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Conversations with Coleman
The Rise and Fall of China with Michael Beckley [S2 Ep.25]
00:58:27
Today's episode is all about China. My guest is Michael Beckley, who's an associate professor of Political Science at Tufts University and a visiting scholar at the American Enterprise Institute. He's received awards from the American Political Science Association and the International Studies Association and he's been featured in numerous media outlets, including the Financial Times foreign affairs, foreign policy, The New York Times, NPR, and The Washington Post. Michael is also the author of the book Unrivaled: Why America Will Remain the World's Sole Superpower. Many people are worried that China will one day surpass America as the world's leading superpower. Michael Beckley doesn't think so. He thinks that China's extremely fast growth since the late 20th century is unsustainable and that its flaws will soon lead to a decline, which is an interesting counterpoint to my conversation with Neil Ferguson many months ago. I really enjoyed this one and I hope you do too. #Ad When ...
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Welcome to another episode of Conversations with Coleman. If you're hearing this, then you're on the public feed, which means you'll get episodes a week after they come out and you'll hear advertisements. You can gain access to the subscriber feed by going to ColemanHughes.org and becoming a supporter. This means you'll have access to episodes a week early, you'll never hear ads, and you'll get access to bonus Q and A episodes. You can also support me by liking and subscribing on YouTube and sharing the show with friends and family. As always, thank you so much for your support. Welcome to another episode of Conversations with Coleman. Today's episode is all about China, and my guest is Michael Beckley, who's an associate professor of political science at Tufts University and a visiting scholar at the American Enterprise Institute. He's received awards from the American Political Science association and the International Studies association, and he's been featured in numerous media outlets, including the Financial Times, Foreign Affairs, Foreign Policy, the New York Times, npr, and the Washington Post. Many people are worried that China will one day surpass America as the world's leading superpower. Michael Beckley doesn't think so. He thinks that China's extremely fast growth since the late 20th century is unsustainable and that its flaws will soon lead to a decline with the which is an interesting counterpoint to my conversation with Neil Ferguson many months ago. I really enjoyed this one, and I hope you do too. So without further ado, Michael Beckley. All right, Michael Beckley, thanks so much for coming on my show.
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A
Thanks for having me, Colin.
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B
So before we get into the topic of US China relations and your really interesting and sort of unique against the grain take on it, can you give people a sense of who you are, how you came to be interested in, and study international relations?
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Sure, yeah. I currently have two jobs. I'm a professor up at Tufts University, and I work at a think tank, the American Enterprise institute down in D.C. and I've spent pretty much my whole career either in the US Government, mostly in the US Department of Defense, or working for various think tanks like the Carnegie Endowment for International Peace, the RAND Corporation, Carter center down in Atlanta, and have basically just been writing and researching and trying to talk about foreign affairs as much as possible. And I mean, I think you'd have to lay me down on like a psychologist's couch to figure out why, but I've always just been obsessed with it since being a little kid, can't get enough of it. And so have really made it my hobby and my passion in my career.
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B
Yeah. So I found your book to be really interesting and I've talked a little bit about China on this podcast before. I had Neil Ferguson on who. Who takes a very different stance, a much more worried stance about China's rise. And I found your arguments to be really, really interesting and compelling. So I guess the, the place to start here is just probably most listeners to the podcast will be aware that it's now very much acceptable and in vogue in a bipartisan way to be truly worried about China surpassing America in terms of global domination. At least on its face, there are many compelling reasons to worry about China's rise. Right now. You have the Belt and Road Initiative, exporting infrastructure to all kinds of developing nations and the attendant expansion in China's influence that comes as a result of that have obviously just its rapid GDP growth relative to ours and the military influence in the South China Sea and so forth, in addition to the kind of the political ideology making its influence felt among US Corporations that actually in some cases like the NBA and others are unable to say certain things because of the CCP and its global influence, just the fact that they do business there. So many of us are worried about China potentially surpassing the US in global dominance. And here you come and you say, well, actually there's a lot of interesting reasons why we probably don't need to be as worried or at the very least are worrying about the wrong things. So give me a sense of why you think that and what the I might even call it an emerging consensus gets wrong.
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A
I think people are right to worry because I do think China is making moves. All the things you just listed are certainly true, but I think the way we tend to think about China gets it a little bit wrong. We tend to focus on China overtaking us as this giant superpower. What I tried to do in my research was show that China has a number of weaknesses. Even though it has a big economy, that economy generates high growth at very high costs. The cost of having to sustain a lot of loss making companies, the cost of having to feed 1.3 billion people, the cost of having to run this giant authoritarian state that's trying to track everything that the Chinese people do that sucks away a lot of China's wealth. And it's the same thing in the military sphere where China has this mass army that it has to maintain. And as a result it's not able to focus on some of the higher end weapon systems that would be critical for it to project power globally in the same way as the United States. But that said, even though I think that China lags pretty far behind the US in standard metrics of national power, I do worry about a sort of huge surge of Chinese repression as well as international aggression. I think we're already seeing that. But the reason I think we're likely to see that even more in the future is that I think China's power is peaking. China is facing a big economic growth slowdown. It's been concealing it. It's much worse than most people think. The massive debt that it's accumulated. And at the same time, anti China sentiment around the world has soared to levels we haven't seen since the 1989 Tiananmen Square massacre. And it's starting to manifest itself in ways that are making life very difficult for the Chinese. Everything from the Taiwanese, more and more people there just don't even consider going back with the mainland. You saw the skirmish between China and India on their shared border. You see a number of China's maritime neighbors beefing up their navies and air forces and, and starting to form alignments with the United States and engaging in various types of diplomatic and military cooperation with the US So China faces this growing emerging ring of encirclement at the same time that its economy is slowing. I've studied past cases where that's happened. Germany, Japan, Russia, where you have a power that's been rising for a while, and then it hits economic headwinds and strategic pushback, and they tend to not mellow out. They tend to get even more aggressive because they have to kind of batter their way through this difficult period. And I worry that China is already doing that today.
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B
So you had this concept of net power that captures why scholars get China's level of power wrong. So can you explain what you mean by that?
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A
Yeah, I mean, the metrics that we use like that you just see in newspaper headlines. So gross domestic product, how big is the economy? How big is the military? How many people are in the military? How much do they spend? These metrics all systematically exaggerate the power of countries with big populations. So China and India just look really big and look really powerful just because they have huge populations. What those metrics don't capture are the costs of having to feed, clothe, secure, clean up after that many people. And so it would almost be like looking at someone's wealth by just looking at their credit card statement and seeing how much spending on their credit card. Well, if they don't have a lot of wealth to back that up, they may be running up tons of debt. And so the idea is you have to actually look at the liabilities, not just the assets that every country has. And so in a lot of my research at base, it's essentially making what accountants call a balance sheet, where you have assets on one side, liabilities on the other. And when you do that, China's wealth is a lot less impressive than it might otherwise seem. Its military power is a lot less impressive, its trade volumes around the world, its diplomatic outreach. For all these reasons, a lot of China's wealth and power gets sucked away simply by the huge cost of having to take care of the largest population in the world.
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B
It's interesting that this argument about cost was really counterintuitive to me, at least part of it was. I can totally see how it's difficult to take care of a billion people, many of whom are one generation removed or not at all removed, still living in, you know, agrarian poverty. But you have this argument that Chinese businesses actually suffer from high production costs, where obviously, you know, I would associate Chinese businesses as having much lower production costs. And that's why so many businesses get outsourced to China. So how does that get squared?
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A
So labor costs are very low, which is why jobs are outsourced. But in terms of actually generating wealth, Chinese production costs are very high because a lot of the output from Chinese firms is relatively small. So they're making products that have pretty marginal returns. They tend to be doing export, what they call export processing, where a bunch of different components like the laptop I'm speaking to you on right now, the screens come from one country, the ships come from another country, and a lot of the final assembly is done in China. And so it's cheap to do it that way because labor is so cheap there. But the products that, the value that those Chinese workers are adding is also relatively small. And so you just have sort of mass production of relatively low value operations. That's in the extreme kind of example. And so if you just look across the board at Chinese businesses, on average they use about twice the amount of capital and five times the labor of the average American firm to produce the same amount of economic output, the same type of products. And so even though you, as a multinational in the United States could maybe save some money by outsourcing some of the low value activities in your supply chain to China, if you're looking at it from a Chinese perspective, like, how are we going to generate wealth for our entire country? It's much more difficult because the Value that you're generating is not really that high relative to the amount of people and the amount of investment that you have to put into those companies. Especially the state owned enterprise sector in China is extremely inefficient. A lot of those companies actually are loss making. They destroy value and they're basically propped up through subsidies doled out by the Chinese government.
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B
Yeah, this is one of the really interesting issues here is what role does autocracy play in China's power? Because I've heard the argument and I think I can't remember which guest it was I had was making interesting and persuasive points about how autocracy can in many cases be an advantage. Because just from the point of view of getting things done, a hierarchy, a clear hierarchy can be more efficient than a democracy where it's impossible for us to come to any decision that's bipartisan and then execute it for more than four years at a time as the president or dominant party in Congress flips back and forth. Whereas in China, if Xi Jinping wants to do something, that's about it. So there's a kind of. Does that not give China an advantage in all sorts of foreign policy domains relative to the US it could.
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I think the standard argument is authoritarian governments are very good at, as you said, getting things done at mobilizing resources very rapidly. We need to build a bunch of bridges. We can just push aside whatever peasants are on that land, take away their rights and build that bridge. We can allocate the money that we need to build some huge factory. So we've seen this time again where the Soviet Union is a critical example, where they modernized very quickly in just a few decades after being formed. China is another example. But the problem that we've seen historically anyway is authoritarian regimes tend to be not so good at things like innovation because when everyone's looking to the state for direction about what to do next, when you have bureaucrats who are basically picking economic development projects, and these bureaucrats have their own personal interests, whether it's accumulating wealth for themselves or maintaining power and just not looking bad, they don't necessarily make the best decisions. And the people in general don't have much incentive to engage in entrepreneurship because if you open up your own business, you don't know if the government's just going to come and take it away at some point or bulldoze it to make room for some other property development. If you make an invention, you may not be able to secure the intellectual property to that gizmo. That you just spent all that time trying to invent. And so what we've seen time and again is authoritarian regimes tend to have this surge of economic development where they're moving from either an agrarian society or sort of a low level industrial society up to the highest levels of industrial power. But then when they need to transition to a more information driven economy, that's where things get much more difficult because it's just really hard to mandate innovation. China spends lots of money, employs lots of scientists, but outside of some pockets of excellence, is still struggling with aspects of innovation. And so that's the general knock on authoritarian regimes. Now, I think the big X factor are these new technologies, especially those driven by things like big data and when you're using artificial intelligence. And if you can just train algorithms by cramming through a lot of data, an authoritarian regime would have a huge advantage in that area because they don't have to worry about privacy, individual rights, and they'll have access to tons of data and be able to just pump it into whatever national projects that they want. And so that to me is the kind of thing that remains to be seen whether these new technologies, these emerging technologies, fundamentally change our theories that have been well established about the relative advantages of democracy and autocracy when it comes to economic development and innovation.
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B
Yeah, this gets into some of the things that I read about the Belt and Road initiative about China testing out AI surveillance technology in many countries, in certain African countries. How worried are you about the consequences of those kinds of technologies in the context of the relationship between China and the rest of the world?
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A
So just from a human rights and democracy perspective, I'm extremely worried about the digital authoritarian system that China is promoting and is already supplying and operating in more than 80 countries as we speak. I just think about the data collection and messaging power of Apple, Facebook, Amazon, and then I just imagine that collected in the hands of the Chinese Communist Party and merged with the massive internal security apparatus that China already has going for it. And, and combined with China's many economic links with a lot of poor either shaky democracies or already authoritarian regimes around the world. And when you combine all that, China is really able to push this particular model into other countries. And the reason China would do that because a lot of people say, well, why would China want to export its political model? It's not really an evangelical power, but I think autocracies want there to be more autocracies in the world because one other autocracies won't criticize them for their own human Rights abuses. And second, if democracies look kind of shambolic or dysfunctional, that's also good because then their own people aren't going to want to emulate that system. And so these new technologies where it just makes authoritarianism so much more efficient than it ever used to be and so much more effective, it's just a lot cheaper. Instead of having to fund death squads and send them around and beat people into submission, now dictators can sort of send subliminal messages through social media feeds and just mainline it into people's Facebook pages. They can use data to track entire regions within their countries. We're seeing that in Xinjiang today, where when you combine lots hundreds of, when you combine millions of video cameras and you're feeding the data and then you use artificial intelligence to sort through all of those images very rapidly and identify potential perpetrators, and then you send in the normal security forces to go give a knock on the door. That's a very powerful system. And it also frees dictators from the traditional trade off they used to face, where you could either spend money on guns or you could spend it on butter, you could spend it on more security services to ensure your rule, or you could try to increase the amount of wealth that you're giving out to the population. But a lot of these technologies not only allow for authoritarianism, but they also enhance economic development. They help make the trains run on time, they help diagnose diseases, they help spur entrepreneurship. And so I just worry that dictatorship has just become much more efficient because of these technologies. China, as you mentioned, is sort of beta testing them in many countries around the world and as well as within its own provinces, and is now starting to push those technologies not because it wants to spread a particular China model, but because it does want to spread the amount of authoritarianism in the world and to try to destabilize democracies, try to make them more anti democratic, try to funnel in disinformation, frankly, they're starting to use a lot of the tactics that Russia has perfected over the last five years. And so even though I'm not as concerned as some other folks you've mentioned about the sort of global balance of power, I worry about particular areas of competition with China. And this is one particular area that scares me the most. Just because I think these new technologies give China such a much more powerful weapon than any past Nazi Germany, the East Germans, the Soviets, they didn't have these kind of technologies at their disposal.
- [19:33]
B
Right. And what the Nazis had and the Soviets had that you argue China pretty much doesn't have, at least relative to America, is it any kind of truly threatening military? And it seems from your book you don't think they're likely to develop one.
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A
So I think the global balance of power is very much stacked against China. They don't have the bases, they don't have the aircraft carriers, the nuclear powered submarines to really project military power far beyond their borders. Now, that said, there are local balances of power, particularly in the Taiwan Strait, where if there was a war over Taiwan today, China would have home field advantage. They can hit targets all over Taiwan with never having to leave the Chinese mainland in the first place. They've got more than 1,000 missiles trained on Taiwan. They've built these new amphibious ships. So in a war over Taiwan, where the US has more than one arm tied behind its back, because the United states only has two major military bases within even 500 miles of Taiwan, they're on Okinawa, Japan, and China now has missiles that can potentially wipe those bases out in a Pearl harbor style surprise attack. And if that happens, then the US has to fight China from Guam, which is more than 1,000 miles away. And so you'd have to be sending in forces through a hail of Chinese missiles and mines to get anywhere close to the Taiwan Strait. And so even though I think the United States is much more militarily powerful than China, in aggregate in the places they're most likely to fight, and especially in the Taiwan Strait, the local balance of power is much closer than most people think, because geography sort of equalizes things for China, and they've been training their military specifically for that, while the United States has been fighting wars in the Middle east that are, of course, very different than the kind of war that would take place with China in the Taiwan Strait or the South China Sea.
- [21:27]
B
So another big topic that comes up around the relationship between the west in general, but the US specifically in China, is intellectual property theft. How worried are you about that aspect of our relationship?
- [21:44]
A
I'm also very worried about that. Not necessarily because it's going to turn China into this giant technological superpower, but more because it'll help China hone particular technologies that'll help it accomplish some of its other aims. So if China can pilfer more speech and facial recognition technologies, that'll help it hone the use of those to crack down on its own people. I mean, they're trying to build a system where they can essentially monitor people all over the country, can within a few minutes, find out where someone is because they can hear Them talk and listen in on them and recognize their voice and recognize even the way they walk. And so you can pick individuals out of a crowd very rapidly and then hunt them down. So I worry about that type of theft. And then also just particular businesses or industries that have strong links to the military. So if China can pilfer certain aerospace technologies, that's going to greatly help it make jet engines. And then it'll have a much more powerful air force. If it can steal certain avionics technologies, that's also going to help it. So it's more about these individual technologies that either have military applications or applications for authoritarian governance that worry me. But it's less about the, oh, if they steal technology, they're going to become this technological superpower. I mean, history shows that you're on a treadmill. If you're just relying on theft over and over again to steal things, yeah, you might equalize for a little bit. But if you don't have the broader innovation system to then build on those innovations and create an entire ecosystem of different products, it's not going to lead to long term economic gains. But there can be short term military and governance gains by stealing technology.
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B
Yeah, so this gets into the structural problems with China's, with China's government and institutions that lead you to be less worried about its global dominance than some people. And one thing I find interesting is the problem of demographics of birth rate and aging population. This is a problem some other countries are facing as well, Japan obviously, and with declining birth rate to a lot of countries in the west as well. So can you talk a little bit about the demographics of China, how they're changing, why they're changing and what the implications of those changes are?
- [24:13]
A
Yeah, I think it's good to start with just kind of the headline statistics because they're pretty shocking. So according to current projections, China's population by the end of this century is going to be half of what it is right now. So just cut the country's population in half. Worse, it's going to be a much older population. China just recently surpassed the United States in age. So the average person's about 38, 39, and that's going to go up into the 50s within a couple of decades. By 2040, 2050, a third of China's population is going to be over the age of 60. So it's going to be this huge senior citizen population. And if you just look at the absolute numbers, over the next 30 years, China's going to lose about 200 million working age adults. So take the workforce and take out 200 million workers. And at the same time, it's going to gain more than 300 million senior citizens. So almost like a United States of just senior citizens is going to be added on top of the of China's population. So that's going to be catastrophic for China's ability to generate wealth. You're just with so many more elderly people to take care of, that's going to be extremely expensive. And you're going to have way fewer workers to actually produce the wealth that you need. And at the same time, it's going to destroy, I think, the fabric of Chinese society. Because the thing that's really held China together for millennia has been the family. The family has been the core unit of Chinese society. But because you have this huge generation of only children coming through that have very few blood relatives, I mean, they literally have five times fewer cousins than previous generations. So that means not only do you have fewer family members to help take care of grandma when she gets old, but it also just means you're sort of socially isolated and maybe your only relatives are your elderly parents that you have to take care of. So you can imagine the kind of dislocation that that causes. So in terms of the reasons why this is happening, China has a very peculiar demographic history. So basically, for 100 years, from the 1840s until the 1940s, China is just absolutely ripped apart in what the Chinese refer to as their century of humiliation. And especially coming into the first half of the 20th century, you have the war with the Japanese, obviously with World War II, you have the Chinese civil war. So tension, hundreds of millions of people are either dislocated, tens of millions are killed in these wars, and that decimates that generation of people. Then once Mao comes to power in 1950s, 1960s, he encourages Chinese families to have lots of children and they oblige. So there's this massive baby boom generation. But then the Chinese government reverses course in the late 1970s, early 1980s and institutes the one child policy. And so over the last 30 years, things have been great for China because you had this large baby boom generation with relatively few parents to take care of because so many of them had died in the wars and that the huge famine that took place. And they also had relatively few children to take care of because of the one child policy. So they had eight workers for every elderly citizen in China over the last 30 years. But over the next 30 years, that's going to reverse because you have this huge baby boom generation that's going to retire and fall on the backs of this tiny one child generation. That 8 to 1 advantage China used to have in terms of workers and retirees that's going to collapse to 2 to 1 just over the next 30 years. So you can imagine what that will do to the productivity of the workforce, the amount of money that's just available for any kind of spending, whether it's military spending, whether it's spending on innovation, what have you. So it's going to be a huge constraint for China going forward.
- [27:57]
B
I'm curious what how immigration fits into this picture. I think immigration has had a lot to do with the US dominating on the global scene and how attractive we've made the United States to the world's migrants, especially high skilled migrants that then come and contribute to the country in all kinds of ways. And this is obviously there are two ways to at least two ways to fight an aging population. One is to get people to have more babies within a country and another is to import people from other countries that are young to do the work. So is there, what's the prospect of China sort of choosing to become more and more a nation of immigrants?
- [28:45]
A
I think it's very unlikely because the Chinese government is now promoting a much more like ethno nationalist conception of what it means to be Chinese. I mean, we see that certainly in Xinjiang where the Uyghurs have always been considered kind of not really part of China. But that has escalated and Xi Jinping, the whole propaganda apparatus has been, if you actually read Chinese documents, is all about we are going to have a Han Chinese dominated nation. That's what it really means. And we're going to enforce that kind of ethnic purity on the rest of the nation. We're no longer going to cater to these various minority groups and give them special autonomy, et cetera. We are going to start ruling and start expanding Han Chinese dominance throughout the country. And so given, and they're doing this because of internal security, they're worried about separatism as they've been for a very long time. And especially as they confront sort of slowing growth and more pushback internationally, that's going to become even more of a concern for them. And so just given that hostile attitude taken towards non Han Chinese people, it's going to be very hard to attract immigrants. And frankly, I don't think the Chinese government is that keen. Even though they recognize the demographic issues, they also worry very much about foreign pollution, as they call it, foreign influence. If you open yourself up to immigration, you also have to deal with a whole host of new foreign ideas and China's system is not set up to deal with that. And as far as I can tell, Xi Jinping very much wants to keep it that way, even though he recognizes the long term demographic problem coming as well.
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B
Yeah, this reminds me of a Financial Times article I read a while back about China subsidizing Uyghurs to intermarry with Han. Basically paying the Uyghurs hoping that they could use money to incentivize sort of interracial marriage and breeding such that there were just fewer Uyghurs or that there was. That they melt into the Han majority. And it struck me a government, it just struck me how different the moral sensibilities of the CCP are. That's just the kind of policy that would be such a non starter in the west at this moment if there were an analogous problem here. Obviously we have racial tensions here, but could you possibly imagine even the worst of our politicians saying something like we're gonna pay black people and white people to intermarry? Right. It's like it was so discussed the sensibilities of citizens here and it's worth reflecting on sort of how different these worlds are in many ways. And I'm curious, what would the CCP be willing to do to combat this? What is sort of a not quite existential but extremely serious problem of an aging population? What kind of policies are they going to look at to try to solve that?
- [32:02]
A
Yeah, there's been chatter about, well, are they going to shift to a multi child policy, namely forced breeding of Chinese adults? I mean, I actually don't think that's likely because simply because it just wouldn't be effective. It takes 18 years or maybe even more to grow a fully functional adult citizen and worker. And so even if you start literally forcing Chinese families to breed, it's actually going to make the problem worse the short term because now you have a lot of children you need to take care of. And so it doesn't really within the time horizon that I think Xi Jinping, who's starting to get up there in age is thinking about. I don't think that's likely. I think the more likely scenario is they're trying to really double down on automation. This is one of the reasons, one of the many reasons why China's pushing so hard on these emerging technologies, both robotics but also artificial intelligence, in order to guide this new sort of army of machines that they want to use to replace workers. So I think that would be the more likely scenario. I mean, just to your earlier point though, about the type of mentality that the regime has, I think what you described from that Financial Times article is kind of actually the old China policy, which in some ways was more humane or less humane than what they're currently doing. I mean, before the idea was manifest Destiny, just try to push as many Han Chinese settlers into Xinjiang, into Tibet, and basically just try to sweep out or integrate through a melting pot minority groups. But now what we're seeing in Xinjiang is they've locked up more than a million Uyghurs in concentration camps. And there's been many documented reports of forced sterilization of Uyghur women, as well as just sort of a mass terror campaign. And we've seen statistics suggesting that Uyghur births have basically fallen off a cliff. So now it's just getting to the point of we are going to literally snuff out these groups. And this is why so many groups, including the US government, are starting to call this a genocide. So these are two different issues I think on the just overall population automation is their answer. But when it comes to minority regions, they're willing to actually cut population levels if it means significantly reducing the population of those minority groups.
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B
Couple other things I wanted to hit here. One was the problem of ghost cities in China. What are these ghost cities and why do they get built?
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A
So ghost cities refers to an entire metropolis basically that's more or less empty. So big skyscrapers where nobody's doing any work in them, apartment buildings where nobody lives, roads going to nowhere, airports that aren't being used. A few years ago there was a major study led by Chinese researchers where they use satellite data and they documented more than 50 of these ghost cities where they could just look at, they could see the buildings, see the metropolis, and then see the total lack of activity going on within them. There's been a lot of interesting books where people have actually tried to tour through these areas. And I think it speaks to a broader problem in China's economy, which is that most of China's growth, especially since the 2008 financial crisis, has been basically generated by just stimulus spending, just lots of government spending, force feed through the system, green lighting, any kind of infrastructure project. And the basic idea is you keep these big state owned enterprises that are in the construction business. They build infrastructure, they lay down the pipe, they install the electricity. It keeps a lot of the activity going, which keeps money flowing to state connected firms. It keeps a lot of people employed. It's essentially a Patronage system where the top leaders in China give these firms huge loans that don't necessarily have to be paid back. And in return those firms do whatever Beijing wants them to do, as well as employ just a lot of Chinese workers so that the Chinese people have jobs and don't rise up. Now, of course, the huge downside is debt, because a ghost city doesn't generate real economic value. And you see that reflected in the skyrocketing of China's debt. It's increased even before COVID On the eve of COVID it had ballooned Eightfold over the previous 10 years. And I don't think we'd seen a surge in debt from any country, any major country in peacetime that comes anywhere close to that. China took out $29 trillion in new credit. So just putting it on the credit card basically. But over that 10 year period going into 2019, 2020, that's equivalent to a third of the entire global economy. And so just to give you a sense of the amount of easy money that China has opened up, but at some point there has to be a reckoning and some people go as far to say, well, the whole system's going to collapse like Enron style. I tend to think of it more as an extreme version of what happened to the Japanese in the 80s and 90s where they propped up a lot of these inefficient firms and then basically their economy had to take a haircut. A lot of those assets that don't generate any value, factories that aren't producing anything, have to just be written off. And you just take them out of all the statistics you've been compiling. And it turns out the economy is a lot smaller than we thought it was. Turns out a lot of things just have to be shut down. So I think that's the more likely scenario. But some people think that this could bring down the whole system because you could have a huge financial crisis in China if people start calling in those debts. I think that's unlikely just because the state controls everything. But it's not out of the realm of possibility.
- [37:33]
B
What could China have done differently in the past 50 years to have created a much more sustainable long term growth pattern?
- [37:45]
A
But the standard Western academic answer is, well, they could have liberalized the economy more and in fact they were starting to do that in the 90s when they were trying to join the World Trade Organization, which they eventually did in 2001. If you look at the book that China signed onto of all these new regulations imposed by the international community to join The World Trade Organization. It's thousands of pages long of new regulations. And the Chinese, to their credit, not only integrated those, but they actually had to change their court system, they had to change their domestic regulations to try to harmonize with international standards. And so there was a movement towards that going all the way up until maybe the early to mid 2000s, but we've seen a huge retreat from that. I actually think the 2008 financial crisis was a major turning point. Other people can pinpoint other areas, but clearly under Xi Jinping, it's much more of a state dominated system where the state calls the shots. It's just a traditional authoritarian system. So the standard Western answer would be like, well, if they just continued those reforms, you'd have more space for entrepreneurs. You wouldn't have a situation like where Jack Ma, the leader of Alibaba, has just been basically, his assets have been cut in half, his empire has been crippled because the state wants to maintain control. You'd actually have a flourishing of private companies that could leverage China's huge domestic market and huge workforce and really be a major economic player. So that's the standard answer. The reason to question that, though, is China. It's a difficult place to rule. If you look at Chinese history, it's been hard to hold what we know of today as China together. A lot of Chinese history is basically trying to build an empire and then having to absolutely collapse into different warlords. Big parts of Chinese history are literally called the warlord era. It doesn't really cohere geographically in a way that other countries do. It's also in a very rough neighborhood with 19 countries around its borders, most of which are either unstable or hostile towards China or some combination of both. And so it's just a very hard area to generate sustainable economic development. And so this is why the Chinese say, well, you can always tell us democracy is better and having an open system is better. That doesn't work for China. That may not be totally true, but there's at least a kernel of truth there that the only time China has been unified is through just sheer authoritarian brutality, essentially. It's really hard to keep it unified otherwise. And in that, when you need to do that to maintain the country, it's hard to have an open, liberal, free market, anything goes economy, because that's just not compatible with the type of rigid political control you need. So while I criticize China a lot, I also kind of understand at least some of the challenges that they face. And it's only gotten worse over the last 10 to 20 years, because China has plowed through a lot of its natural resources. It's become heavily polluted. So that just makes it even harder to generate wealth over the long run. But the standard answer is just, liberal reforms open up, create more space for entrepreneurs and innovators.
- [40:53]
B
Speaking of China's history, and something you mentioned earlier in the podcast, which I find to be really interesting, is this notion of the century of humiliation. I remember learning about this a few years ago, and just this notion that the way Chinese history has been taught, at least in the past 50 years, imbues people with this extreme concern about China's national sovereignty and integrity that stems from this period in the 1800s and early 1900s where China was just being conquered and harassed by various foreign states. Is that something that you've thought much about or that you think motivates the psychology and sort of political messaging in China today?
- [41:53]
A
Absolutely. It is a central pillar of the Chinese nationalist narrative today. It has deep emotional resonance for pretty much everyone that lives in China. It's in the textbooks that Chinese students study. It's part of. It's referenced in speeches. And there's holidays. There are literally holidays that you wouldn't call it celebrate but commemorate, like Japanese brutality, you know, against China. And you can understand why, because, you know, prior to the mid-1800s, China had thought of itself as this great empire with thousands of years of history, and that it was sort of the center of the world and that it didn't need to learn much from, say, European barbarians because it already had everything it needed. And so you can just imagine.
- [42:41]
B
Doesn't zhongguo literally mean central country?
- [42:44]
A
Yeah, yeah. So it's. Yeah, yeah. So it's the center. You know, scholars are debating to what extent that phrase was actually used back in the mid-1800s. So I don't want to say it, but certainly the mentality that China is the superior civilization on earth was very much prevalent, at least in the Chinese government going into the mid 19th century. So you can imagine the shock where the British, who had only been allowed in a few little trading ports and minor trade, decided they really wanted to sell lots of opium. They wanted to sell drugs. Right. They wanted to sell drugs in China so they could get the money and then use that to bankroll their empire in India. And so in order to do that, they started putting pressure on China. China launched a war on drugs. And then Britain just brought in its navy and obliterated China's military and just started to impose what ends up becoming a century of what The Chinese call unequal treaties because it's followed by the French, it's followed by the Russians, and then infamously, it's followed by the Japanese, who come in and inflict really biblical brutality on China for decades, going all the way until the end of World War II. And so you can imagine just the huge shock that that has on China. It absolutely is catastrophic because China collapses in on itself. And so the fact that China was able to shake that off, the Chinese Communist Party is the ones, they claim that they are the ones that defeated the Japanese and they unified the country. And so you can imagine how critical that is for their long term legitimacy. Only we could have done that. We are the ones that reversed the century of humiliation. And now, as Xi Jinping has said, we are now going to reclaim our rightful place in the world. And that's not just an abstract thing. There are lost Chinese territories that Xi Jinping has pretty much made clear he wants to take back on his watch. So Hong Kong, we're gonna consolidate our authority there. That's already done. Now, next, maybe Taiwan, right. Not only did it used to be part of China, but there's this rival Chinese government there that's democratic and basically has this defense agreement with the United States that cannot be allowed to stand if you're the Chinese Communist Party. And then the South China Sea and the East China Sea, that should be a Chinese lake, essentially. That should be our waterway that we control, and we decide who gets in and who gets out. I mean, this is so fundamental for the Chinese psyche, for the decision making of the government and for the narrative of the Chinese Communist Party, for the legitimacy of the Chinese Communist Party, what they can sell to the Chinese people. I think we in the west tend to underestimate that and tend to underestimate the emotional core and how it affects Chinese decision making.
- [45:28]
B
Yeah, that's why I find it so interesting, is because unless you've heard of that notion of the century of humiliation or taken a little bit of a dive into it, which I think most people would sort of have no reason to, you wouldn't necessarily know that the arguments about Hong Kong are connected in Chinese political rhetoric and in people's minds to the brutality of Japan towards them, this is all part of one narrative. You can't understand how many Chinese people feel about the Hong Kong issue without putting it in the context of this historical meme of the century of humiliation. And I'm not sure what there is analogous to this in the West. I mean, we have the legacy of slavery in America, which is probably similarly deep to many Americans. But there's no. I'm not sure there's any direct analogy here. And it's something that I've always found fascinating and makes sense of a lot of the feelings of typical Chinese people on these issues.
- [46:40]
A
Yeah, I think American nationalism and Chinese nationalism are very different. American nationalism, I mean, just look at the Fourth of July. Like, we blow stuff up and like send the Blue Angels over. And it's this giant celebration and is essentially commemorating, at least if you were in the dominant ruling class, just a steady progression of rising to become the richest and most powerful country in the world. And you're a relatively young country. For China, it's about what was taken away from us for an entire century where we were absolutely ripped apart and brutalized by Western imperial powers and by the hated historical enemy, Japan. And we need to understand it is commemorated. There are multiple holidays throughout the year, every year in China that commemorate various atrocities that were perpetrated against China. And so it's a very different type of. Very different way of kind of rallying people around government and coming together as a nation. You know, if you've ever been part of a group where you have this like, it's us against the world mentality, it's like that, but times like a billion. Right.
- [47:42]
B
So I mean, it's probably a closer analogy to the legacy of slavery for black people. Might be the sort of never forget mantra that Jews have about the Holocaust, something like that. But for a nation, obviously there are many differences, but.
- [47:56]
A
Right. I mean, that's why I think that this. With slavery in the United States, because it was so horribly experienced by a particular segment of the population and not with the time the ruling class. It's different than what China has, where even, you know, even if you're a top leader, you end up getting brutalized. In fact, you might be singled out first by the Japanese. Right. So it's a. It's a different kind of humiliation for the United States. We have this horrible historical blot on our record that we're still working through with China. It was like the entire nation was literally just brutalized by foreign invaders and their cronies that infiltrated within China.
- [48:33]
B
Going back to this larger issue of global dominance. Who is the most powerful country on the planet? You have these two. There are these two theories you mention in the book, the balance of power theory and the convergence theory. Can you explain what those two mean?
- [48:54]
A
Yeah. So a lot of people assume that if a country as powerful as the United States Sort of what goes up eventually must come down. And while that might be true over thousands of years, there's actually not that much reason to think that. If you look at what's happened historically, the two major theories that try to motivate that are one, this idea of a balance. So when you get a very powerful country, weaker countries just instinctively gang up on it and they try to rebalance the system by forming alliances with each other. So when Germany rises up, the other European powers get together and crush Germany. When Japan rises up, the United States and other countries around the Pacific band together to crush Japan. The reason, though, I don't think that applies to the United States. And in fact, why the United States has more allies than any great power in history. It has almost 70 formal allies around the world is a stroke of luck when it comes to geography. So the United States is the only really powerful country located in the Western Hemisphere. All the other great powers are packed together in Europe and Asia. And so they tend to fear each other more than they fear the United States. And in fact, the United States makes the perfect ally, because if you can enlist the United States on your half of the local dispute there in Eurasia, you're going to have a huge advantage over your allies. And so we've seen that time again. That's why the Western European powers immediately formed an alliance with the United States in the Cold War, because they were afraid of the Soviet Union. That's why so many countries around China's periphery have an alliance with the United States. You have Japan, Taiwan has this agreement. It's in US Law. The Philippines, South Korea, of course Australia, because of where the United States is located, I think that the power, resources it brings to bear, and some people think the fact that it's a democracy, which maybe is easier to trust than an authoritarian regime, just because it has diffuse power. For that reason, you haven't seen this balance of power form against the United States. And in fact, China is suffering much more from balance of power dynamics. So many countries are starting to gang up on it rather than against the United States. The other main theory that academics have put forward as to why a country like the United States can't stay powerful is this idea of convergence, which is just a fancy way of saying poor countries tend to grow their economies faster than rich countries. And the idea is if you're a poor country, you don't have to invent new technologies. You can just buy or steal whatever the most advanced countries are doing and just immediately set up a brand new subway system. Based on their technology, set up an Internet based on their technology, et cetera. And so you can what they call leap ahead. You can leapfrog stages of economic development very rapidly and quickly close the gap. You also have lower labor costs, so you can kind of suck away economic activity through outsourcing. It turns out that this is not a very good theory, though. If you look at trends over the last hundred years, the rich tend to get richer rich countries. The gap between rich countries and poor countries, with some exceptions in the 2000s and 1990s, has widened in most decades of the 20th and 21st centuries. So we've seen an expanding gap between rich and poor. And that's just because it makes a lot of sense. If you already have a Silicon Valley that's going to attract even more smart people from all over the world, it's going to attract even more investment from all over the world. And so you're going to see actually concentrations of wealth forming in already rich places. And the United States has more of those than any other country. So the argument that I make in the book you've been referring to is not that the US Is destined to lead forever. I mean, something's going to happen over the next maybe 200, 300, 400 years. It's not going to be the same as it is now. But this idea that the US Is doomed to decline, if you actually look at the theories as to why that's the case, there's very little empirical support for them, at least as applied to the United States.
- [52:52]
B
So I just got one more question before I let you go, and that is just one that I'm personally curious about. Do you visit China very often and are you welcome there?
- [53:06]
A
I haven't been there in a long time. I lived there for a couple of years in the early 2010s.
- [53:13]
B
But the point of my question actually is having just published books like these where you're arguing that China is not going to be. It's not going to surpass the United States as a global power, and making a very persuasive argument and being a public person that the CCP could totally be aware of. Do you, if you were to travel to China, would you at all be worried about being harassed or anything like that, or do you feel it would be safe?
- [53:40]
A
I would assume I'd be safe, although it's not totally guaranteed. I mean, Chinese state media has written articles slamming my terrible research and what an idiot I am. And so they definitely know about me. And at the same time, I've been going to Taiwan and have been helping Taiwan quite a bit and writing reports and doing analysis to try to help that situation. So that certainly is not going to endear me to the ccp. I don't know if I don't think I'm high profile enough to be singled out so that Chinese intelligence is going to disappear me. If I set foot in Beijing, I might have some trouble getting a visa to go over there. And there may be a bunch of malware sent onto my computer system. Every day I open up my retirement account or my savings account just to make sure that it hasn't been drained down to zero in some horrible cyber attack. But I don't think that there are bigger fish for the Chinese Communist Party to fry than an academic scribbler like myself. The only reason I'd worry about it is more just the attitude towards foreigners in general who ask the kind of questions that I ask when I go over there. If you're starting to talk about politics, I mean, I've just heard anecdotal stories from friends who have lived in China for a long time, Westerners who have been there a long time, and they say it's palpable that you will get confronted every now and then by people. You'll hear anti foreign slurs in Chinese get thrown out more often than they did before. And certainly the feel of authoritarianism is stronger. It's just harder to get around the great firewall, the Internet barriers while you're there. And I have some journalist friends who, they've been tracked. They know that they're being tracked. They see the plainclothes police officers, they're not that good at hiding themselves. And I actually don't think they're really trying that hard. They want you to know that they're going to be on top of you. So my research tends to be at the 35,000 foot level, looking at the big balance of power. That's maybe not quite as sensitive as if you're a journalist peeking into what's going on in tibetinjiang. But I'm also not exactly eager to get on a plane right now to Beijing if I'm not part of a broader delegation, because you never know, but I think I'm probably safe.
- [55:58]
B
Not to make you more scared, but I remember now having a conversation with Tyler Cowen, who I plan to get on this podcast. An economist, polymath, really, really smart guy who wrote a lot about China. And he gave me a pretty persuasive argument that if things came to a head and this was in the Trump era. But if things really came to a head with China and they wanted to kidnap somebody, they would probably choose a professor that was not huge enough to be truly a completely international incident, but big enough to ruffle feathers. And it just. Who said some things about China that would not make the CCP happy? And it occurs to me that I.
- [56:49]
A
Fit the profile now. I'm going to sleep horribly tonight. So I appreciate that.
- [56:54]
B
He's kind of the smartest person I've ever met. Although I very much hope he's wrong about this.
- [56:59]
A
I hope so, too. I mean, the Chinese, they have a saying, you kill a chicken to scare the monkeys. So you make a bloody example of one relatively weak but, you know, at least decent profile enemy in order to scare the bigger ones. So hopefully I don't. I don't look too much like a chicken to the Chinese Communist Party.
- [57:18]
B
I hope so, too. All right, on that note, I will let you go. But. But before you do, can you direct my. My audience to your book? And if you have a website or a Twitter handle as well?
- [57:29]
A
Yeah. So the book is called Unrivaled why America Will Remain the World's Sole Superpower. It's available on Amazon, wherever books are sold. My website is just michaelbeckley.org it's probably just easier just to Google my name, Michael Beckley. And most of my articles, I try to get as many of them up there for free as possible, so you can't beat that price. I don't tweet. I recently got off of Facebook for various reasons, so it cannot be found on social media. But I write often, I respond to emails, so I'm happy to. To hang out and talk to whoever wants to exchange ideas.
- [58:03]
B
All right, Michael, thanks so much. It's been a pleasure.
- [58:05]
A
Great. Thanks so much, Coleman. Take care.
- [58:10]
B
If you appreciate the work I do, the best ways to support me are to subscribe directly through my website, ColemanHughes.org and to subscribe to my YouTube channel. So you'll never miss my new content. As always, thanks for your support.