China’s Mercantilism and New Global Economic Order

Modern communication technology has allowed China to achieve a centralized bureaucracy that has a smaller chance of becoming overextended and too top heavy. The danger, of parts of central government melting into regional structures with rebellious consequences, is diminishing every year. The risk is not totally gone however if rapid economic growth bumps into serious stagnation and even GDP reversal. As of today, China has the creaky uneven centralization of 18th century France and is gleefully engaged in large scale mercantilist practices.

Chinese society is not yet fully urbanized and consolidated. Beijing cannot yet engage in cutting edge mercantilist practices as done by Japan and Singapore. Chinese political center only recently overcame last remnants of feudalism, warlordism, and peripheral regional integration. Having dealt with that, China is pursuing the same economic path that allowed Kaiser’s Germany to rapidly grow by taking advantage of British post-mercantilist free trade period. It is very historically appropriate. There is no need for Beijing to emulate Spanish, British, or French mercantilist experiences.

For a nation of 5 year plans, it makes sense to try to skip developmental steps and leap from macroeconomics of Kaiser’s Germany to those of Japan. As of today, China has done rapid neomercantilist development by the book:

1) Government imposed positive trade balance through protectionism and currency control (yuan pegged to the dollar)

2) Self sufficiency in agriculture and manufacturing of basic to advanced goods

3) Acquisition of large amounts of money and gold (around a trillion dollars worth as of 2009). Controls to prevent wealth from flowing out of the country through protectionist restrictions on imports

4) Large scale mining and infrastructural projects to increase use of domestic resources and terrain. Hamilton and Quinsy Adams would be proud of what Beijing’s coastal elite have achieved in the last 20 years. China has also secured 60% of Africa’s resource exports and are structurally integrating Central Asia and Siberian Russia into their resource feeding network.

5) Keeping the overall population’s wages low to increase country’s overall manufacturing exports. That is easily accomplished by underdevelopment of Western provinces like Tibet. One child policy is more imposed on the wealthier Mandarin ruling coalition than the periphery ethnic groups. Uneven implementation of one child policy keeps periphery ethnic groups more fertile and poorer. Coastal urban ruling peoples spend more energies on advanced wealth generating employment rather than saving to augment multiple children.

6) Keeping of imports limited to natural resources and large scale buy outs of foreign expert talent in anything from engineering, electronics, economics, and hard sciences

Current opinion and international action has just been reactive so far. Westerners are mainly focused on China’s attempts to prevent rapid devaluing of the bought dollars (before all of them are eventually used on natural resources anyway) through creation of an international reserve currency . Some look on how the international recession, can be used by China, to move from less advanced manufacturing to price competing with Germans and Japanese when it comes to advanced electronics and electric cars. Chinese confidence in constructively criticizing the existing international economic system is often noted.

Very little attention has been paid to the implications of the world being pulled into a mercantilist arrangement. China is becoming more predictable and thus out-maneuverable. Originally, Britain became economically successful because it added free trade theory onto mercantilist practice earlier than Spain or France. It stayed one step ahead of the competition. However, the new economic hybrid has created oligarchal capitalist interests who then used liberal theory to reduce state’s involvement in the economy. Wealthy exporting interests (who controlled the house of commons and people’s opinion through printed media) used appeals to individual freedom to dismantle the mercantilist/free trade hybrid that made Britain powerful and wealthy to begin with. Britain coasted along but economically declined as hybrid societies were able to build up new waves of industrial assets through neomercantilist practices (Germany/ United States). As Britain declined in industrial might, it focused on its core strength of money management and that lead to the torch being passed down to Wall Street in the 20th century. The great competing banking hubs of Europe (Paris, Berlin, Moscow) were looted in the wars/revolutions. We now see what happens when banking and finance is the core strength and emphasis of the economy.

China is now in the process of moving to the final stage of manufacturing asset concentration through focus on development of advanced products like cars and computers. Rapid economic assimilation of Taiwan and Hong Kong will quickly aid in that process. Western investment in Taiwan created a base for high technology and competitive know how. Many Taiwanese oligarchs have already basically integrated their companies with mainland ones. Ideologically, Taiwan’s Kuomintang political center, can now smoothly cooperate with Chinese authorities. People forget how important socialism was in Chiang Kai Chek’s original nationalist ideology.

Very soon, China will begin manufacture of high technology goods to compete with Germany and Japan for markets in Russia, Europe, and North America (as well as lower end cheap electric cars sold to developing nations). They will be forced to utilize existing free trade international system (perhaps stabilized by IMF’s Special Drawing Rights currency basket) to push these products abroad.

How would Chinese like to see the world once their products flow onto middle class Western markets? They would like to see no protectionism from Europe, Russia, Japan, or North America. They would like to see rule of law and capitalist adherence from everybody in the world. They’d be fine with North America and Europe reduced to South American-esque resource providers and vacation destinations. We can see that if China takes on Japanese level importance in high technology exports, they’ll be able to then finally consolidate nationally and relax the amount of force needed to keep social stability.

In a few decades, the communist leadership in Beijing will then be able to claim that not only did they bring the nation out of poverty but they:

1) beat Westerners at their own game like Japan did (but without a period of war over resources)

2) created real feeling of nationalism, inter-ethnic peace, and modern nation state like Chiang Kai Chek wanted

3) avoided Soviet Union’s mistakes when undergoing Perestroika while properly utilizing communist fruits of mass literacy and emphasis on science/engineering

4) took the torch from United States as the Global role model when it comes to free trade, peaceful co-existence, lack of harmful interference in other societies’ business, isolationism, respect for borders of small states, and business cooperation

5) built more for the developing world than the financially oriented English speakers by swapping resources for real engineering construction projects

6) helped create a stabilizing one world currency for more even international development

Such claims will allow Communist party to win election after election for a number of decades even if they then allow political pluralism. Many Asian states continued to have one party rule for decades even after democratizing. Cultural collectivism and emphasis on agreement allows power elites to work smoothly together. Taking into account Britain’s experience, China can easily continue to pragmatically evolve, build a financial center through Hong Kong, bring new resources (such as Helium 3 from space exploration), and guide humanity by being its center of progress.

History has shown that leading global elites will not allow such unimpeded ascendancy. Cutting off resources and containment is too blatantly hostile. Japan and Imperial Germany have demonstrated that. Advanced hybrid of mercantilism and free trade (from a society strong enough economically and technologically) will be the only way to counterbalance Chinese ascendancy. Only European Union with English and Russian speaking allies has what it takes to effectively compete and prevent formation of a long term hegemon that is culturally and psychologically uncomfortable for Westerners.

Earlier in the article, it was mentioned how Chinese bureaucracy, has a small chance of being destabilized again. There is precedent for this happening at numerous times in China’s history with horrible civil wars and revolts from poorer less developed periphery. China’s gini index, that shows country’s income inequality between the rich and the poor, shows that China is even more economically unequal than United States. Today, Beijing’s authoritarian rule keeps the lid on trouble from elites from either the oligarch coastal factions, rural/regional factions, and urban West emulating liberals.

European Union’s job, to deal with the near future, involves:

1) Being proactive rather than reactive to Chinese, American, or Russian moves

2) Acquiring valuable allies to augment influence. That means working first with Russia to kick American/British influence out of central Europe and then with England to push American influence out of NATO. NATO can then be ended and America approached as an equal power to work with.

3) Being pragmatic and not looking at human rights when acquiring resources from other nations. Europe still has time to lock onto substantial amounts of resource exports from the third world, especially Africa. It can join Russia in developing the Arctic energy reserves and help Russia outbid Chinese resource extraction/exploration companies in Central Asia.

4) Consolidate EU structures, such as the European Parliament, so more coherent action can be undertaken with more popular trans European legitimacy.

5) Use advanced collective protectionist methods to keep an edge in high technology products to stay a step ahead of China. Contribute even more constructively to global currency formation through IMF where Westerners still dominate.

6) Work with United States and England to manage the geopolitical, social, and economic decline of United States peacefully and productively. Invite young American professionals to European Union to displace social pressures from relying on less assimilative Muslim immigrants. Become the stable adult co-equal mediator between Russia and United States so the two former superpowers can productively contribute and provide nuclear protection. Open borders to young educated Westerners from around the world to counterbalance aging of Europe.

7) Develop strong ties to regional powers like Japan and India to counterbalance Chinese cultural influence. To do that, rapidly expand economic cooperation with them in the sphere of building climate change infrastructure, energy, military, and space

8) Comprehensively educate the public on climate change and loss of technological edge to China in non-confrontational terms. Take the lead in recognizing petty-infighting (like Poland’s mistrust of Russian cooperation in Europe) and offer tangible economic/developmental incentives to major actors to overcome them.

Brussels has enough time to still effectively consolidate before China does. It will require the same long term vision, developmental eye, and good historical sense as the one possessed by their Chinese politburo counterparts. Europe is more economically egalitarian than China. It has more power elites and cutting edge professionals. It must find a way to be protected by Russo-American nuclear umbrella (without being controlled by them) so not too much money is spent on integrated European defense. Together, Western peoples of the world got close to a billion people and have as much of a shot as Chinese (less than half the Chinese speak the ruling dialect of Mandarin). Western civilization has the qualitative expertise to provide solid competition that will benefit all of humanity.