China Cheats
Once again, those who know better have let us down. They got it wrong.
Stalin and Mao, using the ill-conceived thoughts of Karl Marx as cover, ran two of the most brutal regimes in the checkered history of human existence. Many of the world’s political and thought leaders gave Stalin a pass as he starved and purged his people. His state induced famine in Ukraine killed millions. His purge of the Red Army officer corps just before the war with Hitler led directly to millions of casualties. As FDR deluded himself into negotiating the status of countries in Eastern Europe, Stalin’s operatives were completing their enslavement. The fervent anti-communists who cried foul were mocked as rubes by the great and good.
Mao slaughtered more of his own people, mostly without benefit of war. He avoided fighting the Japanese in order to husband his strength to defeat the Nationalists. Then he proceeded, through policy induced famines and purges, to kill AT LEAST 100,000,000 citizens of his own country: a slaughter of almost incomprehensible proportions. The political and intellectual leaders of the world, for the most part, ignored that monstrous atrocity.
After Mao’s passing, China began to change. It moved from a central planning regime to state sponsored capitalism, with a mercantile vengeance. It became the low wage capital of the world and an export engine. In the process it moved some 600,000,000 people from abject rural poverty to lower middle class status in new or expanded cities. A huge accomplishment to be sure. In the process, it hollowed out the manufacturing sectors of America and Europe.
The response of the great and good was accommodation. If we admit them into the WTO, they will gradually learn to play by the rules and we will give them some waivers as they learn. Increasing prosperity will produce a middle class, which will gradually lead to increased democratization. A bullshit prediction! State owned and state subsidized industries’ share of the economy is larger than ever. The regime is becoming more authoritarian and totalitarian by the day. Those who know better didn’t know. The Chinese cheat!
China used to be the world’s capital for counterfeit merchandise. They now have competition from the gangsters in Calabria, but they are still in the running. If you want a knockoff of virtually any product, there is a Chinese factory willing and able to produce it in a hurry.
China steals intellectual property. It has a unit of the Army whose sole job is theft by hacking. The unit even has its own multi-story office building where the hacking of companies and governments all around the world, with an emphasis on America, goes on around the clock. In addition to outright theft, state owned or dominated companies engage in blackmail. They deny access to their market to any foreign company unwilling to share trade secrets on a “voluntary” basis.
China engages in unfair trade. It has numerous non-tariff barriers to inhibit those trying to sell products in its market. It massively subsidizes selected industries, which can then sell goods abroad at less than the cost of production. It is pouring massive amounts of money into R&D, start-up capital, and subsidized financing for industries it thinks will be at the commanding heights of tomorrow’s economy.
China is engaging in economic imperialism all over the world. It is buying mines and farms all over Africa and South America. It is making loans to third world countries knowing they won’t be repaid. The security is repayment in commodities. Soon, countries all over the world will be indentured servants of the Chinese, sending their foodstuffs and mineral resources to the engine in the East. One of the current sources of pain for Venezuela is that a significant piece of its only exportable resource (oil) is going to China to service debt. It’s One Belt, One Road initiative is designed to turn the Eurasian land mass into a Chinese satellite. The so-called Nine Dash line is an assertion of sovereignty over the territorial waters of all of its maritime neighbors.
What should we be doing about all of this?
The first thing we need to do is to stoutly defend and promote the virtues of democracy and capitalism. China is telling the world that authoritarian rule, repression of dissent, and State run markets are the wave of the future — the only efficient way to run a polity/economy. We cannot impose our values on the world, but we can advocate for them and promote them. In as much as we are successful, the world will be more free, more prosperous and more peaceful.
The second thing we need to do is to bring manufacturing back to the United States. A combination of programmable robots, cheap natural gas, healthy competition, right-to-work laws and technological innovation can turn us into the manufacturing powerhouse we were in the 50s. We will have to face the fact that a significant percentage of our underutilized workforce can’t pass a drug test and do something to clean it up. We will have to develop an infrastructure of for-profit and community college programs that provide relevant job training. We will have to clean up our bureaucratic permitting nightmare. If we do those things, we can do for the manufacturing sector what we are doing for the oil market.
The third thing we need to do is up our cyber warfare game. Our intelligence agencies need to monitor every keystroke coming out of the Chinese hacking machine, so targets can be warned to take protective action. We need to develop techniques to punish Chinese (and other) hackers on a selective basis.
Finally, I think we should attempt to counter the Chinese power play in the Western Pacific. TPP was not the answer. It is far too convoluted. We need a clean free trade area. We could offer membership in a free trade block to any nation in Asia that is willing to follow the rules — no non-tariff barriers, no state subsidies. Any nation wishing to stay out of China’s economic clutches could join, and anyone fudging the rules would be ejected. Any member of the group wishing technical support to improve the rule of law or financial markets in their country would be given such assistance.
While freely admitting our inadequate execution in many instances, I would assert that we do have a better model of governance. We should fight hard to preserve it and expand it.
