During the past 30 years, the Chinese have thoughtfully reverse-engineered (from studying the Hong Kong experiment, in part) a breed of capitalism that exists to serve the common good, officially called a Socialist Market Economy with Chinese Characteristics. Their nation’s rapid economic rise is largely attributed to the double bottom line accounting inherent with this economic model. It works like this:
Government owns all land and sources of production (capital)
Government lends (leases) land and sources of production (resources) to corporations, who in turn are encouraged to maximize profits for the owners (individuals) and the lessor (Government).
Lots of people get rich (10% of all the world’s billionaires are in China), which in turn motivates more people to lease more land and sources of production. As those people get rich, so does the Government.
Government then spends all this money on more infrastructure, education, and health care to make more farmers and workers fit which benefits the corporations and Government.
People are generally better off financially, and they are healthier, better educated, and have their basic needs (food, water, shelter, clothing) met.
It is a virtuous cycle.
From a Western perspective, a primary social and diplomatic challenge facing China is that the political oligarchy (“people’s democratic dictatorship”) that is necessary for the functioning of this system flies in the face of our views of individual freedom. However, if you ask the average Chinese they may tell you that the system works, that they as a nation they seem to be able to accomplish the impossible, and that they are on their way to achieving their place in the world economically. The Maoist communist rhetoric of old has been modified by a deeply nationalistic pride that now recognizes market economic forces as serving the needs of many. In a culture that has lived for 5000 years under one form or another of caste system, feudalism or imperialism, the improvements nationwide for greater good are largely looked at as justifying the limited personal freedoms. Under this political system, the good of the community is more important than the rights of any one individual. A silent minority desires greater freedom of speech and suffrage, but are they willing to trade that for their own economic self-interest? The other minority pole views capitalism as a source of evil, ideologically. But are they willing to abandon the great economic progress of the people for these ideals? It appears that China’s dominant socialist market economy is here to stay, but its political system is in tension between the two extremes. Only time will tell where the point of social equilibrium exists.
A second, and potentially more vexing problem for China (and the world for that matter), is the realization that natural resources are not unlimited and that pollution poisons people. In response to the risk that the depletion of these resources poses to the national interest, China appears to be moving ahead of the United States in pricing the externalities of extraction of domestic resources and environmental destruction within their economy. They have to in order to preserve their virtuous economic cycle. Western economies long ago have given or sold the national assets of land and resources to individuals and corporations, who would be harmed economically by environmental regulation, and so these powerful interests often successfully oppose their adoption. The Chinese Central Government by contrast has a vested interest in maximizing the nation’s balance sheet, since government owns all land, resources, and primary sources of production. To preserve the assets on its balance sheet means to preserve the nation and advance its global competitiveness. So China is now investing $800 Billion over the next five years in energy conservation, renewable energy production, and sustainable infrastructure. Whereas, the United States just invested about $800B to prop up its failed banks.
Is it just a coincidence that China has been selling us tons of useless crap that we finance with home equity loans, and then it turns around and buys tons of our coal reserves with the proceeds, thereby subtracting from our national balance sheet and adding to theirs? Moreover, they are investing the profits into renewable power production. Genius.
So who is going to win the race to the top of the charts, economically? America can’t even find the track that it used to own, and the Chinese have already left the starting blocks on the first lap. If China figures out how to successfully balance a triple bottom line in the next 30 years to incorporate resource consumption, the world will be way better off for it. But unless we get our heads in the race, it may prove to be the last chapter in the great American story.