On China

But let's focus on China for a moment, because that is the economy Americans seem to fear the most. And certainly it is true that China has been the wonder of the world for three decades, growing at an astonishing rate and lifting hundreds of millions of people out of grinding poverty into something approaching a middle-class existence. It's probably no exaggeration to say that this has been one of the most positive events in recent human history.

Indeed, we can say about China precisely what I say abut the former Soviet Union in Chapter 2 “In barely a generation, [Chinese]-style communism transformed a backward, peasant, agrarian society into the second-largest economy in the world.” But it's one thing to convert an agrarian society into an industrial society. A strong and determined (communist) central government can basically decree that it will happen and it will. (Note, on the other hand, that a determined but weak—democratic—central government, as in India, will have a much tougher road.)

But for the Chinese economy to continue to grow at anything like its former glory, that economy can't remain a simple industrial society in which capital²¹ is allocated mainly to create jobs and keep the populace docile. China has to transform itself into a vastly more complex postindustrial economy, where capital is allocated moment by moment to where it is needed most. And that is something that no society has ever achieved using a top-down, command economy approach. The Soviet Union collapsed when it tried to compete with the complex U.S. economy, and there is little reason to suppose that the Chinese will fare any better.

Following the catastrophic Leaps Forward orchestrated by Mao (who died in 1976), Deng Xiaoping reorganized the Chinese economy into a combination of socialism and free market principles (often called state capitalism). Since that time, domestic peace has been achieved in China via a kind of deal with the Devil, in which the citizenry gave up any hope of enjoying Western-style rights, democracy, or the rule of law in exchange for the promise of rapid economic progress that would be dispersed throughout the society.

For three decades that bargain held, with the Chinese economy growing at nearly 10 percent per year. But the bargain contains the seeds of its own destruction. As noted above, a complex postindustrial economy simply can't be managed by a small cadre of senior Party members in Beijing. Already the Chinese economy has slowed and, net of inflation, is now growing well below levels once thought to be incompatible with domestic peace. More slowing can be expected as the Chinese economy necessarily becomes ever more complicated.

In addition, corruption and nepotism are rampant, and though nearly a quarter of the population has benefited from economic growth, three-quarters (mainly the interior of the country) has not. Note, in addition, that the main beneficiaries of economic progress have been Han Chinese, while the main losers have been concentrated in other ethnic groups.

Finally, as discussed at some length in Chapter 2, the Chinese government lacks moral legitimacy. Although China is surely a freer society than was the Soviet Union, it remains the case that a government that withholds human rights but provides rapid economic growth had better keep providing rapid economic growth and it had better ensure that that growth is widely dispersed. Ultimately, the moral basis of a society matters. True, it matters less when people are starving and the central government is feeding them, but it matters more and more as citizens become more affluent and move up the Maslovian ladder. And it matters even more as the central government fails to uphold its part of the bargain.

And if the center begins to lose its hold in China, chaos can't be far away. Throughout history China has rarely been the unified country we observe today—and even in the modern era it has been unified (excluding Taiwan) only since the late 1940s. If “the center cannot hold,” China is likely to fragment into a variety of autonomous countries along the lines of the former USSR. At the very least, we can expect to see Tibet, Xinjiang, Inner Mongolia, and Manchuria reorganize themselves into separate states. The same people who believe that China will soon dominate the world, and that its totalitarian form of government is either irrelevant or a positive virtue, are the same people who were blindsided by the collapse of the Soviet Union and, more recently, by the Arab Spring.

Speaking in shorthand, the internal contradiction of Chinese society can be expressed this way: If the Chinese Communist Party (CCP) maintains its iron grip on the country, the Chinese economy will continue to slow and the CCP will have to spend more and more of its time putting down insurrections and less and less of its time trying to grow the economy. If the CCP loosens its grip and democratizes, the country will come unglued.²²