In years gone by, powerful leaders exerting maximum control could plausibly claim they needed this power to protect the governed from attack or to lead them to “More” by taking it from others. Fighting with and taking from others was justified by presenting your culture as superior to others. From Imperial Rome to Imperial China outsiders were considered barbarians. Much easier to take their goods and enslave if you see them as inferior. In the modern world, these claims just don’t hold up. Recent German history illustrates the point. Prior to World War II Hitler claimed the Germans were being denied their Lebensraum. Invading Poland and other “inferior” nations were imperative to give them the territory needed for its natural development. Today even with unification Germany has less territory yet is much wealthier. With a declining birthrate, the country has had to actually import workers and allow in migrants. After spending 2 Trillion euros on joining east with the west, the country has no interest in taking over Poland or Ukraine anyone else.. Much more profitable to just trade with them. Closer to home, we would love to back what we spent occupying Iraq and Afghanistan. It surely didn’t gain us “More.”

As we pointed out in our last post, innovation was at best a very slow contributor to humanity gaining “More.” Top-down government and culture were essential. The educated elite made and recorded the laws, maintained calendars, and made the proper tallies. For most of mankind being an elite was gained by heredity. 10% or less of humanity used their positions to acquire whatever “More” there was to be had. The rest of mankind was mostly at the bottom. For thousands of years, this was mankind’s basic organization. Then the 15th Century A.D. came and the pace of innovation accelerated to the point it is the main determinate of gaining “More.” As change could now come from anywhere at any time we, in turn, have to be more nimble and flexible. Top-down governance of everything just can’t keep up with what is happening from the bottom up. The more controlling a government is the less efficient. If this wasn’t true the Soviet Union with its 5-year plans would’ve won the cold war.

Today the most controlling top-down governments such as Cuba, Egypt, North Korea, Iran, and Venezuela not only have failed to lead their citizens to”More,” but managed to provide “less”. The question is whether China will join them. Taiwan and South Korea liberalized from one party states to a democratic market dominated countries and gained much “More.” For a while, it appeared China was heading in the same direction. Then Xi Jinping took over. Facial recognition, the social credit policy and concentration camps for Muslims match or exceed anything George Orwell ever penned. It looks like the Chinese Communist Party is bent on joining the “we have to stay in power at any cost club”. President for life Xi seems aligned with those leaders with lifetime job security in we provide “Less” club. The one thing all the members have in common is they have maintained absolute control over their citizens no matter how much pain they have to inflict on their citizens just to maintain control.

China because of its size is of utmost importance to continue the march of humanity to “More.” The nation is at a crossroads. It either to moves to a responsive flexible society like its neighbors Taiwan, South Korea, and Japan and continues on its journey to “More” or it becomes North Korea or Venezuela on a much greater scale. Remember the Chinese Communists went down that road before with Mao’s Great Leap Forward. A failure setting China back for decades. Worse it cost 45 million lives. Is Xi out to break that record?

Right now the test for China is being played out in Hong Kong. After its return from a harsh Japanese World war II occupation to British rule, Sir John James Cowperthwaite was appointed Financial Secretary for the colony. A staunch follower of his fellow Scotsman, Adam Smith, he was responsible for mating British Law with a very open economy. A relatively poor colony of 600,000 became a world-class financial hub of over seven million. How successful? Mainland China’s GDP per capita is $9,645 is impressive when compared to North Korea but it pales beside Hong Kong’s $48,517. China’s choice is to continue to liberalize (in the classic sense) and continue to have “More” like Hong Kong or regress to North Korea’s “less.”

Hong Kong has no oil, minerals or rich farmland for China or anyone else to exploit by conquest. Its wealth is its inhabitants. The City-State serves as a legally safe commercial center. As such it is a perfect conduit between the legally questionable China and the rest of the world. To this point, this been highly beneficial to all parties. Clamping down on Hong Kong has no apparent advantage of China’s growth. A gutted city and a diaspora of angry talented millions only would hurt China.

So why go down that road? Every day talented mainland Chinese go to Hong Kong to do business with other talented people. People living without fear able to pursue their lives on their own terms. It has to affect the mainland Chinese. Maybe that’s why wealthier Chinese have bid up properties from Vancouver Canada to Jeju Island South Korea. To these people, Hong Kong is a constant picture of what their lives might be. A constant reminder of how useless the Communist Party is. Can the party really co-exist with neighbors with ‘More”? Today it’s Hong Kong holding up the big mirror. Will it be Taiwan, South Korea or Japan tomorrow. Will China turn inward to avoid freedom infection Will it become just a bigger North Korea or Venezuela. The only ones benefiting from such a path are the Communist Party members. Everyone else would lose.

How the impasse in Hong Kong plays out should govern our future China policy. If Chief Executive Carrie Lam is t replaced with somebody acceptable to the people and whoever it promises never to bring up the extradition bill ever again, it would signal a liberalizing trend that would be hard to impossible to reverse. Once the mainland Chinese see mass protests can force change the rulers will have to get in front of liberalizing or risk Tiananmen Squares all over China with everyone sensing a different outcome. That China probably without Xi is worth working within setting up new trade deals. It would signal China is going to follow down the path of Taiwan and South Korea. This we can support and encourage. However, if Hong Kong is crushed, would signal a commitment to “the stay in power at any cost club.” Given the wealth of sanctions on this group, we know we have no future in dealing with who will do anything to anybody to keep their power. How can you have a supply chain dependent on criminals?

We were on the right track with the Trans-Pacific Partnership. A trading system excluding those who fail to play the rules is the way to go. We should’ve gone ahead and greatly expanded on that theme. Unfortunately, both major parties turned their back on the right path. Instead, we have Trump’s strange Trade War with his pal Xi inflicting pain on Americans and the Democrats being less free trade than ever. We need to recognize what Xi and his party cohorts are and act accordingly. If there is a new cold war, it would be a result of China’s choices.

Isolation and containment should not be the sum total of our response. We need to take the offense in providing the Chinese and other people caught under this club of horrors with the truth and the means to communicate. We know these bad actors will use tech against us because they have. We need to use everything to undermine these regimes. The fate of far more than a billion people depends on it. The last thing we should do is confer any legitimacy on these governments. Their leaders aren’t our friends. Megalomaniacs can’t be your friends unless maybe you’re one yourself. We share the earth with them so we have to deal at times but there should be no mistake what we think of them. We know what is right.