I first visited China in 1977. The London Times had arranged to take a group of businessmen from Britain to open up trade contacts. As Editor of The Times I was the Deputy Leader of the group and had to do a good deal of formal handshaking. Fortunately we were able to take our wives with us as part of the ceremonies of speaking and feasting.
It is now thirty two years since we made that visit. The change in China has been beyond belief. In 1977, China was still a land of bicycles and physical labour. It was also a land of absolute authoritarian orthodoxy. One would get on an aircraft, leaving behind an obsequious official, spouting the party line. One would disembark a thousand miles away, and be greeted by another official minder, repeating the same party line, almost without a pause.
People still criticise the monolithic power of the Chinese Communist Party, but the relative change is what strikes anyone who knew the old China. China may not respect civil rights or allow certain kinds of free political discussion, but the new China is inexorably much more open and free than the old China.
That is just as well, as it is becoming apparent that the resilience of the Chinese economy is the world’s best hope in the present depression. If one looks at the reaction to recession of the United States, Germany and China, one is impressed by the strength and confidence of the Chinese response. I would list the three powers in the order of China, the United States and Germany, for their contribution to the process of world recovery.
Joseph Schumpeter analysed the Great Depression in terms of “creative destruction”. He thought that cyclical recessions and depressions wiped away obsolete economic systems and allowed them to be replaced by fresh structures. Recessions are necessary to speed up the capitalist forces of change.
For the last 33 years, the Chinese economy has been growing two to three times as fast as the United States, and that has continued even in a year of recession. The Asian economy has been taking over the lead from the Western economy, though the performance of the Japanese economy has been disappointing.
I expect that this Chinese outperformance will continue as the world moves into recovery. We can now see the pattern of the three centuries: 1815-1914 the British Empire; 1945-2008, the American era; about 2030 -2100 or beyond, the new Chinese era. China is overtaking the West and the process has been accelerated by the recession.
for The Daily Reckoning Australia