These may be the most important questions of the 21st century.
If I heard a consistent refrain during the China Challenge Summit held at Utah Valley University last week, it was that American assumptions near the end of the Cold War 40 years ago were wrong.
It was the classic free-market expectation. To paraphrase Friedman, a Nobel Prize winning economist, you need free markets in order to maintain freedom, and free markets work best if you have political freedom. Surely, one would lead to the other.
Except, it didn’t in China.
We might have gotten a hint that this wouldn’t be a smooth road when the government massacred student-led freedom protesters at Tiananmen Square in 1989. But now Chinese President Xi Jingping has cracked down on Hong Kong, which not many years ago ranked as the freest and most prosperous economy in the world, according to the annual Index of Economic Freedom, published by the Heritage Foundation. It’s threatening Taiwan, which currently ranks sixth on that list. And it has been cosying up to Russia, which has become an international pariah.
And yet, its economy grows.
Together with Deseret News executive editor Doug Wilks, I sat down with former Utah governor and ambassador to China, Jon Huntsman, Jr., during the summit, to talk about this. The first thing he said was to let history be our guide.
“So, the Chinese are pretty predictable if you look historically at their patterns,” Huntsman said. “And what Xi Jinping is doing is not a whole lot different than what happened in the late Qing Dynasty … not necessarily closing doors, but forcing the world to come to you with some supplicants and building up your own indigenous capacity, such that you don't have to rely on any of the outside world to get things done.”
Look at how many American companies rely on China for important pieces of supply chains, a reliance that became painfully obvious during the pandemic. China extracts rare earth minerals needed for the manufacture of many U.S. electronics — mining that is too harmful to the environment to be legally extracted in many other countries, including the United States.
But when I asked directly whether China’s economy could continue to grow along with repression, I got a direct answer — no.
“Now, they're willing to pay a certain price to get rid of Western influence in Hong Kong, for example. But they're not willing to give up the whole economic model,” Huntsman said.
The lesson of Tiananmen Square, he said, is that people readily joined the protests because they were unhappy with inflation and high interest rates, and they were unable to afford basic goods.
Similar circumstances today would be a huge threat. “We've got one ruling party (in China). It's brittle. It's oftentimes fragile. It's highly bureaucratic and top heavy …” he said. “But the Chinese officials are smart enough to know that if the economic indicators go south, the risk rises substantially. So they have to stay engaged.”
Engaged and on task.
The message of this China Summit, one of the most important international meetings ever convened in Utah, has not been lost on American businesses or political leaders. Congress is mulling legislation that would set up a new federal panel to review private investments in certain foreign countries and block them if they were seen as a threat to national security.
The Wall Street Journal quoted Republican Sen. John Cornyn of Texas saying it’s about safeguarding “supply chains from countries of concern, including the People’s Republic of China.”
In other words, keeping the American economy from being forced to come to China with supplicants, enriching it while becoming ever dependent on its goodwill.
Much has been made about China’s economic success over the last several decades. It has raised 800 million of its citizens out of abject poverty. As a recent Deseret News story noted, its economy grew from 11% of U.S. GDP in 1960 to 70% today, and it is the world’s largest trading country.
Writing for the Brookings Institution recently, Maria Ana Lugo, Martin Raiser, and Ruslan Yemtsov said it’s important to remember that China’s success is due, in large part, to its starting point as one of the world’s poorest countries, as well as to the use of market-oriented reforms and government investments in things such as infrastructure.
However, it’s also important to tell the story of capitalism’s successes over the last 122 years or so — a story seldom told. The poverty rate in the U.S. has gone from about 40% during the Great Depression to a pre-pandemic level of 10.5% in 2019, according to the Census Bureau. The U.S. is a nation where workers become owners. A recent Gallup poll found 58% of Americans own stocks.
And the percentage of millionaire households in the U.S. has gone from 0.1% in 1900 to more than 10% today, according to statistics cited by a blog on spendmenot.com.
But can it keep up?
Huntsman said the key to dealing with China’s ambitions is to use “good thinking and ideas, not cheap and political rhetoric, which I hear constantly from politicians.”
It will take diplomatic problem-solving and the ability to avoid war at all costs.
And it could be America’s biggest challenge of this century.