China’s Ascendancy: The Central Event of this Century

Feeling the power and pressure of ascendant American industry and technology in the 1960s, French leader Jean Jacques Servan–Schreiber flung into the world his book, Le Defi Americain, or The American Challenge.

This 1967 tract sought to rouse the Europeans to the coming economic contest, which would differ from past struggles over wealth and land: “The wealth we seek does not lie in the earth or in numbers of men or in machines, but in the human spirit. And particularly in the ability of men to think and to create.”

Since that worldwide best–seller on the astonishing creativity of American enterprise — a force that would dominate the following four decades — the world has turned again.

Rather than Europe facing an American challenge, the United States now confronts a towering challenge from a triumphant China. In this time of coronavirus and hostility toward Chinese communists, it is easy to forget that the current contretemps is the merest of motes in the Amazonian currents of historic change.

Again, a French thinker has taken the lead in expounding the nature of the epoch. He is Eric de la Maisonneuve, a French general, strategist, and philosopher who has spent much of the last decade in China.

Challenging Western Logic

In his Les Defis Chinois: La Revolution de Xi Jinping, he wants us to understand that the China ascendancy is the central event of this century. “Caught in the whirlwinds of a historic river and led despite themselves toward a large wide opacity,” both the Chinese and Americans may fail to grasp the immensity of the moment.

It is hard for devout capitalists like me to recognize the dimensions of the Chinese defi. Mounting the challenge amazingly is the Chinese Communist Party (CCP) under a devout professed Maoist and even Marxist, Xi Jinping.

Maisonneuve, however, wants us to understand that Chinese culture is fully comfortable with contradictions that would tear us apart. Xi combines a sedulous socialism with a sage practical mastery of markets and new technology.

Western logic is binary, governed by the so–called law of the excluded middle — things are either one thing or the other, true or not, never both. Beyond these binaries of Western logic, China occupies an excluded “middle kingdom,” a Zhongguo.

Here, ordinary logic may give way to elusive but encompassing unities that bridge the contradictions. These unities could be deemed analogous to the quantum superpositions that the Chinese are avidly embracing in their lavish quantum computing programs.

Lifetime President of the People’s Republic of China and General Secretary of the Communist Party of China, Xi showed his dialectical mastery in October. He continued odious crackdowns on major Chinese entrepreneurs such as Jack Ma of Alibaba and Peter Ma of Tencent, who were apparently driven into early retirement for gaining eminence that outstripped the CCP. But at the same time, in a major address to the CCP’s Central Committee, he called on the country and the party to “seize the opportunity” of blockchain technology.

With their distributed architecture, where content is secured by replication through every node, blockchains are the ultimate heterarchy or peer–to–peer technology. They intrinsically give individuals power, identity, and immutable attestation against top–down regimes.

Simply shocking is the range and reach of Xi’s grasp of the promise and implications of this paramount new tool of capitalism. He transcends all the myopic cavils and misgivings of Western governments and his own, such as the previous Chinese cryptocurrency ban and foolish Congressional fears over Facebook’s proposed Libra. Libra was a blockchain based currency that was to serve the billions of Facebook’s social network customers, but Congressmen of both parties treated it like a snake on a plane.

By contrast, Xi declared: “We must take the blockchain as an important breakthrough for independent innovation of core technologies…and accelerate the development of blockchain technology in industrial innovation.”

In his speech of an hour and a half, Xi further called for “implementing the rule of law” into existing and future blockchain systems. Thus, the Communist party attempts to bridge the logical conflict by policing this new architecture of individual rights, which in its early manifestations in China as elsewhere was fraught with hustles and scams.

Declaring that blockchain have a range of applications, from financing businesses and managing monies to mass transit and overcoming poverty, he called for the creation of “Blockchain–plus.” This would be a software platform and “development kit” for launching new applications for personal advancement, education, employment, food and medicinal safety.

That was in October, just six months ago. But already leading in internet and smart phone finance with WeChat wallet and Alipay and Ping An AI loans and insurance, China is forging ahead with what is described as a “grand strategy to lead a global monetary and digital transformation of the world economy.”

China Advances Further

This week came two more fateful steps. China announced a new testing environment for its proposed central bank digital currency. This venture aims to replace the RMB and other currencies around the globe with new digital systems. It follows the inspiration of longtime Chinese Central Bank statesman Zhao Xiaochuan, an advocate of internet banking who challenged the world’s central bankers in 2009 to develop a new global currency like Keynes’s “bancor” with ties to gold.

Then, next week on April 25 comes the launch of China’s national blockchain platform, the Blockchain Service Network (BSN). This is a software regime that will enable developers to plug in and code blockchain applications, both permissioned and exclusive such as Hyperledger (from an IBM consortium), and permission less, such as EOS and Ethereum.

Significant was the specific embrace of EOS and Ethereum, two of the major Western blockchains, with smart contracts and native currencies. Both these systems spring from fervent libertarian and individualist philosophies.

In my introduction to Nathan Lewis’ definitive study — Gold: The Final Standard — I told the story of “bold mariners” in Polynesian Island tribes who crafted elaborate canoes for traversing large distances at sea and catching hauls of fish, but then over the decades allowed these skills to slip away. Their descendants ended up isolated on small islands, close to starvation, and headed for extinction.

Margaret Mead describes the men gazing fecklessly at the sea as if it were an alien realm irrelevant to their shortage of food or possibilities of travel. She asks: “If simple men on islands forgot how to build canoes, might more complex people also forget something equally essential to their lives?”

Nathan Lewis tells how very complex human societies, led by sophisticated politicians and economists, lost their crucial ability to provide stable money as a tool for trade and economic growth. Thus, they are jeopardizing the future of capitalist economies and the world trade that sustains them.

As altogether blindly as those starving Polynesian warriors gazing at the sea, the world’s monetary experts look out on the turbulent oceans of chaotic currency trading that replaced the gold standard and show no awareness that anything is awry.

According to late 2019 data from the Bank of International Settlements, this sea of currency trading now churns away at a rate of $6.7 trillion per day, up 30 percent in three years. In a hypertrophy of finance, this huge turbulence is as much as 73 times all trade in goods and services, 25 times all global GDP.

Yet all the Forex trading arrives at no reliable values to guide entrepreneurs and producers of real goods and services. The currency bloat has brought economic doldrums, time horizon shrinkage, no return for savers, and trade wars.

While Central Bankers hack global currencies for the benefit of politicians, saboteurs hack the Internet at an ever–increasing rate. While spending on Internet security rises some 20 percent a year, the number of breaches of items of personal data soared eightfold in 2019, from a billion items to eight billion.

The blockchain is the answer to both these hacking crises. Are we really going to close down our economy for “viral new mania,” while the Chinese take the lead in the paramount new technologies of the day?

Regards,

George Gilder
Editor, Gilder’s Daily Prophecy

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