China's Economic Trouble & the BRICS Alliance: Current Events with Salsman & Tracinski

September 20, 2023 01:05:09
China's Economic Trouble & the BRICS Alliance: Current Events with Salsman & Tracinski
The Atlas Society Presents - The Atlas Society Asks
China's Economic Trouble & the BRICS Alliance: Current Events with Salsman & Tracinski

Sep 20 2023 | 01:05:09

/

Show Notes

Join Senior Scholar Richard Salsman, Ph.D., and Senior Fellow Robert Tracinski for an Objectivist perspective on the damage to China’s economy since the CCP’s turn back towards central planning, along with a brief overview of the BRICS alliance and what that means for the U.S.

View Full Transcript

Episode Transcript

[00:00:00] Speaker A: Hello, everyone, and welcome to the 170th episode of the Atlas Society. [00:00:06] Speaker B: Asked. [00:00:07] Speaker A: My name is Lawrence Alivo. I'm an associate editor here at the Atlas Society, the leading nonprofit organization introducing young people to the ideas of Iron Rand in creative ways through our Atlas University seminars, our graphic novels, and our creative social media content. Today I am joined by our senior Scholar, Dr. Richard Salzman and senior fellow Robert Chaczynski, who will be discussing three major topics today. The first doing a recap of events surrounding sort of the 911 Memorial last week. We will have a discussion about China's current downward spiral in regards to their economy. And then at the end, we will also discuss the BRICS Alliance and what that means for the United States. As always, I encourage you all to please send in your questions. We'll try to get to many of them as we can. You can bring them in on YouTube, Facebook, Zoom, instagram. Twitter, LinkedIn. Please put your questions in the comments. We'll try to get to as many as we can at the end, but to start things off, I'm going to pass things over to Richard, please. [00:01:18] Speaker B: Thank you, Lawrence. Rob and I were kind of chatting about this offline, and we're not going to spend much time on it, but I'll tell you the origins of it. It is comment about 911. And I think everyone or most people in this audience know the import of that date, that event, the philosophic aspects behind it. What I noted and what Rob and I could chat here briefly about before we turn to China is I'm a bit troubled by the trend I've seen in recent years. But looking into it, I saw that in 2015, it was kind of formalized under Obama that 911 has been turned into a day of service. And we all know that on that day, of the various conclusions one could have drawn from that day, not just the terrorism implicit in Islam or in really any kind of religion that takes itself seriously, it was a tremendous focus, as you know, on the first responders, on the victims. Not only those in the building, but those running into the building and trying to save. And to this day, there still has been that. And on the surface, there's nothing wrong with that. I just think that the emphasis, especially when you memorialize or commemorate something for good or ill, some great date in history or some bad date in history, whether it's July 4 or whether it's December 7, pearl harbor with FDR said, is a day that will live in infamy. I think 911 is just being turned into something that it's supposed to be. We're a reminder that we should sacrifice ourselves. We, too should emulate the alleged self sacrificing activity of firemen and others. And the focus really should be on what caused it. And to this day, whether we still have reason to worry about the vicious stuff that can come from taking religion seriously. I understand why American people don't want to go there to the extent they're religious, but I'll leave it at that. I know Rob walked me down off the ledge a little bit on this, and he said at one point it was kind of a bitter maybe it is. So tell me where just don't well. [00:03:40] Speaker C: I don't think you're entirely wrong. And to put a little bit of a harder edge on it, you know who else also believed in the sacrifice? The hijackers. These were engineers. They were educated guys, they were prosperous. They weren't out of work guys from the slums of Pakistan. They were prosperous guys. These were the elite, in a way, of their societies. [00:04:09] Speaker B: And didn't someone say at the time, Rob, someone said, they're really courageous, they had the courage of their convictions and oh, my God. [00:04:14] Speaker C: Well, there was somebody who got in trouble saying, you have to hand it to Osama bin Laden, I think, but they had to retract that. No, but the other thing about it, the reason why I'm less upset about it is I think there was not much commemoration of the anniversary at all this year, and that's probably because we're out at 22 years. It's not a round number. You tend to celebrate or commemorate, I should say not celebrate, but commemorate the round numbers on big events like this. But the other reason is that Americans, the default option is just to not pay any attention whatsoever to anything having to do with foreign policy. That's one of the reasons I think that went sort of one of the things that went wrong with the War on terror is the reason we all look back at World War II as a great era of national unity is it lasted less than four years. It was all over. And the American public has an ability to really focus like a laser and regard what's going on over the out in the rest of the world as very important. When there's a big emergency, a big disaster, and they can do it for about four years, and then that's it, they're done. So that's sort of the problem we're up against. The story I like to tell is from one of the Dashboard Hammond novels with the sort of hard boiled detective Sam Spade. Sam Spade tells this story about how he was hired once to find a man who had disappeared suddenly and gone off. His wife hires him to lead years later to track him down, and he finds the guy and he finds out the story. So this guy was walking down the street when a beam falls down from a construction site, lands right next to his life, flashes before his eyes, he questions everything about his life, decides to totally upend his life, disappears, goes on a series of adventures. But by the time Sam Spade finds him, he's settled down in a different town. He's married to a woman who's exactly like the one he left behind. He's getting the exactly the same kind of job he was in before. And as Spade, being the harp and detective, he is kind of cynically concludes a beam had almost dropped on his head and he changed his whole life. But then beam stopped falling on him and he went back to the life that he was exactly before. And I think that's sort know, the calls for national service are sort of the default we're going back to of the way things know our normal default. And there's been no big terrorist attack in a while. Beams stopped falling from the sky on our heads. And so we're going to go back. [00:06:38] Speaker B: To what we're doing before. Yeah, I guess somebody else said to me, well, Richard, we don't commemorate December 7. No one stands up and says, remember fascism, remember Japan imperialism, remember an undefended borders. That's true. Yeah. Actually remember the Alabama. That's true. Maybe I'm asking too much from our memorials or our commemorations, but Obama did officially. I did learn that in 2015. Obama did officially. I don't know from the I don't know how you do this executive from the White House designated it a National Day of Service. I mean, that wasn't necessary, but just to confirm my point. But I hear you. Okay. [00:07:26] Speaker C: I think it's like with DDay, you had another anniversary of D Day not so long ago. And unless a number with the zero at the end as the anniversary, it's. [00:07:36] Speaker B: Not as big a deal. Okay. All right, tell me what you're thinking on China. [00:07:41] Speaker C: Well, I've been following the story of what's going on in China, and they're seem to be having economic troubles there. I think there's a long history of this, of course, where every couple of decades there's some rising power that's going to surpass the United States and take over and buy everything. And a long time ago it was Japan and then they kind of stalled out. And now more recently, it's China. And it looks like they're stalling out. They're saying the projections now are know there were projections they were going to surpass the US as the largest economy in the world, and now there are projections saying, well, maybe it'll happen temporarily, but it might not happen at all, that they may not surpass us and their growth is falling out. And I think the fascinating part of this story is the whole story, the larger story in China is they got to the point where they finally said, okay, communism is holding us back. We have to back away from communism, allow more freedom in the economy. And they had this enormous boom that has lasted now for something like 40 years. But what happens tends to happen inevitably in these situations is the existing regimes accepts greater freedom, more free markets as a necessity of the crisis. But then what I just said. The crisis passes, beams stop falling from the sky and almost killing you. The crisis passes and they become more confident that well, we can go back to what we wanted, what we had before and we can go back to exerting the control. After having liberated for a while, we've become so rich now that we can go back to exerting the control. And in fact, in Chinese propaganda, one of the things I've been following is there's a lot of celebration of how the Communist Party was really what led China into this great era of growth. It wasn't them giving up on communism, it wasn't them allowing much greater economic freedom. It was their bold, farsighted planning and innovation that did it. So the idea that it's really communism that brought us to this great period of capitalist growth. But to go even farther back, I think the roots of from what I want your perspective on this, but from my look at this, the things driving this seem to be various forms of government control imposed under the communist regime that are now sort of coming to fruition. So one of them looks very old is the one child policy in China and this is the one they adopted back under communism in the really came from the fact that they had a series of famines that were caused by Mao Zedong caused by the communist policies and the dictatorial policies and his basically destruction of the agricultural system of China. But they couldn't say this is because of Mao, this is because of communism. So they jumped on the bandwagon of saying well, this is because of overpopulation and happened to be a very popular idea globally and in the west at the time. And so they adopted this very draconian policy of you can't have more than one child. Well, now what's happening is China's population, I think has just peaked. The statistics aren't great because the government doesn't want you to have them. But the population has peaked, it's starting to decline and especially their working age population is starting to decline. And one thing that objectivists have talked about a long time and we've embraced the work of somebody like Julian Simon who said human beings are the ultimate resource. More humans means more growth, more production. We need more humans. Population growth is good and I think China is beginning to find that out. But this intersects with another thing that came from the way China they have tried to do this top down management of the economy. One of the reasons that the decline in population is going to hit them is because a huge amount of effort went into real estate. They built all these high rises, all these giant new cities and it was in response partly to people moving out of the countryside, coming to the factories, working in the big cities. But it was also a result of there's sort of a potemkin Village aspect of it over the years because you had these local officials who were judged on how fast is your local area growing. So one of the ways they did that over the years was in basically sort of having this sort of fake government stimulus for growth that has led to a vast overinvestment in real estate and people buying apartments on spec. And that's sort of all the sort of stuff we saw when we had a much smaller effort at boosting real estate here in the US. With government subsidizing people's mortgages and you had people buying apartments to flip them. You had a lot of that going on in China. And that's going to become, I think, the big thing that's driving this sort of slowdown or possibly a crash. There is a huge amount of overbuilding in real estate and real estate companies that are very tenuous, defaulting on their debt, things like that. But it comes from this idea of you had government officials who were charged with they're being judged by how fast is your region growing, and were often overinvesting in infrastructure and doing it very wastefully. But then the last two things that are more recent that I've seen are, first of all, that there was an anti technology company policy imposed by Xi Jinping that know, he embraced this sort of, we need to be an industrial power, we need to focus on industrial self LUTS. And they clamped down on a lot of the technology companies that were going to be the next big wave of growth in the Chinese economy. Now, somebody know, the problem is with Xi Jinping is not so much that he's the Communist, it's because he's a baby, know, and he has that nostalgia for the industrial era, some of which we see here in America too. There's a UAW strike going on. But the other aspect of it is that this was part of Xi Xinping's attempt to sort of reassert government control. So I saw a great statistics recently. Somebody was mapping out the top 100 largest companies in China, whether they were state owned, partially state owned or private, predominantly private, maybe a small stake from the government. And the predominantly private companies peak in 2019 at about 55% of the top 100 biggest companies in China. And after that, they kind of go back off a cliff. And the government has been putting its emphasis back on. No, we want the state owned companies, the government owned companies to be the biggest ones. We want to give them the special favors and give them the special treatment. So there's this attempt to sort of like, let's bring back the centrally managed economy where the government's in control. And I think they're experiencing pretty quickly. [00:14:55] Speaker B: The consequences of doing that. Well, thank you for that. I look at this from part of my job description, Rob, is to do investment analysis and portfolio advice for money managers. So they want to know, among other things, how the China economy is going, whether it's worth investing in Chinese equities and things like that. And by the way, those of you who do that kind of thing, if you just plot the performance of Chinese equities versus any other equity index, the S and P or anything else, it's basically been dead money for 20 years. I mean, it doesn't really go anywhere. So just as that kind of market measure of the value of local Chinese companies, it's just not a really very good performing investment. However, I think the bigger picture here is, and I'm going to dip you with you a little bit here, Rob I think what's happened here is great news and not so great news. So the great news, which you've already kind of mentioned, it's not really news. But from 1949 until Mao died in 1976, it was a hellhole, it was a basket case economically, and of course, they murdered millions and millions of people. But so, interestingly, two years later, 1978, they engage in what's called this liberalization program under Deng Xiaopang, 1978. And this is like a year before Thatcher, a couple of years before Reagan. So maybe there's a global kind of move toward more respect for free markets. But it's also what I would call the Asian model, which used to be called the Asian model. And so even before China did this, they're looking abroad and they're seeing Taiwan, they're seeing Thailand, Malaysia, South Korea, others. Hong Kong doing really very well. But here's the Asian model. The Asian model is you don't have much in the way of political freedom, but we'll let you do pretty much anything you want economically. And there are measures, you can find these. There's Freedom House measures, political freedom, heritage conservative outfit will measure economic freedom. So I track these indices very closely. I try to figure out who's becoming freer, who's not becoming free, or how it relates to their economic, financial performance. And China basically said, that's what we're going to do in 1978. That's what we're going to do. What we're going to do is not give greater free speech or voting or anything like that, to hell with the political stuff, but we are going to adopt as much as we can more, less a fair pro capitalist policies in the economy. And that is what brought many of the Chinese people out of dire poverty, and thank goodness. But it is definitely a different model. And I think what happens is when people say China's horrible, they're usually citing the political stuff. And when they say, as the economist, well, China's amazing. It's usually the economic stuff. And when I track the economic freedom indices, rob and Herd and Heritage, it's really amazing because there they have not gone down, they've gone up over the years. And then I'll measure them usually like relative to the US. Just like for some other benchmark. And this is hard to believe, actually, since 2007, if you just divide one index into the other, china is becoming freer than the US. But economically, obviously not politically, and the US is going down in a trend, and China is kind of going up. It's very interesting. They still have a long way to go. But here's another number really shocking, something like 600. This is what have been well documented. Something like 600 million Chinese people have come out of low levels of poverty in this period, like, since 1978. That's like twice the US population. [00:18:43] Speaker A: And why? [00:18:44] Speaker B: Because they did free up the economy. You look at skylines like Shanghai and elsewhere. Certain provinces are very poor, still very rural, but some of them are just spectacularly financially successful. The skylines look nicer than New York. It's really quite an amazing story. So what am I saying here? I wish, like you, Rob, you and I want political and economic freedom. We want them to go together. But I don't know, I seem to be biased, maybe because I'm an economist, I seem to be biased toward the idea of economic freedom. Because day to day, people trying to build their livelihoods, they really are going to be benefited if they're free to do economic things in America, who cares whether you get to vote every four years for these losers, these false choices we get all the time. And yet, if you can run your business more freely every day, and you can build your wealth and build your standard of build literally your livelihood, to me, that's the real test, given my druthers, so to speak, that's one thing. Here's the other thing I tested. I couldn't believe it, but there's something called SOEs state owned enterprises, and there's measures of the degree to which China has state owned enterprises. The number goes down. Down. In other words, in 1978, of course, they had many most of the businesses were state owned, but SOEs are down to like, I don't know, 30% of the economy now used to be 100%. So, I mean, it's taken a long time. Thatcher did it like, in a decade, she tried to privatize a bunch of things that the Brits had nationalized so, even on a measure like that, I don't think they're so good on land. When I test things like land rights in China and the ability to lease land, that's not so good. That's not so good. But this SOE thing I thought was very interesting. What else do I have here? Trade. Okay. One of the things I'm looking at, why they are slowing down economically, it's true. And I'm thinking, is this because they're trying to reimpose this Maoist political philosophy? I have a different theory. I think they are trying to become more communist politically, but I think they're trying to get away with not being so communist economically, right? To have their cake and eat it, too. Rob right. It's amazing to me, since 1978, they've never had a recession. Wow. The US. Has had like six or seven, I mean, periods where the output goes down year over year. They've only fluctuated between 12% growth rates and 8% growth rates, and it may be down to four now. Now, granted, we should be skeptical about GDP numbers from communist regimes, right? But the fact is they have stock markets, skyscrapers, skylines companies, stuff they send to Walmart, which the Soviet Union never did. We never had any evidence of that, remember, coming from the Soviet Union. And there's undeniary evidence of that from China. So the whole thing can't be like a patemkin village, which is a Russian term, of course. I think what's happened is the Trump trade wars have really hurt China. But that's not China. That's Trump. Trump said, oh, China is sending us too many things. We need to stop China sending us stuff. And interestingly, it's the only policy Biden didn't reverse the only Trump policy Biden did not reverse was the tariffs and the restrictions on imports of Chinese goods. So I think that's hurting them. But how OD. It's not because they've adopted communism. It's because Trump adopted protectionism and Biden kept it. So I'll stop there because I want to hear back from you on this. I don't want to monologue, but just to push back about what China is doing and why. [00:22:25] Speaker C: Well, a couple of things to that. One is the reason I find interesting is because I think I just differ with you a little bit more on this, that I do think that model of you can have no political freedom, but lots of economic freedom, I think that is long term unsustainable. And you can see if you talk about the Asian model, most of the other the Asian tigers, they had initially started with not much economic freedom and then more sorry, not much political freedom and more economic freedom. And then as that comes along and as people become wealthy and they become middle class, they push for more political freedom. Yes, because it's partly as people are not worried about starving anymore, they start worried about having a say, and they become more concerned. They have the leisure to that. And also as they become more middle class, they become more powerful, more have a greater ability to pressure their government. So what's happened is, I think that there's a natural progression that as a country liberalizes economically, it is going to have to have greater political freedom. And I think China is really facing a choice there of saying, which do we prefer? Which is more important to us, the economic control or the political? You know, I think Xi Jinping is very clear to me that he has the attitude the political control is more important. And so you talk about state owned enterprises. So the figure I saw was they're saying that, yes, state owned enterprises are lower as a percentage of the overall economy than they've been going down steadily since 1978. But that recently among the largest companies in China, the ones that are most amenable to pressure from above, political pressure from above, that that's reversed. And that's because of this attempt to say, okay, we want to have more things that are under our control. And so I don't think they're going to go back to a Maoist style communist thing. I think they're going to try to go back to sort of more of a fascist style. I think they are kind of quasi fascist, the current system is and it's going to go more back to we don't nationalize everything and we don't clamp down completely, but they try to assert more top down control politically and I think that's driving a lot of it. And then there's of course, now I don't know to my researchers enough to know to what extent this is a factor, but there's this issue of what they call yeah, that companies have looked at this and realized, wait a know, especially with the current war in Ukraine, that they've said wait a there's. If China tries to take Taiwan, where am I going to be if I've got factories in know and what if there is suddenly embargoes know disruption that comes from that? This could be a problem. We should be investing. And sure we can outsource but outsourcing countries that are less likely to create the geopolitical turmoil. [00:25:36] Speaker B: Yes. On the Tigers, one of the countries I neglected to mention was Singapore. So if you look up at Heritage, the economically freest country in the world, it's Singapore. Now, if you ask what Singapore's political freedoms are, a lot of people would complain that there's not much there. But Singapore and Hong Kong have toggled back and forth on the top of the Heritage list. Remember, this is Heritage is a conservative group. So if anything you would think they would be biased against the more statist oriented regimes. But they are looking strictly at economic freedom. And the other thing is the US economic freedom has plummeted in the last 15 years. I think the US was ranked top 515 years ago and now it's like 25, 26 and going down. But Rob, I wanted to mention this. I think you make a really good point about the idea of fascism. Socialism. We can get caught up, say, in the semantics, but I do like the idea, the model that says, listen, pure capitalism is not only ownership but control of property, not just the means of production, but yourself, your body, your choice and your stuff. And if the opposite purely is socialism, public state ownership and control, fascism is a hybrid system. Right? You and I, I think, agree on that. It's private ownership, entitle. But the government tells you what to do with it, not only with your body, what to put in it and take out of it, but what to do with your business. Is this wrong, Rob? My theory has been that the US. Is moving from capitalism to fascism, not to socialism. We're not nationalizing things except land in Alaska, and then China is moving from socialism Mao, to fascism. Now, directionally, that would mean that the US. Is moving in the wrong direction, away from our ideal. But if I'm right, you'd also have to say China with fits and starts and one step forward, one, two steps back, maybe, is moving from socialism to fascism. And then the question would become, is your next move back to socialism? I don't think so. I think you even said no. And so we need to push them more toward capitalism. But I don't think we do that with trade wars and everything. But if I'm right about this theory, Rob, that's what's happening over the last 15 years or so that's a discussion of, like, convergence and not so much the conservative interpretation of combativeness that these two superpowers are coming toward each other. And Kaboom, my theory more like, says no. They're both likely moving toward this hybrid, and they're looking more and more alike. It's true that their economy in China is big. But remember, per capita basis, I checked the numbers, per capita income in China is something like 16.4 thousand a year, and the US. Is 60. Russia is like 26,000, mostly due to the oil. But let me just ask you this, Rob, because I know you follow the conservative movement very closely. You're a very astute observer. I've always had a problem with this kind of disconnect that goes something like this they're Communists, so we should worry about them, including their military buildup. But then, on the other hand, they're economically a powerhouse, and they're stealing our jobs and our lunch, and we need to block their imports. We know theoretically that if it was truly Communist, they'd be a basket case. They'd be like the Soviet Union. And yet they do seem like an economic powerhouse, which must mean they are much more capitalistic than we think. You see what can't be simultaneous? It can't be they are both commies and the most prosperous people on the planet. Right. I don't think the right has reconciled. [00:29:33] Speaker C: Okay. [00:29:33] Speaker B: Yeah. [00:29:34] Speaker C: And the reason why I think people can't really get their heads around this correctly is I think you're right to some extent, that they are moving towards, I would say, fascism in the technical sense, not necessarily the Nazi. Well, actually, I would say they have concentration camps and they're engaged in, arguably in a genocide of the Uyghurs. So maybe in that sense as well. But they're moving towards, in a sense of we're going to have a economy that is nominally free, though with heavy amounts of government interference and regulation. And the interesting thing is that the big vogue right now on the right is for industrial policy, and that's why we have the trade wars. And the funny thing about. This is you mentioned Biden hasn't reversed the trades. War. Well, that's because that's an old Democratic Party policy, right? That's the Democratic Party platform. And it's a Democratic Party platform from, like, 1983. [00:30:29] Speaker B: Robert Reich and Biden. [00:30:31] Speaker C: He doesn't even have to change anything. [00:30:34] Speaker B: That's good. [00:30:35] Speaker C: Yeah. Putting tariffs on those foreign imports to protect the unions. That's an old Democratic Party policy from the he's a fossil from the 1980s. Both Trump and Biden are really fossils from that era. So, of course, it takes total sense that they would be in agreement on that. But what I find fascinating is they are essentially I mean, ideologically, they're essentially in agreement with Xi Jinping as well. He is an industrial policy guy. And I think the extent that China is slowing down and having problems, I think that partly because Xi Jinping is an industrial policy guy. He is the guy who know. And this is partly going on with the crackdown on the tech companies because he's saying, oh, all these tech companies, people are paying too much video games. We should crack down on that because that's not real economic production, and we should be focusing on more on industrial stuff. And that's why they've sort of killed off a couple of big tech companies there that I think would be necessary to fuel the next stage of growth for China. But I think that what's happening is that, again, the larger pattern I see is this thing that a country will often embrace greater freedom for a burst of time because they're poor, because the old system has led them to disaster. They'll embrace greater economic freedom and sometimes greater political freedom to some extent, and they'll do it in the emergency to get them out of the emergency, and then it produces a lot of great wealth and a great leap forward, to use a phrase, an actual great leap forward. And then what happens is the political inertia of the system tends to kick in, and that's the long term arc of the United States. To some extent, the political inertia kicks in, and the desire to say, well, we should have more central management. We should have more government control, that kicks in, and they go and they start reversing or slowing down or in some way undermining the very policies that led to that growth in the first place. [00:32:43] Speaker B: Really good stuff, rob and what do you think of this, too? Here's another angle on China I've been thinking about. In many ways, the idea that China doesn't give a damn about environmentalism, doesn't give a damn about climate agreements, builds I don't know what the latest numbers are. They build a new Hydroelectronic dam, hydroelectric dam every three months, coal plants, belt and highways and infrastructure and everything. So, okay, they're not completely, let's say, fair pro capitalist like the US. Was in the 1880s, but they're building like it's the 1880s. Remember that song? Like, party like it's 1999. China is like building and growing and like it's 1880s. And from my perspective, I love it. I love it. I don't want them to be anywhere far from capitalism. But it's a model which I think, ironically enough, you know, Rob, that is the old Marxist model. Not in the sense that Marxist programs could achieve it, but remember, the old left idea was labor must be liberated and we must industrialize and we must grow and prosper and blah, blah, blah. The new Left, the Greens that Ein identified in the anti industrial revolution we know was against all that. If capitalism has produced prosperity, let's come out against prosperity and asceticism and denial and self abnegation. And China is so interesting to me because it doesn't embrace any of that. So the Left today is as mixed as the conservatives are. The conservatives are seeing them as prosperous commies which make no sense. And the Greens are looking at them and saying, my God, they are despoiling the environment. But I got to admit that a lot of people are being brought out of poverty. Yeah, just like in the 1880s. What do you think of that? I'm applauding from the sideline when they build all this stuff, even though some of it is goofy and it's overbuilt and they go cities and I know. [00:35:04] Speaker C: A lot of it's going to go. [00:35:05] Speaker B: Wrong, but a lot of it's gone right too, because they want growth, they want industry. And that's not true in America. [00:35:14] Speaker C: The secret of China's growth is two things. One is that when you've been under communism for 40 years, anything is an improvement, right? There's just so rest activity. And this is a large country that was very much engaged in commerce before that, engaged in industry, engaged in economic activity. You suppressed all that very forcibly, very stringently, for 40 years or 30 40 years under Mao. Actually, it's more like 30 years. For 30 years, you pressed all that and destroyed it. And then you take the lids off of that. And even if you imperfectly liberalize, there's so much liberated activity there that you're going to experience that long period of prolonged growth. Same thing that happens with the other aspect of and then so part of that too. Is that one of the keys to economic growth, one of the things we need to relearn in America, one of the keys to economic growth is not so much this policy or that policy. It's just wanting it. Wanting it to let something else get in the way. Now, I think now with the regime in China, my concern is they're going to let something else get in the way, which is political control gets in the way. But in America, of course, we have all these other things that we have decided, and I think there's a certain interesting argument on this, is that there's become a love of stasis. And you see that in housing policy, in the idea. Our little town, our little suburban town has a certain character. We have a character to the neighborhood and we have to preserve the character of the neighborhood. There can't be any change at all. And this idea of, like, stasis of having our environment around us stay exactly the way it is right now has become a public good that supersedes everything else. Right. Somebody describes as a form of welfare for the middle class. Part of the welfare is we will enact regulations so that your little suburban town stays exactly the way it was 30 years ago or at least as. [00:37:17] Speaker B: Close as we can. [00:37:19] Speaker C: But anyway, that's part of it. Is that just pure liberation? The second part is, yes. I think the real secret of China's sustained growth is because they want it. They've been willing to engage in vast increases in the amount of energy they're using and the amount of resources they're using in a way that, with our environmental controls, we have not been willing to do. Now, that's mixed, unfortunately, however, with the fact that there is such a high degree of government involvement there not just in a regulatory level, but also in the corruption level. Because you have a dictatorship, you always have high levels of corruption. And so you mentioned the Belt and Road thing. So the Belt and Road has turned out to be a giant boondoggle because it was done partly as an attempt to sort of gain political control and sort of extend China's political control overseas that we're going to come and build infrastructure projects in Africa and places like that to basically win US. Allies, local allies. But what's happened with a lot of those projects I think I know in Sri Lanka there's a big one that was like this is that they're financed huge amounts of debt. They're often built in places that don't necessarily make huge. And part of the impetus for building them is because local companies and local politicians and Chinese politicians can get their nephews and their people on the inside and drain away a lot of that money and corruption. And so a lot of them have ended up not being really productive. They built a port somewhere and it turns out not to be a really productive project. It turns out not to be well built. And then there's huge amounts of debt and they're not able to pay the debt on it. So it's sort of this weird mixture of we want growth. We're going to build all these dams and all that sort of thing and build new coal power plants. And that's fueled their growth tremendously. But it's also fueled it, in a way very wastefully in the sense that there's also this tremendous amount of corruption involved. So along with that, you get a lot of Potemkin Village type of projects. [00:39:19] Speaker B: Yeah, really good points. It's nice to see that, however crude they might be over the years and again, I'm often a numbers guy. I want metrics and people measuring things. There are measures of corruption, there are measures of economic and political freedom that social scientists have put together. And then, of course, you can always do wealth measures per capita, real GDP and things like that. I published a couple of things people might want to look [email protected] where I publish essays. One of them was relating the degree of a country's freedom, the degree of their political corruption, and then the degree to which they're prosperous. And maybe this audience wouldn't be surprised to learn the more the government intervenes in the economy, the more corrupt there is corruption there is, and the lower their prosperity. And China has been moving in the direction of less corruption. Now, they still have more corruption in Russia. Same thing. They have more corruption than the US. But they're moving in the direction of less corruption. And part of it is if you liberate more, there's less interaction between there's less rent selling, rent seeking, all that kind of thing. That public choice people talk about. Rob, I agree with you about the issue of debt, but there's a lot of debt pessimists about China that have been predicting the collapse of China for two decades. [00:40:44] Speaker C: This was set on these specific belts and road projects. [00:40:47] Speaker B: I agree. Yeah. Gordon Chang is one of the worst. He appears all the time as a China specialist. Gordon in 2001, wrote a book called The Coming Collapse of China. I mean, that was like 22 years ago. They say he has been so wrong on so many things, but they still interview him. Rob, I wanted to ask you about this because it's more geopolitical. I know you love stuff about military and foreign policy. The other thing I noticed about China and its leaders and its policies, not just this idea that they're intrigued and have been for decades about the, you know, can we get away with political oppression plus economic prosperity? And the other thing I think they're intrigued by is all these books that have come out, very interesting books, actually, in the last couple of decades, the Rise and Fall of nations, what Makes Nations Great or not. And the you know, many of the themes have been that you can't have military prowess without economic very. I think they read these books and they're like, wow. And they see history and they're thinking, well, we're going to build up our own economy. Not because we're big advocates of human well being and because we're humanist, but because that's what great powers do and then great powers can build militaries. But here is where I back off a little bit. And the question is, that may be true. That may be true, like what they think, and they actually might be building up their military. But I have a hard time swallowing the conservative view today that China is poised to be a hegemon globally. They're going to use these Chinese military to start taking over countries. I think they just want a strong military because they're thinking, this is what global grown ups, this is what global superpowers do. And what do you think about that? So what do you think about that? First of all, the embrace of the model. But then are they really imperialistic or just defensive? [00:42:41] Speaker C: Well, I wouldn't describe them as being just defensive. I think they have certain imperialistic ambitions. I mean, this is the Middle Kingdom. Middle Kingdom basically means that's a translation for this old view of China's name for itself, the Middle Kingdom. But what that really means is we're the center of the world, right? And they do have this idea that we should be the center of the world. We should be setting the standard for everything. Everybody should basically be judged, should be cowtowing to us. cowtowing being, of course, a word for the old Chinese way of showing your obedience to the emperor. You bow down low, it's a cowtow. But they have that attitude. Everybody should be subordinate to us. And I also think there's one other thing that happens when you have a dictatorship, which is that they don't like the idea of alternative models out there that can aspire their own citizens. So having democracies when you have democratic nations, they don't like the idea of this being a model that our people can look to. So they try to sort of build up, no, don't worry about that. Don't look at those models. We're more powerful. And more important than that, the road to national greatness goes through the party, through the dictatorship. And there's an attempt to want to, first of all, to threaten and to close down and to subvert, if they can, the politically free countries that are around them. I think that's part of one of the reasons they have such an obsession with Taiwan. And there's also this attempt to sort of build themselves up to be greater and more powerful, and we're going to stand down and put the United States in their place. And it goes to a larger thing, which is there is this eternal search, essentially, for an alternative model to a free society. [00:44:37] Speaker B: Right? [00:44:37] Speaker C: So the US. Has stood I mean, we've slacked off a little on economic freedom, but we have stood for a long time as the model of the free society, as a model of government. And there's an eternal search for no, no, we're going to have a better alternative to that. We're going to go to fascism, or we're going to go to authoritarianism or we're going to go to industrial policy. People keep searching for this idea of we're going to have some way to have national greatness, greater, as great as the United States, even greater than the United States, without having any degree, without having the freedom that US. [00:45:12] Speaker B: Has. Yeah. And Rob, I think one of the reasons I'm an optimist on China, Russia and other is I'm old enough to remember how awful they were when they were really true lenin, Stalin and Mao. And when I hear people today say they're Communists, I'm like, you have no idea what real communism is. And whatever Russia and China are searching for, I feel like, oh, thank goodness they're searching for something other than that horrible thing they did in the 20th century. But maybe that's naive of me. [00:45:48] Speaker C: I regard that as a little over. The biggest indication I see about China being in trouble, by the way, is the fact that I'm seeing a lot of European and American expats who went to China were living there. They're departing in droves. And because they view it as like a lot of them went there. I have a friend who went there. It was the land of opportunity. It was a great place to go. And now not so much. And it's become a more hostile place, a more controlled place. [00:46:19] Speaker B: I've heard the same thing about companies. But Rob, what I'm suggesting is this might have much more to do with the trade wars than it does with, you know, just cracking down for the hell of it. But it could be a mix of the two. But here's another thing. If I'm right talk about implications, if I'm right, that they really don't want, obviously, political liberty, but they want to try to get away with preserving economic liberty to get their prosperity so they can be a geopolitical player. That's why they wouldn't touch Hong Kong and Taiwan. The idea that they're poised to take over would amount to economic models of capitalism. This warning has been gone on for decades, right? They could have done it decades ago. They haven't done it. But see, if I'm right, it's because their view is, no, we want these golden gooses to keep producing. It's not the kind of moral argument you and I would use, but in terms of geopolitical prediction or analysis, it would suggest that why the hell would know? Botch the job in Hong Kong. In Hong Kong, they intervened because they didn't want people becoming more democratic. I don't think it was an issue of they want to shut down Hong Kong's prosperity or they want Taiwan's prosperity. [00:47:38] Speaker C: Yes and no. [00:47:40] Speaker B: A lot of the China people, you know, that they'll laugh at something like Venezuela. They'll laugh at the America because they'll say, oh, you guys are Democrats and you think it's great. As long as you vote for things, everything's fine. And then they literally make fun of Venezuela because they'll say, you voted for Madeira, you voted for Chavez, and look what you got now you're eating your own pets. And China's laughing because China's like, well, you're socialist, but you're complete idiots. [00:48:07] Speaker C: One of the great stories about this, by the way, this may be leading to the BRICS discussion, if we got any time for that, is when South Africa, when Nelson Mandela took over in he was his party was very far left, very Marxist. And what happened is they had all these countries that come in, countries that had supported him during the Cold War. All these countries came in, and people from Vietnam and people from China, whatever, came in, and they had some proposal to nationalize all the industries, and they looked at and said, don't do that. It was all the Communist countries who were telling him, no, the last thing you want to do is nationalize the mines and nationalize the industries. And that's how this didn't happen when Nelson Mandela came in. It didn't happen because he was advised, in part because he was advised by these nominally Communist governments not to impose communism. But I do think my issue in this, which is that I think that political freedom and economic freedom do go hand in hand over the long run. And my concern is that the Chinese government will be put in this position, and I think Putin and Russia is definitely in this position, where the political control has to become more important at some point. They want to keep the golden egg, but the political control will at some point, they'll have to make that choice, and it'll become more important. [00:49:29] Speaker B: And I think it's a really good point. It's such an important issue in political economy. I know this much. I think you and I both disagree, at least with this kind of Milton Friedman view or the economy. I call it the economistic view, that if there's economic freedom, it will bleed into and create political freedom. I don't believe that. I'm an economist. I don't even believe that. I wish there was freedom across the board. But I'm also super skeptical of the idea that political freedom is defined as know, general will and democracy, because they voted for Hitler, they voted for Maduro, they voted for socialism. They've ruined these countries. So you don't get the vote in China. True. But if the China leaders move you from socialism to fascism to capitalism, great. I wish we could have both, but yeah. So, looking the other way, I agree with you, Rob. I think it's hard to sustain political oppression and economic prosperity because the political autocrats are going to be super tempted all the time to intervene in the economy. I think that is a problem. That's why it's probably unsustainable, because you. [00:50:40] Speaker C: Also have in China, they call them princelings, which are the sons and nephews and what have you, of the top party officials. What's the point of, your know, climbing up the greasy pole to get to the top of the ladder in the Communist system if you can't use it to enrich yourself and your friends and your family? [00:51:00] Speaker B: Well, we also promised to talk about BRICS, and I'll be as brief as possible. The reason I brought it up as a possible add on to this is the sea in BRICS is China. So I saw Rob and I talked and I said, well, let's say something about Bricks because it is in the headlines and people aren't quite familiar with what it is. So I think we only have eight or ten minutes left. Very quickly, bricks is an acronym. It's not an anachrony. It's an acronym for Brazil, Russia, India, China, South America. So it's five countries who came up with the acronym South America. What's that? [00:51:41] Speaker C: South Africa was the yes. [00:51:42] Speaker B: What did I say? Oh, I'm sorry. South Africa. [00:51:46] Speaker C: Yeah, and I know you know it. South America is not a oh, thank you for that. I know you know that that would. [00:51:51] Speaker B: Have been stupid, like South America. Okay? So thank you, Rob. Okay, so here's the origin. In 2001, it's a long time ago, I think a guy, a guy named Jim O'Neill who was at Goldman Sachs Asset Management, he simply came up with the acronym to group Together Countries. Now, get this. Now he was trying to create like an investment portfolio of like, countries that shared characteristics which were not fully developed conventional. So now think of this. Now he thought of Brazil, Russia, India and China. It was just those four at the time as having the following features ready. Huge geographic footprint. Yes, they're all huge countries. Second, huge untapped, mostly natural resources. Yes, also true. And then he would say something like political systems that are not really conducive to getting this stuff out of the ground, to extracting this stuff and becoming a wealthy country like the US did or Britain did, or other countries just did not have the equivalent of natural endowments. So anyway, the point is this is very interesting because the point is this is a capitalist trying to put together like an equity index following these four countries. And what's interesting is what's actually happened over the decades since is that these four countries have interacted more on a geopolitical basis russia, China, Britain and Brazil and know, talking to each other, coordinating policies, sharing notes, having conferences. In the case of South Africa, adding South Africa more recently. Now, why is South Africa in the same category? Same thing. They have diamonds, they have gold, they have natural resources, but the key to it is untapped, like proved underground reserves, but not fully exploited. And now the idea of fully exploiting is a capitalist idea. And none of these countries really politically can be described as pro capitalist. So I wanted to bring this up only because they're getting more attention. They represent an increasing share of global GDP. I mean, they far surpassed now the G seven, which are the seven most industrialized advanced economies. So they're kind of creating, call it a political, economic bloc. Bloc. And I'm not big into the idea of, wow, they're creating this conglomerate that's going to compete with the US and submerge the US dollar. But I wanted to bring it up because it's in the headlines. They did meet recently, and one of the more controversial things they said is, maybe we should create a gold based currency. What the hell? To an objectivist and a capitalist, you're thinking gold based anything. We haven't had the gold standard in 52 years, right, since Nixon went off the gold standard. And one of the reasons is they're thinking the US. Is using the dollar. Trump was using the dollar. Biden is using the dollar and freezing our assets over Ukraine. We don't really trust the dollar anymore, so we're going to create a competition to the dollar, and the four or five of us are going to get together. Now, I don't think this is actually going to happen, but the fact that they're even thinking about it, the fact that they're even thinking in those kind of broad geopolitical terms, and thinking of real money or as close to real money as possible, is a very interesting thing because it's kind of cockeyed. It's not something you'd expect from semi free mixed economies. And yet I think the reason this is happening, and this is so weird, is those four or five economies do want the kind of growth and prosperity that Americans once wanted in the 1880s. And so it's a real head scratcher, because on the one hand, they want complete development of these natural resources in this regard. They have no environmental influence whatever, and that's why the environmentalists hate the bricks. But on the other hand, they don't quite have the political institutions of respect for property rights, respect for contract that would make it possible. So I classify the bricks as an interesting things to keep an eye on, and they might amount to something, but it is still five disparate countries. Only two of them are contiguous. Only Russia and China are contiguous. And maybe they become more interesting only because China and Russia have come together over the Ukraine war. So this BRICS thing, like being in the background for a while, everyone's thinking, wow, the BRICS consolidation or the BRICS coordination is going to accelerate now because the two major players, Russia and China, are becoming allied, you know, to be continued. I think Rob and I will talk about this more, I think, in future sessions, but I just want that on the radar, and that's what BRICS are, and that's why they're worth watching. That's all. [00:56:56] Speaker C: I have two sentences on that. One is, I saw something about how they tried to create a BRICS development bank, sort of a competitive IMF, but it uses the dollar that indicates that this isn't really coming together. I think there's been a long like I said, there's a long dream of America as the leader of sort of liberal democracy, political freedom and economic freedom and great power. There's always been this attempt to say, let's come up with some alternative. They used to have the non aligned nations in the Cold War and this idea we will have an alternative block of countries that represent a different model. I think that's why people get excited about BRICS. I think it's too disparate. I mean, India and China hate each other, and India is now becoming the bigger country by population. So I think it's an attempt to sort of cobble together a little bit of a dictator's club that will have these authoritarian countries all get together and support each other. But I think it's too disparate, too many different interests, too many diverging interests, and not enough real strength to because they aren't willing to adopt capitalism in the way that we would think of I think that they're not going to have that kind of strength to take the lead. [00:58:13] Speaker B: Okay, but it's not I mean, technically, Rob, it's not really a dictator's club. It's India and Brazil, which are both considered huge. [00:58:23] Speaker C: Questions about what's going on. A hybrid, a Hindu nationalist country. [00:58:32] Speaker B: I still think it's a hybrid group politically. [00:58:35] Speaker C: Oh, absolutely. [00:58:37] Speaker B: But economically, what they all share is massive natural resources. This is how I would classify that have yet to be tapped, that they kind of want tapped, which explodes the heads of any Democrat or environmentalist in this country. That's why it's interesting to me, from the standpoint of I want economic development, I just don't think they've learned yet how to do that. But the fact that they're even combining. [00:59:04] Speaker C: I think that the bricks politically, geopolitically, and economically, the bricks has more aspirations than specific reality. [00:59:13] Speaker B: Right now, we don't even have aspirations to dig up anything. Yeah, so I'm a sucker for aspirations to dig stuff up and use it. Hey, Lawrence, have we run out of time? Because Rob and I can talk all night long as you yes. [00:59:31] Speaker A: We unfortunately. [00:59:32] Speaker B: Have run out of time. But I do want to thank you both. Were we supposed to take questions, Lawrence? Were we supposed to get well, luckily. [00:59:40] Speaker A: A lot of the questions that were asked, y'all, did answer just back and forth. [00:59:45] Speaker B: Really? [00:59:46] Speaker C: I have been watching the chat, and we've been addressing everything. [00:59:50] Speaker B: Really? Okay. Yes. [00:59:52] Speaker A: I will say, just with a little bit of time, one question that I'll try to get to maybe two, depending how fast. There was a question earlier from C. White on Instagram asking that China owes about 859,000,000,000 of US. Debt. With their current economic troubles, do you think that they might somehow leverage this against the US to try to get this paid to help themselves out? [01:00:16] Speaker C: If you owe the bank $100,000, you're in trouble. If you owe them a million dollars, they're in trouble. The variation of that, I think that's my take on that. But you know more about this, Richard. [01:00:27] Speaker B: That's okay. So that number is less than a trillion, and the US. Owes 33 trillion. So it's like 3%. It's irrelevant. No. The story of China is going to dump our debt and. Wreck our finances is not valid. Is there another one? [01:00:43] Speaker A: Yes, this is just another one. This one is from IAM. [01:00:46] Speaker B: Yes. [01:00:46] Speaker A: Who asked, is there a moral argument that supporting or investing in businesses in China has only helped them keep their more authoritarian principles on life support? You've kind of touched upon this already, but just sort of to get the definitive sort of answer from you both. [01:01:01] Speaker B: That's a good question, Rob. Take that one. [01:01:03] Speaker C: Well, let me take this one because I'm going to disagree with you, but you disagreed with the Milton Friedman idea that greater economic freedom would bleed over. Now, I don't think it inevitably leads, because it obviously hasn't inevitably led to greater political freedom in China. But I do think if you want to say bleeds over, that's vague enough that I think I would accept that, that I think it creates some of the conditions. It makes a more conducive environment that when you have mobilization, you get a more conducive environment towards having political freedom. And you've seen that in the other Asian tigers and that kind of area. But I think there's always going to be that push and pull, though, that sometimes the economic growth is used as an excuse by the leaders to say, hey, look, the Communist Party brought you all this economic growth, therefore we should continue our rule. [01:01:50] Speaker B: Yeah, and related to this question, too, also, I've heard it quite legitimately said that China steals our stuff, steals our IP, steals our patents and copyrights. And if that's true, then the Trump administration should have gone after them for that, not for stupid shit like sending us goods that we buy at Walmart. But interestingly, I remember Carly Fiorina many years ago, was asked when she was running HP Hula Packard, they said, when you go over to China, do they steal your patents? Or what happened? You know what she said? She says, no, we give them to them. And they said, Why? And she said, So we can get access to their markets. So there's the political control, right? Access to their workers and their trade agreement. She said, so it's a quick proposal. But she said, we never give them like, first generation stuff. We give them our old stuff. And they know this and they buy it anyway because it's like buying I don't know, it's like buying a used car. You're ten years behind, but you're still getting something new. And I always thought that was interesting because I thought these business people, however pragmatic they might be, they're not really being stolen from. They don't have to go over to China. They've been taught this idea that there's a billion people there that will buy your stuff. And they go over there, and all the CEOs go over there and they have FOMO fear of missing out. They don't want to be the company that didn't set up operations in China and stuff like that. So if the question is, do American businessmen going over know kind of feed the maybe? Maybe. But I don't think China would have been economically as improved had they not invited in foreign businesses. But any others? Lawrence? [01:03:36] Speaker A: I think there are still some more questions, but I think we have kind of gone over time limits, though perhaps we'll have to see in the future about making these for a bit more of a longer period of time so everything could be covered, but that would be 5 hours. [01:03:51] Speaker B: Like Rob, the five hour Rob Richard sessions. Yeah. Okay. [01:03:57] Speaker A: Definitely something to consider. But again, I want to thank both of you for taking time out of your day to come and discuss these issues. I do think they're very interesting, especially with what's going on. And like I said, a lot of the questions were answered sort of through the course of you all talking, so I think that was really good. So, for those of you who are watching at home, thank you for your time. Hope you enjoyed this. If you like what we do, please consider supporting the Atlas Society so we can do more content like this. And let us know if you would like other types of content, maybe longer form, it's good to get this kind of feedback. If you are interested and have other questions for us, be sure to tune in next week. Our CEO, Jennifer Grossman will be back on the Atlas Society ask. And we're going to be interviewing Brendan O'Neill from Spiked magazine in the UK. [01:04:54] Speaker C: And we're going to be talking about. [01:04:55] Speaker A: His latest book, a Heretic Manifesto Essays on the Unsayable. Until then, thanks again, everyone. We'll see you all next time. [01:05:04] Speaker B: Thanks, Rob. Thanks, Lawrence. Enjoyed it. Thank you. Take care.

Other Episodes

Episode 0

April 22, 2021 00:58:49
Episode Cover

Current Events with Hicks, Kelley, Salsman, and Grossman

The Atlas Society Senior Scholar Dr. Stephen Hicks, Founder Dr. David Kelley, and Professor of Political Economy Dr. Richard Salsman join host CEO Jennifer...

Listen

Episode

November 30, 2023 01:00:25
Episode Cover

Music & Meaning: The Atlas Society Asks Akira The Don

Join CEO Jennifer Grossman as she is joined by Youtube's internet DJ Akira The Don to discuss his career and explore the power and...

Listen

Episode 0

March 17, 2021 00:57:25
Episode Cover

Current Events with Hicks, Kelley, Salsman and Grossman

The Atlas Society Senior Scholar Dr. Stephen Hicks, Founder Dr. David Kelley, and Professor of Political Economy Dr. Richard Salsman join host CEO Jennifer...

Listen