Are We Headed For China's Fat Years?

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Chan Koonchung’s chilling science fiction novel The Fat Years — already an underground sensation in China — will be published in the U.S. January 2012. The book, first published in Hong Kong in 2009, is partly so chilling because it reveals a scenario that is all too plausible. Set in 2013, it takes place after a second financial crisis  (euros, anyone?) that all but destroys the Anglo-American economies and ushers in “China’s golden age of ascendancy.”

The nation that leads the world in The Fat Years is less bleakly dystopian than the Stalinist state portrayed in George Orwell’s 1984 or the biologically controlled society of Aldous Huxley’s Brave New World. Yet it is supremely authoritarian — harassing and even executing the rare dissident and putting drugs in the water supply to inflate a sense of well-being among the masses.

This all-powerful Chinese state looks very familiar. It pursues a commercial strategy of plundering resource-rich regions around the world, often working with the most despicable of regimes such as Zimbabwe. And it harnesses and promotes information technology while maniacally censoring the Internet, rendering cyberspace just another outlet for propaganda.

It is also increasingly self-confident. As one character — a highly placed party cadre in the story — suggests, this new Chinese model represents “the best option in the world as it really exists.”

Many in the West already accept this notion. According to a recent Pew survey, nearly half of all Americans believe China will surpass America as the world’s leading power. The same poll found that roughly two-thirds of Britons — and many Europeans — believe similarly.

The higher circles in Washington and New York generally view the Anglo-Saxon democracy as unable to compete with the more ordered, authoritarian Chinese model. Thrilled by what he sees as “China’s green leap forward,” New York Times columnist Thomas  Friedman proclaims the greater advantages of “one-party autocracy.” After all, Chinese autocrats can adopt “policies needed to move a society forward in the 21st century” without needing to check in with the voters. Even conservative pundit Francis Fukuyama, once a believer in the inevitable triumph of market liberalism, feels that “Anglo Saxon capitalism” has squandered its historic moment. “Democracy in America,” he notes, “has less than ever to teach China.”

Former Obama Management and Budget chief Peter Orszag is the latest to endorse the down-with-democracy movement. Concerned with our inability to deal with our fiscal problems, climate change and rebuilding the economy, Orszag proposes shifting power from Congress to more “independent institutions” made up of unelected policymakers.  He argues that democracy can be “too much of a good thing.”  Comfortably ensconced at bailed-out Citigroup, Orszag has benefited from a financial system that increasingly resembles China’s, with its intimate ties between the state and banks. Crony capitalism, on both sides of the Pacific, it appears, has its rewards.

Yet perhaps it is too early for the English-speaking democracies to throw in the towel.  Many who now espouse Chinese supremacy previously argued that Japan, and even Europe, was destined to dominate the world.  Yet Pax Niponica never got past the early 1990s; one former inevitable global hegemon has been downgraded to the sick man of Asia.

Like Japan, China faces many great, if often overlooked, challenges. There’s a devastated environment, growing social unrest and rising competition from other countries, notably the Indian subcontinent. Labor force growth is slowing rapidly, and the country now has up to 30 million more marriage-age boys than girls, an all but certain spur to political unrest. Misallocation of resources by both central and local authorities threatens to create a major property bubble.

Throughout modern history authoritarian and more centrally controlled countries have proved very good at playing “catch up” and impressing journalists. China’s Communist regime can order investment into everything from high-speed trains to green technology and massive dam construction. The results — like those previously seen in Nazi Germany and Soviet Russia — are often as physically and technologically impressive, although often cruel to both the environment and people stuck in the way.

But once a country reaches a certain plateau of development, as Japan did in the 1990s, the nature of the competition changes; it becomes harder to target industries that are themselves in constant flux. Workers who have already achieved considerable affluence tend to be harder to bully or motivate.

Take the battle for cyberspace. Japan’s ballyhooed bureaucracy sought to conquer this frontier through traditional channels. This allowed the internet to become a competition largely among relative young U.S. companies such as Apple, Amazon, Google and Facebook. The much-feared Japanese takeover of the computer and cultural industries back in the 1980s now has petered out into a historical footnote.

And despite the recent, often spectacular gains of China , the primary English-speaking countries — the  U.S., U.K., Canada, Australia and New Zealand — still control a quarter of the world’s GDP, compared with 15% for the Sinosophere. Their combined per capita income is six times higher.

Critically the U.S. and its closest cultural allies — New  Zealand, Australia and Canada —  also have enormous physical advantages. These four countries all stand among the eight largest food exporters in the world.  Recent discoveries on the energy front have made North America, particularly the Great Plains, a potentially dominant force in the global oil and gas industries. China lacks the water, and likely to resources, to match up.

But the real edge lies with culture, particularly the English language, which has decimated all its traditional competitors — French, German and Russian — over the past two decades.  Difficult to learn, Chinese is not likely to replace English any time soon as the dominant language of culture, air travel, science and technology.

This cultural dominion can be seen in the media as well. The U.S. and its English-speaking allies account for roughly half of all the world’s audio-visual exports. To an extent never seen before, Anglophones dominated how people think, dress and recreate.

Arguably our biggest advantage lies in the very thing our upper echelons increasingly disdain — our messy multicultural democracy and our addiction to the rule of law. “The secret of U.S. success is neither Wall Street or Silicon Valley but its long-surviving rule of law and the system behind it,” Liu Yazhou, a Chinese two-star general, recently said. “The American system…is designed by genius and for the operation of the stupid.”

The stunning lack of such constitutional guarantees is just one reason why many of China’s entrepreneurial elite seek to immigrate to the U.S., Canada or Australia.   Indeed, among the 20,000 Chinese with incomes over 100 million Yuan ($15 million), 27% have already emigrated and another 47% have said they were considering it, according to an April report by China Merchants Bank and U.S. consultants Bain & Co.

To be sure, the U.S. and its allies need to change in order to compete.  Greater incentives for savings, investments and productive industries must supplant those that promote asset speculation and financial manipulation. But we can do this without importing Asia’s   hierarchical structures. Rather than trying to outdo the Politburo in developing crony capitalism we should seek to reinvigorate our diverse, grassroots economy.

In any competitive race you do not win by emulating your rivals but by building on your intrinsic strengths.  The best way to avoid the scenario laid out in The Fat Years lies not in abandoning the very strengths that drove our historic ascendancy, but by tweaking and enhancing them so that they propel us in the coming decades.

This piece originally appeared at Forbes.com.

Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

Shanghai photo by flickr user Sprengben

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"Greater incentives for

"Greater incentives for savings, investments and productive industries must supplant those that promote asset speculation and financial manipulation."

This is spot on. One of the key strengths of our economy has always been a banking system that facilitated innovation, entrepreneurship, accretive corporate acquisitions, and so forth. Today, much of the "service" aspect of commercial and, in particular, investment banking seems to have been replaced by the desire to manufacture profits through financial speculation. "Making money" has become an industry unto itself, with no ultimate benefit to the economy other than a little extra liquidity in the markets.

The grassroots of capitalism is where the US will continue to be successful.

taking off the rose colored glasses

Thank you for taking off the rose colored glasses for a moment.

In our current times, everything seems to be judged through the filter of "what's good for business." China looks pretty good to the CEOs of the world.

It was not always so; the economy was just one among several institutions - religion, democracy, and education - that helped define our society.

Even Adam Smith admitted that the "free hand" of the market operates within the context of these institutions. Ken Boulding called them "hedging" institutions because they provided moral and ethical stability to this so-called free hand.

Today, however, these other institutions are under assault and seemingly in retreat. The media associates them with negative influences and holds up China as a model for the future.

With some business experience in China, I think some of the reasons they have a competitive advantage were clearly stated in Dr. Kotkin's article. In addition, stuff that is illegal here - like intellectual property theft, for example - is perfectly OK there. So of course their bottom line looks good.

If we place the economy back within its proper context, we can see that China leaves a lot to be desired, and is not necessarily the best new overlord to embrace.

Richard T. Reep, AIA, LEED-AP
Adjunct Professor, Rollins College
2011 President, Orlando AIA

Crony capitalism and who "owns" the future

".....Rather than trying to outdo the Politburo in developing crony capitalism we should seek to reinvigorate our diverse, grassroots economy...."

Exactly. And crony capitalism around capital gains in urban land and new land for development, is probably the single most destructive form of crony capitalism. Whether it has the fig leaf of respectability of "containment of urban sprawl", or is just outright corruption on the part of Party Officials, the effect is the same.

China is indeed going the same way as Japan, only worse, and with less excuse. Japan did have the excuse that they are "short of land". China is not. Neither is India, or indeed any third world country. Europe is far more densely populated.

".....The best way to avoid the scenario laid out in The Fat Years lies not in abandoning the very strengths that drove our historic ascendancy, but by tweaking and enhancing them so that they propel us in the coming decades....."

Exactly. Parts of the USA, those with "opportunity urbanism" and no housing bubble or affordability problems, are close to this ideal already, and these parts "own" the future of humanity now unless others learn from them. There is nowhere else in the world today, worth emigrating to, investing in, or starting a business in.