Understanding China Part IV

The career of Hu Jiantao, (left) the current Paramount Leader of the CCP is still ongoing in 2010. Since Jiang’s gradual exit from the political stage in China it is worth noting that his appointees (Hu and others) mostly came from engineering backgrounds. For the investor it is comforting to know that the “problem solvers” are still in charge in China and the most scientifically educated elements of the intellectual community are well represented in Chinese leadership. It is also very noteworthy that while private property legal rights are crucial to economic development, and they have been enhanced and protected mightily since the launching of the first Special Economic Zones, by and large, lawyers have very little to say about the nature of economic policies that are enacted in China.

    19th century Prussian mathematician Carl Jacobi (right) would be pleased with the adaptability of China's leadership. The Chinese have performed a Jacobian reverse on the rest of the world, at least in terms of gaining the edge in economic competition. The leadership in China has “inverted” the economic puzzle so it could be solved. More than any nation on earth, the Chinese have learned that the ideas of Karl Marx are economically impractical. This means the Chinese learned what policies and practices do not work.
    On the other hand, the Chinese are not naive or foolish. They wisely concede that there are rare instances and situations where free markets simply do not function properly without some assistance. What the Chinese have managed to do is be practical. They do not endlessly waste resources debating the trite free markets versus central planning issues. Instead, the country, through wise, honest, and practical leadership has incrementally pulled itself away from the horrors of central-planning. And as it has done so, it has steadily prioritized market-based systems that tend to work so well. During this transformative process the Chinese have managed to enjoy a remarkable degree of social order, domestic stability, and breath-taking increases in living standards.

    In more pluralistic western democracies, there are no markets more “free” than the elections that determine political power. In America and Western Europe, this particular “free market” is one that clearly “does not always work.” In fact, these free markets are economic Achilles heels (right). In the west, during each election cycle, the free market battle for election victories involves the market manipulating forces of a variety of hucksters and demagogues. Amazingly, the vast majority of westerners routinely accept half-truths and exaggerations (lies) as part of the so-called “freedom” process. And in each instance, regardless of political party, western candidates allow themselves to become slaves to the dishonesty associated with the so-called “free market” for political power in their democracies. Accordingly, ambitious “leaders” literally trip over each other trying to attract the support of various voter constituencies with more special interest giveaways. And in the ever complacent plurality of the west, this is allowed. In the “free market” for attaining political power, the voters are dulled to the realities of finite resources.
    By contrast, Chinese leadership is not forced to commit the same “free market” folly. Instead, the engineering culture, which has increasingly defined the heart of Chinese leadership since 1989, has been able to maintain a more scientific approach to good government based on facts and truths.

    In China there are very real policy debates based on the merits. Unfortunately for the false sensibilities of the west, these debates are held behind closed doors with only qualified participants listening and evaluating.
    Conspicuously, Chinese leaders in Beijing (left) continuously weather relentless criticism from the self-described morally superior leaders (in the west) for China’s “democratic failings.” China is repeatedly demonized for “only” allowing it’s best-educated to play an active role in government decision-making. Ironically, China has carefully avoided one of the market-based systems that is consistently failing in the west.
    Having emerged from the depth of Marxist despair and delivered well for its citizens, Chinese leaders have the uncommon luxury of having exceeded the expectations of the vast majority of the population for thirty years. And accordingly, Chinese leaders find themselves in the welcome position of being able to under-promise, and then over-deliver.
    It would seem that in the first decade of the 21st century, the Chinese leadership is far ahead of those claiming the democratically “moral” high road in the west. This is so because the leadership understands, at least in economic terms, which parts of the free markets work and which parts should be regulated for the “greater good.”

Understanding China Part IV