When Nixon normalized relations with China, Red China as we knew it in those days, virtually no one predicted the rise of China as an economic power, not just rivaling the United States, but besting it. In terms of purchasing power parity, the Chinese economy is now larger than that of the U.S. The average Chinese consumes 17 times more than he did in 1987. How can this be? According to the economists, their communistic economy is necessarily less efficient than our “free” economy?
Putting aside the question of how truly free our economy is; nevertheless, it is much freer than that of China. China, even with some expanded freedom, remains a totalitarian state with limited political freedom. They impose high tariffs. They run a socialistic shadow market economy analogous to that analyzed by Oskar Lange and Nobel Laureate Wasily Leontief. In economic theory, they should not be able to compete with nations in which decisions are determined by market forces. How do they do it? If the facts do not fit one’s theories, then one must change his theories.
I submit that the manner in which the Chinese are able to overcome the inefficiencies of socialism is by being a meritocracy. To become a leader in China, one must score very highly on a long series of examinations beginning at age 12. The result of this is that only very smart people are making all the decisions for the government and in their business enterprises. Even the children of the president of China cannot be admitted to a university unless they score highly. In the U.S, we have legacy admissions and quotas for protected minorities.
We elect our political officials, and clearly our electoral process does not lead to the smartest people being placed in positions of power. We have some very unintelligent people, people who have difficulty constructing a grammatical sentence, in the highest echelons of power. This is not necessarily a condemnation of democracy, but rather of the type of democracy that we have, that permits the mediocre and sometimes the very stupid to rise in the political world. In China everyone who had any decision making authority has proved himself by many examinations to be very smart. The proof of the pudding is in the eating. Their meritocratic system is outcompeting our system.
It was not always thus. The Department of Labor used to test Americans and provide the test information to employers looking for employees. If intellectual capital is the new capital, then we need to find out how much we have, and where it is, so that it can be most productively utilized. In the early days of our republic, the government wanted to know what physical capital existed in the country and where it was. Tench Coxe basically conducted a census of every tool and every piece of capital equipment in the United States. This was published and made available so that anyone could make rational plans for manufacture. Everyone knew what capital was available.
Today knowledge is considered the capital of the country; yet we have no way of knowing how much any one person really knows or where in the country the knowledgeable people may be. One might argue that one reason for Amazon’s fabulous success is that Jeff Bezos stated early on that he hired people at least partly on the basis of their SAT scores. This is in line with what Andrew Carnegie said over 100 years ago when he declared that he had no special genius, that all his success was based upon hiring the best man for the job. Allowing for the fact that today, one would have to say “or woman,” today does anyone even think of insisting on hiring the best person for the job? There are always non-meritocratic considerations in America today; diversity, nepotism or just plain bribery, corruption or seduction. One may argue, of course, that we don’t want a meritocracy; but if we don’t want one, then we must live with the consequences of that decision, that ultimately we will no longer be the strongest, most successful nation in the world. We are going to face that possibility in a very short time.
Communism failed in Eastern Europe and Russia because the Soviet bloc combined an inefficient economic system with a lack of a meritocracy. China will not fall apart so readily. Anyone who has been there can tell of the magnificent cities which have been constructed in the past 30 years. They have moved 600 million people from the farms to the cities in that time.
Economic measures alone will not be enough to revivify the U.S. economy. Changing trade agreements or tariff structures may be beneficial, but to compete in the world economy, we must return to a meritocratic system. As a nation, we may love the common people, but we don’t need more mediocrities in positions of influence, either in government or business. Everyone suffers when they are in those positions, the common people as much or more so than the able.
In our amusements we demand the best. We will not pay to watch men who shoot 30% from the foul line, running backs who run the 40 in six seconds or pitchers with a 45 mph fastball. We must start demanding the best in the things that really matter in life, in our government, in our scientists and in our business leaders.
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