Cold War II

Roughly five years ago, my book, “The Stewardship of Wealth,” was published in the U.S. Almost immediately, it was translated into Chinese and was being readied for publication by Tsinghua University Press in Beijing. But then one day—actually, it was nearly midnight—I received a frantic call.

It seemed that there was a teensy-weensy problem: the Chinese Communist Party (CCP) didn’t like the book. Specifically, they didn’t like the parts of the book that discussed China’s future prospects. They were demanding that those sections be deleted—otherwise, the book couldn’t be published in China.

As we all know, huge American companies (Apple, Microsoft, Coca-Cola, etc.) cheerfully prostrate themselves before the CCP, giving up their free speech rights, their most secret technologies, their intellectual capital—to say nothing of their dignity—because they are salivating over the potential of the huge Chinese market.

In spite of myself I found something similar happening to me: grandiose calculations were racing through my brain. There are 1.4 billion people in China, I was thinking, and even if each of them bought only one copy of “Stewardship” at the renminbi equivalent of $29.95, that would result in gross revenue of… well, some staggering number.

And if only one in 10 of the people who bought the book hired my company as their financial advisor, that would add additional annual revenue of… GO AHEAD AND CENSOR THE HELL OUT OF MY BOOK!

Actually, if Beijing had been paying attention—that is, if they had read all my books (and white papers and blogs)—they would have known that my position on China has been consistent since at least 2000. Here is how I put it in 2013:

“Speaking in shorthand, the internal contradiction of Chinese society can be expressed this way: If the Chinese Communist Party (CCP) maintains its iron grip on the country, the Chinese economy will continue to slow and the CCP will have to spend more and more of its time putting down insurrections and less and less of its time trying to grow the economy. If the CCP loosens its grip and democratizes, the country will come unglued.”

The notion that China exists in a more-or-less permanent state of contradiction was endorsed by no less a light than Deng Xiaoping, China’s great reformer, who almost singlehandedly saved China from disaster following Mao’s calamitous series of Cultural Revolutions.

As early as 1962, long before the contradictions had actually been embedded in Chinese society, Deng was saying, “it doesn’t matter whether a cat is black or white, if it catches mice it is a good cat.” In 1978 Deng put it differently (and less Politically Correctly): “What,” he asked, “does a dead 19th-century German Jew have to teach China?” He was talking about Karl Marx, of course.

In other words, if free market economic practices are superior to Communism’s state ownership of all the means of production, then China should adopt free market ideas. The Soviet Union failed, Deng always insisted, because it remained mindlessly loyal to Marxist ideology. (Deng, alas, was purged—twice—thanks to such insightful thinking.)

But what can it possibly mean for a country to be governed by a Communist totalitarian regime and still employ capitalist economic ideas? How is it possible to reconcile such a mongrel idea? The whole point of a free market economy is that people are free to build what they want and to buy what they want—i.e., the law of supply and demand—without the state making those decisions for everyone. That’s how capital gets allocated efficiently and how strong economies get built.

Deng didn’t try to resolve this paradox and neither did anyone else inside China. They adopted capitalist ideas because they had no choice—unless they wanted to go the way of the USSR—so to hell with trying to make sense of it. (They did give it a name: Socialism with Chinese Characteristics. But what in the world can that mean? How about Rube Goldberg Invades Beijing?)

But if no one in China tried to make sense of this dog’s breakfast, every China watcher in the West knew exactly what it meant: China would inevitably democratize. China would “converge” with the West, becoming an Asian version of the U.S., like Japan and S. Korea.

But did it occur to our policymakers that Japan and S. Korea only became democratic because the U.S. went to war to make it happen? No, it didn’t. China would “inevitably democratize,” apparently, as if by magic.

It didn’t happen, of course, and it isn’t going to happen. And yet, if you pick up any random copy of Foreign Affairs or the New York Times or Foreign Policy, or if you talk to any of the international trade or State Department people who have been advising on China for decades, you will get the same tired story: if we just continue to indulge China she will eventually join the liberal world order. “Convergence” was such an emotionally powerful idea that it took all the oxygen out of the policymaking air and other promising ideas asphyxiated.

“Convergence is dead.”  –The Economist

The Economist is right. It’s possible that there was a time when the idea of convergence wasn’t completely stupid, but if so that time was long, long ago. What actually happened, of course, is that China used the West’s blockheadedness to 1) repress its citizens even more, 2) seize neighboring territories whenever it felt like it, 3) continue to cheat by stealing foreign technology and the West’s intellectual capital as the price of entry into its markets, and 4) build up its conventional and nuclear military capabilities to near parity with the U.S.

It isn’t just that China hasn’t and won’t democratize. China has become far more aggressive militarily, more aggressive in throwing its economic clout around to the detriment of the democratic West, more aggressive in repressing its own citizens and in exporting repression to other countries. Instead of democratizing and liberalizing, China has devolved into an Orwellian horror where every action and utterance of its citizens is monitored for possible “reeducation” in vast camps like the ones in Xinjiang. Do we really want this country to become the most powerful in the world?

In other words, while my views have been consistent on China for almost two decades, I’ve become over time much more alarmed by what’s going on in China. (And not just because I didn’t become a billionaire on sales of “Stewardship of Wealth.”)  Given that our policymakers seem to have no better ideas for dealing with China than continued appeasement, I hereby offer a better one: Cold War II. We’ll see why next week.

Next up: Cold War II, Part 2