept those cheap low quality export items it has been palming off on the rest of the world for the past thirty years. It’s a tricky, even delicate shift to make. Done well the result might resemble an appealing well blended multi-flavored economic “smoothie”. Poorly made, the result might be a not so appealing coarse economic version of…granola. So it will require extreme expertise to properly manipulate the economic technicalities involved to produce a successful end-result from such a shift.
The recent devaluation of its currency is part and parcel of making that shift and, frankly, the worldwide outcry and market hysteria about it is unwarranted. It’s a classic monetary policy maneuver in such circumstances, and many others have done, and are doing, the same thing. Even the US did it back in the 60’s when the Nixon Administration detached the Dollar from the gold standard. Much like any other periodic market “correction” it should be viewed as just a form of “purging”. Once the dust has settled, commerce and trade will resume with their normal exchanges…only now using a new set of rates for these.
But it’s the political aspect which is more critical. In some respects China is at another of those threshold moments in the long track of its history which will determine how it may or may not progress into a stable and prosperous future. How well it makes necessary shifts in its economic, societal, and political structures will determine its continued standing as a world power.
While it does have the skills to manage those needed for its economic re-modeling needs, its single party authority faces the dilemma on how to do the same for any societal/political remodeling. A single party authority (Communist or otherwise) can’t afford to just let go of its hold on the reins of political power. To do so risks having a complete collapse and disorder which would make the events in Soviet Russia seem like a walk in the park by comparison, because that would let those deeply submerged societal fault lines of its history erupt with an extremely violent upheaval. We’ve seen real hints of that already with events such as Tien An Men, in its Mongolian and southwestern regions, Tibet, and more recently in Hong Kong.
But to succeed in such a process it first must find ways and means to eliminate much of the Party’s corruption, abuse of power, and general unresponsiveness to community needs, at all levels, which has accrued under its tightly centralized system of authority, before it can attempt to replace it with something better. So the crux of its dilemma is how to design and progressively implant a new model for its societal/political structures that will not only fit a new more market-oriented economic model, but also assimilate and conform to so many of the traditional norms of its culture.
What we’re thus seeing happening in China today is an internal struggle between the forward thinking reformist elites of the Party’s leadership, and the old-style Party stalwarts determined to resist such efforts. So far the reformists appear to have the upper hand, but their success will much depend on how well they design and install such a new model.
We only know of two other countries in the world who have successfully managed to blend and combine both an open free market economy with a mildly authoritarian democratic political structure. These are…the Republic of Singapore and the Republic of South Korea. If China is able to transform its existing system in the same way, but on a much larger scale of course, it will indeed no longer be a potential “syndrome” but a world power reality for the rest of the 21st Century…and perhaps beyond.
There is somewhat of an irony here because in many ways America faces a similar problem with regards to its political structure and the general quality of its governance, at all levels. Both have become extremely corrupt, inefficient, and unresponsive to community and individual needs, and a similar conflict about how to change things for the better is also going on.
In that sense, America and China are in the same kind of leaky boat. We can only hope that both succeed in fixing their respective…leaks…so both can remain afloat.