The Untamed Billion-Headed Dragon in the Room

Joel Cawley
9 min readOct 6, 2020

China will dominate the 21st century to the same degree the US dominated the 20th century. That may seem unclear or debatable to the casual observer, but for those of us deep in the process it’s a near certainty. That global leadership transition is both a huge opportunity and challenge for the world. So far, none of us, including China, are doing a very good job managing the process. Those with long memories may recall the protests in Hong Kong, comments from the NBA, and the ensuing explosion of controversy. Those events opened a small peek at a few of the complexities and challenges we collectively face.

When most Americans heard about the events in Hong Kong, they saw an implicitly evil, authoritarian, communist society confronted by an internal democratic uprising demanding freedom. They saw Chinese authorities using force to crush the resistance and repress the free speech of the Chinese people. American outrage really exploded when they realized those same authorities were using their economic leverage to extend their speech restrictions to US companies and citizens. Many commentators quickly asserted that choosing to do business in China while respecting its abhorrent social contract amounted to picking “money over morals.”

That conceptual frame is backed by a selective history and a modicum of truth. By itself it isn’t completely “wrong.” However, it’s absolutely the wrong frame for us to navigate what awaits.

We’ve also been told we’re in an economic war, that China has “stolen” our jobs, our manufacturing industry and billions if not trillions of dollars of intellectual property. All this while we’ve been urging that they “play fair” and follow the rules we’ve set down for them. Every failure to comply with our “reasonable” demands adds fuel to the flames of treachery we perceive.

That part of the US framing strikes deep emotional resonance for many. It stirs our patriotism and our self-image as the global defender of markets and freedom. It’s also almost completely false. If there’s a modicum of truth to the first frame, the second has built mountains of blame out of proverbial molehills.

I won’t even attempt to offer the full Chinese perspective. I’m not sure anybody could.

However, I will provide a small bit of historical and cultural background. Most Chinese take pride in their thousands of years of history. They believe, with good reason, that for most of that period they were one of the leading civilizations in the world. Then the last couple hundred years inflicted on them a series of ignominious events and defeats.

One of the most important happened in the middle of the 19th century. Britain was running a large trade deficit with China and wanted some way to close that gap. (Sound familiar?) The answer Britain came up with was to harvest opium from their colonial possessions in India and export that drug to China. The Chinese strenuously objected to all this illegal traffic but were ignored. Eventually, a Chinese naval officer seized and destroyed the cargo of a large opium shipment. (Just like our US Coast Guard does on a regular basis.) The British response was to deploy their navy, swiftly defeating the far less advanced Chinese military.

What followed has been seared into the national consciousness of China. The British forced China to replace the illegal opium they had destroyed along with paying Britain reparations for the military costs they incurred in crushing China. They also took effective control of the harbors in several major Chinese coastal cities. Most prominent was Hong Kong, which Britain set up as their primary administrative and military gateway. The Chinese were told their sovereignty and rule of law no longer applied in Hong Kong. In a few years, and after yet another major armed conflict, the British forced China to entirely rescind their laws against opium. The list of indignities imposed on China is quite long. In China this is referred to as the period of “unequal treaties.” It’s a stain on their history and Hong Kong is an important symbol of the distaste China feels about their subjugation to colonial rulers.

There are many Chinese who sympathize to one degree or another with the Hong Kong protesters. There are also many Chinese who view the protesters as western puppets who have yet to shed their subservience to colonial rule. Some Hong Kong residents feel a measure of liberation through the protests while others feel they must now hide their pride in China’s history and accomplishments. We loudly assert this is about “freedom” and there are Chinese who agree. Strongly. However, I’ve also met Chinese who see the opposite. In their minds, arrogant colonial demands are the antithesis of freedom. They also feel far freer than their parents, grandparents, and many westerners they’ve met. Many have increasingly come to believe that it is they who are free, not us. It’s not black and white by any means. I’m not sure anyone can state what the majority of Chinese want with any real authority. I suspect they themselves aren’t quite sure.

When US companies and citizens arrogantly inject themselves into this complex situation they do so at their peril. Imagine for a moment how we would react to the following hypothetical scenario. Let’s assume the US federal government passed a law banning all Civil War Confederacy statues, plaques or monuments from public lands or facilities. Imagine further that the citizens of one of our proud southern states erupted in anger at this law, flooded the streets in protest and began making noises about once again attempting to secede from the union. If the Chinese government injected themselves into that internal US debate, openly urging the south to proceed with their secession threats. How would we react? Not well, I suspect. The Chinese authorities are doing no better dealing with our intrusions over Hong Kong.

The analogy isn’t perfect, but it’s pretty close. Both issues spring from events in the middle of the 19th century. Both strike deep into the social and political forces that have molded our respective national cultures and identities. Both are polarizing to our citizens. Neither society wants any outside voices assuming they have the morally superior answer or the right to dictate what they do.

Does that imply we should sit by and do nothing? No, but it does mean we need to proceed with a much more strategic perspective than the knee-jerk reactions that dominated the response to the NBA. In my book, The Fifth Paradigm, I offer a number of observations and thoughts on how we should proceed. The following offers a brief summary.

We must first come to grips with the opening sentence of this article. It may take 50–100 years for everyone to agree, but eventually history will conclude the most important event of 2001 was not a fictional space odyssey nor the tragic events in Sept of that year. It was China’s reengagement with the world, its opening of markets, and its sprint toward world economic leadership. That last statement is not an ideological claim, it’s a mathematical one. Indeed, it was China’s acceptance of the pragmatic necessity of private property, markets, and their specific semi-capitalist economic system that dropped ideology out of the equation and put mathematics in the driver’s seat. There’s a very basic formula defining the size of a nation’s economy — GDP equals the size of the workforce multiplied by the productivity of that workforce. This is pretty simple math.

Right now, China’s productivity is much lower than any Western nation. However, that’s because they’re still climbing their development curve. Their productivity is growing much, much faster than any Western nation. That’s not because they’re working harder, it’s just a reflection of where they are on the evolution of their economy. Over time, their productivity level will converge with that of the more developed nations. Once they do, it’s the size of the workforce that will dictate the relative size of the various markets. And, the Chinese workforce is literally four times larger than the United States. As a result, it’s an almost mathematical inevitability that over the course of the 21st century China’s economy will grow to be at least 3–4 times bigger than the US.

While less mathematically certain, they also fully intend to lead the world in next generation technologies. For this article I’ll spare the details but suffice it to say they’re well on their way to doing so. Meanwhile, their “Belt and Road” initiative will reshape 65–70 percent of the globe. They’ve barely begun modernizing their military, but we should fully expect that process to follow. Anybody who doesn’t realize they expect to be a superpower with the same sort of 3–4x advantage over the United States that we have had over other powers for the past 80 years doesn’t understand how much sheer economic size matters.

None of this is anything we can stop. If they were a society that shared our freedoms and values we could adopt the same sort of posture the British did toward the United States as we followed our own stratospheric and unstoppable rise over the past 100 years. However, they are not and, as the NBA controversy illustrated, our path is more complex.

First, we need to implement our own national strategy. Our house is not in order right now and our deep neoliberal structural flaws must be repaired. The Fifth Paradigm strategy outlined in my book can rekindle our “shining beacon” both for ourselves and for the world. It’s also a strategy that would build a substantial and rewarding socioeconomic foundation for America that is largely immune from global labor dynamics.

Second, we need to energetically and enthusiastically engage with China across the board. Our people, companies, economy, and culture will all benefit. The vast majority of what China and her people are bringing to the world are things we can embrace and enjoy. There is much more than money at stake. This is one of the richest and most dynamic cultures in the world. Science, technology, medicine, education, literature, arts, spirituality and countless other disciplines are fertile grounds for mutual value. Their growth and development in every one of those dimensions can and should fuel our own. This is the opposite of a zero-sum game.

However, we need to ensure as we do this that we not allow the darker aspects of their totalitarian society to infect our own. This is where the NBA and many US companies have struggled. I’ve negotiated with China on many occasions and there are just times we need to say “no” to different demands. I’ve done so on many occasions and they’ve always come back to the table. We need not and should not cede our own values while enthusiastically engaging with China.

While we do this, we must also respect China’s sovereignty. Among other things this means following their laws and abiding by their social contract when we do business in China. I suspect a good portion of the inept response from China to recent events stems from their reaction to the arrogance and disrespect with which so many US commentators have approached events in Hong Kong. That’s not an excuse. Their excessive reaction to a single tweet reflects a nation still finding its identity after the humiliation of colonialism and the catastrophe of Mao and the Cultural Revolution. On the one hand it’s an ancient culture. On the other, it’s a nation just discovering what it means to be a world superpower in the 21st century. As they step onto the leadership stage they need to “grow up” and there’s no reason we shouldn’t say so. Done in the right way, it would actually be the ultimate expression of strategic respect.

Third, we need a firm policy of containment when China tests boundaries. The trick to this is avoiding any direct power escalation. We might win those confrontations in the short term, but in the long run we can’t count on that. We really don’t want to make that the basis of conflict resolution. We may find we need whole new institutions and procedures to sort out our differences. Those will only grow in both frequency and urgency as this century unfolds. We need to establish as early as possible where boundaries exist and that their violation will receive a firm response. This could range from being clear that China has no say over the free speech of Americans to our commitments to open navigation in the South China Sea and everything in between.

Finally, we need to remind ourselves of the inherent “rightness” of our values. It may take time, even whole generations, but eventually the importance of people with inalienable rights to life, liberty, and the pursuit of happiness, will prevail. This connects with the first point above. If we drive out money and restore our own democracy; if we redesign our economy so that it serves our citizens and small businesses; if we fix the failed neo-liberal experiments in healthcare and education; if we reverse our profit driven mass incarceration policies and free our citizens; if we provide enough social benefits to eliminate child poverty; and if we replace the failed socioeconomic paradigm of the last 40–50 years we will do more to sustain our leadership role in the world than all the tanks and bombs we’ve ever built.

--

--

Joel Cawley

After 20 years as IBM VP of Corp Strategy Mr. Cawley retired in 2016 and now spends his time consulting and writing on business, economics and politics.