China’s Future of Neurotic Prosperity
If there is validity in the parallels drawn in my previous articles, China should prosper, though we do not know how long it would take. Recall Shakespeare’s Shylock. Below its dramatic surface, that play is about trust versus contracts. Members of a society who know that they must rely on contracts (Jews, surrounded by a hostile Europe), find themselves in opposition with Christians, who think that contractual agreements must have an escape clause by just saying: “trust me”.
Shakespeare captured the transition from customs, enforced by family, tribe and religion to one where lawyers and formal dispute resolution mechanism would have the last word. Only at that time, to him it seemed that customs should have the upper hand, and guide the courts too. He did not anticipate the necessary adaptation to a world of growing and more mobile population, where “trust” becomes an expensive capital to create and sustain.
Societies that do not succeed creating institutions to substitute lost “trust” with enforceable contractual agreements, will fall behind. And the slower these institutions are being created, the slower will society prosper.
I do not want to venture into making a prediction about the shape and form of the intellectual, neurotic prosperity so many single kids – the “little emperors” of anxious Chinese mothers – would bring about.
But let there be no doubt. A country filled with 1 million variations on Freud, combined with 100,000 variations on Woody Allen and Marx, and 700 million falling between the cracks during the transition from paternalist China to a variation on 18th/19th century lacking-safety-nets-type society, brings about a very neurotic prosperity.
When millions of people, who have nothing to lose, bet on crazy ideas, expect much volatility. It may be interesting to watch, and – no doubt – some will make fortunes from this volatility. Just remember the Chinese curse: “You should live during interesting times.”
One thing the US could do in order not to contribute to this volatility, is let the Chinese keep their currency stable, and pegged to the US dollar. Monetary mismanagement combined with hundreds of millions of people who would have nothing to lose, and a few neurotic millions can be a lethal combination.
A version of this article originally appeared on Asia Times Online.
Become An Insider!
Sign up for Affluent Investor's free email newsletter and receive Jerry Bowyer's Special Report, "How to Be an Affluent Investor in the Age of Obama & Ineffectual Republican Opposition."