China has always held something of a mystery, or a contradiction. Here is a society that once achieved great things. Its accomplishments dwarfed those of Western society. Yet today, China must play catch-up with the West.
Consider that nearly a century before Christopher Columbus arrived in America or Vasco de Gama arrived in India, a Chinese explorer named Zhang He sailed as far west as Africa. The ships of Zhange He's fleet were enormous by Western standards. His 'treasure ships' stretched as long as 440 feet and 180 feet abeam. The ships boasted up to nine masts, as high as 90 feet, and carried up to 500 men. You could have put all of the ships of Columbus and da Gama together on a single deck of one of Zhang He's treasure ships.
The fleet itself consisted of 317 ships, more than twice the size of the great Spanish Armada (which had 132 and was assembled more than a century later).
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Jeremy Siegel's recent book, The Future for Investors, describes notable discoveries made by the Chinese. Yet many of those discoveries, much of that knowledge, were subsequently lost. I found this remarkable:
Latest Videos FromMoneyWeek
'The first timepiece was invented by Su Song in 1086, but the Chinese had to be reintroduced to clocks when the Jesuits came in the 16th century. The Chinese developed movable type in the 9th century, 500 years before Gutenberg's invention of the printing press. The Chinese used silk-reeling machines as early as 1090but as late as the 19th centurysilk was entirely hand reeled. The Chinese invented gunpowder for use in rockets and bombs in the 10th century, but they had to relearn the use of the cannon from the West in the middle of the 14th century.'
This is only a partial list. Still, it shows China had advanced beyond its contemporaries in the West. However, as Siegel points out, many of the discoveries were lost. Improvements in the standard of living in China have greatly lagged those of the West since the Industrial Revolution. Society regressed.
Why? What happened?
Here we come to an unavoidable intersection between economic prosperity and political tampering. For most historians lay the blame at the feet of the Ming Dynasty. It was the despotism of the Ming Dynasty that set in motion China's tumble into economic stagnation.
John King Fairbank, the doyen of Western historians on China, wrote in his magnum opus China: A New History, 'Anti-commercialism and xenophobia won out, and China retired from the world scene.'
The Ming rulers squashed exploration efforts. Shipbuilding was restricted to small vessels only. They shunned foreign contact and closed China's borders. These decisions had great impact on the course of world history. Consider that Chinese explorers easily could have sailed to America long before Europeans began establishing colonies there. Think how different the world may have been if they had.
As Joel Mokyr, a professor at Northwestern University, observed in his book The Levers of Riches, 'The Chinese were, so to speak, within reach of world domination, and then shied away.'
This is why China today is the world's largest turnaround opportunity.
Moving to Freer Markets
For now, China looks to be liberalizing. More and more evidence suggests a steady movement toward freer markets. In October, The Carlyle Group, a U.S. private equity firm, became the first foreign group to gain control of a large Chinese company. Carlyle paid $375 million for an 85% stake in Xugong, a large Chinese maker of construction equipment.
Also in October, UBS became the first foreign company granted a stake in a licensed domestic broker, with its 20% stake in Beijing Securities.
And in another sign that China is moving in the right direction, the Railway Ministry is going to open up China's railway system to foreign ownership and control. Traditionally, the railway system has been one of the most sensitive and guarded areas in China.
That's a nice string of firsts, and there are many more. Plus, there is a burgeoning universe of small privately owned companies in China. Plenty of non-Chinese firms also have growing profitable businesses in China. I'll be writing more about this, and my recent trip to China, in my upcoming issue of Capital & Crisis. But suffice it to say here, China is more than just potential today. It's a real-live red-blooded market.
Insatiable Government
Still, political risk is real, and the nature of government suggests it is hard to shrink. Insatiable Government, newly published, is a good collection of essays on this theme by the late journalist and critic Garet Garrett.
In the book, Garrett applies his incisive reporting and thoughtful pen to the growth of American government, especially during the years of the New Deal. During this time, Garrett - along with several others, such as John Flynn and H.L. Mencken - fought a long retreat against the advancing size and power of the state.
Garrett worried about the size of American commitments abroad, about the continuing debasement of the Constitution and the Bill of Rights, about the lack of political restraint and the erosion of liberty.
The inexorable strengthening of government power led Garrett to conclude that it was in the nature of the beast itself. 'Government is like an organism with such an instinct for growth and self-expression that if left alone, it is bound to destroy human freedom No government ever wants less government - that is, less of itself.'
Lessons for the American Empire
In all of this, there are lessons for America's growing empire. A good book on this theme is Bill Bonner and Addison Wiggin's Empire of Debt. 'How Empires Work' is, in fact, the title of Chapter 3.
The duo notes, 'The United States entered the empire business in the late 19th century. She was able to straighten herself out for a few years, but the lure of it late became irresistible. Between 1917 and 1971, the country was transformed from a simple republic that mostly minded its own business to a grandiose empire with imagined interests and real troops nearly everywhere.'
The problem with empires is that they all end badly: 'A great empire is to the world of geopolitics what a great bubble is to the world of economics. It is attractive at the outset, but a catastrophe eventually. We know of no exceptions.'
China, as old as it is, has already spent time in the empire business. It's lived and died as an empire before the Industrial Revolution got going. As all empires before it, catastrophe ensued. Now, after a long remission, the Chinese are on the upswing, but the scars of empire run deep. Will they be able to shake them and continue the path toward free markets and free people?
And for the United States, will it continue to slide down the slippery path of imperial ambition? Will the American Empire as the Chinese empire did during the Ming Dynasty endure a long period of stagnation and even regression? Will xenophobia and anti-commercialism win out and the American Empire retire from the scene?
These are critical questions that no one can really answer. But the weight of history suggests the Chinese have a tough struggle ahead in beating back the power of the state. And America's empire will not last forever
By Chris Mayer, editor of Capital & Crisis, for Whiskey & Gunpowder
Whiskey & Gunpowder is a free, twice-per-week, e-mail service for more from the team, go to https://www.whiskeyandgunpowder.com
