Notes on the Rise of China and the Fall of America
This century began with a single major world power, the USA, but it will not end that way. The power and prominence of China has risen and fallen multiple times over the last few thousand years, and it is on the rise again. Last century saw the decline of Europe, the rise and fall of the Soviet Union, and the eventual rise of the United States as the dominant world power. This century we're seeing the stagnation of the US. In this article I'm going to look at the primary reasons for China's rise and America's fall.
The United States has continued to be thought of as capitalist even as government regulation has grown, as political corruption has grown, as socialist programs have been implemented, as taxes have increased, as property rights have decreased, as rule of law has decreased. At the same time China has continued to be thought of as communist, Marxist, and socialist even though it has eased regulations, reduced corruption, lessened socialist programs, lowered taxes, increased property rights, and maintained rule of law. So the US was capitalist, has moved away from capitalism toward socialism, and is still called capitalist, while China was socialist, has moved away from socialism toward capitalism, and is still called socialist. Ironically, they've become similar systems in many ways, even though they have very different histories and came to a similar place from opposite ends of the socio-political-economic spectrum. I find this fascinating, and it appears to be understood and accepted by almost no one. There is a large disconnect between the reality of the actions and the labels applied. The actions are more important, and the words can help us understand the reality if we can untangle and understand them.
The chief architect of China's rise was Deng Xiaoping. He learned about communism and Marxism in France and Russia. He helped lead the communist revolution in China and win the civil war. Mao sent him into exile twice for introducing capitalist ideas. After Mao's death in 1976, he organized the reform and opening up of China starting in 1978 and 1979. Over the next decade he set China on a course that they then further developed into the new century.
When you read some of Deng's speeches it's amazing to see the change and how it worked. Karl Marx wrote in his 'Critique of the Gotha Programme', right after saying that the ultimate goal of communism is a slavery that people will like, the famous phrase "From each according to his ability, to each according to his needs!" Deng, in a 1978 speech titled 'Adhere to the Principle “To Each According To His Work”' says this, "We must adhere to this socialist principle which calls for distribution according to the quantity and quality of an individual’s work. In accordance with this principle, a person’s grade on the pay scale is determined mainly by his performance on the job, his technical level and his actual contribution. Political attitude should also be taken into account, but it must be made clear that a good political attitude should find expression mainly in a good performance in socialist labour and a greater contribution to society. If, in handling distribution, we judged mainly on the basis of a person’s politics rather than on the basis of his work, that would mean we were following the principle “to each according to his politics” rather than “to each according to his work”. In short, distribution should be made only according to a person’s work, not according to his politics or his seniority."
This is amazing in several ways. One, it's obviously opposed to Marx. Two, he claims it as a socialist idea. He can do this because of several reasons, one of the main ones being that there are different phases in the idea of communist and socialist development. Deng makes the case that China isn't even close to the end state, China is in poverty and therefore at the beginning stages of socialist development, and what that stage requires is economic development, which can't be achieved by the end principles of a late stage communist society. Three, in practice, communist societies don't actually follow Marx's phrase, they give rewards and benefits based on politics. Deng identifies this and points out that it doesn't work. Four, the philosophy contained in Deng's phrase is the foundational base of a just system based on meritocracy. What we think of as capitalist western culture is built on this idea. This is the idea that built the wealth of the European and American economies. Moving away from it is what flatlined Europe, and is what is stalling the US.
Deng is aware of these things. He has insight into why certain societies are succeeding and others are failing. He makes these things clear. In 1980 in 'Talk with the delegation from the Party of the National Liberation Front of the Democratic People’s Republic of Algeria' on April 21 Deng said, "We should research earnestly how to carry out socialist development. At this time, we are reviewing the experience gained in the past three decades since the founding of the People’s Republic. To sum up, it is as follows. First, we should not adopt “Leftist” policies by divorcing ourselves from reality or skipping over necessary stages. Otherwise, the task of building socialism will not be accomplished. We have suffered losses from “Leftist” policies. Second, whatever we do must contribute to developing the productive forces. In our effort to do this, we should stress economic results. Unless we develop the productive forces, we cannot gradually increase people’s incomes. We have suffered a great deal in this respect, especially during the ten years of the “cultural revolution”. We should research why so many African countries which have been developing socialism have become poorer and poorer. We should not consider it to be glorious merely to call our nation socialist, nor should we be content with this."
He even notes that the capitalist and socialist societies aren't necessarily that different. In 1990 he gave a talk titled 'Seize the Opportunity To Develop the Economy' and said, "We must understand theoretically that the difference between capitalism and socialism is not a market economy as opposed to a planned economy. Socialism has regulation by market forces, and capitalism has control through planning. Do you think capitalism has absolute freedom without any control? The most-favoured-nation status is also a form of control. You must not think that if we have some market economy we shall be taking the capitalist road. That’s simply not true. Both a planned economy and a market economy are necessary."
In addition to these ideas of property rights and free markets, just from some of the titles of his speeches you can see other things that he focused on including keeping rule of law and reducing corruption. These are the things needed for a flourishing society. Here is a list of just some speeches:
Carry Out the Policy of Opening to the Outside World and Learn Advanced Science and Technology From Other Countries, 1978
We Should Make Use of Foreign Funds and Let Former Capitalist Industrialists and Businessmen Play Their Role In Developing the Economy, 1979
Neither Democracy Nor the Legal System Should Be Weakened, 1979
We Can Develop A Market Economy Under Socialism, 1979
To Build Socialism We Must First Develop the Productive Forces, 1980
Combat Economic Crime, 1982
We Shall Concentrate On Economic Development, 1982
We Are Building a Socialist Society With Both High Material Standards and High Cultural and Ethical Standards, 1983
Use the Intellectual Resources of Other Countries and Open Wider to the Outside World, 1983
Make a Success of Special Economic Zones and Open More Cities To the Outside World, 1984
We Must Follow Our Own Road In Economic Development As We Did In Revolution, 1984
The Reform of the System For Managing Science and Technology Is Designed To Liberate the Productive Forces, 1985
We Shall Expand Political Democracy and Carry Out Economic Reform, 1985
Reform and Opening To the Outside World Are A Great Experiment, 1985
Special Economic Zones Should Shift Their Economy From A Domestic Orientation To An External Orientation, 1985
Reform Is the Only Way For China to Develop Its Productive Forces, 1985
There Is No Fundamental Contradiction Between Socialism and a Market Economy, 1985
Help the People Understand the Importance of the Rule of Law, 1986
Planning and the Market Are Both Means of Developing the Productive Forces, 1987
In 1987 Deng Xiaoping gave a talk titled 'How To Judge the Soundness of A Country’s Political System' where he said "There are three important criteria for judging the soundness of a country’s political system or structure and of its policies. First, whether the country is politically stable; second, whether the system and policies help to strengthen unity among the people and to raise their living standards; and third, whether the productive forces keep developing. In the last eight years we have scored some achievements in these three respects." This seems like a fairly decent set of criteria for judgment.
Obviously China has had many issues over the years. They've found it difficult to balance maintaining political stability and the culture while also carrying out these economic and political reforms. Whether or not they're able to continue making progress is unknown, but even after Deng they've been able to implement ongoing laws and policies, including in their constitution, that drive toward this idea. Some things are good, and some things aren't, and they continue to change. For instance, Chinese politicians have term limits. That helps to limit the potential for corruption. That's an issue that we see in American politics where the federal congress doesn't have term limits and is highly corrupt. There are a thousand issues like that which are evolving in both countries.
There is obviously much more to the transformation of China than just this. They've made impressive progress in the 1990s, the 2000s, and the 2010s. Let's look at some of the things that have hampered the United States.
I'm going to list through these things fairly quickly. 1913 was a rough year in American history. In that year the US Federal Reserve was created to stabilize the financial system. In the 1920s the US boomed, and in the 1930s the US crashed. So obviously the Federal Reserve didn't work, but once it was created it couldn't be destroyed. In that same year the 16th Amendment to the US Constitution was ratified to give the feds the power to take income taxes. Notice how much these two things work to centralize financial power in the federal government. Remember that power is a function of dependency, and this sets the stage for big growth in future financial dependency. Also in 1913, the 17th Amendment was ratified and added to the Constitution. Before that US senators were chosen by the state congresses. Now they are directly elected by the people. This is easy to sell, but it breaks an important part of the American system of federal government. The 10th Amendment preserves state rights. The major political check on that was that the state congress could tell the federal senator what to do. With that broken the only thing protecting state rights is court rulings, which will prove to be not enough.
In the 1920s Herbert Hoover was the head of the Department of Commerce, before he was President. In 1924 there was a court case in the Federal Circuit Court of the Northern District of Ohio, Ambler Realty Company versus the Village of Euclid. The judge ruled zoning unconstitutional. That was appealed to the Supreme Court, and in a 1926 ruling, which was unusually heard twice and seems to be partially motivated by some racist concerns, they found in a split decision that zoning was constitutional even though some of it wasn't, but each item would have to be appealed separately otherwise it was all enforceable. This laid the groundwork for an immense growth in regulation as Hoover pushed the implementation by states heavily. Hoover started the growth of the Administrative State which eventually grew to weigh down the US with an unbearable burden of government regulation.
In the US Constitution, Article 1, Section 8, Clause 3 is known as the Commerce Clause. The courts have interpreted this to mean not just that the feds have control over commerce across state lines, as the Constitution says, but also that the feds have control over anything they want that happens within the states. Again we see the limiting of state rights and the centralization of authority in the federal government.
Andrew Mellon was a banker and Secretary of the Treasury under President Coolidge. In 1924 a book he wrote was published titled 'Taxation: The People's Business' where he explained that people were willing to pay taxes up to a certain point because they consider it useful. Almost everyone agrees to pay for police, fire, the military, courts, and roads. Many people support the idea of taxes for schools and some other infrastructure. At a certain point people don't want more taxes though. When that happens the people lower on the socio-economic spectrum don't have great choices. Either pay the taxes, or don't and risk getting into serious trouble. However, people higher on the socio-economic spectrum do have choices. They can donate money to politicians and employ lobbyists to make loopholes in the tax laws, and then hire lawyers and accountants to jump through those tax loopholes. And once you've created a powerful and influential lobbying industry, you'll never be able to get rid of it again. Guess what? Herbert Hoover increased the tax rates a lot when he was President in the early 1930s. Then FDR as President raised taxes more in the late 1930s. Then Truman as President in the early 1950s raised taxes after World War 2 and going into the Korean War. In the 1930s and 40s FDR increased government programs a ton, and LBJ did another expansion of more government in education and healthcare in the 1960s. There aren't good ways to pay for all of this extra expense. You can either tax it, or inflate the money. Those are problems in addition to the creation of the lobbying industry.
Obviously what happened is that a huge lobbying industry was created in the US. This lays the foundation for two types of corruption. One is illegal corruption. The other is legal corruption. The second type has been a major problem for the United States. It's normal and widely known that federal congress people do a large amount of insider trading and run various types of scams through their non-profits and non-governmental organizations, which is just a different type of government organization. People donate to these charities in exchange for political favors. NGOs are created so that the government can give them money, and then the politicians put friends and family members in these organizations to skim off the money. Nancy Pelosi is so good at insider trading that there are a significant number of investors who copy her trades to make outsized gains, which would be illegal for a normal person to do. The Clinton and Biden families are commonly known as crime families. More powerful than any mafia. These politicians are above and beyond the reach of the law. These things have been known for a long time. There is an Eddie Murphy movie from 1992, 'The Distinguished Gentleman', that uses this commonly known type of corrupt lobbying as a a comedy ploy, but it's also true.
To what extent these special interest groups have power and influence is hard to say, but it's significant. The pharmaceutical industry is a good example. By 1986 there had been so many vaccine injuries and lawsuits in the US that most companies were deciding to step away. Instead, congress passed a law exempting vaccine manufacturers from all liability in cases of injury or death, and set up a special court funded by taxes. Arranging that level of government protection is impressive. Pharmaceutical companies have since been found guilty of large criminal operations, including the largest criminal fines in history, but no matter what happens with vaccines they are exempt. That may be unethical and corrupt, but it's legal.
The last war that the United States won was WW2. The Korean War was split. The United States has then lost every war since over the long term, the big ones being Vietnam, Iraq, and Afghanistan. President Eisenhower warned against the dangers of the military-industrial complex in his Farewell Address in 1961. The problem was known about long before that. A Marine General, Smedley Butler, published 'War Is a Racket' in 1935. US Army Colonel David Hackworth, one of the most decorated US soldiers in history, gave the same warnings. This ties tightly into the lobbying industry as previously discussed to create the military-industrial-congressional complex of never-ending wars, which is a classic way to bankrupt a country at the cost of lives and treasure, which is then passed onto the American public through taxes and inflation.
The NSA and the CIA were created by President Truman in 1947 as part of the Cold War against the Soviet Union. They both grew out of units used in WW2. On December 21 in 1963 Truman wrote an article published in the Native American News Association called 'Truman Says CIA Was Diverted From Its Original Assignment'. He warned that things had gone off track. For instance, he says, "I never had any thought that when I set up the CIA that it would be injected into peacetime cloak and dagger operations." Unfortunately, this problem was never been resolved. The US is widely known for arranging the overthrow of many countries across six continents over the last 50 years. The US commonly funds and trains an organization to overthrow a country, to then fight that same organization a few years later. It's a continual boomerang of death and destruction, all funded by taxes of course.
After the 9/11 attacks, the Patriot Act was passed in 2001. This allowed mass spying on American citizens with the obviously associated concerns.
The US has also made massive corporate bailouts including automobile, insurance, banking, and airline companies. This is commonly referred to as being too big to fail. The government even created Fannie Mae and Freddie Mac as private mortgage companies with heavy ongoing government involvement. All of these things heavily distort the price signals that are essential to a working market mechanism. This also helps large corporations at the expense of small companies. In the covid lockdowns the governments shut down small companies and kept large companies open. This grows large companies and bankrupts small companies. Keeping companies that otherwise would fail afloat stifles innovation and technological progress.
In George Washington's Presidential Farewell Address he has a few warnings for the future. One, don't get entangled in foreign politics. Two, don't split domestic politics into vengeful factions. Three, don't lose the religious and moral base of the society. Over time the US has violated all three of these warnings.
Say's Law of Markets is named after the French Liberal School economist Jean-Baptiste Say from the 1800s. He emphasizes that people are often confused about the foundation of wealth. They usually think that it comes about because of exchange. That's not wholly wrong. The division of labor and exchange of goods is important for wealth, but it is not the foundation. The beginning of wealth is production. I know that Thomas Jefferson read the economists of the French Liberal School. I am unsure if Deng Xiaoping was aware of Say, but you can see a similar emphasis on production. In Say's 'Treatise on Political Economy' he states, "Thus, it is the aim of good government to stimulate production, of bad government to encourage consumption." Say originally stated, "It is worth while to remark, that a product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value." The economist John Maynard Keynes argued against this idea in a somewhat complex way, and the US has largely worked to base it's economy off of Keyne's ideas, but you can't get around Say's Law in the end. In a simplified form, Say's Law means that if you want to have things, you have to make things, and if you don't make things, you won't have things. This is true no matter how many financial games are played. The US has moved away from this foundational idea.
There are other factors that have contributed to the difficulties in the United States. The increasing influence of social construct theory is a good example. This is a confused form of magic people attempt. All of the gender confusion is a version of this. People think that if they all pretend the same thing then that imaginary reality will become reality. Words are socially constructed, but reality isn't. Some things are partially socially constructed, like types of social manners. The basic error is confusing words for reality. That type of delusion is harmful to society of course. Yet it has many adherents in the US.
This is a fair list of the problems that the United States has hampered itself with over the last century or so. We can see how the US has hindered its growth and prosperity, while China has to some extent unhindered itself. Taking these things into consideration it's interesting to see that the directions that the US and China have moved are opposite. Both of those trends could continue with the United States becoming less prosperous and correspondingly less influential in the world, and China becoming more prosperous and influential in the world. Or, the US could reverse course and correct these problems and grow back into prominence, and China could hamper itself in these same or different ways. Or, the US could reverse course and grow, and China could continue to grow. Or, the US could continue to hinder itself, and China could reverse course and begin to hinder its progress. All of these avenues are possible. Which way things will go is up to the individuals who are making decisions which add up to the fates of societies. The basic principles are fairly simple: property rights, free markets, rule of law, and low corruption. The difficulties are in getting people to agree to these basic foundations of civil society, and then getting things implemented and maintained. Who succeeds, wins.
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