by
Ron Unz
The
American Conservative

Previously
by Ron Unz: The
Dark Heart of the US Government

The rise of
China surely ranks among the most important world developments of
the last 100 years. With America still trapped in its fifth year
of economic hardship, and the Chinese economy poised to surpass
our own before the end of this decade, China looms very large on
the horizon. We are living in the early years of what journalists
once dubbed “The Pacific Century,” yet there are worrisome
signs it may instead become known as “The Chinese Century.”

But does the
Chinese giant have feet of clay? In a recently published book, Why
Nations Fail, economists Daron Acemoglu and James A. Robinson characterize
China’s ruling elites as “extractive” – parasitic
and corrupt – and predict that Chinese economic growth will
soon falter and decline, while America’s “inclusive”
governing institutions have taken us from strength to strength.
They argue that a country governed as a one-party state, without
the free media or checks and balances of our own democratic system,
cannot long prosper in the modern world. The glowing tributes this
book has received from a vast array of AmericaÂ’s most prominent
public intellectuals, including six Nobel laureates in economics,
testifies to the widespread popularity of this optimistic message.

Yet do the
facts about China and America really warrant this conclusion?

China Shakes
the World

By the late
1970s, three decades of Communist central planning had managed to
increase ChinaÂ’s production at a respectable rate, but with
tremendous fits and starts, and often at a terrible cost: 35 million
or more Chinese had starved to death during the disastrous 1959–1961
famine caused by MaoÂ’s forced industrialization policy of the
Great Leap Forward.

ChinaÂ’s
population had also grown very rapidly during this period, so the
typical standard of living had improved only slightly, perhaps 2
percent per year between 1958 and 1978, and this from an extremely
low base. Adjusted for purchasing power, most Chinese in 1980 had
an income 60–70 percent below that of the citizens in other
major Third World countries such as Indonesia, Nigeria, Pakistan,
and Kenya, none of which were considered great economic success
stories. In those days, even Haitians were far wealthier than Chinese.

All this began
to change very rapidly once Deng Xiaoping initiated his free-market
reforms in 1978, first throughout the countryside and eventually
in the smaller industrial enterprises of the coastal provinces.
By 1985, The Economist ran a cover story praising ChinaÂ’s 700,000,000
peasants for having doubled their agricultural production in just
seven years, an achievement almost unprecedented in world history.
Meanwhile, ChinaÂ’s newly adopted one-child policy, despite
its considerable unpopularity, had sharply reduced population growth
rates in a country possessing relatively little arable land.

A combination
of slowing population growth and rapidly accelerating economic output
has obvious implications for national prosperity. During the three
decades to 2010, China achieved perhaps the most rapid sustained
rate of economic development in the history of the human species,
with its real economy growing almost 40-fold between 1978 and 2010.
In 1978, AmericaÂ’s economy was 15 times larger, but according
to most international estimates, China is now set to surpass AmericaÂ’s
total economic output within just another few years.

Furthermore,
the vast majority of ChinaÂ’s newly created economic wealth
has flowed to ordinary Chinese workers, who have moved from oxen
and bicycles to the verge of automobiles in just a single generation.
While median American incomes have been stagnant for almost forty
years, those in China have nearly doubled every decade, with the
real wages of workers outside the farm-sector rising about 150 percent
over the last ten years alone. The Chinese of 1980 were desperately
poor compared to Pakistanis, Nigerians, or Kenyans; but today, they
are several times wealthier, representing more than a tenfold shift
in relative income.

A World Bank
report recently highlighted the huge drop in global poverty rates
from 1980 to 2008, but critics noted that over 100 percent of that
decline came from China alone: the number of Chinese living in dire
poverty fell by a remarkable 662 million, while the impoverished
population in the rest of the world actually rose by 13 million.
And although India is often paired with China in the Western media,
a large fraction of Indians have actually grown poorer over time.
The bottom half of IndiaÂ’s still rapidly growing population
has seen its daily caloric intake steadily decline for the last
30 years, with half of all children under five now being malnourished.

ChinaÂ’s
economic progress is especially impressive when matched against
historical parallels. Between 1870 and 1900, America enjoyed unprecedented
industrial expansion, such that even Karl Marx and his followers
began to doubt that a Communist revolution would be necessary or
even possible in a country whose people were achieving such widely
shared prosperity through capitalistic expansion. During those 30
years AmericaÂ’s real per capita income grew by 100 percent.
But over the last 30 years, real per capita income in China has
grown by more than 1,300 percent.

Over the last
decade alone, China quadrupled its industrial output, which is now
comparable to that of the U.S. In the crucial sector of automobiles,
China raised its production ninefold, from 2 million cars in 2000
to 18 million in 2010, a figure now greater than the combined totals
for America and Japan. China accounted for fully 85 percent of the
total world increase in auto manufacturing during that decade.

It is true
that many of ChinaÂ’s highest-tech exports are more apparent
than real. Nearly all AppleÂ’s iPhones and iPads come from China,
but this is largely due to the use of cheap Chinese labor for final
assembly, with just 4 percent of the value added in those world-leading
items being Chinese. This distorts Chinese trade statistics, leading
to unnecessary friction. However, some high-tech China exports are
indeed fully Chinese, notably those of Huawei, which now ranks alongside
SwedenÂ’s Ericsson as one of the worldÂ’s two leading telecommunications
manufacturers, while once powerful North American competitors such
Lucent-Alcatel and Nortel have fallen into steep decline or even
bankruptcy. And although America originally pioneered the Human
Genome Project, the Beijing Genomics Institute (BGI) today probably
stands as the world leader in that enormously important emerging
scientific field.

ChinaÂ’s
recent rise should hardly surprise us. For most of the last 3,000
years, China together with the Mediterranean world and its adjoining
European peninsula have constituted the two greatest world centers
of technological and economic progress. During the 13th century,
Marco Polo traveled from his native Venice to the Chinese Empire
and described the latter as vastly wealthier and more advanced than
any European country. As late as the 18th century, many leading
European philosophers such as Voltaire often looked to Chinese society
as an intellectual exemplar, while both the British and the Prussians
used the Chinese mandarinate as their model for establishing a meritocratic
civil service based on competitive examinations.

Even a century
ago, near the nadir of ChinaÂ’s later weakness and decay, some
of AmericaÂ’s foremost public intellectuals, such as Edward
A. Ross and Lothrop Stoddard, boldly predicted the forthcoming restoration
of the Chinese nation to global influence, the former with equanimity
and the latter with serious concern. Indeed, Stoddard argued that
only three major inventions effectively separated the world of classical
antiquity from that of 18th-century Europe – gunpowder, the
marinerÂ’s compass, and the printing press. All three seem to
have first appeared in China, though for various social, political,
and ideological reasons, none were properly implemented.

Does ChinaÂ’s
rise necessarily imply AmericaÂ’s decline? Not at all: human
economic progress is not a zero-sum game. Under the right circumstances,
the rapid development of one large country should tend to improve
living standards for the rest of the world.

This is most
obvious for those nations whose economic strengths directly complement
those of a growing China. Massive industrial expansion clearly requires
a similar increase in raw-material consumption, and China is now
the worldÂ’s largest producer and user of electricity, concrete,
steel, and many other basic materials, with its iron-ore imports
surging by a factor of ten between 2000 and 2011. This has driven
huge increases in the costs of most commodities; for example, copperÂ’s
world price rose more than eightfold during the last decade. As
a direct consequence, these years have generally been very good
ones for the economies of countries that heavily rely upon the export
of natural resources – Australia, Russia, Brazil, Saudi Arabia,
and parts of Africa.

Meanwhile,
as ChinaÂ’s growth gradually doubles total world industrial
production, the resulting “China price” reduces the cost
of manufactured goods, making them much more easily affordable to
everyone, and thereby greatly increases the global standard of living.
While this process may negatively impact those particular industries
and countries directly competing with China, it provides enormous
opportunities as well, not merely to the aforementioned raw-material
suppliers but also to countries like Germany, whose advanced equipment
and machine tools have found a huge Chinese market, thereby helping
to reduce German unemployment to the lowest level in 20 years.

And as ordinary
Chinese grow wealthier, they provide a larger market as well for
the goods and services of leading Western companies, ranging from
fast-food chains to consumer products to luxury goods. Chinese workers
not only assemble AppleÂ’s iPhones and iPads, but are also very
eager to purchase them, and China has now become that companyÂ’s
second largest market, with nearly all of the extravagant profit
margins flowing back to its American owners and employees. In 2011
General Motors sold more cars in China than in the U.S., and that
rapidly growing market became a crucial factor in the survival of
an iconic American corporation. China has become the third largest
market in the world for McDonaldÂ’s, and the main driver of
global profits for the American parent company of Pizza Hut, Taco
Bell, and KFC.

Social Costs
of a Rapid Rise

Transforming
a country in little more than a single generation from a land of
nearly a billion peasants to one of nearly a billion city-dwellers
is no easy task, and such a breakneck pace of industrial and economic
development inevitably leads to substantial social costs. Chinese
urban pollution is among the worst in the world, and traffic is
rapidly heading toward that same point. China now contains the second
largest number of billionaires after America, together with more
than a million dollar-millionaires, and although many of these individuals
came by their fortunes honestly, many others did not. Official corruption
is a leading source of popular resentment against the various levels
of Chinese government, ranging from local village councils to the
highest officials in Beijing.

But we must
maintain a proper sense of proportion. As someone who grew up in
Los Angeles when it still had the most notorious smog in America,
I recognize that such trends can be reversed with time and money,
and indeed the Chinese government has expressed intense interest
in the emerging technology of non-polluting electric cars. Rapidly
growing national wealth can be deployed to solve many problems.

Similarly,
plutocrats who grow rich through friends in high places or even
outright corruption are easier to tolerate when a rising tide is
rapidly lifting all boats. Ordinary Chinese workers have increased
their real income by well over 1,000 percent in recent decades,
while the corresponding figure for most American workers has been
close to zero. If typical American wages were doubling every decade,
there would be far less anger in our own society directed against
the “One Percent.” Indeed, under the standard GINI index
used to measure wealth inequality, ChinaÂ’s score is not particularly
high, being roughly the same as that of the United States, though
certainly indicating greater inequality than most of the social
democracies of Western Europe.

Many American
pundits and politicians still focus their attention on the tragic
Tiananmen Square incident of 1989, during which hundreds of determined
Chinese protesters were massacred by government troops. But although
that event loomed very large at the time, in hindsight it generated
merely a blip in the upward trajectory of ChinaÂ’s development
and today seems virtually forgotten among ordinary Chinese, whose
real incomes have increased several-fold in the quarter century
since then.

Much of the
Tiananmen protest had been driven by popular outrage at government
corruption, and certainly there have been additional major scandals
in recent years, often heavily splashed across the pages of AmericaÂ’s
leading newspapers. But a closer examination paints a more nuanced
picture, especially when contrasted with AmericaÂ’s own situation.

For example,
over the last few years one of the most ambitious Chinese projects
has been a plan to create the worldÂ’s largest and most advanced
network of high-speed rail transport, an effort that absorbed a
remarkable $200 billion of government investment. The result was
the construction of over 6,000 miles of track, a total probably
now greater than that of all the worldÂ’s other nations combined.
Unfortunately, this project also involved considerable corruption,
as was widely reported in the world media, which estimated that
hundreds of millions of dollars had been misappropriated through
bribery and graft. This scandal eventually led to the arrest or
removal of numerous government officials, notably including ChinaÂ’s
powerful Railways Minister.

Obviously such
serious corruption would seem horrifying in a country with the pristine
standards of a Sweden or a Norway. But based on the published accounts,
it appears that the funds diverted amounted to perhaps as little
as 0.2 percent of the total, with the remaining 99.8 percent generally
spent as intended. So serious corruption notwithstanding, the project
succeeded and China does indeed now possess the worldÂ’s largest
and most advanced network of high-speed rail, constructed almost
entirely in the last five or six years.

Meanwhile,
America has no high-speed rail whatsoever, despite decades of debate
and vast amounts of time and money spent on lobbying, hearings,
political campaigns, planning efforts, and environmental-impact
reports. ChinaÂ’s high-speed rail system may be far from perfect,
but it actually exists, while AmericaÂ’s does not. Annual Chinese
ridership now totals over 25 million trips per year, and although
an occasional disaster – such as the 2011 crash in Weizhou,
which killed 40 passengers – is tragic, it is hardly unexpected.
After all, AmericaÂ’s aging low-speed trains are not exempt
from similar calamities, as we saw in the 2008 Chatsworth crash
that killed 25 in California.

For many years
Western journalists regularly reported that the dismantling of ChinaÂ’s
old Maoist system of government-guaranteed healthcare had led to
serious social stresses, forcing ordinary workers to save an unreasonable
fraction of their salaries to pay for medical treatment if they
or their families became ill. But over the last couple of years,
the government has taken major steps to reduce this problem by establishing
a national healthcare insurance system whose coverage now extends
to 95 percent or so of the total population, a far better ratio
than is found in wealthy America and at a tiny fraction of the cost.
Once again, competent leaders with access to growing national wealth
can effectively solve these sorts of major social problems.

Although Chinese
cities have negligible crime and are almost entirely free of the
horrible slums found in many rapidly urbanizing Third World countries,
housing for ordinary workers is often quite inadequate. But national
concerns over rising unemployment due to the global recession gave
the government a perfect opportunity late last year to announce
a bold plan to construct over 35 million modern new government apartments,
which would then be provided to ordinary workers on a subsidized
basis.

Read
the rest of the article

April
30, 2012

Ron
Unz is a Silicon Valley software developer and publisher of The
American Conservative. He is also the founder of Unz.org.

Copyright
© 2012 The American Conservative