WE ARE TOLD that China is a challenge for the West, that its emergence as an economic power is a “Sputnik” moment for American leadership and will affect UK post-Brexit economic prospects. It’s said this requires a major political and economic response to protect ourselves from its global ambitions.
The fear seems to be that an autocracy can outdo democracy simply by mobilising human, financial and technological resources through central command. Is this likely? I am doubtful.
British history offers some precedent for our thinking. Imagine a nation with near monopoly control over the harnessing of steam through the triple expansion engine, local talents in coal and steam production using local mineral resources, access to rapid communications through the telegraph and a cultural belief in itself as bound by God to spread wisdom and civilisation through muscular Christianity. Then harness that productive capacity to a well-drilled military uncowed by the occasional defeat through a confident self-belief in eventual victory. Mid-to-late nineteenth century British imperial hegemony was based on such multiple factors, not least of which was a central command system based on aristocratic and class values that generated appallingly muddled and destructive leadership decisions – think Crimea. Localised initiative, creative capitalism, a few inspired leaders and quite a bit of luck kept the show on the road.
History only tells us so much, it echoes rather than repeats, but some realpolitik principles pertain. Where China pushes outwards militarily or territorially we cannot appease; they also know that they are surrounded. Russia, India, Malaysia, Indonesia, Thailand, Vietnam, Taiwan, South Korea and Japan provide a bundle of obstacles to any imperium. Keeping China’s surrounding nations on our side is a necessity. Trading with all of them freely post-Brexit is an initiative for peace.
As we know, however, we should not be fighting last century’s battles, economic hegemony seems to be the fear; with special emphasis on China’s declared ambition to be a technological leader. The driving forces of British imperialism in steam and coal appear to have come back to haunt us in Chinese electronics. Should we be concerned?
A slightly pat answer is to adopt the optimistic classical liberal response that trade ties peoples together; you don’t fight the person providing you with your fridge or microwave oven, you learn to like each other and trade in more things through time. Some say that optimism is misplaced if it presumes adherence to commercial law and property rights where China needs to improve its behaviour. Contrarily, others suggest the West should not put too high a value on its intellectual property in a fast-changing technical environment.
A concern, however, is that in a modern economy economic leadership is not in technological hardware but in technological systems; wireless networks, artificial intelligence, logistics capability, payment handling and so on. But then, the micro matters in technical systems; the processor chips, servers and routers, digital modems, EPROM memory blocks and sensor signal processors that make such system implementations possible. If China, that makes a lot of the latter, is now emerging as being fully capable of managing the former then could we face a future of control from the East and so need to batten down our post-Brexit hatches?
I think such an approach misses out some key facets of markets; the channels to market and promotion of product within those, plus the localised understanding of how best to harness customer buying patterns and preferences, followed by the loop-back to new choices in design and manufacture. Of course, the internet as a sales channel globalises and commonalises much of the first two, but the last creative loop is uniquely human and community or group interest based; dispersed, varied and crucially rapidly changing because consumer tastes, fads and preferences change. Anyone who has offspring from young teenagers to maturing adults with young families soon realises that their childrens’ lives have very different consumption patterns to their parents.
In this context, this marketing loop denies control to any centralised authority. It also lies at the heart of our post-Brexit opportunity; markets and their supply chains offer two ways earning potential. That’s what free trade does, it maximises knowledge through competition between producer and consumer. China cannot cut itself off from this knowledge or we will change and produce for ourselves, either by ourselves or elsewhere away from China.
I think one has to analyse the “Chinese threat” from the perspective of whether the Chinese state benefits from taking control of our consumption. Consumption of course does include industrial consumables; could the control of a supply chain induce a strategic loss? Yes, they could deny us supply of PPE or ventilator parts for the NHS, but the past month or so has shown us that, as long as our bureaucracy can be urged to step aside while practical people engineer a solution, such actions would affect us for a few weeks at most. Indeed, the shortfall in PPE does appear to be our very own state failure; the sclerotic monopsony of the planning and logistics apparatus of NHS Procurement essentially failed us.
Denying us strategic supplies would leave the Chinese with warehouses full of lost revenue and, once we had sorted out our alternatives, that would be lost for ever. Industrial supply chains are not commonly like “fast fashion” supply chains; holding store room stock allows for bulk discounts and reduction in procurement overheads; it’s only during unexpected pandemics that they become fast needs. The West can cope with that.
Could the Chinese cripple us militarily? Surrounded as they are, we should doubt it in any traditional steel and Semtex sense; or even with respect to precious metals in my view. Multiple territorial ambitions around China’s seas will no doubt push back hard against each other; we have to hope that diplomacy will prevail. The UK has a role here post-Brexit to show how free trade can help mutual understanding and mutualised self-interest.
In the wider senses of system control, we are in new territories. Is cyber-system hegemony a realistic outcome? I can only see the such control as a siege weapon; China trying to lock us down, but to what purpose and advantage? Anything that damages our wealth-creating capacity damages them too. There might be temporary gains for them in conjunction with a “hot war” intrusion regionally; and as in the lessons learned by the British in India, the more you extend your fiefdoms it is helpful to have a command and control system to retain them. Rebellions happen.
First, however, is the tricky question as to whether technological hegemony is in any way achievable? The security experts who have studied Huawei equipment have concluded that it is cheap and plentiful rather than rugged and dependable; an echo of how many of us view Chinese non-military technical equipment. Many doubt their military kit offers much more.
And also, this is a known problem, battles are usually won by surprising an unprepared enemy; the West is at least equal to China in capability here. We do not necessarily need our defences to be infallible; they need to be good enough to deter an enemy from anticipating an easy win. Given our shared academia, developing a globally science-based technology that outwitted everyone is, in my view, a heroic assumption.
I have to wonder if the fear of China is not about the prospects of a “hot war” but rather cold competition from an industrious, innovation-loving, future-facing Asian mentality that is economically successful in trade when up against wealthier, more decadent, tradition bound, padded-lifestyle seekers in the West? An outward-looking post-Brexit UK is already positioned well to change that.
Post-Brexit, the answer to China for the UK surely lies here. If at this moment in history, they like to produce, and we like to consume, let it be; the time will come when we must and will compete. The classical liberal idea holds; if we build our trade through our flighty flexible consumerism and they provide for us, they have to engage by being part of our localised preferences only understood by us. There is no major threat here, only a gradual increase in average operative wage levels in China. It is probably not known widely in the West but the average manufacturing wage in China is already £2644 a month.
The trend in wage rate increases is rapid; so rapid in fact that China is itself outsourcing assembly work across Asia. It too is becoming reliant on other wealth creation and popular local consumption; Britain must encourage this interdependency through support for free trade and adherence to well-defined property rights – a coup at the WTO to bolster its role would help too.
And here, there is another side to the coin. China’s productive workers are also consumers. There are an estimated 140 million middle class households in China (comprising 400 million people).
This is where the West must hold its nerve. We must not make the Chinese “different”; we must make them want to be like us. Visit any Chinese shopping mall and you will see that we are doing rather well at this. Western brands are flying off the shelves and, crucially, the freedom to exchange Chinese labour for Western lifestyle products is creating our very own cyber-intrusion; planting the information that the comfort and security of easy access to “stuff” makes life varied and interesting, creating new habits and diversities; the exact opposite of the dull conformity of state capitalism in its restrictive communist wrapper.
The self-belief we need is that our political freedom is based on such economic freedoms; consumerism is not a bad thing, it’s what people want to enrich their lives. Yes, it can be wasteful, and it can pollute, and if uncontrolled can exploit some, but these are all tactical issues that the West is tackling very rapidly by allocating and pricing such externalities correctly through general law, not specific state-led coercions. The Chinese people know this; there will come a time when they tell their governors that they want their world to be organised this way too.
Article originally published by Brexit Watch
