This is a story about China’s centrally planned Too-Big-To-Fail economy and the impact that has on our future
When I was in business school, there used to be a saying that pointed to the strength of the US economy that went something like this: When the US sneezes the world catches a cold. A lot has changed since and China has become the driver of much of what happens in the global economy today. This is all due to a very odd mix of a centrally planned economy (what we in Spiral Dynamic call the Blue-Absolutistic value system of governance) with a mix of strategic and highly manipulative objectives to take over the world (Orange in Spiral Dynamics), while using Red/Purple values and tactics (oppression and tribal manipulation) to employ slave labor and engage in other subversive practices. This rare form of governance has allowed China to bully the third world and control its resources and undermine intellectual copyrights and global trade covenants. It has condoned the abuse of human rights at home while enriching the few elite members of the Communist Party of China (the CCP). The Western world has overlooked all this as it continues to feed its insatiable appetite for endless consumption and focusing on cheap production costs while increasing the profit margins of big Western corporations on the back of cheap Chinese labor.
In order for any true free-market economy to succeed, Blue central planning must remain a transitory phase that builds the physical economic infrastructure (highways and ports as well as robust institutions) then it must be relegated to maintenance and support as Blue responsibilities become those of a government responding to Orange innovation and its effective regulation. This is not the case with China, as it continued building cities that have remained empty for years through its absolutistic Blue leadership. Click on this link to an interview I gave to Newsweek Magazine a while ago which warns against China’s sudden transition from Blue to Orange.
Well, like any other closed Blue system of governance run by closed system ideologues, China remains unaccepting of ideas on how to give up control without having to instate major reforms that threaten the very existence of its brave experiment. Cracks in the system are beginning to show as the transitory Blue economic policies have been exhausted beyond their useful function. These are signs of the deeper tectonic plates the plague the Chinese economy. The canary in the coalmine is its real estate sector with 100’s of development companies teetering on the edge of collapse as they owe 100s of Billions to Chinese banks. The first hint of the forthcoming collapse of this sector recently came from property development giant Evergrande, warning that it might not be able to meet its debt payments to its lenders. The news sent shockwaves through global financial markets as analysts began to speculate as to what this could mean. Evergrande in the largest real estate development firm in the world and holds a world record of $300 Billion in debt; a sum that is larger than most counties’ annual sovereign debt. As the Chinese Communist Party tries to grapple with these upcoming existential economic crises, there could only be one of two outcomes:
- Stop the blind drive-at-any-cost to become #1 and transition to a free market economy. This will necessitate the long-awaited upward movement in governance and values to an entirely different set of metrics, which will bring the long awaited, market-driven price discoveryto a $16 Trillion a year economy that will now be based on market forces of supply and demand not the will of a few people in the National People’s Congress claiming to know what’s best for their people and the world while becoming Billionaires and rarely if ever being transparent.
- Continue with the Blue-centrally planned economy that blindly seeks becoming #1 while hiding much of the corruption and abuse that remains hidden from the eyes of the world.
If I were a betting man, I’ll put my money on the latter. This will likely be the path that the CCP will take while seeking to increase its geopoltical influence through its repressive Red-Blue policies. Change will not likely come anytime soon to China since it holds the biggest Ace in the hole that the West has chosen to ignore. Part of it’s hidden wealth is in a 200-year reserve of resources and raw material that it has accumulated from around the world over the last few decades. While the West was preoccupied with outsourcing everything, falsely believing that China shared their advanced Orange capitalist values such as improving stockholders’ bottom line, the endless pursuit of lean manufacturing and the inexhaustible obsession with the global supply chain, China was focusing on how to exploit this Western naiveté for its long-term strategic advantage.
Once the West wakes up to China’s drive to create a global resource monopoly, they will be forced to reassess their ill-thought preception of global trade and begin to focus on resources as a national security matter. This is the new geopolitical divide the awaits the world: China and resource-rich third world counties on one side, the West and its allies on the other. In my work, I call this the New Global Axis of Values: Red/Blue v Orange/Green. Click here for a full explanation of what these values stand for. My long-term bet is on the West since it has long been established in the values of the Orange system which has the mandate to uncover the secrets of the universe through scientific discoveries, quantitative analysis and research and development.
We in the West must reinvent ourselves as the undisputed global leaders in research and development in energy and in new sustainable, carbon-neutral resources , especially when the alternative is China’s carbon-heavy pile of natural resources that will surely continue to destabalize life on our planet.
