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In the Jaws of the Dragon: America's Fate in the Coming Era of Chinese Dominance

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In the Jaws of the Dragon: America's Fate in the Coming Era of Chinese Dominance [Paperback]

Eamonn Fingleton
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Editorial Reviews

From Publishers Weekly

America's fate looks dicey in the showdown with the Chinese juggernaut, warns this vigorous jeremiad. Fingleton (In Praise of Hard Industries) argues that China's "East Asian" development model of aggressive mercantilism and a state-directed economy "effortlessly outperforms" America's fecklessly individualistic capitalism. Nor will economic development democratize a "quasi-fascist" Confucian culture. More likely, Fingleton contends, is "the Confucianization of America" as Chinese wealth subverts American politics and media. Fingleton's brief against Confucian societies can seem vague and paranoid; fortunately, his economic analysis is incisive. His most telling critique is of American business elites and policymakers, who have wrecked the U.S. economy, he insists, by promoting laissez-faire nostrums, free trade and a hollowed-out service economy. More compelling than Fingleton's exaggerated dread of the Confucian dragon is his well-supported case for economic nationalism. --This text refers to an out of print or unavailable edition of this title.


Praise for In the Jaws of the Dragon

“America’s fate looks dicey in the showdown with the Chinese juggernaut, warns this vigorous jeremiad. . . . his economic analysis is incisive.”—Publishers Weekly

“One of the most powerful, shocking, well-written, solidly documented, tear-the-scales-from-your-eyes books I’ve read in more than two decades. . . . I couldn’t put this book down—at least 100 of its 310 pages are dog-eared and highlighted. It’s probably the most important book that's ever been written about the future of our republic.”—Thom Hartmann

“Eamonn Fingleton demonstrates once again why his analyses of modern capitalism deserve serious attention. He lays out the consequences of seeing China the way outsiders would like it to be, rather than the way it is.”—James Fallows, The Atlantic Monthly

“Eamonn Fingleton’s riveting and provocative book is required reading for anyone who cares about the U.S.-China relationship.”—Senator Byron L. Dorgan, author of the New York Times bestseller Take This Job and Ship It

About the Author

Eamonn Fingleton, a prescient former editor for Forbes and the Financial Times, has been monitoring East Asian economics since he met supreme leader Deng Xiaoping in 1986 as a member of a top U.S. financial delegation. The following year he predicted the Tokyo banking crash and went on in Blindside, a controversial 1995 analysis that was praised by J. K. Galbraith and Bill Clinton, to show that a heedless America was fast losing its formerly vaunted dominance in advanced manufacturing to Japan. His book In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key to Future Prosperity brilliantly anticipated the Internet stock crash of 2000. His books have been read into the U.S. Senate record and named among the ten best business books of the year by Business Week and

Excerpt. © Reprinted by permission. All rights reserved.

Chapter 1

Two bets are on the table. One has been placed by the Washington policymaking establishment; the other, by the leadership of the Chinese Communist Party.

Analyzing China’s prospects in terms of the currently fashionable globalist ideology, the Washington establishment is betting that a rich China will be a free one.

The theory is that the only way China can continue to grow is by embracing Western democracy and capitalism. Moreover, the very process of China’s enrichment is supposedly serving to undermine the Beijing government’s authoritarianism. Thus a feedback effect is said to be at work: more wealth means more freedom means more wealth. . . .

This view has been championed by many American political figures in the last fifteen years. Here, for instance, is how President George W. Bush put it in 2005: “As China reforms its economy, its leaders are finding that once the door to freedom is opened even a crack, it cannot be closed. As the people of China grow in prosperity, their demands for political freedom will grow as well. . . . By meeting the legitimate demands of its citizens for freedom and openness, China’s leaders can help their country grow into a modern, prosperous and confident nation.”

Similar optimism is poured forth daily by the American press, not least by the Wall Street Journal. Here is a typical Journal comment from 2006: “Sooner or later China’s economic progress will create the internal conditions for a more democratic regime that will be more stable, and less of a potential global rival. . . . China’s burgeoning middle class, created and buoyed by economic growth, will drive internal change.”

Abroad too the Washington view is increasingly prevalent. In Britain, for instance, it has now been embraced not only by the media but by many top politicians. After visiting Chinese premier Wen Jiabao in 2005, then British Prime Minister Tony Blair, for instance, cited the rise of a huge Chinese middle class and the spread of the Internet as factors that had produced “an unstoppable momentum . . . towards greater political freedom [and] progress on human rights.”

The Washington view’s prevalence probably owes something to its implicitly flattering regard for Western culture. After all, it is founded on the premise that Western philosophy constitutes universal truth.

Those who espouse it, moreover, often loudly claim to occupy the moral high ground. Skeptics are made to feel either that they do not fully comprehend the perfection and universal salience of Western values or that they are denying the Chinese people’s essential humanity.

Claims to the moral high ground apart, however, the Washington view has also been propelled by something more reliably persuasive: money. The fact is that various powerful interests, most obviously countless multinational corporations, see profit in promoting the Washington view. Thus vast amounts of money have been pumped into a propaganda program to win over key opinion makers, not least elected officials, top editors, press pundits, government bureaucrats, and think-tank scholars.

As more and more money has been applied to the task, the Washington view has come to be accepted by more and more erstwhile skeptics. In particular many hawkish Sinologists from the cold war era have now reversed themselves. Up to the late 1990s they had generally held that China’s economy diverged too sharply from Western capitalism ever to amount to much. China’s continuing export surge in the new century has forced a total rethink—and corporate America’s lobbying money has sweetened this bitter ideological pill.

So widely accepted has the Washington view become that until recently almost no one had noticed there was another bet on the table. This second bet—that of the Chinese leadership—is on a disturbingly different proposition: that a future China can be both rich and authoritarian.

If the Washington view is right, the future is unclouded, and a fast-rising, fast-Westernizing China can readily be accommodated within the existing Western-defined world order. But what if it is wrong? What if—surprise!—China’s top leaders turn out to understand the Chinese character better than anyone in Washington? What if in, say, 2025 or 2030 the United States finds itself facing off against a China so rich that it has surpassed all other nations in military technology, yet a China that remains resolutely opposed to Western values? The implications are hard to exaggerate. Yet so far they have received remarkably little consideration. It is past time that this oversight was rectified.

New China: Rich Because It Is Authoritarian

In the great debate over China’s future, Chinese leaders have more at stake than most. After all, their jobs, if not their heads, are on the line. It is reasonable to conclude that they have considered their options carefully.

Moreover, they enjoy the priceless advantage of local knowledge. They read and speak the language. They have studied their nation’s history and know its mind.

By contrast, those on the other side, with virtually no exceptions, are pathetically uninformed. As they have never lived in China—or in any other part of the Confucian world for that matter—they have had no practice in the mental gymnastics often needed to make sense of the distinctly Confucian way modern China explains itself. Even worse, the fundamental ideological framework within which newcomers to the Confucian region try to understand China is completely wrong.

For a start, contrary to all conventional wisdom, the Chinese economic system is not capitalism, nor is it converging toward capitalism. Thus any deterministic Washington analysis based on the history of Western capitalism is doomed from the start.

The truth is that China is operating an adaptation of the so-called East Asian economic system. Launched in the then Japanese colony of Manchuria in the 1930s, this system was perfected in Japan proper in the 1950s and 1960s and has now been widely copied throughout East Asia.

As James Fallows has pointed out, the Chinese version differs from the Japanese original in being more atomized; hitherto at least, the role of government in micromanaging outcomes is far less in evidence than in the mature version of the model seen in Japan. Nonetheless in its key elements it is the same system. As itemized by the authors Richard Bernstein and Ross Munro in their 1997 book The Coming Conflict with China, these are just some of the more obvious features of the Chinese version of the East Asian economic model:

• A labyrinthine system of trade barriers
• An artificially undervalued currency
• An industrial policy that focuses on developing so-called pillar industries and uses export subsidies and other unfair tactics to give them a competitive advantage in world markets
• Systematic pressure on foreign companies to transfer their most advanced production technologies to China

While the East Asian approach to economic development resembles capitalism in some ways (it makes extensive use of markets, for instance, particularly at the level of small business), its fundamental logic is quite different. A key difference is that whereas authoritarian political controls constitute a hindrance to the full efficacy of capitalism, such controls are really essential to the functioning of the East Asian system.

The ability of top officials to keep tabs on everything is greatly enhanced by the fact that, as James Fallows has pointed out, Confucian econo-political culture diverges fundamentally from the West in its approach to power. In his 1994 book Looking at the Sun: The Rise of the New East Asian Economic and Political System, Fallows wrote: “Anglo-American ideology views concentrated power as an evil (‘Power corrupts, and absolute power . . .’). Therefore it has developed elaborate schemes for dividing and breaking up power when it becomes concentrated. The Asian-style model views concentrated power as a fact of life. It has developed elaborate systems for ensuring that the power is used for the long-term national good.”

One critical way in which power is deployed to economic advantage in China—as in other East Asian economies—is in savings policy. However counterintuitive this may seem to Westerners, China’s famously high savings rate is imposed on the nation from above. By dint of various authoritarian policies, vast savings surpluses have been generated. These have provided the principal driver of China’s rise, making possible a superfast rate of growth in investment not only in industry but in the sort of advanced infrastructure needed to maximize the nation’s exports.

Top Chinese leaders have been inspired by the now voluminous evidence that, in modernized form, authoritarian Confucianism almost effortlessly outperforms Western capitalism. The impact of the East Asian system on the world economy has already been massive. Based on figures cited by the Berkeley-based political scientist T. J. Pempel, between 1960 and the early 1990s alone, East Asia’s share of the world economy multiplied sixfold—rocketing from less than 5 percent of total world output to about 30 percent. For several decades to come we can expect East Asia’s share to continue to rise as China rapidly catches up with earlier Confucian industrializers in deploying the most advanced production technologies.

Understanding Why We Misunderstand . . .

As we will see in detail in chapter 2, the West faces special difficulties in understanding the Confucian world.
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