This morning, we’re hearing about how there’s a new outbreak of COVID 19 in Beijing, and that flights are being canceled. The already tottering Chinese economy will take another massive hit; what, if anything, is left of Chinese credibility will be completely gone.
Is this not proof the pandemic is real? Note: the question is not: is COVID 19 a real disease? Of course it is. The question, put more pointedly, is: does this not prove that lockdowns, masks, social distancing and the ongoing panic is justified?
No, it does not. Let me explain. Way back in the 90s, my thesis adviser, a Chinese (probably Taiwanese, I didn’t ask) economics professor and I used to shoot the breeze talking about how little Americans really understood the Chinese Communist government. At the time, America was well into a China policy of economic engagement, under the express theory espoused especially by the Bush clan that if China were to move into a Western style economic model, they would necessarily also move toward a Western style liberal democracy. (That the Bush clan is alleged to have made many millions from facilitating Chinese trade deals was not part of the public discussion at the time.) That was under Bush the Elder; Shrub tried the same theory in the Islamic world a decade later, this time with guns.
I specifically remember discussing two scenarios with my thesis advisor: if the Chinese Communist would kill 100,000,000 of their own subjects if that’s what it took to retain power – answer: without a moment’s hesitation – and whether, if it had to choose between power and the vast wealth created by their snow-job, parasitic faux capitalist economy, if they would destroy that economy – answer: yes, although they might hesitate for a moment. Hey, wealth is fun.
This was 30 years ago. A few things to note:
A. 1958-1962: Mao, on what looks in retrospect almost like a whim, launched the Great Leap Forward, resulting it the deaths of an estimated 65 million of his own people. He did succeed in destroying to a large extent traditional social structures and village life, and instilled a fear that anybody could turn you in at the drop of a hat. The killing was generally carried out by young, ignorant thugs (Solzenitzen describes a similar use of the young and stupid under Stalin). There’s not the slightest evidence Mao or his fellow dons felt the least hesitation or regret. Just business, Communist style.
B. 1989: At Tiananmen Square, about 10,000 unarmed student protesters were ground into gore by Communist tanks; bulldozers were used to scrap up the mess. About a thousand who escaped getting crushed were offered safe passage if they would leave; they were machine-gunned on their way out. Again, business as usual.
C. Under Bush the Elder, we chose to make these people, the leaders of Communist China, preferred trading partners. At first, the cost in stolen IP and out and out espionage seemed minor, especially since it was generally private companies paying it. And the elites weren’t losing their jobs to Chinese slave- and near-slave labor, only those hicks in flyover country. And oh, those cheap goods! Wow!
Eventually, the IP theft, espionage losses and currency manipulation to ensure Chinese goods remained insanely cheap got more serious. By then, an interesting dynamic was in place: Nobody in the world market wants Chinese currency – no one outside of China does, and even there, they wouldn’t if there were an option. Trade banks demand Chinese deals be secured with $US, because they’re not idiots. Therefore, in order to do all those billions of dollars in trade, China needed to hold billions of dollars in US dollar-denominated securities: US Treasuries. The US government needed to issue treasuries to fund various bailout – and look! The Chinese Communists needed to buy those treasuries in order to secure trade financing (which all international trade requires).
So a huge chunk of the US dollars going to China to buy Chinese goods (and support all the theft, espionage, slavery and tyranny that involves) ended up coming back to the US, which issued treasuries to the Chinese so that they could keep doing what they were doing.
Trump, to his credit, knows this. He has a long history of denouncing US reliance on trade with China.
D. Hong Kong, with their British-founded banking system and history as a trading hub, is a pinch-point for all this trade: trading banks around the world have histories with Hong Kong banks – banking does come down to trust in the end – and so, while NOT trusting the Communist Chinese, they could and did do business through the Hong Kong banks, who provided a buffer. It was the Hong Kong banks that told the Chinese Communists what they would need to do and how they would need to behave in order to get this trade gravy train rolling.
And so, the Chinese Communists kept their hands more or less off Hong Kong for several decades. That has come to an end. Funny how COVID 19 drove the Hong Kong protest right off the news. Anybody know if protesters are getting machine gunned down or driven over with tanks? Yet, I mean?
The Bush clan was right, to some extent. At least in Hong Kong, a taste of freedom lit a bit of a fire. People there, all of whom have relatives and connections in mainland China, don’t want to be absorbed into the hive. The Chinese Communists must have figured they had established enough of a relationship with the trading banks to keep this train running without the mediation of the Hong Kong banks. I doubt it – the reality would be something like: Trade bank makes tons of money off Chinese trade mediated through Hong Kong banks; Hong Kong banks are crushed/brought to heel by the Party; having seen this movie before, trade banks look at how they can extricate themselves with as little damage as possible. Takes time. I bet it’s well under way.
E. Put this all together: The Chinese economy was going down ALREADY. (I didn’t even mention the costs of the one-child policy in terms of shrinking cheap labor force & social unrest. That’s a real economic crisis in itself!) Under Trump, America was clamping down on IP theft, currency manipulation, and espionage. Trump was piushing for onshoring of all critical pipeline items, and repatriation of manufacturing jobs. As the recovery boomed, the end of an endless supply of US treasuries loomed. The world’s trading and banking professionals are all over this: while the Bush clan was wrong about free trade pushing the Chinese toward democracy internally, the rest of the world has had enough.
The Chinese Communists hate Trump as much as any other deranged leftists. While, objectively, the gravy train’s days were numbered anyway, it’s not clear the Chinese Communist leadership acknowledged it, and Trump’s trade crackdown and a booming US economy certainly didn’t help. Would they pitch in, as it were, jump-starting Son of the Panic by overeating to a few COVID 19 cases in Beijing? Note: the reports are – ready? – 86 cases have turned up, 7 of them asymptomatic. So they lock down hard and cancel a thousand flights.
Beijing has a population of over 21 million.
I say, and I think history bears this out: yes. The Chinese Communists have their backs against the wall. Having read Sun Tzu, they know to try to appear strong when they are weak. But they are in much worse shape than the outside world is being lead to believe.
We may have already had our one unexpected miracle: the largely peaceful collapse of the Soviet Union. Should not count on getting another one. This time, we have a wounded animal cornered. No telling what they will do, but it’s prudent to remember that nothing, and I mean nothing, is off the table.