Monday, August 11, 2008

The New Yellow Peril? Probably not.

Western alarmists have made a cottage industry for over a century in warning Americans and Europeans of "the Yellow Peril." In most variations, some Asian country uses underhanded dealings to gain an advantage over the West. Soon the world will be dominated by China/Japan/India, etc.

Twenty years ago we feared Japan. Japanese work ethic and aggressive investments were going to take over the world and make the US a second rate power. Paul Kennedy in 1988 ended his well received Decline and Fall of the Great Powers with this prediction. Guess what? It never happened. The Japanese overextended themselves, suffered the debilitating effects of a real estate bubble the size of Mount Everest, and have not really seen tremendous economic expansion since the early 1990s. Japan's closed economic system prevented them from growing past a certain point because it prevented truly fair trade. Plus, US industry got its act together and competed more strongly than Japan expected.

Now the new "peril" lies in China. It has over one billion souls, boundless resources, and a will to regain a position of respect not held by them since the 1700s. We risk being fooled again by their tremendous growth numbers and predictions by some experts. Chinese growth does occur at 10% compared to 3% in good years for the US. However in simple numbers, our 3% growth is 3% of a very massive GDP. China's GDP is nothing near ours, so their 10% is actually quite puny. The main problem for China lies in its corrupt and worn out brand of Communism. Like Poland in the 1970s, everyone knows Communism is finished as a system. No one believes in it anymore. However the social betterment promised by Communism has been the historical justification for secret police establishments, torture, and lack of freedom.

The good news is that China has nurtured a growing middle class. Historically, middle classes seek material gains and political freedoms. Chinese middle class members have seen material gains, but political freedom has not occurred yet. Additionally economic opportunities are not fairly open to all. Much of this is reminiscent of France in 1788.

That leads us to the bad news. The rickety and corrupt China that currently confronts us is stable and seeks little more than a chance to expand its economy and be a leader in East Asia. A revolution on one hand would be good because it would free the people. Hopefully it would not lead to a redux of France in the 1790s, a bloodthirsty revisionist state that confronted the entire world violently. China has a historical hatred of Japan and seeks territory from Russia and India. Revolutionaries could potentially seize on these nationalist issues. Luckily it also has little history of seeking to expand beyond its current frontiers. However we must not forget that they have nuclear missiles.

A revolution would be appropriate given Chinese political philosophy. Their mandate of heaven, loosely like our Declaration of Independence, claims that divine Providence will help the people sweep away a government when it is no longer beneficial. Our government must be in a position to anticipate these kinds of events when they occur and channel them in positive directions.

China has a lot of developing and growing pains to experience before they become a true world leader. Structural problems in their economy and social system will prevent them in their current incarnation from becoming a more powerful nation than the United States. The biggest threat they pose comes not from what they are now, but what they could become.

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