Bill,
The Capitalist
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Those who have watched Doctor Strange might remember the Ancient One - a Celtic monk played by Tilda Swinton, who takes on the role of teaching the main character. What not everyone knows, however, is that in the comic book on which the movie is based, the Ancient One was a Tibetan monk. The change was made out of fear that a portrayal of Tibet might cause the movie to be banned in China.
The Chinese Elephant in
the Room
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There is something very unsettling about the current relationship between the western world and China. On one hand, we see concentration camps, violent imperialism, and censorship and political prosecution being carried out with an efficiency seldom seen in the history of mankind. On the other, there is a consensus that all the great western economies - the United States in particular - depend on Chinese industry and investment to maintain its current productivity.
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This paradoxical situation is not new, but has been getting ever more blatant, with no immediate perspective of improvement. While it used to be restricted to more subtle acts, like Marvel’s replacement of a Tibetan monk by a Celtic one in Doctor Strange , the subservience of large western companies to the whims of the Chinese government became nearly surreal throughout the past year, after the onset of the Hong Kong protests. On the passive side, this subservience is illustrated by the official apologies of Dior, for not including Tibet in a map of China aired in a marketing campaign, and the NBA, over the possibility that a personal tweet from the general manager of the Houston Rockets - in which me merely argued in defense of freedom of speech - might have “offended the Chinese people”. On the more active side, there is the overt complicity of companies like Blizzard, the video-game mogul who banished a Hong Kongese professional player for taking a political stance. The situation is, at best, curious - at worse, spine-chilling.
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From where, exactly, does China's power over western companies come from? What are the possible consequences of this state of affairs? What can we expect from China in the future?
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To answer these questions, we need to understand what exactly China is - it’s history, the fundamental values of its culture, and the political and economical systems to which these values give rise. After going over a brief history of China to establish the necessary context, we will turn our sights to the west, analyzing how the nature of Chinese and American institutions relate to each other, and going over the history of that relationship. We will deal with the interaction between the western economic system - with a focus on the American system - and the one in China, showing how the latter’s economic success is not merely a consequence of it’s large population. Finally, we will deal with the possible attitudes towards the Chinese issue - what is being done by the politicians in power, what is proposed by their opposition, and what should be the focus of discussion.
What is China?
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The political system under the Zhou dynasty somewhat resembled European feudalism, insofar as relatively independent local leaders swore fealty, and pledged allegiance to a king. In modern-day standards, that is a relatively decentralized system, but in comparison with other societies at the time, which were organized mainly in bands and tribes, Zhou feudalism was extremely centralized.
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The mandate of heaven is a belief somewhat similar to Europe’s “divine right of kings”, insofar as the ruler’s power is perceived to be the direct consequence of metaphysical principles. However, while the divine right of kings sees the ruler and his bloodline as chosen by God, who must respect divine law, and whose power should not be put into question, the mandate of heaven sees sovereingty as a law of nature; the sovereing himself as free to do as he pleases, so long as he keeps the nation prosper; and political revolution as a sign that the ruler has lost the mandate.
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Confucianism’s five cosmological entities, for example, included not only Heaven, Earth, Ancestors and Masters (the elders), but also the Sovereign, or Government. The existence of a centralized government is elevated, in Chinese philosophy, to the metaphysical - it is as fundamental as the natural principles of Heaven and Earth.
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Existence itself, and not the individual, is the proper starting point of Metaphysics, and therefore of Philosophy. The nature of the individual, however, is the proper starting point of Epistemology, and consequently of all the philosophy that follows it.
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The longest of these transitional periods of decentralized power is known as the age of Five Dynasties and Ten Kingdoms, and lasted only about 50 years.
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In his treaties On Practice and On Contradiction, Mao establishes his own interpretation of marxist historical dialectics, arguing that the absence of a proletariat class in China was not a hinderance to the socialist revolution, as the more orthodox marxists believed. While Marx argued that only the inequalities, the social organization and the ideology that come from capitalism’s industrial structure of production could create a social class with socialist revolutionary potential, Mao argued that the peasantry could, if properly educated and instigated, bring about socialsm. That belief is, quite possibly, the central tenet of Maoism.
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The Laogai Research Foundation estimates the number of slaves kept into China’s more than 1000 forced labour camps to be somewhere between 500.000 and 2 million. Those numbers only refer to the Laogai system, and does not include those affected by the Chinese government’s many other atrocities, such as the “reeducation” camps for muslims, the enslaving of dissidents in Tibet, and the institution of organ harvesting in the common prison system.
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It is easy to believe that Chinese totalitarianism has its roots in the communist political system, after all, there is more than enough information about both the concrete atrocities perpetrated by the likes of the Soviet Union and the Khmer Rouge, and the abstract incompatibility between Communism and Liberty. As we will see, however, the causality is reversed. China has always been a totalitarian society, where the State is above the law, the family, the individual, or any other institution, and that is precisely why the communist system flourished so violently there, while collapsing decades ago around the world.
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In 1000 b.C. while Europe was no more an agglomerate of primitive tribes and small towns, Chinese society unified under the Zhou dynasty, which established the doctrine of the mandate of heaven . Unlike the western world, where political power had its roots in tradition and religious rules, which in turn limited the power of rulers, the mandate of heaven established that those in power should be in power, regardless of their lineage or religion, up until the moment when that power is overtaken by another group, or collapses because of an internal crisis. The mandate of heaven entailed, on one side, a pioneer separation between Church and State, and on the other, the fundamentals for a system that completely rejected the restriction of the State’s actions by the law, and of political power by some form of morality - since at least 1000 years before christ, power is justified, in China, by power itself.
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After around 200 years of stability, during which the Zhou emperors progressively stripped local leaders of their power by establishing a mobile proto-bureaucracy, with no blood ties in the territory it was assigned to manage, the dynasty starts to lose their claim to power, starting a period of 500 years in which power became progressively decentralized. Decentralization of power in China, however, was not stable like that of America - and Europe to a smaller degree - but entailed constant military conflict, between hundreds of small States, all seeking to return to the totalitarian centralized form of government prescribed by the mandate of heaven.
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This time of war and decentralization, divided by historians between the periods of “Spring and Autum” and of the “Warring States”, saw the birth of the great Chinese philosophic traditions: Taoism, Confucianism, Legalism and Mohism. With the exception of Taoism, which was essentially a religious doctrine based on supernatural ideas, and had but a marginal influence on society, all major schools of thought were secular and collectivistic, much like Communism. Unlike Europe or the Middle East, where supernatural ideas were fundamental in shaping the political system, Confucianism, Legalism and Mohism would approach concepts like “heaven” as metaphysical principles belonging to the natural world, and not divine existents - something closer to Marxist historical dialectics than to the christian God. The state was thought of, not as a result of the interaction between individuals nor as a consequence of godly designs, but as a metaphysical need onto itself.
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All three secular schools of thought were radically collectivistic, considered the individual to be, not the starting point of epistemological and ethical inquiry that in turn gives rise to larger systems, but an incomplete part of a larger fundamental unit, disagreeing only on what that unit would be. According to Confucianism, the family was the fundamental “whole”, of which the individual was a part of; to Legalism, it was the central government, of which the family was merely a part of; Mohism, on the other hand, rejected the family/government dichotomy, considering both of them to be different facets of society as a whole. The Christian idea of equality in the eyes of God as well as the Greek notion of individual rationality, both of which were essential to the development of modern individualism, have always been completely alien to Chinese culture.
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After centuries of war, China is once again unified by the brief Qin dynasty, that expands and professionalizes governmental bureaucracy, but is overthrown by the Han dynasty after 20 years. Adopting Confucianism as the State’s official doctrine, the Han rise to power in 202 b.C. and keep it for around 400 years, using that doctrine as the basis with which to create a system of public service exams, with the goal of replacing family bonds with an impersonal, centralized bureaucracy as the standard of social hierarchy. Without a class of local political leaders (like Europe’s feudal lords), or a parallel system of legitimacy (like the one provided by the Catholic Church), the Chinese central government becomes absolute, and its power only grows larger in the centuries that follow.
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After the fall of the Han in 220 A.D. the power of China’s central government not only remains centralized, but expands even more with the institution of Juntian Zhidu (that roughly translates to equal-land system) in the period of the Six Dynasties, ending the heredity of land ownership. All land effectively becomes a property of the Chinese government, that divides it into lots and temporarily assigns it to the families in the region which are, themselves, subservient to the local bureaucracy. When the head of a family dies, its land returns to the government to be redistributed once more. The local bureaucrats, in turn, are routinely transferred to other regions, so as to avoid the rise of local political leaders that might challenge the central bureaucracy.
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With the exception of brief periods of instability and decentralized power between the fall of a dynasty and the rise of the next, China essentially remained a centralized and totalitarian bureaucracy up to this day. After the fall of the Tang dynasty in the 10th century, Juntian Zhidu is abandoned, and local leaders gain strength. Nonetheless, a centralized bureaucratic government remained such a strong cultural need that even foreign conquerors, like the Mongols in the 13th century and the Manchus in the 17th century, had to forsake their traditional forms of government - and even a great deal of their culture - to be able to remain in power. Chinese bureaucracy was so complex, and Chinese society so dependent on that bureaucracy, that even its conquerors had to effectively become bureaucrats in order to rule it.
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The Manchu conquerors, who became the Qing dynasty, ruled China until the start of the 20th century, when conflicts with Japan and the United Kingdom destabilized the emperor - who was, in turn, attempting to do away with a large section of the bureaucratic class, and move towards a more personalistic regime. As one would expect, the emperor is deposed, beginning a period of instability marked by a war between local warlords, Chiang Kai-Shek's (1887 - 1975) Kuomintang, Mao Zedong’s (1893 - 1976) Communist Party of China (CPC), and the Japanese invaders. By the start of the 1950s, Japan had been defeated in World War II, the local warlords had been subdued, and the fight between the Kuomintang and the CPC had resulted in the expulsion of Kai-Shek’s group to Taiwan, and in the conquest of the mandate of heaven by the Communists.
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Chinese communism is significantly different from that of the Soviets. While the Soviets followed Karl Marx’s (1818 - 1883) theory more closely, artificially forcing an industrialization with the goal of transforming the Russian peasantry into a revolutionary proletariat, Chinese communism is essentially an evolution of the classical Chinese political system, maintaining a peasant class . Chinese communism, which is extremely unorthodox from the point of view of Marxist theory, is essentially a radical new application of two traditional Chinese political principles: the mandate of heaven is adapted to marxist theory, providing the ideal justification for an extremely totalitarian State (even by Chinese standards); a new, more radical version of Juntian Zhidu becomes public policy again, with the collectivization of land and the execution of landowners during the “Great Leap Forward” - which resulted in 45 million deaths - and the institution of Laogai, the enslaving of “political dissidents” that is still a big part of the regime today.
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It is precisely those hegemonic values in Chinese society, that precede communist ideology by millennia, that make China fundamentally incompatible with western society. As we will see, it is exactly the partial adoption of those same values by western governments that make them vulnerable to Chinese intervention.
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The Chinese Symptom to the
Western Disease
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The Austrian School of Economics traditionally divides money into three different types. Commodity money is one that has its roots the market value of the commodity out of which the money is made. Fiduciary money is one that has its roots in some form of debt, whether by the government or by a private institution. Fiat, or token money is one that is artificially created by a government, and has its value established by law.
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The hideous nature of the Chinese State is obvious, not merely to those who hold objectivist values, but to anyone who adopts a moral code that commands a modicum of respect. Slavery, the extermination of political dissidents, the suppression of speech and military imperialism are foul things, by any moral standard worthy of some respect. Those problems, however, although deserving of repudiation, are a Chinese problem, and only affect people under the direct rule of the Chinese government. The problem that this particular article seeks to address, however, is the dangerous growth of Chinese influence on western societies - specially in the United States of America, the political and economical leader of the West.
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Recent events show how the Chinese market, strictly controlled by the Chinese government, became paramount to western economies. Seeking an ally against Soviet Russia, American presidents have repeatedly visited China in attempts to get closer to it: Nixon in 1972, attempting to normalize the diplomatic situation between both nations; Reagan in 1982, with the same goal - both offering an economic embargo on Taiwan in exchange for the gradual opening of China to western exports. In 2000, Bill Clinton signs the US-China Relations Act, normalizing trade between the two countries, while at the same time prohibiting Chinese companies from selling goods in the US at a much lower price than one would find on the domestic market.
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The consequences were immediately apparent. With the admission of China in the World Trade Organization, the Chinese market becomes the largest buyer of American soy, with a trade deficit growing from a mere 6 million dollars, in 1985, to 83 billion in 2001, to nearly 420 billion in 2018. Recently, Mark Kern, activist for intellectual property and one of the lead videogame designers in the industry, went to tweeter to talk about how Chinese subsidy to the entertainment industry made the western market subservient to the decisions of China’s government. Still in 2018, China became a larger buyer of American movies than the US and Canada combined. But if the competitive advantages of Chinese companies are basically cheap labour and the large-scale sale of unfinished products, how does one account for its economic power? Is the explanation to be found on the sheer number of consumers and producers in the country, regardless of their purchasing power of productivity?
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The answer lies in the nature of both the Chinese and the American economic systems - specifically, in its monetary system, and its economic regulations. As I have explained in more detail on a previous article, there is a fundamental difference between a metallist monetary system, in which money is a commodity that works as a value-reserve for the individual, regardless of any political authorities; and a chartalist monetary system, in which money is essentially a tool for the State’s accounting and public policy. The Chinese system is, essentially and openly, a chartalist system - money is a document issued by the State, and it sets its value at will. The United States traditionally had a metallist system, but has gradually transitioned to a partial and apologetic chartalist system for over a century.
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In her Anatomy of Compromise, Ayn Rand explains how “In any conflict between two men (or two groups) who hold the same basic principles, it is the more consistent one who wins”. The economic success of China in relation to the West stems from the fact that we have started to adopt the same principles in regard to our economic system, but while China does so openly, we do so reluctantly. While the western world attempts to balance freedom and servitude through high taxes, excessive regulation, partial suppression of freedom of speech, and a fraudulent monetary system that nonetheless attempts to keep public debt and inflation under an illusion of control, China practices servitude in its entirety, utilizing slave labour, completely censoring political discourse, and taking full control of prices and currency emission.
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In a society with a free monetary system, in which money is a commodity that has its value established by the market, the value of a fiat currency like China’s Renminbi would be closely dependent on the available information with regards to the Chinese government, and each attempt by the government to arbitrarily expand its monetary base would bring about a significant corrosion of its value, and a stark change in the market for credit. The logic is relatively simple: if the price of Chinese currency in relation to an honest dollar were defined by voluntary trade, it would ultimately be defined by the relationship between the value of the monetary metal one holds and the purchasing power one expects from the Chinese currency. In such a scenario, the indiscriminate emission of money by the government would quickly be perceived by the market a source of insecurity, causing the value of the currency to fall and the risk of credit to rise. The competition between honest money and a legal instrument from a corrupt country is impossible.
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Since the creation of the Federal Reserve, and the abolishing of commodity money - the consequences of which are masterfully explained by the authors of the New Austrian School of Economics - our monetary system follows the same logic as the Chinese one: the individual no longer has the power to retain value independently from the government, who is in turn responsible for manipulating its value. In spite of that, the American values of freedom and private property present an obstacle - albeit a very flawed one - to the indiscriminate emission of currency, under penalty of grave economic crisis. As Keith Weiner explains in this series of articles, if the interest rates become too low, one is still able to step out of the monetary system by stocking up on commodities and finished goods. The Chinese government, on the other hand, has no qualms with exterminating any individual that might dare to reject the use of its currency, at the value it establishes. Instead of a currency that fluctuates in relation to the dollar according to market forces, the Chinese government arbitrarily defines a fixed parity towards the dollar, that is subject only to the design of the government itself and its political disputes.
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On top of the monetary issue, which by itself would be enough to cause the current situation, there is also the issue of economic regulation - specially, when it comes to the market for labour. From Austrian Praxeology to the incentive analyses of the Chicago School, respectable economic theory is quite unanimous in its verdict that the productivity of a free individual is far greater than that of a slave. Economic regulation, however, always has the effect of diminishing productivity and increasing the costs of producing a specific good.
Most western countries, from Germany to Argentina, have a well established tradition of regulating their economies, and would never be able to compete with a country like China in the first place. After over a century of increasing economic regulation, however, American producers are becoming unable to compete with the Chinese. The extreme productivity that came as a result of American freedom has been constantly eroded by the institution of regulating agencies, the creation of subsidies and taxes, and labour legislation that is increasingly authoritative.
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On one side, the “half freedom” of American markets - the most productive of western nations - is no longer able to properly compete with the low costs of Chinese slavery, and the legal concessions that can be purchased from its government by sufficiently large companies. On the other hand, its monetary system based around the irredeemable credit of a central bank hides, with its own inherent flaws, the unsustainable nature of China’s endless subsidies, based on an unlimited amount of fraudulent money. Competition is impossible. But once we have properly established the problem, how does one go about solving it?
What Is And What Should Be
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“Left” and “right” are used under quotation marks throughout this article because, although common, they are not proper concepts with which to identify and differentiate political movements. Both terms have multiple definitions, many of which contradict each other, and end up bundling together fundamentally different ideas, like economic freedom and Christian tradition, or sexual liberty and opposition to Capitalism. In the context of this article, both are utilized loosely in their demeaning formulations, with “left” denoting those partial to subjectivism, collectivism and ethical relativism, and “right” to those partial to intrinsicism, supernaturalism and western nationalism.
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Readers with some skill in Portuguese or Spanish can find a great description of that process in Gianluca Lorenzon’s Ciclos Fatais (Fatal Cycles), in which he explains how even mild socialistic economic policies lead to debt that cannot be payed off, due to the very nature of the economic system. To avoid the just collection of such debt, or the bankruptcy of the government, the system must necessarily develop institutions to suppress those who push for those debts to be honored.
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Antal Fekete, founder of the New Austrian School of Economics, has published a masterful series of lectures on what a safe and efficient transition from our current monetary system, based on fiduciary currency, to a free one, based on commodity money, would entail.
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The subject of when war becomes necessary is a complex one, the proper treatment of which would require at least an article of its own, which I currently lack the knowledge to write. As Ayn Rand has made clear in her discussion of pacifism, however, there is a point on which military action is the proper route, and a government that had its commander-in-chief recently shake hands with a genocidal communist leader like as Kim Jong-Un does not inspire confidence in regards to the knowledge of what that point is, and to the willingness act when necessary.
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By this point, the problem is clear: the inconsistent adoption of the same abject principles that China adopts consistently - collectivism, totalitarianism and nationalism - makes us play the same game as they do, while being worse at it. There are only two possible solutions to that: either we start being consistent with those principles, or we reject them entirely. Both the political “right” and the “left”, unfortunately, seem to propose more consistency in the abandoning of freedom and property, instead of the rejection of collectivism and totalitarianism.
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Due to the “left’s” worldwide loss of power during recent elections, not only in the USA but in a big part of Europe and Latin America, we would do better to analyze its solutions by looking at the proposals put forth by its politicians and intellectuals. A radical one of these solutions, consistent with the general values of the “left”, and which I believe provides a good illustration of modern left-wing proposals as a whole, is Modern Monetary Theory (which we have looked at in more depth in a previous article). The theory essentially proposes the adoption of the same monetary system as that of China, that is, a complete and consistent form of chartalism, in which the State has full control over the economy, both by controlling the value of currency and by having unlimited funds to subsidize any particular section of the market it deems to be important.
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There are two fundamental problems with the solutions proposed by the “left”. The first one is that, if we adopt the same principles as China, we become a society that is as evil as that of China’s. The economy cannot be conceptualized as something removed from social life as a whole, and control of the State over the economy necessarily leads to the development of an ever more authoritarian political regime - and if we become an authoritarian society, it does not matter in the slightest whether we speak English, Russian or Mandarin. The second problem is that, even if we concede that it is somehow possible to become authoritarian solely in the realm of economics, we would still be playing the same game as the Chinese, except we would be a new player competing against someone who has been playing it for thousands of years.
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The “right” on the other hand, has been gaining political power, and we can judge, not only its proposals and theories, but its current public policy. Going in the opposite direction as the “left”, which seeks to become closer to China, the “right’s” answer can be illustrated by Donald Trump and his attempt to build an economic wall by means of his so-called tariff war. The tariff war consists of imposing costs - whether through taxation, quotas or regulations - on the act of importing Chinese products, attempting to hinder their competition with domestic products.
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As with the “left”s proposals, the problems of the tariff war are two-fold. The first one is the fact that hindering cheap Chinese imports, besides being a blatant violation of the individual’s freedom to trade, entails decreasing American productivity even more. To stop the purchase of Chinese products precisely because they are cheap, is to further decrease both the productivity of the American companies that rely on these products, and the wealth of individuals that save money by purchasing these products. Ignoring the competitive advantage that comes from China’s cheap labour is ignoring America’s own problem with excessive economic legislation. The second problem is that imposing tariffs on imports does not stop fraudulent Chinese investment from entering the country, and the dependance of western companies on these investments is one of the pillars of their subservience to the Chinese government.
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The only real solution is to grab the bull by its horns. If the problem has its roots on the adoption of collectivism and authoritarianism, the solution starts by completely abandoning these principles, and reinstating freedom and property as the cornerstones of social interaction. That means, in the economic realm, to deregulate the economy, not in an apologetic, case-by-case fashion, but radically, albeit gradually. It means deregulating the economy while making it clear, through political discourse, that the reason why an economy must not be regulated is primarily moral, and not merely pragmatic. As far as the monetary system is concerned, it is paramount that we stop arguing for palliative measures, like contractive credit policies by the Fed, attempts to make the dollar “stronger”, or means to keep the growing public debt in check, and start discussing a return to the gold standard, to free coinage, and to the fluctuation of the value of money according to market forces.
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In the realm of politics and culture, it is paramount that we stop treating China as a “different” nation, with a culture and a political regime that we “can’t fully comprehend”, due to not being a part of the Chinese people. It is absolutely necessary that we, as individuals, start pressuring our companies and public figures to treat China for what it is: a murderous, slave State. We need to win the cultural war, and that is only possible if we make our values, and those of our adversaries, explicit in a clear and precise manner. We must not abstain from passing moral judgement on those values and their consequences, both through speech and through action: by boycotting companies that attempt to appease it, pushing for its exclusion from international events and organizations, and even pressuring our representatives for military action - if, and when, that becomes absolutely necessary.
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By now, the reader might be thinking: “That’s all well and pretty on paper, but radical measures such as these will never be applied in practice”. It is true that radical change in the way in which a society organizes itself, while not impossible, is very hard to achieve. It is also true, however, that such radical change is exactly what gave birth to this country. The issue, however, is not how hard it is to become a free society once again, but what the alternative is in case we do not: to forsake our morals, and learn some Mandarin.