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Thursday, January 27, 2022

If China Is As Bad As Its Critics Say, Then We Have Nothing To Fear

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Politicians are constrained by the commercial known. This isn’t a knock as much as it’s a statement of the obvious.

If the known weren’t the frontier of their vision, they wouldn’t be politicians. That is so because enormous wealth awaits those who can see around the proverbial corner.

So while there are many reasons why politicians, dictators, and anyone in between can’t invest wealth that’s taxed away, their limited knowledge is the main reason. The previous truth also helps explain why politicians, dictators and anyone in between can’t plan economic activity. As a rule, economic planning results in much worse than stasis. It results in decline.

To see why, consider the United States. The economic progress that has long defined the world’s most prosperous country is rooted in the happy fact that the seemingly brilliant present is constantly being replaced by an exponentially greater future. Space age as videocassettes and VHS players once were, “Be Kind, Rewind” wouldn’t do it for us. Soon enough it was DVDs on which we were watching films, and that didn’t require rewinding. Now we “stream” movies and TV. Is this frontier of entertainment? Don’t bet on it.

Along similar lines, back in the 1990s visions of superagent Drew Rosenhaus talking a mile a minute on his cellular phone to NFL GMs interested in client Warren Sapp was a source of awe for viewers. For those who watched the 1995 NFL Draft, the conclusion was that Rosenhaus was rich, obnoxious, and likely both. Nowadays we all talk a mile a minute on phones that make the one attached to Rosenhaus’s ear 26 years ago seem positively primitive by comparison.

In dynamic economies, the future relentlessly replaces the past. Products die. Businesses die. Can’t you see why politicians can’t plan this? Not only are they constrained by the known, they’re also worshipful of the present. They want to preserve jobs and businesses, but in a dynamic economy tomorrow rarely resembles today.

All of this and much more came to mind while reading a speech about China that former Trump national security adviser Matt Pottinger recently gave at the Hoover Institution. It was reprinted in the Wall Street Journal, and exists as a loud reminder of why government types are such a threat to economic progress. Pottinger embodies the known. It seemingly never occurred to him that economic growth results from visionaries well outside of government running roughshod over the known.

Evidence supporting the above claim comes care of Pottinger’s hand-wringing about China. Pottinger worries about the country’s “explicit goal of making the world permanently dependent on China.” Oh dear.

For one, if the world were to ever be “permanently dependent on China,” then so would China be permanently dependent on the world. While countries don’t produce and trade in the first place, “China’s” desire to produce for the world means that its future prosperity will be a function of it meeting the needs of the world. Not only would such a scenario make war with China much less likely (rare is the nation that aims to destroy its best customers), it would also make a war waged by China on the rest of the world much more difficult for – you guessed it –China.

You see, imports aren’t just the reward for production. Imports also enable exponentially greater production by the people in any country importing. Imports signal labor being divided up, and labor divided amounts to labor specialization. Translated for those a bit slow on the uptake, labor specialization is the embodiment of economic growth. When we’re doing what we do best, which is what imports enable, we’re much more productive. Last this writer checked, strong military forces are made possible by economic growth. By seeking to meet the needs of the world, China will, if successful, strengthen the economies of countries not China.

Pottinger added that Xi Jinping (the CCP’s General Secretary) is the mastermind behind “China’s” strategy of making the world dependent on it. In Pottinger’s words, “Mr. Xi has issued guidance, institutionalized this month by his rubber-stamp parliament, that he’s pursuing a grand strategy of making China independent of high-end imports from industrialized nations while making these nations heavily reliant on China for high-tech supplies and as a market for raw materials.”

Of course, missed by Pottinger is that in describing Mr. Xi, he’s plainly describing central planning by a politician who, like all politicians, is constrained by the known. It hasn’t occurred to Pottinger that the strategy pursued by Mr. Xi, if real, will cause China’s economy to sputter, and eventually contract. Indeed, “high-end imports” is very much a moving target. As the Rosenhaus example reveals (among millions of others reveals in blindingly obvious fashion), what’s high-end today will almost certainly not be advanced tomorrow. Translated yet again for those slow on the uptake, if “China” were pursuing what Pottinger believes, its economy would be on the verge of staggering decline to reflect forced investment of precious resources in the past.

Important about the previously expressed truism is that Pottinger’s suspicions are likely incorrect. If not, as in Pottinger were correct, stock markets in China and the U.S. would presently be retreating in sickening fashion right now to reflect China’s looming decline born of central planning. You see, the happy truth not expressed by Pottinger is that China seeks to meet the needs of the world precisely because its people seek the world’s plenty. In other words, China is a huge market for the U.S.’s greatest companies as a direct consequence of the world more and more on goods produced in China.

Which explains a happier truth not understood by Pottinger. China’s success redounds to American companies, and so will American success to redound to the Chinese. Work divided endlessly lifts those lucky enough to be able to divide it.

In short, what scares Pottinger should excite those who desire economic growth and progress. Though China has demerits, its people want to acquire the world’s plenty in the way Americans long have. Their economic yearnings will logically lift the U.S. through the very imports that Pottinger views as a threat, but that relentlessly push Americans to higher levels of specialization.

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