Chairman Xi

The recent state-of-the-nation address by the Chinese leader Xi Jinping has officially confirmed what most people already expected. China is planning to replace the US as the most powerful nation in the World – economically, politically and militarily. Something that even 20 years ago would have been viewed as a fanciful dream is becoming a reality. This post will look at how and why the West is about to get knocked off its perch.

The most telling part of Xi’s statement is that China does not intend to emulate the West’s political system. This makes perfect sense – to get where the West is now China needs to adopt the solutions the West had used to achieve its current dominance, not the policies it is employing at the moment. What made the West incredibly successful and allowed it to project both hard and soft power to all corners of the World was free-market economy. We need to realise that at present China, although nominally communist, is in fact much more capitalist than any country in the West. This is precisely why it has enjoyed phenomenal rate of unbroken economic growth in the last few decades and is now positioning itself to overtake the Old World. It is the capitalism, stupid!

For the readers of the blog who are too young to know what I am talking about, pure capitalism is a system based on free exchange of goods and services, which limits the government intervention to the matters of public safety and national defence. The closest the West got to it was the Industrial Revolution in Europe and the 19th century US. The problem with capitalism is that the smart and resourceful will get very wealthy while others will not, leading to social tensions fuelled by jealousy. Socialism successfully explored the fractures created by unequal distribution of wealth. Where socialism sparked revolutions (like in Russia, China, Cuba or Cambodia) the citizens quickly became equal but only in their shared misery. All other developed countries suffered a creeping influence of socialist ideas which, eventually, put the West in its current position. So what exactly killed the economic vitality of the Old World?

As individuals, families, social groups or whole countries get comfortable in their success they also become keen to legislate security. But any policy aimed at forcing a particular social outcome goes against the spirit of capitalism and blunts its entrepreneurial thrust. While it may sound morally comforting to fight racism, sexism, discrimination or take from the rich to support the poor all these interventions will hit the growth rate and, eventually, lead to stagnation. If the equality of access to all opportunities on offer were conducive to maximum growth it would have naturally emerged in a capitalist economy, without the need for government intervention. But if we have to legislate to make employers pay taxes for those who do not work, offer child-rearing leaves to both men and women and print fat content on bottled water it is precisely because all those actions kill economic growth. And when tax intake dwindles, to keep funding the bloated social programs, welfare states have to borrow. This is where the West is at present – visionless, overregulated and burdened by debt.

China’s rise to prominence is remarkable because it used the very handicap that had held it back – state authoritarianism – to suppress the social dissent created by wealth inequality. While a socialist revolution in a communist country is unthinkable the Chinese leadership made sure that the rich were allowed to get richer unmolested, making the poor less poor in the process. The stats of China having lifted 500 million of its citizens out of poverty are staggering. This is as perfect an example of benign dictatorship as we will ever see. Compared to China’s effort at eradicating poverty the pathetic, ideologically-driven and ultimately counter-productive actions of the likes of UN are a disgrace.

I wish the communist-capitalist China all success on its path. I also wish the West courage to analyse its failures with a view to reign in the unaffordable welfare programs and re-create conditions for growth.

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One Response to “Chairman Xi”

  1. Voytek Klepatski Says:

    You probably have not meant to time it so perfectly, but it happens to be timed perfectly – on the day when Winston Peters decides to change the nature of capitalism (he said so in so many words) in New Zealand and chooses to go with Labour Party. Of course the consequences for New Zealand economy can only be bad, if measured by economic ability of these days’ China

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