- The Washington Times - Sunday, April 27, 2008

The Olympic torch relay was not intended, least of all by Beijing, to become an exercise in China’s public humiliation. Yet as the world’s attention turns towards the 2008 Olympics, it sees Tibetans gunned down in the streets of their capital, democratic activists imprisoned for writing “seditious” e-mails and bishops placed under house arrest.

That a supposedly modernizing China still showcases such medieval horrors calls into question the principal theory lubricating China’s rise: That is the comforting idea, ceaselessly promulgated by the Washington policy-making establishment, that a rich China will inevitably be both capitalist and democratic. Or as George Bush put it in 2005: “As China reforms its economy, its leaders are finding that once the door to freedom is opened even a crack, it cannot be closed.”

But what if the prevailing Washington belief that China cannot be both rich and authoritarian is wrong? What if those who insist that the West’s economic and political experience constitutes universal truth have been merely laboring under an ethnocentric delusion?

The leaders of the Chinese Communist Party, heir to a governing tradition of the mailed fist and hobnailed boot, clearly believe they can have a wealthy and powerful country without ceding power to the people. And why shouldn’t they? They have presided over a “socialist market economy” that has experienced a quarter century of explosive economic growth, all the while keeping the “door to freedom” heralded by President Bush locked and heavily guarded.

These two bets about the future of China and the world are on the table, explains long-time Asia observer Eamonn Fingleton in his new book, “In the Jaws of the Dragon.” “What if — surprise! — China’s top leaders turn out to have had a better understanding of the Chinese character than anyone in Washington? What if in, say, 2025 or 2030 the United States finds itself facing off against a China so rich that it has surpassed all other nations in military technology, yet a China that remains trenchantly opposed to Western values?”

Mr. Fingleton, who has resided in Japan for the past 20 years, has a major advantage over today’s China watchers. Unlike them, he is intimately familiar with the successful economic policies pioneered decades ago by the Japanese and now being clearly copied by the Chinese. As he writes, “Top Chinese leaders have been inspired by the now voluminous evidence that, in modernized form, authoritarian Confucianism effortlessly outperforms Western capitalism.”

The East Asian economic model that China has adopted from Japan, it turns out, can only be implemented by a strong government hand. How else, he asks, could China have erected and maintained a labyrinthine system of trade barriers, artificially undervalued its currency, driven up its savings rate to unprecedented levels, developed so-called “pillar” industries, and put systematic pressure on foreign companies to transfer their most advanced production technologies to China?

Those who believe that China cannot be both rich and authoritarian thus have it exactly backwards. The New China is getting rich precisely because it is authoritarian. Why should China’s leaders give up a good thing, especially when it means giving up their power — and possibly their heads — in the bargain?

Since China, like other practitioners of the East Asian economic model, is obviously eating our lunch in trade terms, why aren’t its predatory economic policies more widely known? In addition to the economic ignorance of China watchers, Mr. Fingleton scores “a remarkable policy of obfuscation — and sometimes outright deception — by East Asian leaders … [and their] aptitude for Potemkin village-style dramatics.

I think here of the destruction derbies that Beijing organizes from time to time to show its “commitment” to enforcing intellectual property rights. Poor street vendors will have their pirated DVDs seized and, when the pile of cassettes is impressive enough, a bulldozer will pulverize it before the assembled foreign press. The story goes out over the wires that China is finally getting serious about enforcing agreements first inked over two decades ago. Meanwhile, the well-connected factories that made the destroyed DVDs somehow escape official scrutiny, continuing to churn out millions of copies of movies on which MGM and Disney shareholders will never see a penny.

If there is any one secret to China’s supergrowth, it is that China socks away nearly half of its GDP each year, money that can then be reinvested in infrastructure and new production facilities. This is not only the world’s highest savings rate, it is the highest savings rate that any nation has ever achieved since records started being kept. And it is, Mr. Fingleton convincingly argues, a direct result of the relentless suppression of consumption by Beijing.

In the West, the savings rate is determined by millions of freely made decisions by individual savers. Not so in China, Mr. Fingleton argues, where the government has imposed “a panoply of constrictions on consumption,” from trade barriers and anti-consumer land policies, to travel restrictions and a ban on credit cards.

“While most of these seem relatively insignificant, in the aggregate they constitute a tight tourniquet.” As a result of these and other authoritarian measures, China’s “socialist market economy” continues to grow at nearly 10 percent a year, while America’s trade deficit continues to widen, and its manufacturing sector continues to be hollowed out.

There is much more to Mr. Fingleton’s rich account, from the ways China keeps its markets closed to the system’s parasitical approach to technology. He makes a credible case that, at least in economic terms, the Confucian authoritarian values by which China is ruled “are not only fundamentally incompatible with those of the West but, in head-to-head competition, prove strikingly more robust.”

Whatever one thinks about Mr. Fingleton’s thesis — and it is hard to argue with 25 years of nearly double digit economic growth while the U.S. is mired in recession — it is clear that Beijing and Washington are headed for confrontation. Washington’s desire to “change China” into a country that respects human rights and is a responsible stakeholder in the global community, he notes, is more than matched by Beijing’s determination to maintain a socialist market economy and authoritarian controls.

I would add that leading Chinese strategists are so confident in the superiority of their authoritarian system that they assert that it is not China but the United States that will change in years to come, “transition[ing] away from capitalism … toward some type of ‘socialist market economy.’” At some point, they believe, the U.S. government will simply have to intervene to regulate trade and the marketplace to stop the ongoing hemorrhage of capital and technology to China.

To counterbalance Beijing’s predatory trade policies, Mr. Fingleton endorses moving to a Value Added Tax to level the export-import playing field, or even adopting Warren Buffett’s suggestion of a system of publicly auctioned import licenses, which would force exports and imports into balance.

For the moment, however, the ongoing contest of values and institutions is inherently unequal. Pace Fingleton, “[i]t is as if an American boxing champion challenged a Chinese kung-fu master. Confident that the world is converging to Western values, the American assumes his Chinese adversary will fight by Queensberry rules. The kung-fu master, however, sees nothing wrong with kung-fu rules. Particularly as they give him an unbeatable advantage.”

Actually the fight is playing out far worse than this, metaphorically speaking. For the kung-fu fighter publicly agreed to fight by Queensbury rules before the match, and signed a treaty to this effect. Then, in the very first round, he caught the boxer off guard and kicked him in the groin. Fending off a flurry of “illegal” blows and kicks, the boxer somehow managed to survive until the end of the round, regaining some of his strength after the bell. The kung-fu master was contrite as the next round begins, assuring the now battered boxer that he is very sorry for violating the rules and will abide by them from now on — right before kicking him in the groin again. And so it goes, round after round.

The referee should stop the fight, you say. Don’t count on it. The referee was bribed by the kung fu master before the fight.

Steven W. Mosher is president of the Population Research Institute and the author of “Hegemon: China’s Plan to Dominate Asia.”

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