Sunday, October 23, 2005

Empire To Free Market - The China Case


In my lifetime, I have heard over and over again, how the days of the West, and the United States in particular, are fading and should be demoted in favor of the Orient, seen as a relentless tide of innovation, population, and fate. I have read countless essays warning about the inevitable dominance by Asia, and by countless countries like Japan, Vietnam, and China, or by Supercompanies like Sony or Mitsubishi, or the front companies set up bythe PRC to claim market share in high-tech industries. While such companies have enjoyed success, and some Asian countires have enjoyed better-than-average GDP gains and improved market positioning, the long-term results remain clearly advantageous to the West, and to the United States. There are many reasons for this, but for this article I will pretty much focus on the largest and most populous country in Asia as a representative focus; the People’s Republic of China.

Just after Mao Tse Tung assumed control over Communist China, and the Communists chased the Nationalists off the mainland in 1949, the United States was full of outraged Senators demanding to know “Who Lost China?” The arrogance implicit in such a statement helps display the nature of U.S. myopia at the time, believing that any U.S. action was by definition legitimate and authorative. The very notion that we possessed China, even notionally, so that it could be “lost”, goes a way towards explaining the decision by regional powers to support Mao. Also, the Nationalist Party under Chiang Kai Shek not only was tied to organized crime (Mao’s Communists were also heavily involved with Triads, but kept this quiet), but also played up ties to the United States which not only failed to reap the benefits of Chinese appreciation for American support in World War 2, but implied that the U.S. controlled Chiang’s decisions and position, which brought up unpleasant memories of domination by Europe a century before. Anyone familiar with the Boxer Rebellion should have understood that any campaign to claim the support of the Chinese people begins on the three pillars of Chinese Racial Pride, a promise by the government to leave people alone for the most part, and as always happens in politics, the promise of a better life for the next generation.

While Mao’s Communists were unquestionably heavy-handed and brutal in various places and times, they always stayed on key with the three main pillars, and so have enjoyed if not support, at least an absence of antipathy. When the CIA began to measure and project discontent in Communist countries as a key indicator of potential instability, they discovered that by 1970, even after the “Cultural Revolution” which abused so many Chinese, discontent in China was well below any potential threshold to support revolt, compared to rising discontent in the Soviet Union which later played into Reagan’s policies and showed up in such movements as the Polish Solidarity union. This relative stability of the PRC was one reason Nixon chose to play up the Chinese condition in an alliance against the Soviets in his trip to Beijing, and represents a long-term condition of the Asian environment. American response to Chinese dissidents, therefore, must balance the attractive demand for civil liberties and individual rights with the knowledge that we cannot be seen as trying to coerce a sovereign nation and proud people.

This is not to say, at all, that there is no desire for true economic and political freedom in China, but that it must be perceived as the United States supporting a popular Chinese initiative, and not as the United States attempting to overthrow a native and legitimate government. A good scenario for the United States might be like Poland, where initial attempts to unionize industry met not only with government crackdowns, but disapproval by the citizens. Gradually, the Solidarity union and similar actions won over enough of the people to take momentum past a tipping point, where it was clear that Polish people were demanding their own course, and the Communist committes were seen as the oppressors. This gained sufficient support that even Soviet occupation failed to quell the movement, and unlike revolts in Chechnya and Kazakhstan, was almost completely non-violent. The Polish movement combined economic logic with individual rights, and while it suffered many setbacks, in the long-term it was not only successful in forcing a Soviet pullback, but helped establish a stable and constructive government of its own.

The China model is similar. As galling as it is to see Beijing crush dissent is such forms as praying in public, or even silent meditation as a group, it should be understood that this offends the Chinese sensibility at a deeper level, and the resentment will naturally flow against the Communists, unless the United States makes statements or actions which distract attention and emotion against the West. Take the Falun Gong, as an example. While many Falun Gong teachers have taken refuge in the United States, the movement is clearly home-grown and native in spirit to China. Therefore, the oppression by the Communists is not only seen as unreasonably harsh against non-violent and non-offensive actions, but also as anti-Chinese, creating and increasing resentment against the Communists as an anti-Chinese force, which they can suppress in the short term, but which weakens Communism in the long term.

At the risk of sounding like a Grand Strategist (I can get away with that, as I am only a pretentious individual, and have no place in the government where someone might be able to claim that I represent official policy), this is how the United States has sustained an economic and cultural preeminence in Asia. Japan was supposed to have passed the United States in most comparable factors a generation ago, yet the United States has not only made gains where Japan has failed to, they have caught up in areas where Japan initially appeared to be running away (such as the nanotechnology innovations), and on most economic fronts, including even the stock market, a comparison over the past 40 years between the United States and Japan favors the Americans. But this economic advantage is nothing matched to the cultural advantage; American music, movies, fashion, and language completely dominate Japan. And the Japan situation is very representative of the rest of Asia; even in Vietnam, American money is readily accepted and American business investment is highly sought. The same is true in places like Singapore, Thailand, Malaysia, and across the Pacific coast.

The United States did not achieve this dominance through subversion or manipulation, but by simplying offering attractive products and reasonable opportunities. The overall condition of American business, has been to create a network of generally trustworthy partners who keep their commitments for mutual gain. Synergy is a common element in American Business agreements. In the case of China, this not only allows the United States to attract investment opportunities, but also forces the Communist Party into a dilemma; in the past, the Communists simply broke agreements where they pleased, but in order to grow in the long-term, they must accept terms which force them to comply with commitments, to accept losses in individual cases where they miscalculated or failed to anticipate critical events or conditions. In other words, despite the long practice of acting autocratically in their contract negotiations, the Chinese government is coming to understand that economic success comes only through the review of independent auditors, the diligent compliance with contract terms, and essentially the embracing of truly democratic practices in trade practices. If they refuse to take on these attributes, Chinese businesses will suffer the stigma of being unreliable, and China will lose contracts to those countries whose businesses accept such conditions. If they accept those attributes, then the economic success of China will begin to influence cultural expectations. As is the case already with Hong Kong and Macau and Shang Hai, China is learning that corporate success, which brings in the coveted tax revenues, also creates an environment of expectation, where individuals demand their own standing and rights. One can hardly imagine what will happen when a Chinese Trump or Forbes comes onto the scene, but it is almost certain to happen in the next two decades. A Free-Market China will be good for their Economy but even better, is a foundation for a Free China in general.

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