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Why China Surpassed the United States

By Mohamad Shaaf

February 04, 2021 "Information Clearing House" - Following its revolution in1949, China adopted a new economic model based on the basic needs of the population instead of profit. This vital switch resulted in lifting over one billion people out of poverty. Disregarding flaws of the Chinese political model, when measured by Purchasing Power Parity its economy is larger than that of the US by 25 percent. Becoming an economic superpower in this short period of time, and getting ahead of the US, China has already changed the world balance of power. The purpose of this essay is to use several historically proven criteria to determine how China’s dream happened, and why it will continue to win the economic race with the US, peacefully or otherwise. It starts with comparing the Chinese and US economic models, their goals that are reflected by policies, and the race itself. Finally, it will discuss the outcomes, options, and best choices in dealing with China.

II. Economic Model Criteria

1. Primacy of Needs versus Corporate Profit: China’s economy, like that of the US, is a market economy with profit-making and capital accumulation. The main difference is that China’s primary goal is meeting the basic needs of the population, while that of the US is profit. This implies that the Chinese Communist party develops plans based on the provision of basic needs, while the US-two main parties primarily stand for big corporations and monopolies, protecting their profit, and interests. Accordingly, their governments’ goals, priorities, functions, structures, and organizations are different.

2. Public versus Private Ownership: In the US natural resources, land, oil, gas, and other minerals, are mainly owned by private corporations compared to China where all are owned and regulated publicly (collectively). China’s government regulates large and highly profitable state enterprises, which dominate key sectors of the economy; it discourages private ownership of enterprises to limit private-capital accumulation. Also, the majority of banks in China are publicly owned, while in the US all banks, other than one in North Dakota, are privately-owned where profit is in command, rather than responding to the needs of the community including housing, healthcare, and education.

III. Reflections of the Models

1. Stable vs Unstable Economy: The dynamics of the US model leads to structural imbalances: overproduction, over-accumulation of capital, concentration of wealth, monopolies; commodification and privatization of public assets, resources, housing, healthcare, and education. It opens the way for risky speculation and cycles of bubbles and crashes. All the above further increase polarization and inequality.

Historically, the US has had several depressions, and many recessions, about every four years. The Great Depression that started in the US, was the worse and the largest economic disaster in history, with wide and massive cuts in production and employment, widespread poverty, social unrest, family disintegration, suicides, and homicides.

Economic depressions have frequently led to large-scale wars between imperialist rivals for markets: WWI followed the 1907 crash of 50%, 1910-1911, 26%, and WWII came after the Great Depression, 80%. Generally, after an economic downturn the US government steps in by stimulating spending in war or the economy. However, these types of remedies shift the problems, without solving them. In contrast, China’s model does not generate structural imbalances, continuing its steady-state growth. During the US-2008 major economic downturn, considered by Bernanke to be worse than the Great Depression, China continued to have a booming economy with full employment.

The current crises of the economic depression starting prior to and the Covid-19 pandemic have been much worse in the US than in China; confirmed by faster action due to a higher degree of readiness, fewer deaths, and full recovery compared with the US, that is still struggling with waves of infections and economic depression, millions of unemployed who cannot pay their rents and mortgages, anxiety and homelessness, and little hope it will get better.

2. Dynamics of Inequality: Declining vs. Rising: China’s model tends towards a reduction of inequality in wealth, income, wages, housing, healthcare, and educational services, compared with that of the US where the inequality in all of those areas has been trending upward; since the early 1980s with the adaptation of neoliberal policies of the laissez faire and less of government help, such as minimum wage and housing subsidies that inequality has been rising more rapidly.

All land in China is publicly owned, corporations and individuals are not permitted to own land, but business entities and individuals in China may own the structures above the land. This policy makes absolute rent zero, differential, and monopoly rent low due to public ownership of enterprises, which leads to affordable housing. Also, China regulates the housing market, and ensures that housing for low-income residents is affordable, resulting in relatively less expensive houses in China than in the US.

Chinese healthcare is largely publicly owned, leading to less inequality compared with that of the US where healthcare is largely provided by private corporations for profit. Starting from far behind, China has had its own set of healthcare problems. Many indications suggest that the speed of improvement in China’s healthcare is much faster than that of the US. This is confirmed by the speed of Chinese of Covid-19 recovery, and Chinese visitors to the US are often surprised by the high price and long waits at healthcare facilities. While 5% of Chinese have no health coverage, the rate of uncovered in the US is 8.5%.

In China, education is considered a public good. Nine-year compulsory education in China is free, but secondary school and college are not compulsory, nor free. College tuition in China is ranked seventh, $3,300-$9,900, and its best universities are public, unlike the US, where the highest-ranked colleges are private.

Therefore, housing, healthcare, and education are more affordable in China than in the US enabling the Chinese to live better and be content, confirmed by the population’s support of their government.

3. Postures: Defensive vs Offensive: The US has invaded 70 nations since 1776 compared with China which invaded the Korean peninsula during1950-1953, but has not invaded any country since. Very lately China began expansion of trade agreements and created several large free trade zones with other countries, based on mutual respect, and win-win cooperation. China’s defensive posture costs much less than the offensive posture followed by the US, which enables China to grow faster.

4. Dollar Scam Made US the Economic Super Power: The dollar is a tool the US has been using to rob commodities from the world peacefully. The US dollar was originally backed by gold, and since the late 1960s, US dollar creation has far exceeded the stock of gold in US possession. In 1971, Nixon had to stop converting the dollar into gold.

The US covertly replaced gold with oil; five steps were necessary. First, the oil-exporting countries must sell their oil only in dollars; oil importers had to use the dollar to buy oil, which required exchange of their real commodities and assets for the fiat dollar. The real reason why the US invaded Iraq was because Iraq was not selling its oil in dollars, and its leader was hanged (Video). Similarly, the Libyan leader, Gaddafi, was sodomized (Video) and killed. Second, the price of oil was increased quickly by 300%, and continued to be raised gradually to match the dollars stock in circulation. Third, oppose any substitute for oil: sun, wind, and nuclear energy as in France, South Korea, and Iran. Fourth, the US had to control world supply of oil. Fifth, prevent any global-warming agreements and keeping economies dependent on oil.

Moreover, the dollar has been used by the US as a weapon against countries such as Iran, by blocking it from having access to SWIFT. The US has not used this weapon against China and Russia, although they and some other countries have prepared themselves for that possibility by trying not to use the dollar in their transactions with other nations. Now that the US is in an economic dip, it is injecting trillions of dollars, at no cost, to bailout banks, and pay for huge budget and trade deficits. This action and using the dollar as a weapon have both raised the probability of de-dollarization and the loss of US dominance.

IV. War with China

1. An Economic Offensive against China: On day one of a full-scale trade war with China, Reed explains, all the American factories in China would be shut down. Apple would lose its factories, its products, and its Chinese market of 1.4 billion consumers. That action would be repeated for industry after industry; within weeks, Walmart’s shelves would be bare. Not only plastic buckets and mops but chain saws, pharmaceuticals, motorcycles, and blood-pressure cuffs. The US buys 472 billion in goods annually from China, high-tech, low-tech, consumer goods, and manufacturing components. That would cease. The US-China Trade War might be expected to become a war of military resources, under Biden.

2. A Strategic War against China: Rand, a Pentagon think tank has conducted war games and concluded that a war with China could be both very long and a loss for America. It is no longer 1961. In 2021, with her defensive posture, China is not the USSR of 1989, and will not lose. Of utmost importance, the US must stop the aggressive doctrine of Full Spectrum Dominance (Video), a dream more now than ever, pushed by discredited neocons who strongly believed in 2003 the wars in Afghanistan and Iraq would be a cakewalk. Since the war in Syria, Russia and China with superior defensive weapons such as S-400 and S-500 (Video), wars of aggression should not happen; in fact, it could bring peace.

V. Conclusions

Being far behind with poverty and hunger before1949, today China has eliminated poverty, though the US has not. China, as the winner of the economic race with the US, has consolidated its position on the world stage. The only way the US can catch up is by moving toward the Chinese model with a US-democratic character, and make peace and cooperate with all countries. That will lead to coming out of the current depression for good. The sooner the US revises its model the better; it will be less costly economically and politically. This revised model is an updated version of President Kennedy (Here, Video) and that of President Franklin Roosevelt (Here, Video).

The Western establishments must recognize that, while their economic model already contributed to the material wellbeing of mankind in the past three centuries, it now creates massive unsustainable imbalances. The model of for-profit military-industrial-Congressional-intelligence-media-prison-healthcare-education complex resulted in larger numbers of incarcerated persons, poor public health, loss of innovative spirit, permanent wars, and more “defense” costs. The political system becomes even less democratic, the government becomes like a large-scale organized-crime entity that cannot be controlled and no longer functions at the service of the population. It can only be sustained with more lies, blackmail, distortions, crimes, and aggressions against far-distance defenseless people who have not done any harm against the aggressors. It is about time for the US and its “allies” to accept the fact that the profit-only model is outdated and cannot lead to peace even for their own population, much less for the world.Thus, it is time for the West to cut their losses and stop their propaganda and lies, to discontinue using highly expensive, useless, and ineffective institutions, such as media and think tanks, to justify their aggressive conduct. It is not the time for a new cold war: provocation and aggression against China’s defensive-posture. Failure to change will result in the defeat of the West, at best, and loss of humanity at worse.

Mohamad Shaaf, MBA, PhD, is an Emeritus Professor of Economics at the University of Central Oklahoma, an empirical research-analyst and has published on a variety of economic issues in professional journals, using Artificial Intelligence, Dynamic Programing, and Econometric Models. His email is: mshaaf@uco.com


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