Alert Reader, reacting to Robert Steele’s recent video on going to China, writes in:
I recently watched your interview with Stephen Arnold on China. I have some comments.
1) Deng Xiaoping was an important leader of China for a number of reasons, but the increasing role of people with an engineering background in upper leadership started with him. Xi Jinping has an engineering background:
“In 1974 Xi became an official party member, serving as a branch secretary, and the following year he began attending Beijing’s Tsinghua University, where he studied chemical engineering. After graduating in 1979, he worked for three years as secretary to Geng Biao, who was then the vice premier and minister of national defense in the central Chinese government.” from: https://www.britannica.com/biography/Xi-Jinping
Someone with an engineering background is rare among USA political leadership. But it has become common in China. This has become important for China’s success in re-industrialization and economic growth in its real economy.
2) Deng Xiaoping also pushed “Socialism with Chinese Characteristics”
“From the mid-1950s Deng was a major policy maker in both foreign and domestic affairs. He became closely allied with pragmatist leaders such as Liu Shaoqi, who stressed the use of material incentives and the formation of skilled technical and managerial elites in China’s quest for economic development. Deng thus came into increasing conflict with Mao, who stressed egalitarian policies and revolutionary enthusiasm as the key to economic growth, in opposition to Deng’s emphasis on individual self-interest:” https://www.britannica.com/topic/Gang-of-Four
His favorite phrase was “I don’t care whether the cat is black or white, only whether it catches mice.”
Economically, two institutions came out of his effort. 1) a purely state run operation such as the that running the railroads, first as the Ministry of Railroads which then became a state owned industrial enterprise; and 2) Chinese entity company that could have private ownership component, first as joint ventures and then with some share ownership. Both were professionally run and preserved/enhanced human capital within their operations. And both, kept vestigial socialist objectives such that there was not a purely profit motive. Later, other forms of enterprise were developed.
The key idea is that with regard to a wide swath of Chinese companies, especially in the industrial sector, there is great emphasis on managing and developing human capital. USA has come to regard lightly its human capital and in particular that arising from on-the-job experience. Germany is another country that really values its human capital. Increasingly, China can make things and have infrastructure that actually work. It still has a way to go, for it is trying to overcome a legacy of economic operations and their employees where preserving an “iron rice bowl” rather than giving good customer service was paramount.
3) While China would have a propensity for open source and true cost economics, it will not relinquish centralized control of political power and utilization of surveillance and social control mechanism.We are going through a natural long term cycle which is and will distort the world climate. Food will be in severe short supply going forward and there will be a greater increase in natural disasters, e.g., floods, drought, severe winds, storms etc. This is the time when Chinese dynasties fell in the past with severe social disorder. They know more about this then other countries because of their still existing imperial records, including weather information going back further than any other country.
The Belt and Road initiative is crucial to China in securing food supplies for its people over the next decade or more. This is driving in part the rush to get it done and working. The more they can strengthen the Belt and Road relationships, they will do so – including a new internet based on Chinese cable and nodes even though it may not be that profitable. Likewise, open source engineering could be adopted because of the engineers in political leadership, an understanding of the need to develop human capital and in understanding with regard to non-military, non-high tech application, expands reliance and understanding of Chinese goods by rural Chinese and foreigners who can repair and not over paid for technology they don’ need. China will not worry on making money on low level IP and instead make money on superior manufacturing both in terms of quality and cost effectiveness. More important for the moment is strengthening relationships.