Mises against China

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Cesar Guarde

From the point of view of the post-2004 Western perception of China, its economic shift, at least on paper, has been praised both by the libertarian followers of John Locke or Ludwig von Mises and by the socialist antiliberals who feel more comfortable with Marx’s Manifesto and John Dewey’s educational suicide. Both sides have hijacked “China” as a particular concept that can be accommodated within virtually any political framework –a practice that goes back to earlier Western Enlightenment thinkers such as Malebranche, Leibniz, Wolff, Montesquieu, Voltaire, Toland, or Quesnay, just to name a few. These philosophers, as relevant as their respective systems of thought may be, were not interested in China as an object of study. Rather, they were looking for a corroboration of their previously formulated ethical and political thesis. And so do libertarians and non-libertarians.

In Europe, and more particularly in Spain, libertarian authors such as Luis Torras or Francisco Contreras believe that China’s economic expansion should be seen as the raison d’être for further developments –human rights, democracy, capitalism, and libertarianism. In other words, they believe that, since libertarianism is “right,” and China is indeed growing and flourishing, it should experience a transition from communism/socialism to democracy/libertarianism. They could not be more wrong, and if they had read Mises more carefully, they would have noted it.

 

Towards a libertarian China?

I will leave aside Luis Torras’ thesis and review it at another time, for it deserves a post of its own. Let me just say this: This so-called “opening” China has been experiencing for the last two decades has given intellectuals access to a new culture that before, under Maoist rule, was quite enigmatic. However, most of them, especially those who are invited or have received scholarship, or just visit China as tourists, do not see beyond the domed China the authorities have put in front of them. Ignoring the language does not help, either, for example, to understand the massive amount of Communist propaganda on buildings, universities, restaurants, and streets. It is then understandable that some intellectuals, who are certainly distinguished scholars in their respective fields –economy, politics, and so on–, are unable to analyze the country they visit. Just like a guided tour around North Korea will never show you the North Korean social reality.

            It is a widely shared idea, both by libertarians and totalitarians: economic freedom leads to other freedoms. This point may be true, but another scenario is possible: that the State, aware of how his monopoly on violence and power are being threatened, will try to suddenly repress those economic freedoms to stop any other emerging liberty. And totalitarians also know this. Fidel Castro once famously told his friend Huber Matos:

“It cannot be done, Huber. If we allow workers to have economic freedom, this will lead in practice to political independence.”

And this is a problem many libertarians ignore, I believe, because we are intoxicated by our own theoretical framework. Let me illustrate my point with a personal experience I had in 2011, when I had the chance to discuss this topic with a professor from INSA, a remarkable business, marketing, and communication private school in Barcelona, Spain. I was very skeptical about the development possibilities of Marketing 2.0 courses for Chinese students because it was focused on social networking websites like Facebook or Twitter, which were, and are, banned in China. The professor, whose name I don´t recall, explained that China was growing and it will have to open, obviously, to the marvelous wonders of libertarianism and, then, such knowledge about Facebook and Twitter will be very valuable for any new entrepreneurship. As for 2015, not only Facebook and any other Western social network remain blocked in China, but just some months ago the networking platform LINE, used in many Asian countries from Thailand to Taiwan to South Korea, and with more than 400 million users worldwide, was added to the Chinese Hall of Defame. It won´t feel lonely, for Chinese censors have got new acquisitions: gMail, WorldCat, and, amusing as it sounds, Catalonian domains .cat are now blocked, and HotMail, GoogleMaps, and GoogleTranslate do not work all the time.

On the other side of the balance we have the socialists, statists, and anything non-libertarian. Those who say Mises was wrong, and who call classical liberals “morons” and Chinese economy’s sons “geniuses.” Second time around: They perceive socialism as good or “positive,” and since China is indeed growing and it is a socialist country, this serves them again as “confirmation bias”: The libertarians are wrong!

 All these authors have something in common: they have much more education on economics than on China. In fact, they are totally ignorant about it and their understanding of China is, like those Western Enlightenment philosophers I mentioned before, almost pure superstition.

There is this key passage in Mises’ seminal work Liberalismus (1927), where he discusses the impracticability of socialism:

“A socialist state of this kind is not comparable to the state enterprises, no matter how vast their scale, that we have seen developing in the last decades in Europe, especially in Germany and Russia. The latter all flourish side by side with private ownership of the means of production. They engage in commercial transactions with enterprises that capitalists own and manage, and they receive various stimuli from these enterprises that invigorate their own operation” (II.4).

Or simply put: “Anticapitalism can maintain itself in existence only by sponging on capitalism” (Mises, Liberalismus, IV.5).  And this is exactly what China is doing: sponging on capitalist societies to sustain its socialist –and unsustainable– system. By manipulating their currency, violating intellectual property by selling off low-cost rip-off products without spending on R&D, building large infrastructure projects to increase their GDP that will remain empty forever, and working side by side with the private ownership of the means of production that Hong Kong offers them, as their so-called “Special Administrative Region” free to parasite, China goes on sponging the countries of the world, capitalist or not, from Hong Kong to Taiwan, and from Africa to Ukraine’s 5%.

In fact, the Chinese government has been aware of this fact since the late 1950s. In a speech given on January 30, 1958, Zhou Enlai, at that time Premier of the People’s Republic of China under Mao Zedong, declared that a “plot, or conspiracy, was being hatched to make Hong Kong a self-governing Dominion like Singapore” and that “China wished the present colonial status of Hong Kong to continue with no change whatever.” In 1960, the director of the Overseas Chinese Affairs Office Liao Chengzhi threatened to “liberate” Hong Kong from independence, democracy, and universal values if any political reform was made to change the colonial status of Hong Kong. Liao asserted that Hong Kong was Chinese territory but he would prefer the actual colonial status because it “is to our benefit. Through Hong Kong we can trade and contact people of other countries and obtain materials we badly need.” This basically means that the Chinese Communist Party, as early as 1960, was aware of the inefficacy of communism

As the last governor of Hong Kong, Christ Patten, put it in his book East and West (1998), soon China will outgrow its political structures:

“There are probably about 110,000 medium and large-sized state-owned firms [in China]. At least half of them are losing money. They employ about 120 million people, of whom about 50 million are thought to have no useful work to do. Lending from the state Banks to these firms is hollowing out China’s banking system, which it would probably cost about 25 to 30 per cent of China’s GDP to recapitalize.”

China shows that Mises was right: Socialism is unsustainable. The rest of the (still) capitalist world shows the same fact: that economic freedom can only flourish among politically free people. Otherwise, they shall abuse our own.

 

 

Further reading (and listening!)

Doug French, “The China Model Is Unsustainable,” Mises Daily.

Tom Woods, “Rothbard and Mises in China? Plus, Is China a Bubble Waiting to Burst?”.

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