China’s Disturbing Vision

Hong Kong and the NBA
China’s Vision of Victory
Clashing Values
Houston, Philadelphia, and Dallas

And once you see it, you cannot unsee it.

I’m not alone. Here is what we are observing at macro scale:

That it has been common knowledge—something we all knew that we all knew—since the Nixon years that by simply exporting capitalism and free enterprise, we would unshackle the forces of freedom in China.

That this common knowledge is [now] breaking.

Today, we all know that we all know that the influence of the Chinese Communist Party over what you and I do has been aided, not thwarted, by the nominal Chinese embrace of capitalism. I think that this—not the NBA, or Hearthstone, or Disney, but common knowledge about the distorting effects of concentrated power on the efficiency of market outcomes—is the real main event.

—Rusty Guinn, Epsilon Theory

I have been writing about China for almost the entire 20-year history of this letter. We have had multiple intense and focused sessions on China at the Strategic Investment Conference. It is highly likely that we will do so again next year.

China’s growth has been one of the most important economic events in human history. It has moved more than 300 million people from what was essentially a medieval bare-bones existence to fabulous cities, built one of the most incredible transportation and railroad systems in the world, all the while allowing entrepreneurs (what a concept for a communist regime) to create some of the world’s largest and most creative companies. All this is staggering.

On the other hand, China did this on an incredible mountain of debt raised in just the last few decades while generating some of the worst pollution in history. Their monetary system is a potential nightmare. Two-thirds of the population still lives in utter poverty. Over one million Uighurs are locked up in what are, for all intents and purposes, concentration camps. Citizens are routinely arrested and tortured for resisting government edicts. The stories coming from China are frightening to Western minds.

This sort of thing isn’t new. Millions died of starvation because of bureaucratic ineptitude and fear during Mao Zedong’s “Great Leap Forward.” Not to mention the purges of intellectuals who disagreed with Mao.

And then came the Cultural Revolution:

The movement was fundamentally about elite politics, as Mao tried to reassert control by setting radical youths against the Communist Party hierarchy. But it had widespread consequences at all levels of society. Young people battled Mao’s perceived enemies, and one another, as Red Guards, before being sent to the countryside in the later stages of the Cultural Revolution. Intellectuals, people deemed “class enemies” and those with ties to the West or the former Nationalist government were persecuted. Many officials were purged. Some, like the future leader Deng Xiaoping, were eventually rehabilitated. Others were killed, committed suicide or were left permanently scarred. (NY Times)

We in the West simply cannot understand the soul-searing aspect of the Cultural Revolution. It was the Great Depression to our grandparents’ generation on steroids. It cemented the power of the top-down, authoritarianism of the Communist Chinese Party. That imperative underlies the entire culture today.