03 February, 2014

He who loves the world as his body may be entrusted with the empire

Lao-tzu, The Way of Lao-tzu

All empires have ended due to these causes—war, war and more war. This exhausts the treasury, as the Chinese sage Lao Tzu knew all too well. 

Reading the Lao Te Ching last night, it occurred to me that ancient Chinese wisdom already knew about that phenomena known as “imperial overreach.” Therefore in page after page there are warnings: keep away from war, it exhausts the country by exhausting the treasury.

The Chinese have been good at following this advice. Besides the invasion and takeover of Tibet in the 1950s (lets overlook minor skirmishes with India over border issues, for the moment), they’ve steered clear of invasions, buildup of giant arsenals, and warfare. Indeed, even their “lack of innovation” can  be seen, in hindsight,  as a strategy of keeping off the warring process of innovation. Instead, they do what good capitalists have always done—they let others take the risk in inventing something. Then they simply manufacture and replicate. Those who own the means of production own the economy, as Marx, sage of the Western world, said so wisely. 

Western countries, on the other hand, have always turned to warfare as an easy solution to control and dominate. Britain’s empire collapsed, you might say, because its overt control over people and resources was done through the authoritarian system of domination.  The age of American imperialism seems to be coming to a close—it is as if the past two decades of unaccountable wars and runaway military spending have finally brought the economy down to its knees. 

The Chinese, on the other hand, have been masters at hiding their country’s strength—exactly as Lao Tzu advised. Nobody knows how big the Chinese economy is, at this point—if you add the shadow economy that operates outside the government control. All we know is this—the Chinese have brought out 1.25 billion people out of poverty within the span of 30 years or thereabouts. Through the strict and sober act of fiscal and social discipline, they’ve managed to transform a giant population (four times the size of the US’s population) into a well-educated, productive group of citizenry contributing actively to the world economy. 

The problem with Western countries is that they’ve always relied too much on overt force (and disruption of small economies for monetary gain) to hold on to oil, natural resources and the like. In 2014, however, these sort of Machiavellian policies appear to belong to the Dark Ages. Not the least because “the economy” is no longer just a casino of foreign currencies, and commodities being traded in the stock market. But it is also billions of people innovating and producing new products every minute. With these kinds of new players able to disrupt the market within short periods of time, the key is to keep the field of trust open so that the country with the most social capital wins, when they next Big Thing rolls around.

Who will dominate the global economy in the next thirty years? To me, it appears all the old methodologies of counting (ask your local market research firm how well the economy is doing) is no longer going to work in terms of adding up the total economic, social and cultural capital the world has at its disposal.

If you were to believe mainstream Western publications, you’d think “the economy” is the rise and fall of the stock market. But the stock market is just a tiny piece of the puzzle. More fundamentally, “the economy” is people-billions of people working in small, medium and high income jobs. The economy is people growing food, making clothes and medicine, providing education and healthcare, and building public transport. The economy is people painting artwork, making films, singing songs and staging theatre. And when these foot-soldiers of the economy become tired, underpaid, sick and hungry, you know the economy of a country, no matter how brilliantly it shines in the tickers of the stock market, is on the decline.

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