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Wednesday, November 24, 2010

China as the Borg

What is the relationship between economic or technological progress and political freedom? In a previous post that analyzed this question, I wrote:

In her dystopian novella, Anthem, Ayn Rand demonstrated her keen understanding of the relationship between technological progress and political freedom by setting a future collectivist society, not in an advanced mechanized utopia, but in a devolving, primitive slave pen. Rand would later prove in great detail that the pre-condition to man's happiness and prosperity is the freedom to think, produce, and trade. A society in which the state stifles the individual mind, erecting legal barriers to production, trade, and profit, is a society doomed to suffer the misery of privation and technological stagnation.
History could not offer more evidence to prove this point. The fact is that relatively free people enjoy remarkable upward progress in living standards while those living under dictatorship endure generation after generation of squalid degradation. In other words, political freedom, i.e., "freedom from government coercion," is the precondition of economic freedom which, in turn, leads to material progress. In reality, individual countries rarely if ever represent pure ideals of laissez faire capitalism or Orwellian level socialism. Most are a mixture of the two - a so-called "mixed economy" - in which the degree of economic progress is directly correlated to the degree of economic freedom.

Although this principle is theoretically and empirically true beyond question, it is fascinating how this principle appears to have been jettisoned by those who analyze developing economies where central planning is still a dominant political theme - particularly Asian economies. In fact, many seem to accept the exact opposite belief!
Recall the wave of fascination with "Japan Inc." that swept the West in the 1980's. Despite Japan's economic collapse, we are now being led to believe that "China Inc.", i.e., China's leviathan complex of central planning bureaucracies and state owned enterprises, are superior in their ability to lead a kind of collective economic juggernaut. Not coincidentally, this view of collectivism can be observed in popular culture. In the television series, Star Trek: The Next Generation, there was a collectivist alien race known as the Borg which traveled around in a space ship cube conquering and assimilating other races:
Also referred to as the "hive mind" or "collective consciousness", this is the term used to describe the group consciousness of the Borg civilization. Each Borg individual, or drone, is linked to the collective by a sophisticated subspace network that ensures each member is given constant supervision and guidance. The collective is broadcast over a subspace domain similar to that utilized by the transporter...
What is fascinating is that the writers of the show, like their economic counterparts today, regarded this collectivist system as efficacious - the Borg were portrayed as the most powerful race in the universe. In fact, as the article states: "the Borg have become a symbol in popular culture for any juggernaut against which 'resistance is futile'." In essence, for modern analysts, China Inc. is like the Borg against which economic resistance is futile.

This false view of collectivism is why I found
this interview with Vitaliy Katsenelson excellent. In 2009, I wrote about the emergence of a Chinese bubble, and Katsenelson provides some fresh insight into exactly why Chinese central planners will fail and why it will end in economic disaster. As he states:

So when we look at China, the conventional wisdom says that the government is very, very smart, and therefore they can do a very good job in steering the economy in the right way. Chinese government may have the best intentions, its leaders may have IQs of 250 each on a bad day, but it is impossible to centrally manage an economy of China’s size.
After a hundred years of central planning boom-bust debacles, you'd think economists would learn. Central planning collectivists are not the Borg. In fact - keeping with popular cultural references - they are closer in stature to the Wizard of Oz.


Ken Power said...

Chinas' growth is a consequence of its de-facto economic freedom. Officials are easily bribed to stand aside. Also, the ruling party contains believers in the free market. The party frequently promises genuine freedom (in the future). The significance of this is not that it is being delivery, but that it is necessary to make such a promise.

garret seinen said...

Good post Doug. The collectivist all share one trait - amnesia. None of them choose to remember how highly they held the USSR's economic model, saying that their unimpeded control gave the rulers so much more latitude for building things. Of course, no shoes, no food, no shelter etc. never opened their eyes. A sick, stupid, intellectually-bankrupt bunch.