But China Is A Totalitarian State

Yes, it is. I’ll grant all the critics say about the domination of CCP in all things political. When visiting with employees around China their reluctance to enter into any political discussion is an indicator that even a generation that didn’t experience the cultural revolution is still trained to avoid politics – save by the approved path of joining the party, expressing a vigorous love of country (nationalism) and working within that system. And it has its share of corruption. However the U.S. has both forms, cross-my-palm and "legalized" corruption of an even greater magnitude (certainly by $ and fraction of the economy that’s directed by non-market dicta).

Consider that once the CCP removed its dead hand from the market it boomed, and the amount of literature and access to foreign ideas of necessity became a torrent. Those ideas are everywhere and as Richard notes, they ARE living the (economic agenda of the) Tea Party. And it’s not just the citizen and their enterprise that benefits – when there’s a market in housing (and no neighborhood party officer required to approve) you now have a thriving gay community in Shanghai (and other big coastal cities). And the examples go on and on. The first freedom is the freedom to trade your time (and become less of a slave). Political freedom often follows when some non-violent means is needed to deal with corruption that the market makes visible. Granted, it could still end in disaster, but they’re more than 50% along the path to being as free as, say, HK under the Brits or S. Korea’s first 30 years.

The fact that families still “buy-the-bullet” for a member that steps-over-the line is a horrific punishment, but it works to keep the people in line, and forces them to take their competitiveness, pride-of-country, and search for wealth and power into the business sphere.

Re: cheating. Very true. But at least they test. And the cheating quickly sorts out when the students are employed and have to produce. Consider that our leading schools have stopped testing so what a graduate gets is a credential with little meaning to a future employer, save perhaps if they need a “member of the gentry” to schmooze other members because D.C. is far too involved in businesses. Be wonderful to return to an era where government had no role in picking business winners and losers. China doesn’t have this curse for large parts of their economy. Guess who really wins if, say, a government supported GM has to compete with (today’s Korean and) tomorrow’s Chinese auto companies?

10-15 years ago my teams did a lot of college hiring, around the world. And the best and brightest U.S. (engineering and science) students I hired had succeeded in spite of their so-called great high-schools. Irrespective of great SAT scores and placement, they found themselves behind the Asians in math and science because their (great, exurban, #1 rated) high-schools had stopped challenging their brightest (as in challenge to the point they failed) and focused their time and $ on the average (and politically correct nostrums). They often had to take remedial courses to catch up with what they thought they understood but didn’t as well as their foreign competitors. Many in those same classes didn’t want to spend the money towards courses that didn’t count towards a degree, so they switched majors and went into law which also rewarded good minds, but didn’t require great tools. So we got the worst of possible results. Supply creates demand (lawyers, litigation, numerically ignorant political class), and more and more technical work in the U.S. is being drawn (not driven) offshore (because that’s where the talent is, to say nothing of we tax, regulate and litigate our successful companies to death – esp. the > 200K$ intellects who create jobs for more employees.. – because “progressive taxation” is “only fair”).

Re: patriotism and the market. Be careful here. It’s easy to say “buy American” but if the competitive product is honestly better do we want to go without, do we want to ignore a “price signal”? At that end of the spectrum is Soviet Russia where billions of workers entire-lives’ of effort amounted to nothing in terms of bettering their condition – the inputs to their factories were worth more than the outputs. And save for a few artists and weapons designers, they invented nothing of value.

If we, say, deny our children the best childhood drugs who suffers? Perhaps not just patriotism but due to nationalizing health care because we thought third-party pays has too large a political cost to fix but didn’t like the costs so we stopped funding the gold-rush in medical technology (which today is still closer to the age of witch-doctors than, say, what we understand about building bridges). Irrespective of the political system, if we’re not at war, not embargoed or placed under sanction that government, we should certainly be willing to allow the market to deliver better products to us. And if we (continue to) stand still (and handicap our citizens and their enterprise), that’ll be the case in all these technical domains. And we’ll see a return of export medical tourism – except rather than flying 747s of heart patients into Houston and Dallas, the flow will invert. Already has in some small part to India – where they are willing to start from scratch to build MRSA-free facilities. So using patriotism to tip the market to poorer products will only hurt the masses. The elite and wealthy will be able to get it irrespective of government sanction (just like we saw with the Politburo in the USSR.)

re: hacking into computers, stealing us blind. Yes, they don’t have our sensibilities. Imagine what would happen if we incentives (PLA uses $ and cars), say, MIT students to use their lab days to hack into Chinese government and businesses? Don’t imagine too much, Chinese hack into their own systems more than they hack into ours – but they know who buys the bullet if they use the information politically, or offend or blackmail one of the powerful families in a province. I’ve heard talk of how hacking activity follows lab days at schools, with grades being assessed based on what was collected from whom, and creativity required to obtain. Some of its paid for by the PLA, most by businesses who want something to (re)sell, like music, movies, software, etc. Which is a good news and bad news story. Like the U.S. in the late 1800s, it means the poor will be able to “buy” (pirated) CDs and DVDs. Bad news is that until they get wealthy, there will be no local market for good ideas not expressed in something physical (no market in intellectual property by itself). Even more bad news is the "first world" is well along the same path, at least for high-value content.. means we’ll have less music and movies unless the price of product & actors & musicians drops along with revenues which appear to be settling at 10% of the 80s. We shall see who gets more of what because they value it more, tax, regulate, and litigate it less.

Re: a community of several hundred thousand being more vulnerable to outside influence that the current federal/central government (in terms of domestic affairs). Yes, potentially (remember that this community has more economic clout and people than all but a few Fortune 50 companies), but to have a large effect whomever is buying influence will need to buy it 500+1 times to have a majority (v. today’s single point of failure, either in DC, or being able to convince 50M+1 to dictate something to 50M-1).

I’m hopeful, but not optimistic, that this election sets us on a better path. We’ve far too many people that think government intervention helps, v. simply insuring civil society can do its magic with a minimum of interference, and/or masking of market signals by putting its thumb (arbitrarily) on the scales.

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