China’s real threat to the West

While trolling through the television-news wasteland on Monday night in search of meaningful content, I turned — as I often do — to Canada’s Business News Network. Since Bell Media’s BNN merged with Bloomberg’s Canadian business channel earlier this year, BNN’S revamped evening program schedule now provides Canadians with mind-blowing new perspectives on global business and economic developments. Beginning at 9 p.m., the network plugs into Bloomberg’s Asia-market programming live from Hong Kong, where the hyperactive and Ipo-crazy Asia stock exchanges (from Shanghai to Jakarta, Singapore, Bombay and beyond) make North America look like a sleepy backwater.

But on Monday, instead of market news and commentary, Bnn/bloomberg did something no major Canadian network has done before. Non-stop and commercial-free through 85 minutes of prime time, BNN carried the live feed of Chinese President Xi Jinping’s speech marking the 40th anniversary of China’s 1978 “Reform and Opening” policy shift.

Eighty-five minutes is a long time to spend on a political leader who delivers messages with all the charisma of a novice radio announcer reading a script he’d never seen before. But there was much to learn from Xi’s speech to 10,000 Communist Party members and observers crammed in disciplined rows into Beijing’s Great Hall of the People.

After the speech, immediate commentary focused on reading the Chinese tea leaves in search of relevance to global trade, stock market reaction, economic growth and power politics within China.

Missed in these reactions was a more important issue. The West’s greatest China risk is not trade or military threats. The greatest risk China poses to the relatively free-market private-enterprise West is ideological — a risk embedded in Xi’s description of how China rose from poverty to become a world economic power by aggressively pursuing state interventionism and control policies.

China’s most dangerous export isn’t Huawei’s 5G networks or subsidized steel production. Xi’s message to the world on live television was that statism works and managerial socialism is the road to prosperity. The threat is all the more real since Xi’s basic message has come to be accepted by most of China’s economic competitors and many of the world’s intellectuals and commentators.

Here’s a typical view , courtesy of just one British academic: “The non-democratic and authoritarian political regime in China has meant that it has been possible to embrace westernstyle free market economics while maintaining control over the political system. In many ways, the planned economy of China (where the state controls economic activity rather than private business) has accelerated economic growth because the government has controlled all decision-making.”

The possibility that China has created a new economic model with global potential dominated a recent series of commentaries in The Economist: “Is China’s growth model a threat to free-market economics?”

Such perspectives rewrite economic theory and history. China is supposedly doing so well economically — in trade, technology, investment — because of government control and intervention, subsidies and favouritism. Versions of this thinking have taken hold in North American political and economic circles. The claim that the free-market U.S. is losing ground to statist China motivates many who back U.S. President Donald Trump’s trade war with China.

If the world comes to believe that narrative, then the West is in much greater trouble than whatever risk it faces from Huawei’s possible threat to national security.

By accepting the idea that China’s success is a function of direct government manipulation of investment, banking, currency values, corporate strategies, industry formation and labour markets, the West is essentially endorsing China’s ideological schemes. Attributing China’s rise to state control means accepting President Xi’s 40th anniversary description of the “unprecedented miracle” of China’s surge.

What was even more disconcerting about Xi’s 85-minute drone was his frequent adoption of the jargon and spin used by many Western and Canadian management and economic consultants. China needed “supply-side structures” and “co-ordinated strategies” to foster “innovative, coordinated, green and open development.” China needs “sustainable development” and “institution building” and a “broad range of democratic rights that are tangible, meaningful and practical.” (See sidebar for more.)

This is statism wrapped in managerial bafflegab ripped from reports issued by the world’s leading management consulting firms and the jargon of Western policy activists that influence policy in Canada and elsewhere.

Those around the world watching Xi’s speech, including Canadians, were exposed to a complex blend of explicitly authoritarian ideologies that Xi claimed led to China’s great economic resurgence.

China’s success, said Xi, is the product of vigilant control exercised by the Communist Party of China along with its continued adherence to radical interventionist principles. “Chinese communists are duty bound to develop Marxism in the 21st century and adapt it to the Chinese context,” said Xi. This, he said, is China’s historic mission — to update Marxism and Leninism and the thoughts of Mao Zedong to create “socialism with Chinese characteristics” — a national slogan he repeated more than three-dozen times.

Xi’s central message is that China’s new Marxist/ Leninist/maoist/statist model, updated with market-based reforms, has delivered China out of poverty and turned the formerly destitute totalitarian country into a global economic powerhouse. In the forty years between 1978 and 2018, China’s GDP soared more than two-thousand fold, Xi said. Foreign trade has risen from virtually zero to US$4 trillion a year and China’s share of global output has jumped from 1.8 per cent to 15.2 per cent.

Xi mentioned the opening of China to greater market forces occasionally, but only as backdrop to the core statist message. Over 40 years, China went from “the traditional system of a planned economy to the open system of a socialist market economy and to reform that enabled the market to play a decisive role in resource allocation and for the government to play a better role.”

Public ownership remains a priority, with the Communist Party holding ultimate control to apply “the basic principles of scientific socialism,” he said. “It is by upholding the centralized and unified leadership of the Party that that we have been able to achieve the historical transformation” of the Chinese economy.

Market forces can be deployed, he said, but with a statist purpose. “We must give full play to the decisive role of the market in resource allocation,” Xi said. But the reason for giving the market “full play” was to “better leverage the role of the government.”

The real power behind China’s economic emergence is not state control but the explosive impact of opening part of the Chinese economy to free markets and private enterprise. A

XI’S MESSAGE IS THAT STATISM WORKS AND MANAGERIAL SOCIALISM IS THE ROAD TO PROSPERITY.

few years ago, Adam Smith Institute fellow Tim Worstall wrote in Forbes that “China is the most viciously free market economy on the planet right now.”

That seems a little over the top, but the reality is that China’s 40-year growth boom lacks a cohesive and convincing analysis. That is all the more reason to be wary of a growing consensus around Xi Jinping’s view that the world needs more government economic control and management.