Expensive PoliticsInstead of a demonstration of its overwhelming military might intended to intimidate tiny North Korea and pressure China to lean on its defiant communist neighbor, President Trump and the West should try to learn a few things from China. |
 Photo credit: AP - Click to enlarge President Trump meets President Xi. The POTUS reportedly had a very good time in China. |
| The President’s trip to the Far East came on the heels of the completion of China’s 19th National Congress, where the current president Xi Jinping has cunningly positioned himself as China’s unchallenged leader. In an address at the opening of the Congress, Xi cautioned that the country faced “challenges” that are “extremely grim” yet, despite these, the nation’s future is “extremely bright.”*
While Western politicos and pundits bemoan the lack of political pluralism that exists within China and President Trump complained about bad trade “deals,” they miss an important factor as to why China has transformed itself from a socialist basket case some three decades ago into an economic powerhouse which now boasts over a third of the world’s billionaires (!). China’s economic ascendancy can be attributed not only to the implementation of market reforms in the 1990s, but also its lack of “political competition.” As a one-party state, resources, time, energy, and capital are not allowed to be channeled into wasteful political processes, but instead are used and “invested” in wealth-creation activities – construction, factories, plants, equipment, research, technology – all of which leads to more and cheaper consumer goods. The US and the West spend too much on elections, campaigns, polling, political consultation, etc., which diverts scarce resources away from the private wealth sectors of society. For example, in her last failed presidential campaign run, the Wicked Witch of Chappaqua alone spent over half a billion dollars. |
 A mystery is suddenly solved. - Click to enlarge Under Western democratic pluralism, public debt and state spending have increased to unsustainable levels. In the US alone – history’s greatest debtor nation – the national debt is in excess of $20 trillion, while total GAAP-based debt officially stands at $68 trillion [ed. note: this includes unfunded obligations according to CBO estimates; there exist far high private sector estimates, of up to $200+ trillion (Kotlikoff), PT] with a federal deficit running at $666 billion in FY 2017 [ed. note: $90 billion above the draft budget after $585 billion in FY 2016. The FY 2018 budget calls for a $440 billion deficit, to which we say “good luck”. PT]. |
Economic Freedom vs. PoliticsSuch staggering numbers are the result, in part, from political parties seeking public office and once elected exploiting their position to enrich themselves, their constituents, and create dependent classes among the ever shrinking productive segments of society. China’s foreign policy – an extension of politics – has also been conducive for wealth creation. Instead of wasteful spending on military hardware, the maintenance of a far-flung global empire, and involvement in incessant wars, China has a rather meek military compared to its national income and has conducted a pretty much non-interventionist foreign policy – witness its diplomacy with North Korea. The US is almost the polar opposite. It spends more on “defense” than the next eight countries combined.** Instead of the production of useful consumer goods, billions are siphoned off into the military/security industrial complex. Not only does this impoverish Americans at home, but it leads to never ending involvement in wars, conflicts, and disputes, most of which are created or exacerbated by US spy organizations. |
 Recent estimates of US defense spending relative to the next largest defense spenders in the world - Click to enlarge |
After meeting with the Chinese leadership, President Trump tweeted:
I don’t blame China, I blame the incompetence of past Admins for allowing China to take advantage of the U.S. on trade leading up to a point where the U.S. is losing $100’s of billions. How can you blame China for taking advantage of people that had no clue? I would’ve done the same!
Making better trade deals will not revitalize the moribund US economy. Instead, there should be less politicization of society and adoption of market reforms as China has done. The most important plank of such a policy would be the encouragement of real savings – not the creation of bank credit – through the normalization of interest rates. This would begin the arduous process of capital accumulation, the basis upon which any economy can be built.
Another sign of the divergence between the two is China’s continued push to make the yuan the world’s reserve currency with apparently some sort of gold backing to it. Contrarily, the Trump Administration has continued the same disastrous policies of its predecessors and has chosen a Janet Yellen clone to head the Federal Reserve with a continuation, no doubt, of the suppression of interest rates.
On the other hand, China continues to import massive quantities of gold and encourages its citizens to own the yellow metal while the West is in the midst of a crypto-currency mania, another fraudulent monetary scheme.
China’s economic miracle, while certainly impressive, would not look as astounding if Western economies had not been in a state of stagnation and decline over the past half century. It was not political liberalization that led to China’s phenomenal growth, but economic freedom which used to be a staple of Western life. The lesson that should be taken from President Trump’s trip is less politics domestically, and more free markets.
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Tags: Donald Trump,newslettersent,On Economy,On Politics,Xi Jinping
