Western Socialism And Eastern Capitalism

There has been a significant shift in geopolitics in recent months, with the US consciously deciding to withdraw from Asian conflicts, notably in Afghanistan. But the diplomatic war against Iran also appears to have been downgraded and the US presence in Iraq is to be wound down. Furthermore, President Biden has downplayed his objections to the Nord Stream 2 pipeline between Russia and Germany.

In this, the greatest of Great Games, America has seen the strategic advantage move to the China—Russia partnership, which probably explains why the US is backing off from Asia. Meanwhile, China’s production-based economy is strong while that of the US remains weak, a weakness only disguised by monetary inflation.

China will accelerate her policy of encouraging domestic consumption and trans-Asian trade expansion to become increasingly independent from US markets, which are likely to be hampered by a renewed bout of trade protectionism.

This article examines these and related issues, concluding that China and her close allies will be positioned to survive the worst of a developing monetary and economic crisis about to engulf the West.

Introduction

At the root of the political conflict between the West and China is economics and the global distribution of capital. To understand it, we must sweep away the fog of disinformation, and analyze it dispassionately, devoid of all nationalist instincts.

As soon as the state takes over economic functions from the private sector they get lost and replaced by political objectives. The West’s move from free markets towards greater state control in recent decades while China moved in the opposite direction is behind current geopolitical tensions. Since the days of Deng, China’s authoritarian leadership has prioritized free trade to create national wealth for its people. Meanwhile, the objectives of social fairness, to redistribute wealth from the haves to the have-nots, have become a destructive obsession for Western-style democracies.

The only way the tide of socialism is ever reversed is when the accumulated destruction of the economy that results from the drift away from free markets ends in a crisis — proved again and again, most recently in Asia. This is why following the failure of communism China has embraced free markets. The Chinese have certainly learned the lesson and are not about to be lectured by, in their view, a decadent West about how they should run their affairs.

An economic crisis, such as that undoubtedly faced by Western democracies, is initially blamed by the establishment on the intransigence of private sector actors. But so long as a few statesmen in the political arena understand that the increasing unaffordability of the socialist drift is responsible, the reversion to common sense can occur. Think Margaret Thatcher, Ronald Reagan. And before that think Germany’s Ludwig Erhard in the post-war forties. There is no such savior for the West in sight today.

Having lost all sense of its economic bearing, the West needs new free-market heroes to give it a post-crisis sense of direction. It should look no further for a laboratory experiment confirming the stark differences that arise from socialism and free markets than post-war Hong Kong, which contrasted with Mainland China; the former becoming without any natural resources arguably the most successful economy in the world and the latter the most oppressive and one of the most impoverished as well.

With the death of Mao, that changed because China embraced capitalist reform. After a while, autonomous Hong Kong became the medium through which America attacked China. Geopolitics, the pursuit of war by other means, rather than socialism became the nemesis for Hong Kong.

Led by the Americans, Western disinformation, the handmaiden to geopolitics, became the threat to China. In this article, I assess the current and future state of geopolitics between America and China, effectively that of the world, from an economic point of view.

The financial war intensified under Trump

Under President Trump, America commenced a trade war against China under the slogan “Make America great again”. Trump’s proposition was that China unfairly drove US production offshore, and that was the reason for America’s enormous trade deficit, to be corrected by imposing trade tariffs. As subsequent events proved (tariffs did not reduce the trade deficit, which roughly doubled under Trump) the analysis was a surface argument by a politician following a populist agenda. But when tariffs failed, other attempts to destabilize China emerged. Indeed, even from Obama’s time, the Chinese detected American involvement in the Occupy Central movement aimed at Hong Kong in 2014, so under Trump trade was part of a continuing conflict. The Americans then attacked China’s Made in China 2025 economic plan, openly concerned that China would challenge America’s technological supremacy.

America escalated the trade war on a basis of unfairness, the theft of international property, and on suspicion of spying embedded in China’s technology. Huawei, which was the leader in global 5G mobile technology suffered its founder’s daughter being detained on US instructions in Canada, and America’s five-eyes security partners made to revisit and revoke all Huawei 5G contracts. In effect, the US forced its allies to back off from trading with China’s technology, or risk their relationship with the US being downgraded. Politicians in the five-eyes partnership had no option but to comply.

Separately, the US stepped up its financial war against China by extending trade sanctions against Hong Kong and by supporting student demonstrations, creating civil disorder. The financial angle existed because China was using the Shanghai Connect route through Hong Kong for inward investment to support its infrastructure investment plans and the wider demand for capital. Global investment flows, predominantly from EU member nations, would otherwise have gone to the US, and the US was reluctant to see its global hegemonic rival benefit from them.

China’s authoritarian response to riots in Hong Kong was to protect its interests by reneging on its 1997 agreement with the UK and to take it in under Beijing’s direct control. But in doing so, it politicized the financial and trade war with the US, and the agenda moved to condemning China for its treatment of Uighurs and its territorial claims over Taiwan. And the intervention by the coronavirus in human affairs has led to China being blamed for its creation, assumed by many to be from a state laboratory in Wuhan.

Whether this is true is beside the point. Covid appears to have been less damaging to China’s economy than it is to those of her Western trade counterparts. The proof is seen in the money. China has been restricting bank credit expansion for over a year, damping down the credit cycle, while the West is still pretending their economies are okay, covering the evidence of financial and economic destruction by government spending financed by monetary inflation.

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Disclaimer: The views and opinions expressed in this article are those of the author(s) and do not reflect those of Goldmoney, unless expressly stated. The article is for general information ...

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