Being a history buff, I enjoy watching old clips of history and historical economics lectures. Yet I noticed something a while back when watching UCLA professor Eugene Weber lecture in the 80’s as well as watching an old miniseries from Milton Friedman called The Freedom to Choose. Mainly, I noted the contrast of the academic climate and values compared to today.
I realized that one of the serious academic concerns of that time was whether developing countries would have enough food to survive. Yet this concern and debate seems to have completely disappeared from the public discourse. This may seem like an interesting footnote in academic dialogue but it had real world consequences that played out over 40 years and I believe one of them was through the Chinese government.
Academics of the 70’s and 80’s, when they approached the scarcity problem of world food production coupled with the booming populations which were brought on by vaccines and other medical advances, often took the viewpoint of Thomas Malthus. In brief, Malthus theory states that:
- The population is necessarily limited by the means of subsistence.
- Population invariably increases where means of subsistence increased, unless prevented by some very powerful and obvious checks.
- These checks, and the checks which repress the superior power of the population and keep its effects on a level with the means of subsistence, are all resolvable into moral restraint, vice and misery.
However his theory completely ignores any thought for greater productivity in food production and land use. The period since the 70’s and early 80’s saw a liftoff in the productivity of food production, especially in those countries endowed with large tracts of land which are heavy exporters of agricultural products.
Nevermind that much of academia and policy makers didn’t pay attention to economists that argued that production was not the issue but rather poor governance and barriers to trade that prevented food from getting where it was in abundance to where it was desperately needed.
This relates to something that has often gone overlooked about Milton Friedman and his writings over the years as well. In his miniseries based off his book of the same name, Friedman highlighted that the academic climate of the times have a heavy influence on policy decisions. It makes sense. Who are the people who educate most of our politicians and sew the seeds of future policy? Or even help write the policy once those politicians are in power? It’s often those teaching higher education. Friedman gives historical examples of how the academic climate and intellectual consensus affects policy in his series: when the Meiji dynasty of Japan decided to modernize they copied the open markets model of the British and Americans. When former New York governor Roosevelt was president during the Great Depression and academics such as John Kenneth Gabriel worked in his administration, there was a tilt towards European style welfare states which is coming into fashion again today.
How This Relates to China
Contrary to how the media in the West portrays the Chinese government, they are anything but inward looking. They have managed to stay in power through the late 80’s and the Tiananmen protests to survive to the current day. One way they have done this was by deftly pivoting on policy to keep their populace content.
The Chinese government seems to be well aware that academic climate that Friedman spoke of and it’s effect on the public consciousness. Indeed, it seems to have made up its mind that this is a potential source of survival in recent times. Deng Xioaping’s reforms and emulation of growing authoritarian economies like Singapore were a matter of survival for his reformist government which took power in 1978. Deng sent many bureaucrats to study Singapore and learn its ways.
That brings us back to the academic climate of the time which was then dominated by those Malthusian ideas. The one child policy was introduced in 1979, the same year Deng’s other economic reforms had begun and had a goal of achieving that prosperity that had eluded China under Mao and his cultural revolution. I’m willing to bet that the sending of bureaucrats oversees to gain knowledge on how to make China richer as well as the academic climate around Malthusian ideas of overpopulation at the time, we’re not mutually exclusive events. This was a policy formulated on academic logic that has turned out to be faulty given what has transpired since then. In addition to the cruelty of forced abortions and infanticide it produced, it has now set China up for a demographic time bomb which could wreck its status as an engine of growth for the coming decades. The working age population, the source of much of its output, began to fall rapidly in 2018 and will likely continue to do so for another 30 years.
Fast Forward to 2021
With the consolidation of power of Xi Jinping, the government will continue to be focused on maintaining popular support and control. On the one hand this will consist of using tools like tightening the police surveillance state which rewards compliant behavior through the social points system. The other tool the government uses to maintain this popular consent is to look as if they are moving faster and more swiftly than Western democracies in attacking the social ills of the day; enter Jinping and his crackdown on billionaires, tech companies and education companies.
A popular media narrative is that this is a move to send a message to other powerful Chinese billionaires that Jinping is the one true ruler. But this misses the fact that China already has a tight grip on its populace including its billionaires. Why else would many of them be buying up property overseas in case they run afoul of the boss. Much of the communication on this matter from the Chinese government has centered around promoting “common prosperity” and that sounds very familiar to what college campuses around the US have pushed into the public sphere and debate.
The work of academics like Thomas Piketty have injected a class debate into the public discourse that has help fan a hatred for the wealthy. It’s not uncommon to hear the Jacobin rallying cry of “Eat the rich” made popular during the French Revolution nowadays. Yet this is a bit ironic coming from people living in the US, a country where the median income of $63,000 puts a household in the 1% of earners globally.
In the past, China’s government could probably ignore the whining of privileged US young adults but even their control of the internet can’t stifle connectivity to Western pop culture and the academic climate it comes with.
What the US Can Learn
If US politicians can take away anything from this, it’s that taking the whack a mole approach to public policy driven by media attention is doomed to end up looking a lot like China’s heavy-handed we know what’s good for you better than you do approach, rather than tackling the underlying problems. Low interest rates can be blamed for much of the wealth inequality which has developed since the 70’s as the rich have been able to borrow ever more cheaply against ever dearer assets. Only a wealth tax could remedy that without more distortion are effects on everyone else and that is nowhere on the table except in the more extreme and unlikely proposals.
As Chinese observers have pointed out, the banning of profit for education companies, the throttling of Ant Financial and the punishment of ride hailing apps that dare to list their shares overseas like Didi, has wiped $1 trillion off the value of Chinese shares since April. It’s easy to point out because it was broad and swift, but many of the same heavy handed tactics for the “common prosperity” are taking place in the US as well. The CDC eviction moratorium essentially bans profit seeking behavior for landlords. The student loan deferrals and mortgage deferrals temporarily ban profits for the pensioners that hold them, and government controls of zoning have driven up the price of real estate across the country which only now are people beginning to start to remedy. California’s single family zoning law is a step in the right direction but it’s not an end all solution to the lack of housing there. Many of these steps were all well and good as compensation when the government was forcing us inside and many couldn’t work, but the rebound is here and yet states continue to prolong these programs likely because they find them politically expedient.
As consumers, we also need to be a lot more conscious of the information we take in. Some may be bored by economics but many of the pressing problems we have today are economic in nature. Many of the journalists reporting on these issues are poorly trained or not trained at all in economics. From reports on housing to wealth inequality to tax policy, I often see poorly constructed writing and arguments that appeal to human emotions rather than presenting facts from which the reader can decide, and remember, these are the people pushing the national debate on these issues. These journalists were trained in journalism and fine arts schools by the same academics that push heavy handed government solutions to our social problems. The academic climate helped produce distortions like the one child policy due to beliefs which turned out to be false in the past, what will be the result in the next 40 years?
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