Essay: “Will the Chinese Model of State Capitalism Win over the Free
The buzz has been going on since the beginning of the twenty-first century that China will not only be the number one economy, its rise will taper the economic might and influence of the United States around the globe. This dire prediction was supposed to come about in 2020. Now, it has been pushed to 2030.
Yes, China may overtake the US in terms of Gross Domestic Product (GPD) someday because its population is more than three times that of the United States and its workforce is five times bigger than the US. This too is uncertain should China’s GDP growth slow down and USA’s keep growing. Remember when Japan was going to become the world’s biggest economy in late 70s and early 80s? Decades later, its GDP is 4.9 trillion dollars whereas the USA’s GDP stands at 20.5 trillion dollars (Ref. IMF 2020 report).
GDP in absolute terms doesn’t reflect the economic wellbeing of a country. A nation with the population of 1.5 billion may boast of becoming the largest economy in the world in terms of GDP, but they’d still depend on wealthy nations for work and growth. As a matter of fact, GDP per capita of a country is the true measure of its prosperity and wealth. USA is the third largest nation in terms of population behind China and India but its per capita income is close to 65,000 dollars. China’s per capita income is nearly 10,000 dollars. There are six countries whose GDP per person is higher than the US, but most of those countries are either islands or city states. The rest are of the size of Atlanta or New York in population.
The question that many of us are asking is which is a better economic model between free-market system of the US and the state capitalism of China? The cynics and invidious have been telling us that free-market policies had lost the punch in creating jobs, new industries, wealth, and a bright future for the United States. Chinese state capitalism, on the other hand, had already won the round by adopting the state capitalism model.
The fact remains that a state capitalism cannot match the vigor of a free economy. If we look closely, we’ll find that most of the emerging Chinese tech companies are trying to mimic the features of the US tech giants such as Google, Facebook and Twitter. At the same time, China restricts Western companies to operate in their country freely. The Chinese companies thrive on imitation and copycat. They also steal the American technology through agents and spies imbedded in the US companies and universities. Thus, they can never match up to the free capitalist economy of America because the USA thrives on creative destruction, the engine of its economic growth and dominance. The game-changing innovations go on changing the entire world again and again from railroad to aviation to computers to space programs and beyond. State capitalism lacks that engine of growth.
A free economy encourages risk taking, innovation and entrepreneurship. Since people and companies in the US free economy are encouraged to be pioneers, no one knows what the next huge product and industry will be. One recent example is fracking that has made the United States the biggest producer of oil surpassing Saudi Arabia and Russia. We don’t know what the likes of Bezos, Musk, Gates and others will work on tomorrow. Their imaginations are not controlled by the state, so the possibilities are limitless.
Another big source of innovations and ideas are the US universities. Those are the places where real new products and industry of tomorrow are created making the US wealthy and great. Cranking out iPhones might employ more people, but it’s not the foundation for a new kind of industry that economy will need tomorrow.
State capitalism may churn out some good financial reports, but it lacks the fundamental strength inherent in a free economy. As mentioned above, state capitalism is just a pale imitation of the real thing, where there’s neither the ability nor desire to go beyond catching up with America’s innovations.
The coronavirus epidemic has further exposed some critical flaws in China’s governance system. It is clear that China hasn’t truly modernized its governance system 17 years after the SARS epidemic nor has it established a public epidemic prevention system. The regime in China only seems interested in safeguarding the regime by ignoring the facts and basic ethics. The leader of the state capitalism, Xi Jinping disappeared from public view for days after losing control on coronavirus, something unthinkable in a free economy. A lack of transparency cannot match the lucidity, reliability, trustworthiness and responsiveness of a free economy. As John Galbraith said, “In economics, hope and faith coexist with great scientific pretension and also a deep desire for respectability.”
President Trump was impeached by the Democrats on December 18, 2019 and was acquitted by the Republicans on February 5, 2020. All said and done, this was a mere power play, egoism and a waste of time. Everyone knew the outcome including the Democrats. Overall, the biggest losers, undoubtedly, were the voters who didn’t ask for the impeachment or the acquittal. Neal Katyal summed it up on Twitter like this:
“There’s no sense of apology for putting our nation through something that will tear at us. Nothing. Just insults to the opposition. I can’t think of something more un-American.”
Although the Congress provided a good reality show for us to watch, I don’t think it was worth it. During all this drama, the only person who worked indefatigably and without pay was President Trump. As a result, Mr. Trump is in an advantageous position now, but there is no denying that he persuaded the Senate to block the witnesses and was indifferent to Democratic requests. The Republications were in denial that Mr. Trump abused the power of the office though it may not have been an impeachable act, after all. The Republicans didn’t care about the fact that holding up duly appropriated aid to Ukraine was illegal. Rep. Val Deming’s tweet said this the best:
“Apparently the White House team decided to pretend that John Bolton doesn’t exist.”
Dave Brook, an opinion columnist at The New York Times describes Mr. Trump’s success as:
“As several people have noticed, this was the most politically successful week of the Trump presidency. First, President Trump’s job approval numbers are rising. When the impeachment inquiry got rolling in October his Gallup approval rating was 39. Now it’s 49. If he can hold this level, he’ll probably be re-elected.”
President Trump’s State of the Union speech was so effective that Nancy Pelosi had to tear that in full view of the camera. Consequently, she got a new name now, Nancy the Ripper. Michael More supported her by twitting:
“Thank you. That felt good. #NancyTheRipper”
Many are comparing Trump’s post impeachment attitude with Clinton’s. Bill Clinton conceded in public that what he did was wrong. In contrast to that, Mr. Trump publicly denied that he did anything wrong. Monica Lewinsky summed this the best (pardon the language):
“this is definitely an “are you f*@&#^g kidding me?” kinda day.”
I also wondered what Chief Justice John Robert was doing in the Senate trial. Well, his role can be described by the following tweet from Kimberly Robinson:
“Some details about Chief Justice’s impeachment role: – He’ll wear his normal robe (no stripes) – He’ll attend arguments in the AM, Sentate trial in the PM – If he misses an argument, Justice Thomas will preside – He’ll be driven across the street, escorted by #Scouts security”
Overall, the growing public support for the Republicans and Mr. Trump may not bode well for the Democrats in 2020 elections. Mitt Romney’s position in the Republican Party is that of a pariah. We shouldn’t be surprised if he, eventually, becomes a Democrat or an independent. This is what the President said about him:
“I don’t like people who use their faith as justification for doing what they know is wrong. Nor do I like people who say ‘I pray for you’ when they know that that’s not so. So many people have been hurt and we can’t let that go on.”
Ultimately it was an interesting but a futile show. Shakespeare would have said, “It is a tale told by an idiot, full of sound and fury; signifying nothing.” (Macbeth)
When I first came to this country in the 70s, assimilation meant acting like the natives, eating hot dog, becoming baseball fan, watching fireworks on the Fourth of July and celebrating Halloween and Christmas. The magazine racks then were adored by blue-eyed blondes. Who can forget Cheryl Tiegs, Lauren Hutton, Patti Hansen and Brooke Shields? Dressing up on Sundays meant going to the church and people made sure to perform at least one good deed of the day.
Having an American-sounding name was also a badge of assimilation that conferred genuine economic and social benefits. Devendra became Dev and Kanan became Connie. It was that simple. People thought that with less-foreign-sounding names they were more likely to be unemployed than their counterparts whose names sounded more foreign.
That reminds me of an interesting anecdote:
My first boss in the U.S. was a British immigrant named Glen. He spoke in not so savoir faire Brummies’ accent instead of cockney. The truth was that our co-workers didn’t understand either of us. I became so infamous for my unusual accent that whenever I sneezed, Gloria who sat next to my desk would shout, “Anil is sneezing with accent again,” instead of saying “God bless you“
Ultimately, Glen gave me a warning, that if I didn’t improve my accent within a month, he’d have me fired. Fortunately (and unfortunately for him), Glen was fired by the plant manager before the former could fire me. We were both victims of nonconformance or a lack of assimilation. However I lucked out.
Well, that was then. Assimilation today is different from the Age of Mass Migration in the early 20th century till the 70s. In the 70s immigration rules became highly regulated, favoring those with money, education, and skills and drawing migrants primarily from Asia. They were more skilled and educated than their compatriots who stayed in their countries of origin. This, of course, was contrary to the immigrants who came in the first wave (1920s) who were less skilled than those who stayed behind.
Today most of the immigrants come from both Asia and Central America. The Hispanic population has increased from 9 million in 1970 to 54 million now whereas the Caucasian share of the population has decreased from more than 80% in the 70s to below 70% now. The Central American immigrants are fast changing the demography of the Southern and Southern west states, especially those of California, Nevada, Arizona, New Mexico and Texas. Today’s immigrants are more fearful of words like assimilation and melting pot. Many of them reject the very idea of assimilation which, in their views, is denying one culture for the other. The fact remains that this fear was also prevalent in previous batches of immigrants. Despite that, immigrants have always made a distinctive contribution to the economy, innovation and culture.
However, the above tells the story of the first generation immigrants only. The second and the third generation immigrants still become wholly American by learning the language, embracing the folkways and traditions and becoming deeply patriotic. I have personally talked to many second generation Hispanic Americans. They prefer to speak in English and they identify themselves as Americans only.
In my view, the American melting pot is still alive and well. One in five newlyweds is marrying someone of another race (Pew Report). As stated above, they identify themselves as Americans. The fear that today’s immigrants cannot assimilate is misplaced. Of course, we won’t see many blue eyed blondes on magazine covers. Many of them won’t go to the Church on Sundays. I hope they’d still do the good deed of the day without giving any name to it. They are the new generation of Americans who come in all colors and traits. They may not look homogeneous as before, but they are distinctly Americans.
For three years, lifetimes ago, I was Stu’s superior at a major auto company. During those years, without exception, I never fired anyone. Probably this was because everyone quit first. I was also opposed to death penalty for similar reasons. Stu was a miserable employee. He was always wrapped in financial troubles; his marriage was on rocks and his short fuse, quite frequently, landed him in odds with the law. My superior, Jack was an aimless man who wanted me to fire Stu. I managed to evade him every time as I was bent on reforming Stu instead of firing him.
Stu was lazy and incompetent, but who was not? Our organization was full of people who were lazy and nincompoop. One time Stu was jailed for three weeks. I had no choice but to hire a temp to get the work done. The temp agency sent a twenty-one-year-old woman, Paula as his replacement. Paula did an outstanding job and was willing to take over Stu’s position. To top it off, she brought Jack his morning coffee and whoppers with fries for lunch every day, something that Jack couldn’t have imagined Stu doing for him.
Now Jack had a stronger case for firing Stu and replacing him with Paula. Since I was vehemently opposed to that idea, I reminded Jack how that could be deemed against company rules. Stu had to go through corporate retraining program first. I also suggested that Stu should go to an anger-management class at company’s expense. I consulted the personnel and they agreed with me to justify their own top heavy staffing. More irrelevance meant more job security for them. Jack had no choice but to abide by my suggestion. Presumably there is a way to fire people, but jack had not mastered that yet.
I always thought about the ways to reform Stu. During the next annual review, I recommended a hefty raise for him which put Jack at his wit’s end.
“Are you crazy? How can you recommend a raise for Stu when he is so incompetent and is often absent due to serving jail time?” Jack seemed really agitated at me.
“Jack, a good manager has to know how to get the best performance out of his subordinates. Do you realize the root cause of Stu’s problems? It’s obviously money, Jack! He gets in fight with his wife due to his weak finances. Money will certainly contain his temper and combined with corporate retraining and anger management program, he will become productive, “I tried to convince Jack..
“ What do you suggest for Paula?” Jack asked anxiously.
I’d make her permanent and will put her under Stu as his direct report. That way Stu will get much needed managerial experience after his reform. And don’t forget Jack that you’ll still have Paula bring you morning coffee and whopper with fries every day.” I suggested.
Jack very much seemed to like my idea. He smiled under his mustache and went to Paula and winked at her.
A year later, Stu’s performance and attitude had really improved. I gave all the credit for that to Jack. The management was so happy with him that he was promoted to a more responsible position in another organization. Jack took Paula with her as he gathered his other trophies from his wall. That was a task well done by everyone.
I am told that that 1920s was a very good decade. During that period Charles Lindbergh made the historic first nonstop flight from New York to Paris. Besides that, electric iron, washing machine, vacuum cleaner, electric toaster, television, frozen food, bread slicer, Model-T and many more items were invented that shaped not only the American life but the lives of people around the world for forever. However, it’s not always good to project this century based on what happened in the last since we won’t like a repeat of the Great Depression in the following decade of this century.
Coming to the present decade, first of all, it has a catchy name, the decade of 2020. It’s the number of perfect eyesight, thus I hope that we will be able to see things clearly free from prejudices and preconceived notions and our politicians will not lose either their sight or focus from the needs of their constituencies. I also hope that people will think more independently and will change for good.
I can safely predict that the babies born today will emerge into a world light years away from any generation that came before them.
1. In this decade, humans will be on the cusp of going around Mars.
2. Cure for many kinds of cancer will be found through stem cell research and the technology that edits genes.
3. Hyperloop travel will be tested successfully between either Los Angeles and San Francisco or between Los Angeles and Las Vegas. The travel between the two cities will be completed in approximately 36 minutes.
4. “Deep learning” will enable machines to learn what to learn making them super intelligent.
I am averse to farfetched predictions, therefore, I have chosen the above based upon what are definitely possible in this decade (2020s).
That sounds good and dandy, but the bigger issues needing our attention in this decade should be of our prime concern. Some of the dangers facing our future are mentioned below. If we don’t take action now, the following decades may bring miseries to our planet.
1. Can we provide adequate health care to ever growing population around the globe?
The World Health Organization estimates that one billion people go their entire lives without seeing a health worker because of distance, unavailability of health providers, poverty and lack of any health education. As the population grows beyond 7 billion in this decade, this problem will intensify even further.
2. Will we face a nuclear holocaust?
Nuclear bombs are no more prod possessions of a few countries alone. Soon many more countries including rogue nations will have these weapons in their arsenals. They won’t hesitate to use them against their enemies like they use bombs and guns now.
3. Will we go back to the Stone Age?
There are a couple of possibilities that this may happen. First of all, the war of the future will be fought in space. If the enemies destroy each other’s communication satellites, we’ll definitely not be able to function due to our dependability on satellites for practically everything we do today.
Secondly, there are possibilities of big meteors colliding with the earth and annihilating a major part of our population.
4. Can we save earth’s atmosphere?
According to NASA, earth’s climate has reached a dangerous level due to human-made greenhouse gases. This is not an imagination of a fickle mind or a part of any political agenda. NASA’s survey also reveals that Antarctica has lost much more ice to sea than it gained from snowfalls. Similarly, Arctic is melting and we all are aware of this fact.
We have two choices in 2020s. Either we enjoy the epicurean and esthete life while it lasts or we care and plan for the future so that we are not forced to rusticate and become ascetics sooner than we want.