Chapter 6: The Big Cycle of China and Its Currency
Comment of the Day

September 18 2020

Commentary by Eoin Treacy

Chapter 6: The Big Cycle of China and Its Currency

This chapter of Ray Dalio’s evolving book “The Changing World Order” will be of interest to anyone monitoring China’s evolution. Here is a section:

As a result of their longer history and their more intensive studying of it, the Chinese are much more interested in evolving well over much longer time frames than Americans, who are much more interested in making quick hits—i.e., the Chinese are more strategic than Americans, who are more tactical.  The arc that Chinese leaders pay the most attention to is well over a hundred years long (because that’s how long good dynasties last) and they understand that the typical arc of development has different multidecade phases in it, and they plan for them.  For example, the first phase, which occurred under Mao, was when the revolution took place, control of the country was won, and power and institutions were solidified.  The second phase of building wealth, power, and cohesiveness without threatening the leading world power (i.e., the United States) occurred under Deng and his successors up to Xi.  The third phase of building on these accomplishments and moving China toward where it has set out to be on the 100th anniversary of the People’s Republic of China (PRC) in 2049—which is to be “a modern socialist country that is prosperous, strong, democratic, culturally advanced, and harmonious,” which would make the Chinese economy about twice the size of the US economy[4]—is occurring under Xi and his successors.  Nearer-term goals and ways for getting toward these goals are set out in nearer-term plans like the Made in China 2025 plan,[5] Xi’s new China Standards 2035 plan, and the usual five-year plans.[6] 

Eoin Treacy's view

There is a quote from the movie Pirates of the Caribbean which is doing the rounds on the social media. It’s “part of the ship, part of the crew” The Communist Party equates itself with the country. That means that if you are Chinese you owe fealty to the Party. That belief is at the essence of the ruling ideology.

The only way to view the Communist Party through the lens of history is as another dynasty. Everyone knows that dynasties rise and fall. The increasingly strident attempts at control over the population can be viewed from that perspective. Hegel’s Master/Slave dialectic is foundational to Marx’s dialectic materials. Considering China’s long history of peasant revolts that must be at the forefront of thought. Lofty ideals of hitting the numbers are always and everywhere subservient to retaining power.

Every ruling elite is, above all, convinced of the rightness of their actions. The severe limitation of looking at thousands of years of history as justification for the actions of today is it’s not a particularly good model. Throughout the span of human history, we have killed, enslaved, raped, lied, cheated and stolen our way to development.

The challenge when dealing with a regime that views its place as unevolved in the context of that history, means they believe it really is about the survival of the fittest, the ends justifies the means and the sanctity of the regime trumps all other considerations. Rebasing to single person rule and the precious manner in which any slight is defended suggests China is already at war. The thing the legalist/fascist regime fears most is any affront to its authority. So, that is what it defends most aggressively against. Property rights and especially free expression are subservient to those ambitions.

Democracy is an innovation. It takes the entire span of history and strives to do it better. The paradox of individualism is that when we give control to people, they exhibit more fellow feeling with one another. When we take control away, they behave more as individuals. That’s not a bug in the system, it’s a feature.

That’s the primary mistake people make when they go to China. They look around at everything which has been achieved in the physical world and accept at face value that what they are doing must be right. You can’t have it both ways. Legalism/Fascism either sits outside of the span of history or within it. 4000 years of history and the Confucian framework of filial piety work for the winner of the war but not for the rebel. Subservience to authority is convenient to the winner of the war, but it is not an evolution. If the Communist Party is not evolving beyond the span of history it is doomed to repeat it.   

If we play the story forward, China’s Communist Party is an empire in the classic sense of the term. They are intent on developing a cutting-edge domestic semiconductor industry. Once that is achieved, within the next 15 years, they will have no need for technology imports from the rest of the world. That will create the exact same situation as what existed with the East India Company ahead of the opium wars. That’s why China is actively outspending the US on military expansion.

China is perfectly aware that the more strident manner in which they are pushing for control in Asia and Africa will elicit a reaction. They have been preparing for this eventuality for decades and it is all part of the plan for global dominion. They view the USA as a failing empire which will follow the British Empire’s decline in this century. If that outcome is to be avoided, the USA and its allies will need to win the war and reset the global monetary system on their own terms. That event will reshape the global geopolitical perspective for the subsequent century.     

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