Western Naiveté

First Nixon, then all the West opened China to modernity. Their naive notion was that, if China embraced capitalism, it would create a wealthy middle class of hundreds of millions ... which would provide an enormously juicy market for our products and service. This was all under the rubric of "free trade."

Didn't happen. Instead, the U.S. and the rest of the world became customers for Chinese products while being shutout, with tariffs and autocratic restrictions, from freely entering Chinese markets ... or, even worse, being forced to cede trade secrets and technologies to their Chinese "partners."

It was not like this mercantilism was a secret. Ever since Bill Clinton opened the door to the World Trade Organization to China, American presidents and candidates have averted their eyes from this potentially fatal flaw in world trade ... except for Donald Trump ... who is willing to try to fix things while they still might be fixable.

A simple conclusion: capitalism under a democratic government is powerful ... but is quite dangerous when tightly managed by a totalitarian regime.

If Ptesident Trump will succeed in his trade war is any one's guess. But, for me, I give him great credit for trying. And, if he does win, somehow I doubt if China's Xi is going to embark on an apology tour ...

China vs. U.S.

As I have previously mentioned (see: here and here), China and the United States are locked in an economic battle that has enormous consequences for world leadership, national security and economic pride. This face-off may be the ultimate test of  the American way. Will China achieve its goal to become the largest world economy by 2025? Or will they overextend key elements of their economy and falter in this race?

Clearly, with three times the population of America, with authortative central planning,  with a very large balance of payments and resultant sovereign wealth, with am industrious and intelligent workforce, with the ability to manipulate its currency ... and with a willingness to cut ethical corners; China mas some clear natural advantages. But is this enough?

But the U.S. also has some advantages -- with a superior (but deteriorating) higher education system, with more natural resources (particularly energy), with a stronger military, with a natural geographic advantage (spanning two oceans), with superior  technical innovation, with a governance based on checks and balances ... and with a larger set of historic allies (such as they are). But is THIS enough?

It seems that the two critical advantages that the U.S. has are the geographic and governance edges ... the former, China cannot change ... and the latter, it can change but is unlikely too. Why is central planned capitalism inferior to America's when many pundits (Tom Freedman, Paul Krugman) advocate just the opposite?

Yes, strong centralized capitalistic planning (as in China) can do better in some situations ... in trade wars for instance ... but, without the push and pull of free-market capitalism (as in the U.S.) mistakes can be made that are bigger and not self-correcting. This us likely the most critical difference between China and America ... and the one most likely to spell the winning margin in this battle of the Titans.

It also would be nice to have Russia on our side in this joust!

Counterpoint

Recently I wrote a blog specifying all the good things that can be said about the United States ... see: Rose-Colored Glasses. However, daily we see media articles that show these advantages often slip-sliding away. To illustrate this I have juxtaposed below, next to my previously-stated advantages, media stories that show the slow dulling of our nation's edges:

We have a capitalism-driven growing economy ... the largest in the world. See: China Overtakes the U.S. as World;s Largest Economy.

We have a plentiful supply of cheap labor to our south ... anxious to experience our American life. See: Donald Trump Was Right.

We have a premier higher-education system ... the envy of the world ... and one which keeps supplying us with gifted entrepreneurs. See: Higher Education -- Not What It Used To Be.

We have the geographic advantage of being isolated from most of the rest of the world by two large oceans. See: How Geography Explains The United States.

We have a very low inflation rate. See: What Official Inflation Figures Aren't Telling Us.

We have a generally benign climate. See: Scientists Warn Sun Will Go To Sleep In 2020, Cause Temperatures To Plummet.

We have a national park system that is the envy of the world. See: Obama Designates More Than 1 Million Acres For Three New Monuments.

We have the world's best health-care professionals and technology. See: Healthcare Is Getting Worse Under Obamacare.                 

Despite continuing declines, we still have an enormous manufacturing capacity. See: Fast Track To Lost Jobs.

We are currently not in a hot war draining our treasury and supply of young people. See: Pentagon Official Lists Militants, Russia and China As Threats To The U.S.

Most crime in this country is on the decline except in a few hot spots. See: Murder Rate Surges In Major U.S. Cities.

We have a democratic-elected government and all the freedoms provided by our Bill of Rights. See: The Constitution Is Eroding.

We are abundantly supplied with raw materials. See: How Putin's Russia Gained Control Of A U.S. Uranium Mine.

We have a stable currency ... the basis of most world-wide commerce. See: Momentum Builds To Label Chinese Yuan A Reserve Currency

We have the strongest military in the world. See: Lawmakers Blast US Army Force Cuts.

We have a very large middle class that supports our democracy and our way of life. See: The Shrinking American Middle Class.

We have an enormously efficient food-supply chain. See: America.s Fragile Food Supply Chain.

We lead the world in most technological advances. See: U.S. Moving From Technology Leader To Laggard.

We still carry a large surplus of prestige with most world governments. See: The Decline Of U.S. Power?

Now you see "the rest of the story."