For the last decade, Western liberal democracy and free-market capitalism have been under attack, and China has moved quickly to capitalize on the West’s problems. The 2008-2009 Great Recession raised doubts about American-style capitalism: bubble-prone financial markets are no longer considered exemplary models, and large financial institutions are criticized for lavishing wealth on an undeserving top “one percent.”
Nativist and populist movements around the world are also challenging long-standing economic, political, and social orthodoxies: the West, supposedly, is once again in decline — the result of dysfunctional democratic institutions, financial-sector greed, poor education, lack of discipline, drug epidemics, and widening income inequality that mocks globalization’s promise of shared prosperity.
In response, China has launched a direct challenge to the “Washington Consensus” — the recommended package of institutional and policy reforms such as fiscal discipline, liberalized interest rates, privatization, competitive exchange rates, and tax reform that were designed to boost economic performance in developing countries.
Externally, China’s multi-trillion-dollar “Belt and Road” initiative courts developing countries by promising economic development on the cheap — except that China’s approach involves potentially burdensome loans, not the direct grants of America’s postwar Marshall Plan that helped rebuild much of Western Europe.
Internally, China has reversed course on the “reform and opening” era launched by Deng Xiaoping (China’s leader from 1978-1989) in favor of restricting religious minorities, human rights activists, the media, and other civil-society institutions. Social media now functions behind an internet “firewall” that is relentlessly monitored and censored by the Chinese army plus private companies that assist the government’s bidding.
At home and abroad, China is playing a global “mind game” backed by trillions of dollars and a massive effort to silence dissent and reward conformity.
The current Chinese leadership believes that its version of state-driven, “authoritarian capitalism” will prevail over the more open, weakened, and discredited Western approach. China’s leaders think they’ve found a better way and are aggressively marketing their economic approach, accompanied by escalating direct or implied threats directed at potential foreign adversaries. For Chinese citizens, the tradeoff is clear: stay out of politics, let the Communist party run the country, and the leadership will bring you higher living standards with greater consumer — but not political — choice.
Should the West and the United States be worried? Not if we promptly address the known shortcomings of free-market capitalism and our education system in order to enhance productivity and innovation, restrain anticompetitive practices, and promote standards of excellence, accountability, and transparency. After all, we’ve seen this movie before.
In November 1956, Soviet First Secretary Nikita Khrushchev told the world that the Soviet Union would “bury” America when it came to economic competition, and in the 1980s, there was considerable buzz about how Japanese management practices would quickly overwhelm outdated American concepts. Between 1986 and 1991, however, the Japanese economy imploded thanks to an asset price bubble (especially in commercial real estate) and has spent more than 20 years recovering.
While China’s long-term economic growth potential remains high — with nearly 1.4 billion people becoming domestic and global consumers — the country’s one-party political system will ultimately doom its ability to provide sustained economic growth, entrepreneurship, innovation, and productivity. Other one-party, authoritarian regimes such as Cuba, North Korea, Russia, and Venezuela are not encouraging — to put it mildly. The Chinese government’s ability — even now with greater use of algorithms and artificial intelligence to track and monitor people — to stay ahead of and control its citizens will be limited. Freedom always wins out, because government algorithms simply cannot model or anticipate the myriad mysteries of the human brain and human desires.
On my first visit to China, more than 10 years ago, I flew from Hong Kong to attend an economic conference on Hainan Island, a destination that China is grooming as its Hawaii. The conference sponsors met me at the airport and asked me to wait a few minutes before leaving for the hotel so that they could gather other guests arriving from Japan.
As I read on a bench in a quiet corner of the small airport, a Chinese man in his early twenties and who was associated with the sponsors approached me and asked to chat. His English was passable (far better than my nonexistent Mandarin!) but at one point in our discussion, I had trouble understanding a particular word he kept saying.
After I asked him for the third time to repeat the word, he took out a notepad and wrote “freedom.” And then he said, “Your country very good, my country not so good.” I nodded in response and said, “Yes, that’s true, but your country is getting better.”
That Hainan conference was held at a state-owned and state-operated resort. At one of the afternoon discussions, a panel of Chinese government representatives acknowledged that China did not have an especially good record when it came to intellectual-property protections. When asked about China’s toleration of such violations with respect to high-end luxury-goods knockoffs, a spokesman said that the government was cracking down on such goods.
When that session ended, I left the conference room and wandered into a gift shop directly across the lobby. There I saw the same luxury knock-off goods — neckties, handbags, and jewelry — that the government spokesman had discussed but a few moments ago. If the government was, indeed, serious about stopping piracy, it could have done so immediately. After all, that gift shop was in a government-run hotel.
I never shared my conversation with the young Chinese man with anyone at the conference, as I wanted to respect — and protect — the young man’s candor, and, possibly, his freedom. As we now know, the situation in China has only worsened under Xi Jinping, with growing restrictions on the internet, human rights, and freedoms of religion, speech, and association.
It is difficult to predict what 2019 will bring in terms of Chinese-U.S. relations. Trade, economic, and military tensions must be addressed — one way or the other. Beijing assumes that its model of state-directed, authoritarian capitalism will ultimately prevail. My experience with that young Chinese man tells me that consumer goods in exchange for political conformity won’t be enough. Many Chinese already regularly circumvent the Internet firewall; they know what’s happening elsewhere in the world, and it is unlikely they will remain content defining themselves through their shopping carts. People define themselves by their aspirations as autonomous, self-directed individuals. Algorithms, authoritarian government, and administrative fiat can’t change that fact.
If Ronald Reagan were president today, he might well give a speech in which he said, “Xi Jinping, tear down that firewall.” And if Xi didn’t heed that advice, people would ultimately find a way to prevail — just as the people did in Berlin on Nov. 9, 1989, when another wall came down just five months after the June 1989 pro-democracy protests in Beijing’s Tiananmen Square.
Charles Kolb was deputy assistant to the president for domestic policy in the George H.W. Bush White House from 1990-1992. From 1997-2012, he was president of the nonpartisan, business-led think tank, the Committee for Economic Development.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.
