China's Great Leap Backward
China's opening up to the West—and the West's opening up to China—was supposed to lead to pressure for even more liberalization. We were hoping to see a gradual transition of China to representative government, in the same way it had happened in nearby countries like South Korea and Taiwan.
After all, in the words of the great Locofoco leader William Leggett, free markets and representative government are "sister doctrines," both based on equality of rights and the freedom of the individual.
Yet this theory hasn't been turning out so well in the past decade or so. The Chinese Communist Party seemingly found a way to get the economic benefits of free markets and international trade, but without giving up its dictatorship. In fact, embracing the market economy made its dictatorship more powerful, helping it build up its military and throw around huge amounts of money to purchase the support of various interest groups, both domestically and internationally.
But the less well recognized flip side of the theory that greater economic freedom leads to greater political freedom is the idea that the attempt to maintain political control will ultimately force the regime to start cracking down on free markets, throwing away all of their benefits.
That is what seems to be happening now.
In the past few months, China has launched a crackdown on capitalism.
"Chinese President Xi Jinping emphasized at a finance and economic meeting Tuesday the need to support moderate wealth for all—or the idea of 'common prosperity,' which analysts have said is behind the latest regulatory crackdown on tech companies....
"The meeting called for the 'reasonable adjustment of excessive incomes and encouraging high income groups and businesses to return more to society,' state media said in Chinese, according to a CNBC translation."
A particular target is precisely the foreign investors who have helped fuel China's growth, including those who bought into initial public offerings of companies that are now being destroyed by the Politburo's arbitrary decrees.
"Among the surprises was an order that app stores remove Chinese ride-hailing app Didi, just days after its massive US IPO in late June.
"Authorities then suspended new user registrations for Chinese job search app Boss Zhipin and subsidiaries of Full Truck Alliance, which both listed in the US in June. In late July, two US-listed after-school tutoring companies plunged after a mandate telling the industry to restructure its businesses and remove foreign investment through a commonly used overseas listing structure.
"Behind the dramatic shift is emerging political rhetoric around 'common prosperity,' which analysts say means companies will be scrutinized for their contributions to the broader population, rather than rapid creation of wealth for a few."
This is billed as a concern about inequality, and some Western reporters are lapping it up. But anyone who has been following China knows that it's the party elites who have used their power to make themselves wealthy, and giving them more control over private businesses gives them more power to enrich themselves through corruption.
The actual focus of the new crackdown, though, seems to be less about who gets the wealth and more about what kind of wealth Chinese companies get to make. This is primarily a crackdown on China's technology industry, targeting any company that doesn't make something whose value is obvious and tangible. I recently recommended Noah Smith's analysis on this.
"China is smashing its internet companies. It started—or at least, most people in the US started noticing it—when the government effectively canceled the IPO of Ant Financial, then dismantled the company. Jack Ma, the founder of Ant and of e-commerce giant Alibaba, was summoned to a meeting with the government and then disappeared for weeks. The government then levied a multi-billion dollar antitrust fine against Alibaba (which is sometimes compared to Amazon), deleted its popular web browser from app stores, and took a bunch of other actions against it. The value of Ma's business empire has collapsed....
"But Ma was only the most prominent target.... For whatever reason, China is suddenly not a fan of the industry we call 'tech.'...
"But notice that China isn't cracking down on all of its technology companies. Huawei, for example, still seems to enjoy the government's full backing. The government is going hell-bent-for-leather to try to create a world-class domestic semiconductor industry, throwing huge amounts of money at even the most speculative startups. And it's still spending heavily on AI. It's not technology that China is smashing—it's the consumer-facing Internet software companies that Americans tend to label 'tech.'...
"[T]he crackdown on China's internet industry seems to be part of the country's emerging national industrial policy. Instead of simply letting local governments throw resources at whatever they think will produce rapid growth (the strategy in the 90s and early 00s), China's top leaders are now trying to direct the country's industrial mix toward what they think will serve the nation as a whole.
"And what do they think will serve the nation as a whole? My guess is: Power. Geopolitical and military power for the People's Republic of China, relative to its rival nations.
"If you're going to fight a cold war or a hot war against the US or Japan or India or whoever, you need a bunch of military hardware. That means you need materials, engines, fuel, engineering and design, and so on. You also need chips to run that hardware, because military tech is increasingly software-driven."
He quotes another analyst, Dan Wang.
"It's become apparent in the last few months that the Chinese leadership has moved towards the view that hard tech is more valuable than products that take us more deeply into the digital world. Xi declared this year that while digitization is important, 'we must recognize the fundamental importance of the real economy... and never deindustrialize.' This expression preceded the passage of securities and antitrust regulations, thus also pummeling finance, which along with tech make up the most glamorous sectors today."
Later on, in a Twitter thread, Smith cites a Chinese academic's description of this as a call for "physically fit contributors for 'socialism construction.'" He goes on to call this a version of "dadcon-ism," that is, merely a temperamental conservatism in which the older generation complains that kids these days are soft.
"My thesis is that Xi [Jinping] wants to reorient China's economy towards what he thinks will make China a powerful country. But remember, he's a Boomer. So he's going to have a very Boomer conception of what makes a country powerful.
"The natural progression of a modern nation is: violent nation-defining struggle; rapid industrialization based on hard work, thrift, and manufacturing; happy consumer society filled with slackers
"Xi is nostalgic for stages (1) and (2)."
It is certainly true that there are shades of this outlook that are universal, as when Donald Trump declared, "If you don't have steel, you don't have a country."
But what struck me about this new direction is how Communist it is, specifically in being materialist and collectivist.
In the outlook of a genuine, traditional Communist, only heavy industry and particularly industries with military application really count as growth. Why? Partly because Communists are materialists, philosophically, and partly because they are materialists in their epistemological habits. These are shrunken minds that cannot appreciate the value of anything unless it is immediately, perceptually obvious. Tanks and guns they understand, computers not so much.
As to collectivism, by the standards of Communism, the only thing that counts as real wealth is that which serves to glorify the masses—which in today's variant of Communism means national greatness or, in practice, the self-aggrandizement of the rulers. Notice that what China is targeting is economic activity that is primarily geared toward the entertainment, enjoyment, and self-expression of the individual. This is why they're targeting the consumer information technology sector, as a way of clamping down on the expression of unapproved ideas.
For his part, Smith seems impressed by this because it is Big Government "industrial policy," but the same ideas are also being embraced by nationalist conservatives, who have long complained that the US doesn't "build things" any more. Then again, both variants of collectivism, communist or nationalist, tend to end up gravitating toward the same attitudes over time.
"Industrial policy" never works and usually ends up being a sinkhole of corruption. China has already demonstrated this with its Belt and Road Initiative, an attempt to buy international influence by pouring money into giant infrastructure projects like ports and railroads that tend to be unprofitable but divert a lot of money into the coffers of party officials.
The history on this is that China's leaders liberalized the economy, unleashing private effort and initiative, while trying to pretend that all the credit for that growth really belonged to the Communist Party. After thirty years, they began to believe their own propaganda. They were helped in this by the self-flagellation and self-defeating actions of the West. Starting with the financial crisis in 2008 and continuing up through the current debacle in Afghanistan, we've given them plenty of material for propaganda to the effect that our system is weak and tired out and not to be emulated.
So they have now fully adopted the illusion that China's turnaround over the past forty years was entirely due to Communism, so therefore Communist power should be reasserted. They really seem to have talked themselves into believing that Communism got them here, and they are now clamoring for even more Communism to raise them higher levels of greatness.
This is confirmed by other moves, including a new decree to push more Communist propaganda in the schools.
"The guiding document requires that Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era be integrated into the curriculum covering basic, vocational and higher education, and be integrated with various subjects, said Han Zhen, a member of the National Textbook Committee, media reported.
"Primary schools will focus on cultivating love for the country, the Communist Party of China, and socialism. In middle schools, the focus will be on a combination of perceptual experience and knowledge study, to help students form basic political judgments and opinions. In college, there will be more emphasis on the establishment of theoretical thinking.
"Studying Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era is the primary political task of the Communist Party of China and of the country, read a statement published on the MOE website on Tuesday."
Moving from the grandiose to the ridiculous, the new push for censorship includes a Karaoki blacklist to prevent the regime's subjects from singing any song that "endangers national unity, sovereignty, or territorial integrity; violates China's religious policies and spreads cults and superstitions; and advocates obscenity, gambling, violence and drug-related crimes or instigating crimes." Tipper Gore, eat your heart out.
In perhaps a more tragic and revealing note, they have extended this crackdown to Hong Kong's famously vibrant and creative film industry. As with so much else about Hong Kong, they have decided that they must control it, even if they kill it in the process.
China's great illusion is the one Communism has had since the beginning. Communism was born out of the explosion of economic activity created by the Industrial Revolution. This activity was the product of capitalism, but the fantasy of the Communists was that they could re-route it toward their own ends. "What earlier century," Marx asked in The Communist Manifesto, "had even a presentiment that such productive forces slumbered in the lap of social labour?" So if it was "social labor" that produced all this wealth, why couldn't the self-appointed representatives, both of society and of labor, seize it for their own ends?
Those are the deepest, earlier roots of China's present policies. Having unleashed the productive labor of many individuals, they now want to harness that "social labor" to serve the needs of the Party.
But people's efforts cannot be so easily re-routed in the direction desired by the state. A smart and ambitious young person in China, told that he cannot start a software company, may divert his energy toward building a faster microchip or a better steel mill for the glory of the state and Xi Jinping. Or he might just seethe in resentment, direct his energies toward rebellion, try lying flat, or scheme to get out and live somewhere where he can direct his own fate.
Certainly, the old Maoist system did not produce a Great Leap Forward the first time around, so why would anyone expect to do so now? China is making a Great Leap Backward, and we can expect concomitant results.
I wish I could glory in it, and I certainly take some solace in the fact that China is scheming to make itself weaker just as we are revealing our vulnerability. (I presume you have seen the latest news from Kabul.) China is not ten feet tall. Between a population implosion that is already underway and its Great Leap Backward toward Maoism, it is likely to get even shorter.
But this will come at a price in suffering and broken dreams, and if history is any guide, the Chinese regime may become more dangerous as it becomes more desperate.