“I used to be poor, but then I stopped doing stupid things.” The previous statement is a real one. It was uttered to me long ago by a very well-to-do supporter of free-market, limited government causes. It will elicit nodding of the head from some, offend others, and surprise still others.
The man who said it to me formerly worked too little, slept too little, and drank too much. After changing his ways he made a lot of money.
Love or hate the statement, it speaks to an undeniable truth about what we call an “economy.” It’s not some living, breathing blob, nor is it an engine. An economy is people. That’s it. When people broadly prosper, so does an economy.
That’s why it’s so difficult to take most economic commentary very seriously. Well-educated people routinely publish pieces in well-regarded publications wondering what the Fed, Congress, or both can do to “stimulate growth.” Are these people serious? Obviously they are, which is really astounding.
There’s no mystery to economic growth. Government can’t create it as much as government can get out of the way. The natural state of people is to grow. It’s to produce goods and services in order to get them. Where people are free to do “the getting,” there’s quite a lot of production to enable the getting. Where they’re not, there’s very little getting.
Please keep all of this in mind with China top of mind. Several decades ago the unnatural state of the Chinese people was starvation, or something very much resembling it. As Americans consumed and ate with abandon, the Chinese went without. Did they stop wanting things in the 1970s? Obviously not. Did the central bank in China starve the country of so-called “money supply”such that people ceased eating? The question itself insults reason, but don’t tilt your nose up too much: a poll of most U.S.-focused economists would reveal a belief among these modern-day phrenologists that a “tight” Federal Reserve caused the Great Depression. Yes, they really believe this.
More realistically, a lack of economic freedom brought on the 1930s in the United States. A lack of “money supply” could never cause economic sluggishness simply because money is a consequence of economic growth as opposed to a driver of it. Where there’s economic activity there’s always and everywhere money meant to facilitate the exchange of its fruits. Economists focused on “tight money” are looking at symptoms as opposed to problems. Where there’s production there’s always money.
Looked at through the prism of China, its people were once poor because they weren’t allowed to do things associated with not being poor. Paraphrasing the rich free-market patron at the start of this write-up, the Chinese were formerly poor because their government did stupid things. Now that Chinese leadership isn’t acting as foolishly (let’s call collectivism the epitome of stupid economic policy), its people are producing a lot and getting a lot. It’s beautiful.
All of which brings us to a recent opinion piece by Kevin Rudd, a past prime minister of Australia. Rudd, like many political eminences in the western world, fears China’s rise. The view here is that his fears are misplaced. China was a much bigger worry when its people were poor, and weren’t “getting.” It’s when they’re getting in return for producing that war becomes most expensive. The more the Chinese are participants in the global economy, the safer we all are. What lifts them gives them a rooting interest in the prosperity of others. Rudd would seemingly disageee.
He claims that China’s leader in Xi Jinping “wants nothing less than to see China become the pre-eminent global power during his lifetime.” Perhaps Xi does. The Chinese are a proud people. At the same time, they can’t become a global power without vastly improving the lot of the rest of the world. China can only become globally prominent insofar as its people succeed in the meeting the needs of those not Chinese. In other words, if China achieves greatness economically, so will the rest of the world achieve economic greatness. Wealth isn’t zero sum as much as it’s created. The more the Chinese produce, the more that those not Chinese get to specialize, while producing more themselves.
Most troubling or confusing is Rudd’s assertion that “China may not escape the so-called middle-income trap common to many developing economies.” What can Rudd mean? Economies are once again people, and as the Chinese government isn’t acting as foolishly as it did in the past, the Chinese people are increasingly free to produce in order to get. Rudd writes as though the Chinese have prospered because the CCP has decreed prosperity. In reality, the country’s prosperity is a consequence of reduced decrees in favor of freedom. Again, fewer stupid things from the Commanding Heights. What’s scary is the less-than-wise comments coming from China’s critics. Rudd looms large here.
In writing about what he imagines will be reduced growth in China, he writes that the latter “may be why Mr. Xi has reportedly pushed officials to ensure that annual growth remains above that of the U.S.” Ok, but growth cannot be decreed. Only freedom can happen, and growth the happy consequence of same. If Xi wants China to be a global power, it will only get that way if the country is freer. If he just wants more power, he can kiss off global prominence. He can’t have both.
Which is a good sign. By Rudd’s own admission, Xi wants major prominence for China in his lifetime. Good. It’s good because under that scenario China will have to be freer, and in being freer, war with the western world will be much more costly. In other words, Xi’s goals are arguably more in line with our own hopes that the critics realize. The only thing we must do is not stupid things, like taking away freedom in the western world.