A few items of interest to my readers:
First, at the end of last month I appeared on the German Marshall Fund’s China Global podcast to discuss the CPC’s current techno-industrial drive. You can listen to the full thing on Simplecast, Apple Podcast, or in the embed below:
Here is an excerpt:
Bonnie Glaeser: Now, you wrote in your blog that you are somewhat skeptical that China’s strategy will work. So, what’s your reasoning?
Tanner Greer: Well, I have a few reservations….
The first is that this plan is predicated on essentially two bets. The first bet is that you actually are in a moment of transformative technological change equivalent to the industrial revolution. By the Chinese intellectuals’ own account, this happens like once every century. So if we are not actually in such a moment, if the suite of technologies that they have identified do not actually have the potential to revolutionize the world economy, then they might be putting a lot of investment into something that won’t produce [the returns] they are hoping for.
And then even if they have correctly identified the historical moment we are in, that does not necessarily mean they will be the ones who successfully lead it. One of the questions you have to ask is ” what is the opportunity cost of this sort of policy?” And in this case, I think looking at the example of past communist regimes is somewhat interesting because the Communist Party of China is not the first communist regime to stake its economic future on a new techno scientific revolution. There are two examples that illustrate two different modes of failure.
The first one is the Eastern Bloc in the 1970s and 1980s. In the late sixties and early seventies, many parts of the Eastern Bloc—Germany, Poland, and so forth—they thought “if we can do a proper round of industrial upgrading, we can become an industrial manufacturing center for the world.” And they took a lot of debt in order to finance this potential future. It turns out they messed up. A lot of the problems you have in the 1980s, when these communist regimes fall, happen because these countries were now in so much debt that they have to institute austerity measures on their own populace. There’s a lot of discontent and it leads to the Berlin Wall falling down. So that’s one failure mode: you make investments and they don’t turn out, and you’re left with a lot of money that you have to pay back.
The other [case] is what happens to the Soviet Union. The Soviets also talked about a global techno scientific revolution. They had a very similar phrase. I don’t think they added the words an “industrial transformation” to their phrase. They thought that they needed to lead what we would call the digital revolution. They struggled to do so.
There are certain economists who have written about this and they say the real problem with the Soviets was not just that they couldn’t develop these technologies, but that focusing so much on this technological utopianism ( the “oh, if we can grow out of our problems, if we can just stumble upon these new technologies and have new growth rates return, we can grow out of our problems” attitude) was a way for conservatives under Brezhnev to avoid discussions of more immediate and painful reforms that the Soviet system might have needed. As long as you had the hope of this technological revolution, you could continue to defer those to the future. And eventually those problems came to swallow the Soviet economy.
So that’s another possible failure mechanism. Perhaps the Chinese will chase this chimera, and if it doesn’t pan out, then a lot of the other more traditional problems that economists have identified, and that even the Chinese Communist Party has identified—things like the real estate bubble, or especially the need to increase consumer demand within China—if those problems take second fiddle and the bets don’t work out, they will still be there and might have gotten worse in the meantime.
I’m not saying this is what will happen. Just that this is certainly a possibility for what could happen. Very rarely do I see discussions in the Chinese analysis that focus on these case studies of [countries] attempting do a scientific revolution and failing. They mostly focus on the countries they felt like did it right. The United States, above all.
Bonnie Glaeser: That’s interesting though, because of course the Chinese have studied the Soviet experience ad nauseum.
Tanner Greer: Well, yes, they have. It’s very interesting. They have obsessively studied it, in fact. But certain theories are more popular than others. One of the very first speeches Xi Jinping, gives when he’s elevated to General Secretary of the Communist Party of China is when he gives a speech on the Communist Party of the Soviet Union and the lessons to be learned from [the USSR] for China.
One of the things he says is: “Why did the Soviet Union fall? Because ideological competition is fierce.” His preferred version is that they fell because the party members stopped believing. The party members were affected by anti-Stalinism. They became corrupt. If you look at his policies, things like the anti-corruption campaign, and the whole campaign on sticking to our “original intentions,” these are campaigns that educate. They aim to instill a patriotic and pro-party sentiment, mostly in the party members themselves. That’s the overriding lesson he thinks should be learned from the collapse of the Soviet Union. And there’s been many, many popular presentations. Whole documentaries have been shown to cadres that tell this story.
That story isn’t immune to technological elements. They will emphasize that had the economy of the Soviet Union done better a lot of their problems would have been avoided. But the lesson that Xi Jinping himself wants the party to learn from [the collapse] is not about science and technology. So this might in some ways be a reflection of his personal obsessions. But I can’t be 100 percent sure of that.
The full transcript of the podcast, complete with links to the sources I cite, is available to Patreon supporters at the mid-tier and above levels on the Scholar’s Stage website.
Second: I will be traveling to London over the coming weekend. If you are a Scholar’s Stage reader in the city, please come to the reader meet up I will be hosting on June 30th. The meet up will be hosted by the London College of Political Technology’s Newspeak House. It will be a chance to peg me with any questions you have about my writing–I expect we will have lengthy discussions on China, “cultures that build,” and my prognosis for the future of conservative American politics.
Please sign up for the event here. Full details on location and timing are available on that sign up page.
Omitting context helps a chequered history, no doubt: During the Cold War, the United States and Western European countries imposed a strategic economic embargo on the Eastern bloc. This time though, the West has no leverage to do so.
Your depiction of the problems of the late GDR have truth in them, but in the end the picture you paint seems a bit misleading to me. I am not sure they really did that much industrial upgrading. Honecker allowed more money to go into consumption (newer housing, washing machines for everyone and the like) and that was partly financed by external debt, but the debt never reached any kind of proportion that would have been problematic on its own, had the lenders not been the ideological enemy who leveraged the debt. One additional problem was that a good part of valuta income came from the oil refinery that sold refined oil to Western Germany, and the Soviet Union now wanted that oil for itself. But when the reckoning was done, in the end, the whole GDR valuta debt that wasn’t covered by liquid assets (like the Strauss loan that sat untouched in a bank account) turned out to have been only 20 billion, a trivial sum from today’s vantage point, and far less than the then communal debt of the city of West Berlin alone even then. The state debt of modern Germany or the US will never be paid back and everyone knows it. The problem was ideological traitors and profiteers like Schalck-Golodkovsky who held the purse strings and lied to the administration about a supposedly dire situation, plus the Zeitgeist pressure and Gorbachevs loosening the strings helping to destabilize the whole system. When the GDR economy crashed, and boy, did it crash, much more than Czechia, it did partly because the two Germanies could not be kept apart, so along came the shock therapy of Mauerfall with half of the young working population taking off for greener pastures and adventure, and the catastrophic ad hoc economic and currency unification plus robber baron privatization. West Germany then spent profligately for consumption in the East, and upgrading the roads and making all the derelict buildings in the abandoned old city centers pretty, in the process incurring much more debt that the GDR ever had, plus letting West German infrastructure decay.