We're in for a wild ride. Exponentially accelerating technological, cultural, and socioeconomic evolution means that every year will see more developments than the previous one. More change will happen between now and 2050 than during all of humanity's past. Let's explore the 21st century and ride this historic wave of planetary transition with a confident open mind.

Thursday, November 15, 2012

2012 China Political Transition and Global Economic Uncertainty

China's 5th generation leadership is status quo prone due to lack of development in the West.

It has been been a few years since we looked at the rising east with China Mercantilism and New Global Economic Order article. Forgive that article for a certain tone of Western geopolitical chauvinism (that will be explained below).

Time to refresh.

The new Politburo Standing Committee is a leaner 7 member group with an average age of 63.4. I guess the red "princelings" in China are more in Prince Charles style. Whereas the average age in legislatures and highest committee bodies has been falling in the wider Western world (with an exception of United States), the new Chinese leadership will be prone to gerontocracy along with its tied at the hip American tango partner.

Xi Jinping, one of the youngest at 59 is a trained chemical engineer (which is serious business much like Angela Merkel's doctorate on quantum chemistry and people with such backgrounds are often benefit to the public). Another old member, 67 year old Yu Zhengsheng, has missile and electronics engineering training. Two engineers and the rest of the 7 member group are economists, statisticians, and propagandists. All very wealthy of course. This is going to be a very cautious status quo bunch and the generation that will finally start making major mistakes. It is irrelevant whether mistakes will stem from general generational/class divide, overconfidence, above mentioned gerontocracy and cautiousness, or having to make the first major uncertain step into the darkness as a regional hegemon. No country has gone longer than 30 years on such a breakneck pace and on such scale without a major misstep or at least slide into some stagnation. Even with Washington DC and Moscow "reorienting" towards the far east, a vacuum will still be opened in the region due weakness of both powers in the area (US navy is currently being gradually strategically pressured/forced out of Western pacific with Chinese "carrier killer" and "satellite killer" missiles).

The China Mercantilism article threw many analogies around concerning China. Here are some of them that we're all familiar with at this point:

1) The ruling center finally effectively centralizing after warlordism chaos period of the 1920s-1940s which is reminiscent of unification of large pieces of feudal France under 18th century monarchic absolutism. Thus effective first time creation of a modern nation state for China.

2) The current rapid Chinese industrialization and neo-mercantilist rise reminiscent of rapid rise of Germany within a multipolar world of the 1870s-1914 period. With current Anglo-American empire of today naturally playing the role of a deindustrializing British Empire hegemon of yesteryear.

3) The neo-mercantilist practices from Beijing attempting and aiming to be futuristic, evolving, and cutting edge (Deng Xiaoping was mentored by Singapore's Lee Kuan Yew [who is still alive!!] on Asian illiberal capitalism of the future). Thus Beijing aims to borrow and improve on the best of evolving neo-mercantilism of pre-1990s stagnation Japan, Kaiser's Germany of old, and of course smaller neighboring modernizers like Taiwan, South Korea and survivalist dictatorial city state of Singapore. Mercantilism, state sponsored industrialization, and protectionism have been observed to work again and again historically and so the previous article saw most of the world being pulled into the Chinese system and orbit.

[Sidenote: we may even add a new analogy of China partially learning from desires of Hamilton and Quinsy Adams in terms of development and rapid achievement of autonomy from a global hegemon. In any case, Beijing learns and absorbs from all corners much like Moscow does. This is a sign of health. The mass scale chaos and butchery from mid 19th century lasting into the 1960s taught them to never repeat such a time of troubles at any cost.]

The conclusion of the article was cold and geopolitical one since it was assumed China is becoming predictable along its heavy great power path much like Britain became predictable in 19th century. This would allow the Western progressive elites in conditions of a global crisis to out think and outmaneuver Beijing since they would know where Beijing would want to head next. The advise of the article was to use the rather narrow 10-15 year widow of opportunity for the West to get its act together and to co-divide the world in terms of influence on the southern hemisphere countries (to put it in the crudest terms).

The window of opportunity refers to time period from the present to when China moves up the value product chain and begins to effectively compete with Siemens, IBM, GE, Boeing, and EADS when it comes to manufacture of advanced value added complex products like transatlantic super heavy passenger jets, high speed electric cars, high speed train wagons (and not just construction of amazing rail lines with Western assistance), super computers, rocket engines, small next generation fission reactors, tanks, robotics, stealth jetplanes, genetic medicine, etc. Even if a second wave of the financial crisis in the Western world triggers an American 1930s depression style event in China, such harsh transition and taking advantage of Chinese window of opportunity for West to unite remain relevant suggestions. Regional, semi-global, and global unification and globalization (taking new forms) remains inevitable but it would be nice for various unifications to have more individual and human friendly political ideology. Current Chinese state capitalist illiberal dictatorship model must be resisted and much of humanity should have access to alternatives. It is up to large swaths of the Northern Hemisphere (even totally stagnant regions) to develop such alternatives.

Admittedly the article was written on May 19 of 2009 and focused on how to make Europe the "first among" equals" pole in a multipolar world arrangement (with best case scenario being Europe on friendly terms with both US and Russian Federation and perhaps even gently playing them off against each other the way Yugoslavia did with Americans and Soviets). The focus on preserving Europe as island of stability was because of European elites still having energy and desire for experimentation (unlike Americans) due to the sophisticated supranational nature of project they were engaging on (similar to what American elites of early 19th century faced). In a world of great paradigm shift due to automation, third industrial revolution, and very slow paradigm shift to post-scarcity, it was and still is very important to keep one continent as a fortress of civilizational safety with a dynamic cluster of elites overseeing it.

Now of course that was before the beggar thy neighbor currency wars between US and EU and the rest of the world, before the perpetual debt crisises born from private debts being socialized, and before it became clear of the sheer paralysis within American and European politics (although much less so in Brussels than in DC). China has moved along swiftly since then, bypassing Japan as #2 economy, humiliating Western powers at Copenhagen conference, and beginning to compete in high end products like solar panel technology with dramatic increase in subsidies. In global conditions where Western leaders decided to kick the can down the road, it is not surprising that China decided to do the same with election of the current Politburo Standing Committee. It appears Western elites don't yet fully appreciate the historical magnitude and paradigm shifting nature of the financial crisis they are facing and will not make major moves for another few years allowing China to bypass US by 2015 (the most recent estimate). Then we may see history repeat itself as a farce with Westerners asking to be financially bailed out (it has already been indirectly happening at G20 meetings) by the Chinese development and foreign investment banking organs. A Politburo with a lower average age might have stirred some worry in Brussels, DC, and Moscow.

The Chinese "overconstruction" has not been an issue so far (it is rather hilarious when economists are puzzled why China is building entire cities with nobody yet living in them). Considering how many Chinese still live in medieval conditions of poverty, eventually this infrastructure and residential areas will be filled. Yes, Japan dumped a lot of money into infrastructure in the 1990s to get its GDP and stock market growth back up without results but it didn't actually hurt the people since they got newer and faster roads, tunnels, transport, shelter, etc. In fact, preemptive dumping of mass resources and/or fiat wealth into seeming infrastructural bubbles of residential "ghost cities" is rather prudent considering robotic workers will soon make the concept of the "cheap Asian laborer" obsolete (and cheap African laborer and most of humanity for that matter. AI software and miniature electronics are finally catching up to make practical cheap robot workers possible and ever-present). These obsolete humans will need to live somewhere and Chinese may as well construct the shelter during the current paradigm. Talk of residential housing bubbles is as ridiculous as talk of bubbles in food production and such talk is a product of a sick global socioeconomic system (consider the millions of houses sitting empty in United States and the amount of the homeless). That is a story for another day but China may be one of the first countries facing the brunt of a new automation paradigm shift first and head on and with potentially the most painful of consequences.

The average age of the new politburo doesn't help with bringing potential flexibility and finesse when it comes to reacting to major issues. The accumulated wealth buffer (to be readily dumped on the problem as in 2009) is being relied upon instead of having rapid reaction flexible human leadership tools. Although most of the members of the new Politburo were not born directly in coastal provinces, their upbringing and the great power trajectory of the country will still push them to favor more resource expenditures on coastal integration than Western provincial development. The focus on the Chinese coast may allow China to play a civilizational role within trans-Pacific space that America played in trans-Atlantic space in later half of the 20th century (and that China could have played as far back as 500 years ago if it chose to). However, it will be very important for them to not forget infrastructural links with Central Asia, not forget to increasingly allocate resources to the Western provinces to create a societal shape more like Japan's than Brazil's or America's (olive shaped as one Politburo member said), and to push forward with high speed rail towards Europe.

We will return to China and look deeper after observing some of the moves this new bunch makes.

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