Stephen Kotkin: evaluation

Transcript context

…No, you have a point. We're not disagreeing. I’m just trying to say that we give too much credit to the Communist Party for what's happened in China and not enough blame for what's happened in China. This is part of the dynamic of us seeing communism as potentially successful. We criticize these fools who thought that the Stalin regime was not going to kill them, and was not going to produce famine. Yet we have this narrative that the Communist Party produced an economic miracle in China. I’m sorry, the Communist Party took advantage of the economic miracle in China. It played a part in it, expropriated the hard work of many people, and stole the businesses. A lot of those local officials just stole the land and stole the businesses from people who'd created a success. This is the thing that the Party did that's really important. Deng Xiaoping first went to Japan in early '79, before he came to the US and met Carter and put on the cowboy hat, that gigantic ten-gallon hat that was bigger than he was. He was like five gallons, the hat was like ten gallons. He goes to Japan. You're looking at Japan, DK, and it lost the war. It was literally incinerated in the American use of atomic weapons. It was destroyed, it lost the war, and it's rising to be the second-largest economy in the world. What happened? How was that possible? How could Japan rise from the ashes, literally, when China won the war? It was on the winning side and it has a $200 per capita GDP. Deng Xiaoping looks this over, and he says the answer is that Japan is partners with America, not with the Soviet Union. Deng Xiaoping is going to divorce the Soviet Union economically, and he's going to marry the US. Deng gets most-favored-nation status in 1980, thanks to Jimmy Carter. The communist regime in Beijing gets most-favored-nation status, which has to be renewed every year and is renewed every single year until 2000-2001, when they're admitted to the WTO. That's a Clinton initiative that happens right when Bush is going to come to office. The secret sauce is, you have to manufacture and export to the American domestic market because the American middle class is insatiable. They will buy anything as long as the quality is high and the price is low. Japan did this. Japan's two former colonies, Taiwan and South Korea, followed in Japan's footsteps. China's going to do this too. We're going to use this Japanese model and the American middle class, and their insatiable overconsumption, is going to create the Chinese middle class. So this is what the party does, this geopolitical reorientation from a Soviet economic model to a Japan-style export-led partnership with the US domestic market and middle class. They have a couple of tricks that are really important. They have Hong Kong. Hong Kong is a British-controlled, rule of law, international financial order that allocates capital based upon risk and return, not Communist Party dictates. re really important. They have Hong Kong. Hong Kong is a British-controlled, rule of law, international financial order that allocates capital based upon risk and return, not Communist Party dictates. Gorbachev's Soviet Union, they have nothing like Hong Kong. The only reason China has Hong Kong is because after World War II—when Truman announced that Chiang Kai-shek and the Nationalists were going to accept the Japanese surrender in Hong Kong—the British sent their boats in and took Hong Kong back themselves, so that when Mao defeated Chiang Kai-shek he didn't have Hong Kong. The British had Hong Kong, and they created this international financial system that Mao's successors would be able to use. Had the British not done this, there would be no Hong Kong and there would be no Chinese miracle in the Deng Xiaoping and after period. The other thing they have is overseas Chinese who know the culture, speak the language, and are going to do the FDI, again routed through Hong Kong. So you have Taiwan. Ironically, the failure to win the civil war 100%… We think of the Korean peninsula as divided. We think of this partition of the Korean peninsula, but China is also partitioned. There's also Taiwan, still partitioned to this day. Taiwan is the FDI that's going to come in, through Hong Kong, routed through into the special economic zones on a risk-reward, capitalist market basis, not a communist basis. Furthermore, they have the Japanese war guilt because the Japanese committed those atrocities in China. So the Japanese are going to make up for what they did by helping rebuild China. Again, the FDI and the tech transfer, like it's coming from Taiwan. So Taiwan and Japan, this partitioned China, and this war guilt, through the British Hong Kong is going to go into the special economic zones, manufacture things like the Japanese, and then export them to the American domestic consumers. It's going to be t-shirts at the beginning and then they're going to, like the Japanese, and then they're going to climb the value chain until it's got the highest value-added products. Then supply chains are going to change as a result, and nothing is made in one place anymore, and the world gets very complicated. The point being is that Deng Xiaoping did that. That was intentional. That's the credit that the party deserves and the party never gets because it's a story not of the party's rule alone, but of British Hong Kong, Taiwan, Japan, United States domestic market, etc. So how do you get rich in the modern world? You sell to America. Those countries that are partners with America and that are able to compete. The Chinese deserve credit. They can manufacture higher-quality, lower-cost products that American consumers will buy. American consumers are not forced to buy Chinese products. They're just better, and they're cheaper. So they buy them because it's a market and there's competition. Bangladesh can do this in textiles, you referenced Bangladesh, which is how I got launched on this reverie that I hope is now ending. r. So they buy them because it's a market and there's competition. Bangladesh can do this in textiles, you referenced Bangladesh, which is how I got launched on this reverie that I hope is now ending. My point being is that the East Asian miracle is Japan selling to the American domestic market, followed by South Korea and Taiwan doing the same trick, and then followed by Deng Xiaoping's Communist China, the same exact trick, filtered through British Hong Kong. The problem with the Chinese one is that they're not allies, former enemies who are allies like Japan. They are former allies who are now enemies who have done this magic sauce. Now we're in the pickle that we're in as a result of this. But the formula… This is where the communists deserve the credit that they never get, whereas they get credit for things that they didn't do.…

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