China and the Gap

Zenpundit has an insightful article on China's role in the world and its possible future. Since I lived in Taiwan when I was young (and was born in Okinawa), the region holds great interest for me. Indeed, I've written about this subject before. I think that Mark underestimates one factor (which I've also written about before): the corrosive impact of private property upon tyranny.

A necessary, but insufficient, condition of Liberty is the ownership of private property. If you cannot own property and dispose of it as you like, then you are unable to ever attain independence from others (the State, your boss or your lord or what have you). Without the independence to choose what you will do, without the possibility of your actions causing offense which offense in turn causes you to lose your livelihood, you are not free. You are not free, because you must constantly tailor your actions to not offend those who have power over you, by dint of being able to deprive you of your livelihood. And of course, once a person has that kind of power over you, it becomes terribly easy to offend them, because they don't have any incentive to not be offended, and every incentive (human nature being what it is) to exercise that power.

However, the mere ownership of property is not sufficient to Liberty. In order to be at liberty to do what you will, you have to be able to dispose of property as you will. That is, you need to be able to acquire, sell or give away, allow to lapse or in any other way manipulate your property. Otherwise, you are at the mercy of those who regulate the way in which your property can be used. They have the power to deprive you of your livelihood by depriving you of the ability to obtain wealth from your property. (Note: in a very real sense, your time is your property as well, and the labor you invest in can create wealth just as the improvement of land can.) Even barely-intrusive regulation has a chilling effect on Liberty, and the more intrusive the regulation the greater the effect.

From these simple observations arises the concept of the free market. A free market is one in which a person may take posession of (and in some cases create) property, use it, give it away, sell it or in any other way dispose of it, and in which no outside entity interferes as long as the transactions are between private individuals. The closer to this ideal a market is, the freer it is. The US once had an almost entirely free market domestically. This is no longer the case, but our market is still relatively free, even compared to Europe or Japan (which are much more regulated, but still freer than most of the world). History provides no example I can find of a country maintaining Liberty (or even representative government) without a relatively-free market; nor is there any country I can find which has had a mostly-free market (even at the level of China today) for 50 years which has not become a free country, with a representative government and respect for the rule of law.

China has not quite taken the fatal step: fully-private ownership of property with the government enforcing property rights and contracts. At present, for example, China will still close down businesses that don't toe the line carefully, and has nationalized small businesses in areas deemed critical to the State. It is possible that China will step away from this path, and back towards more State control, because remaining at a semi-private property level is not sustainable (either the people will demand and be granted more and more power over their property, or they will be increasingly restricted as they use the property in ways inimical to the State).

Given China's embrace of capital markets in both domestic and international affairs, it is likely that they will eventually tip towards fairly liberal personal property rights. At the point they do that, China as a Communist nation is doomed: they will eventually face the demands of the people for individual liberty as well as property rights.

The forces of the market are such that no tyranny of the industrial age has survived for more than a few decades with a free market. People who have control of property, and want to use it to create wealth for themselves, increasingly demand to more fully control their property, and thus themselves, and thus their time and resources, and thus their flows of communication (requisite to efficient use of property as a generator of wealth), and thus political power to ensure their property rights are maintained. Eventually the government must become utterly ruthless and destroy the property rights systems (as Communism has done everywhere it has come into control) and many of the people, or they must fall to the demands and possibly revolution of the people who stand to gain much by the exercise of liberty.

I believe that China is on that road, that increasingly China will find itself unable to resist giving more property rights in exchange for more growth, and that this will eventually reach a tipping point. Perhaps, 50 years from now, we will look upon China as we do upon South Korea: a prosperous nation globally interconnected and essentially free. The danger zone is the next two decades, with the central government still unchallenged, the property rights and conception of liberty of the Chinese people still rudimentary, and the increasing power and prosperity of the nation fueling nationalistic forces with much influence in the government and military.

If we can shepherd China through the next 2 or 3 decades without a major dislocation, it is very likely that China will end up as a free and modern nation.

Posted by Jeff at July 23, 2004 10:41 PM | Link Cosmos