Monday, February 26, 2018

The US vs. China: A Study in Opposites | International Man - by Jeff Thomas

In the first photo, taken in 1972, US President Richard Nixon made what was then considered a bold move, visiting Mao Zedong in Communist China. Literally, as well as figuratively, Chairman Mao is on the left and Mr. Nixon is on the right.
In the second photo, taken over forty years later, we have US President Barack Obama making a similar visit to China. This time, again literally as well as figuratively, Mr. Obama is on the left and Chinese President Xi Jinping is on the right.
Over the ensuing four decades, both countries have been changing dramatically. The US has become increasingly socialistic, more focused on Big Government and more of a totalitarian state. In 1972, it was the world’s foremost creditor nation; it is now the world’s foremost debtor nation. By contrast, China, since the death of Chairman Mao, has opened up considerably, with billions of people becoming upwardly mobile, in response to China becoming increasingly capitalistic.
To be sure, both countries retain some of their historical features, but increasingly, the US is acting like a country in decline, whilst China is acting like a country on the rise.
As a result of successful capitalism, the US became the world’s foremost power after World War II. Then, in the 1960s, the US began apologising for the spoils that came with that capitalism. It became increasingly popular for Americans (largely at the urging of the media and the political structure) to be ashamed of capitalistic achievements and to head in a more socialistic direction.
Republican politicians have needed to soften their views on capitalism in order to appear to be “good people.” (“Good people” has essentially come to mean “those who are prepared to take from the rich and give to the poor.”) They are now Republicans in name only. The US still has two major parties, but one is a moderately liberal party and the other is a vehemently liberal party.
China has gone in the opposite direction, becoming increasingly capitalistic. The results have been dramatic. Many Chinese now have all the trappings that Americans do. In addition, their government is expanding more each year into capitalism.
Again, these developments have followed along the lines of “Declining Empire” vs. “Burgeoning Empire.” Increasingly, the US approach to the world has become one of demanding that other countries subjugate themselves to the US, as though they are subsidiaries of the empire. The US has demanded that trade in many essentials (particularly energy) be settled in the US dollar.
As this relationship has been crumbling in recent years, the US has responded by threatening other countries, creating sanctions against them, and even invading them. In doing so, the US has earned the reputation as the schoolyard bully of the world—the country that the world loves to hate. They still have to play ball with the US, but the resentment is growing globally.
(It should be noted here that, if and when a schoolyard bully does fall from his position, he is stomped on, not only by his challenger, but also by those who resented and hated him but had previously deferred to him and pretended to befriend him. Similarly, when empires fall from grace, “staunch allies” frequently switch sides rather quickly.)
In contrast to the US, the Chinese have, in recent decades, displayed the sort of capitalism that is indicative of a burgeoning global player. They are, in effect, saying, “We’re open for business and we’re here to deal. We have some creative ideas to offer that we think you’ll welcome.” They’re not twisting arms behind backs. They’re offering creative opportunities for other countries.
In addition, they’re not aiming for immediate gratification. Their aim is for long-term benefits, just as US goals once were. Today, the Chinese are buying up properties on every continent, setting up businesses, and making sure that the locals benefit from their investments.
In addition, they’re creating deals with governments that those governments could not create on their own. They seek out a country like Venezuela that is on the ropes economically and offer to buy heavily into Venezuela’s primary asset—oil—to the tune of tens of billions of dollars. The deal is not intended to provide a major return for China in the short term, but it does place China in the economic catbird seat in Venezuela over the long haul.
Around the globe, state-backed Chinese developers are offering creative deals to other countries’ political leaders. For example, if a small nation needs, say, a new port and the port costs $50 million (an amount that the country does not have), the Chinese offer to build the port for, say, $30 million, a bid that no other developer can meet. The Chinese developer takes a loss on the construction, but a part of the deal is that he gets a significant portion of the income of the port for, say, 50 or 75 years.
Chinese developers are now executing such deals in nearly every country in the world. What they lose in profits upon completion is made up for in long-term income. As a bonus, China not only owns property worldwide, it is a shareholder in the economies of countries worldwide.
This rapidly expanding global Chinese capitalism is receiving little notice in the US media, but that, most certainly, will change. As the US reaches its own economic tipping point—market crashes, currency collapse, etc.—and finds that it can no longer pay even the interest on its debt, it will also discover that it cannot pay out the benefits promised to the 50% of its population who pay no income tax but are recipients of governmental largesse. The US government will then find itself desperately trying to keep this portion of the population at bay, as payouts to recipients decrease. As a result, governmental capital projects will fail to receive funding. Someone will need to step in and offer “creative bidding.” Enter the Chinese.
Once the US is on more of a Third-World economic footing, it will have little choice but to accept the kinds of deals that the Chinese have recently offered in Jamaica, Egypt, Nicaragua, etc.
The result will be Chinese ownership not only of considerable US real estate and corporations within the US, but ownership of US infrastructure.
Today, the vestiges of Communism undoubtedly remain in China, but the move is decidedly away from Communism, toward capitalism. Conversely, the US seems to be hell-bent on replacing US capitalism with a socialist totalitarian state. Since more than 50% of Americans are now on the dole in some form, it seems highly unlikely that the US will suddenly reverse that direction, since the majority of Americans will vote for continued (and increased) government hand-outs.
Both Chairman Mao and President Nixon are now pushing up daisies, and their present-day replacements are reverse images of them. The future belongs to those who are productive.
As investment guru Jim Rogers has stated, the future belonged to the British in the 19th century and the Americans in the 20th century. The Chinese will own the 21st century. Accordingly, Mr. Rogers made Singapore his home.
We are passing through the early stages of a period of dramatic change. The economic and political world is in the process of turning upside down. Those who come out the other side of this change with their skin on will be those who have diversified both their wealth (however large or small) and, indeed, themselves, so that they are positioned to thrive in the future, rather than to remain where they are and be a part of the decline.