A Blessing from China: A Challenge to Innovate

Some of my readers worry that I am “soft” on China, too optimistic about the prospects for freedom there, and unwary of the Chinese threat to the US.

As one reader recently wrote, “at the end of the day China is still a communist country” which “does not recognize the right to private property,” and therefore can steal our intellectual property without any twinge of conscience.

I love this comment because it gets us right to the heart of things: is China still a communist country? Not, does China have lots of politicians who ritually declare themselves communists? (It does.) Or even a few who deep in their hearts still yearn for good old days of Mao? (They exist.) But is China a communist country, a nation of 1.4 billion people living under anything we would recognize as communism?

My answer is: “By their fruits, you shall know them.”

Let me explain…

Not your Average “Communist” Country

What China has achieved over the past three decades could not have been accomplished by a communist nation.

My reader makes clear in the rest of his letter that he grasps the economic power and moral imperatives of capitalism. He knows that genuinely communist regimes have always and everywhere impoverished their people, that command and control economies fail miserably and murderously, destroying more wealth than they create. Every long-standing communist regime has survived only by tolerating some free market activity, even if only the black markets that everywhere sprout up when real free markets are suppressed.

Yet here we have China, for several decades now the fastest growing economy in the world and now the second largest economy, and, as I discuss in more detail in my monthly George Gilder Report (available here) certainly the most innovative of any large economy.  (Tiny Israel dominates the welter-weights.)

Half my portfolio choices for The George Gilder Report so far have been Chinese companies that are doing almost everything better than their American counterparts.

Wealth that Cannot be Stolen

Chinese insurance companies are bringing diagnostic tools powered by artificial intelligence (AI) to tiny Chinese medical clinics around the country, setting up same-day appointments with medical specialists in a country in which previously many people went a lifetime without ever meeting a real doctor.

Furthermore, the Chinese internet and social media companies combine every offering of Facebook, Google, Amazon, Spotify, and more and do all of them better.

Are these conceivably the fruits of Communism?

American politicians love to accuse China of stealing our technology. They attribute Chinese economic growth not to the growth of freedom but the rewards of larceny. As upholders of capitalist morality, they should know that in the hands of a thief all gold turns to lead, all diamonds revert to the coal from which they came.

Technological leadership is not a static thing to be stolen and hoarded. Innovation can never be completed — or the innovators allowed to rest on their laurels — for the same reason innovation can never be planned: It always comes as a surprise.

The Chinese have surely benefited from the explosion of learning in the capitalist world sparked by the invention of the transistor at Bell Labs in 1947. Yet all the crucial advances flowing from that moment have been thoroughly documented in prestigious journals and textbooks, debated in industry conferences open to the world, and pitched by sales forces whose job is not to conceal technological advances but to reveal their wonders.

That interchange of ideas — and the furious competition it powered — was not a threat to American prosperity but it’s very source.

Now come the Chinese, suddenly more free than anyone of my generation ever expected. And because they are more free, because Capitalism (and Christianity) are on the rise in China and Communism in any genuine sense in general retreat, the Chinese have become powerful competitors — and great innovators.

And as innovators the Chinese are a blessing to America, challenging American companies is to adopt Chinese innovations and surpass them.

This sudden, astounding change in the plot of the story — China free and rich, rather than poor, enslaved, and angry is a blessing almost beyond imagining. China enriched will enrich America and the world.

Should we regret how much China has changed in three decades, or pray that the change continues?

I’m in China right now looking for investment opportunities — and innovations American companies can learn from. I’ll have lots of news for this space and detailed reports on the best companies I find in The George Gilder Report.

 

Regards,

George Gilder
Editor, Gilder’s Daily Prophecy

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George Gilder

George Gilder is the most knowledgeable man in America when it comes to the future of technology — and its impact on our lives.

He’s an established investor, writer, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance.

And he’s certainly no stranger to the financial newsletter...

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