On February 4, 2023, an American F22 fighter jet shot down a Chinese airship near South Carolina in the Atlantic Ocean. The stray balloon incident was pushed to a dramatic climax. Several balloons were shot down in the air in the next few days. The hostility between China and the United States has increased sharply. Who will win and who will lose in the game between China and the United States has become an indispensable essential judgment for countries to formulate national policies. Canada has been on one side since the Meng Wanzhou incident and is attached to the United States in geopolitics. The presumption of this federal policy is probably to be that the United States can successfully suppress the rising of China, so betting on the winner's side. Because China has never been hostile to the United States and Canada, and there is only a moderate reaction of China to the hostile behavior of the United States.
How to judge who wins and who loses in the Sino-US confrontation? In terms of current events, there are too many emergencies, such as the war in Ukraine, the earthquake in Turkey, and the COVID pandemic, which often bring drastic changes to the geopolitical situation, and it is difficult to tell. As far as the economic cycle endogenous to the capitalist system is concerned, the ups and downs in the short and medium term are difficult to fathom. However, if we put the game of great powers into the historical trend, the certainty is quite obvious.
What is the general trend of history? Marx believed that the general trend of history is the progress of productive forces. Both Marx and Adam Smith are great economists. Marx and Adam Smith have many points in common, one of which is that the division of labor leads to the improvement of productivity.
The driving force behind the progress of productivity lies in the desire of human beings to obtain more utility with less labor. This economic indicator is called productivity, that is, the less production input, the more output, and the higher the living standard of human beings. Whether it is socialism or capitalism, whether it is a natural economy or a market economy, the improvement of productivity has always been the impulse of human economic behavior. It can be said that increasing productivity has been an eternal law since the birth of human beings.
The genius Adam Smith discovered that one of the most important means of increasing productivity is the division of labor. Before the industrial revolution, workshop craftsmen passed on their skills from master to apprentice, and the key to craft is practice makes perfect. When the scale of the workshop expands, a product can be divided into several procedures, and each worker only specializes in one process, which greatly shortens the learning curve. Each worker repeatedly operates a few simple actions. The products produced in this way are of good quality and can produce faster. Of course, the expansion of the workshop scale requires a larger market. The division of labor also divides the production process into several processes, paving the way for the mechanization of the industrial revolution. Machines are designed according to the several divisions of labor required in the production process of a product. The division of labor has brought about the alienation of labor. The labor of workers has become a boring and simple repetitive action. The labor force has lost the subjective consciousness of the laborer. The products of labor are not for use but for exchange.
The British Industrial Revolution began in the textile industry, using textile machines powered by water wheels on the rivers around Manchester. The use of machinery necessitated a certain scale of output, a greater market, and greater sources of cotton and wool. It can be said that the Western Industrial Revolution was the product of transoceanic trade after the discovery of the New World. African slaves were transported to New Orleans, cotton from slave plantations was transported from New Orleans to Liverpool Port, and textiles produced in Manchester were sold all over the world. At that time, for the sake of the industrial revolution, the great powers had to colonize overseas to obtain colonial resources and markets in order to maintain the scale that machine production must achieve. Western capitalism arose from the commercial capital, and Western democratic political systems arose from the self-government of capitalists in trading seaport cities of the Hanseatic League. After the Meiji Restoration, Japan immediately colonized overseas, colonized the Ryukyu Islands, colonized the Korean Peninsula, colonized Taiwan, and colonized the three northeastern provinces of China. The capitalist industrial revolution was built from the beginning on the exploitation and oppression of the indigenous people in colonies. However, the overseas colonies occupied by Japan and the overseas colonies of the British Empire are not of the same order of magnitude at all. Therefore, the aggressive and expanding nature of capital has been the gene of Japan's national behavior since the Meiji Restoration.
Japan, the United States, Russia, and Germany are all emerging powers in the second industrial revolution. The United States has expanded to the west, expanding from 13 states in the east to the Pacific Ocean. It has the transcontinental railway as its industrial revolution infrastructure, and the area of 50 states is larger than the colonies of many old powers. Russia expanded in Central Asia and the Far East, and also occupied a large area of land and abundant resources to support the scale of the industrial revolution. This is not the case for Germany and Japan, especially Germany, whose overseas expansion will inevitably conflict with the old powers, because the world has been divided up by the old powers. That's why both world wars started in Germany.
After the Opium War, the earth-shattering Taiping Heavenly Kingdom Movement took place in China. In 1900, the Eight-Power Allied Forces suppressed the Boxer Rebellion and occupied Beijing, but they dared not and could not split China into eight parts for each power to occupy a colony. They cannot repeat the suzerain-colonial international order that divides Africa and the Americas. Because the Taiping Heavenly Kingdom and the Boxer Movement demonstrated the organizational capabilities of the Chinese people, the big powers could only use the hands of the Qing court and the later National Government to control China's politics and economy, that is, using the bureaucratic comprador class and warlords to divide the sphere of influence in China for imperialist powers. The United States is the least advocate of splitting China. The Eight-Power Allied Forces demanded Boxer indemnity, and the old colonial model degenerated into a financial colonial model. After 1900, China's customs were jointly managed by the international community, and the customs revenue, as well as the tax revenue of the Chinese central government, were used to pay Boxer indemnity. At that time, the policies of the great powers towards China were "open door" and "equal shared interests". This model has a lot of appeal for rising empires like the US, Germany, and Japan, as an alternative to the suzerain-colonial economic order.
In World War II, the United States replaced the United Kingdom as the global hegemony to encourage national independence from colonialist powers. National independence turned the old British and French colonies into an "open door" and "equally shared interests" model. The loss of Britain and France is the gain of the United States. The model has changed, but the basic economic principles of division of labor and economy of scale remain the same, that is, Western developed countries also need resources and markets in Asia, Africa, and Latin America to support their capital operation scale. The most-favored-nation treatment and the national treatment of the WTO are extensions of the principle of "equally shared interests". When a country lowers tariffs for one big power, it must lower the tariffs for all other powers as well. This is called the "most-favored-nation treatment. " mode. Demanding free trade is the extension and continuation of the "open door" policy. The global market economic order dominated by the United States after World War II is a unified global market, which refines the global division of labor and improves productivity. Movement of independence was surging, becoming the general trend of the world that "the world trend is mighty, and those who follow it prosper and those who go against it perish".
The WTO rules are aimed at the free movement of production factors and goods in the world market. There is free movement of goods and commodities by lowering tariffs. There can also be free movement of the labor force. The United States and Canada issue visas to Mexican seasonal migrant workers every year, and the Gulf oil-exporting countries use a large number of foreign laborers. The use of foreign labor is often the soil of racial discrimination, creates a market for human traffickers, creates social problems in the underground economy, and conflicts with moral norms. Therefore, it is preferable for the free flow of capital. After the disintegration of the Soviet Union, the first thing to implement is the free flow of capital. The free flow of capital is also a double-edged sword. It can promote the prosperity and development of the global economy, and it can also become a channel for international financial monopoly capital to loot the wealth of other countries. The debt crisis in Latin America in the 1980s was the work of monopoly capital looting the wealth of Latin America and putting Latin America in the "middle-income trap". After the disintegration of the Soviet Union, its wealth was looted by the West, which is the result of the free flow of capital. In the 1998 Asian financial turmoil, financial monopoly capital looted a large amount of wealth in Asia. When western capital poured into certain countries in Asia, Africa, and Latin America, the country's economies flourished. When the western capital withdraws from a country, the economy of that country collapses. It is called economical assassination. This financial drama was repeated several times after World War II. This is a good game for financial monopoly capital to loot developing countries in Asia, Africa, and Latin America. At the beginning of the 21st century, the Internet economic bubble in the United States burst, and the economic crisis in the United States looted the assets of American allies in Europe. The Kosovo war in 1998-1999 drove Eurodollars to the Nasdaq stock market. After the dot-com bubble burst, all the Eurodollars vanished on Wall Street. The 21st century is the century when the United States cannibalizes its allies.
Let's continue with the talk about the division of labor promoting global economic progress. The information revolution at the end of the last century suddenly brought countries closer together, globalization has become a sacred human mission, the global economy is booming, and the world division of labor is unprecedented. Many manufacturing industries in Western countries are outsourced to developing countries. An increase in productivity is an increase in efficiency at the company level. If the company's own production cost is higher than the market price, it is outsourced to other factories to reduce costs. A market economy only needs to maintain the core competitiveness of the company. For example, the core competitiveness of Nike and Adidas is marketing, and all manufacturing is outsourced. American shoe companies do not need to manufacture shoes in the United States, and they can stand out from the crowd by only retaining design and marketing. The same is true for clothing, such as the Crocodile brand, which can profit from brand royalty only, and the clothing factories can be located in Bangladesh or Vietnam. The Canadian automobile manufacturing industry is all factories invested by American and Japanese capital. The Canadian automobile manufacturing industry is very developed, but there is no Canadian national brand. Globalization has created huge wealth, which is the result of the global division of labor in industrial mass production. Capital export is more human rights acceptable than labor import. If you want to uphold human rights, you don't have to uphold them domestically, and just oppose other countries if you uphold them. On January 23, 2023, a Chinese shooting occurred on a California farm in the United States, and 7 people were killed. This is the tragedy of importing labor. The United States is the world's largest human trafficking market. After the upheaval in Eastern Europe, a large number of women and children were abducted into the United States as sex slaves. The black market for American labor is a humanitarian disaster. U.S. capital needs cheap labor, but the U.S. built a wall on the U.S.-Mexico border to prevent Latin Americans from trafficking into the U.S. Instead of the free movement of labor in the market, the U.S. chose the North American Free Trade Agreement to allow capital to flow into Mexico to harvest profits from cheap labor. American capital invests in China, and some white leftists in the United States attack China for having no human rights, not protecting workers, and making labor cheap. Therefore, American workers support Trump and denounce China's human rights situation. In this anti-China atmosphere, the two parties are unanimous to have the manufacturing industry back in the United States. This is a move of deglobalization and isolationism and is a move against the international division of labor and a move against the trend of history. Deglobalization is the dismemberment of the international division of labor in mass production in society, resulting in a supply chain crisis, which reduces the productivity of the global economy, lowers the productivity level of the global economy, and leads to global inflation. The COVID pandemic and the Ukraine War have made the inflation caused by the US trade war with China even worse. The U.S. trade war with China is the deglobalization by decoupling China. It is the contemporary Luddite movement. It believes that China has benefited from the international division of labor in globalization, so it wants to abolish globalization. This is the same as in the Luddite movement back then. The craftsmen in the workshop think that the machine has robbed them of their jobs and want to smash the machine.
The 2008 financial tsunami was a turning point in history. Unlike the Latin American debt crisis, the 1998 Asian financial turmoil, and the bursting of the Nasdaq stock market bubble, something went wrong on Wall Street. Wall Street monopoly capital failed to take advantage of this crisis to quickly harvest the wealth in the world economy. However, the original genes of the empire's plunder of Asia, Africa, and Latin America have not changed. The United States launched the Asia-Pacific rebalancing strategy in 2009, targeting China's huge wealth. Instead of instant profiteering, such as cutting off Russia's energy supply to Europe and selling liquefied natural gas to Europe at a high price in 2022, the United States entered the era of zero interest rate policy and quantitative easing, sucking wealth from the world economy until the COVID pandemic. China's manufacturing capacity is more than enough to supply the sucking of the United States. Therefore, for more than ten years after 2008, China has built a high-speed railway network. The United States can sustain its economy through quantitative easing and zero-interest rate policy, but it cannot stop China's development. The international division of labor in globalization is the inevitable result of the market economy. The 2008 financial tsunami made both China and the United States realize that the international north-south economic pattern typified as Chinese manufacturing and American consumption is no longer sustainable. The U.S. wants to transform from producing less and consuming more to increasing manufacturing, and China wants to transform from producing more and consuming less to increasing consumption. Which strategy is easier to realize for China and the United States? It is certainly easier to increase consumption than to increase production. Therefore, the rapid rise of China's middle class after 2008 has been charged by both China and western countries. There are theories in the West that the middle class is the cornerstone of Western democratic systems, and the rise of the Chinese middle class is benefiting China's adoption of Western democratic systems.
Let's continue the talk about the division of labor and progress. China's inclusion in the world division of labor began with the Opium War. There is a view that the Opium War opened the door to China, that is, since the Opium War, the great powers had equally shared interests in China, and the opening of the treaty port brought China into the suzerain-colonial global economic order dominated by Western powers. The century of humiliation since the Opium War is the history of China being a semi-colony. In 1949, under the historical trend of "national liberation and country independence", Red China was born. The West was dissatisfied with the loss of the quasi-colony. The United States published the white paper "The Loss of China" followed by a blockade against China. During the Cold War, China was blocked by both hegemonies and excluded from the global economy. The reason why China's industrialization process is difficult to make progress is that there is no overseas market like the British Empire, and there is no market in the world like the United States financial domination after WWII. However, during the Cold War, the economies of the two camps were comparable, that is, the market economy could divide labor, and the planned economy could also divide labor. But the capitalist market economy was lost to the Soviet-planned economy in the Eastern camp. When the West fell into the Great Depression in the 1930s, the industrialization of the Soviet Union led by Stalin advanced by leaps and bounds. The Soviet Union took the lead in sending astronaut Gagarin into space, while the United States was deeply mired in the Vietnam War. The essence of national strength is economic strength. The essence of economic strength is the level of productivity. Nixon's visit to Mao Zedong opened the door for China to return to the international division of labor, and the door was opened again, but this time the opening of the door was different from the Opium War. China's reform and opening up is China's independent opening up, and it is an opening up that maintains sovereignty and independence. The United States won the Cold War because of a deal between Nixon and Mao Zedong. Nixon accepted China into the international division of labor, and China helped the United States get out of the quagmire of the Vietnam War. Among the two camps of the Cold War dominated by the United States and the Soviet Union, the American-led camp suddenly combined the huge market of China, and the economic strength of the Western camp greatly increased. Due to China's reform and opening up, the GDP growth rate of the United States in 1984 was as high as 7.24%. China accounted for a quarter of the world's population at that time. The biggest advantage of China's participation in the world division of labor was cheap and high-quality labor. The special economic zone model at the beginning of the reform and opening up was, "processing with supplied materials", and "with two ends outside". Foreign manufacturing is assembled in China, using Chinese labor. Japan's economy has also reached a higher level. It has transferred labor-intensive industries, such as garments and footwear. This is a win-win relationship. China has embarked on the process of industrialization. The process of industrialization depends on a large market, which is larger than the domestic market. It is an international division of labor, an increase in productivity, and an increase in productivity. After China joined the international division of labor, it first developed the garment industry, which is almost the same as the origin of the first industrial revolution in Britain in the textile industry. Facts have proved that win-win cooperation is feasible. Western capital makes profits in China, labor is the source of surplus value, and Western capital profits come from Chinese labor joining the world division of labor.
The international division of labor pays attention to resource endowments. Countries have different resource endowments and different cultures. China as an agricultural civilization emphasizes production over trade. Since ancient times, there has been an economic culture that "emphasizes agriculture over commerce." Western capitalism started from the commercial capital, from maritime trade, and the West emphasizes trade. Adam Smith's "invisible hand" is the culture of worship of market transactions. In business practice, Chinese merchants place a high value on smaller profits with more sales. Overseas Chinese like to buy things in Chinese supermarkets because of the high value/price ratio. Most Chinese businessmen use smaller profits with more sales as their business strategy. Western merchants focus on monopoly profits and want high returns, occupying a market monopoly position and harvesting monopolizing excess profits. Westerners like brand strategy, patent protection, legal procedures, and other maneuvers to maintain monopoly profits. Therefore, since China's reform and opening up and joining the international division of labor, there has been such a phenomenon for decades. Whatever China buys is expensive, and whatever China sells is cheap. The high-priced goods that were produced in the West drop sharply once they are made in China. China's industrialization process has promoted global market competition, and market competition has lowered profits and lowered prices. In the early days of reform and opening up, China was a transitional economy, transitioning from a planned economy to a market economy, and free market competition was the Washington consensus, an academic consensus in Western countries to encourage China to open its door. The essence of a monopoly is to suppress market competition and an anti-market economy in essence, so countries have different degrees of anti-monopoly laws. Monopoly is actually a kind of bullying and domination of the market, which is a distortion of market rules. It can be said that China's participation in the industrialization process of the world division of labor has strengthened global market competition and improved the global market economy under the capitalist system.
The information revolution at the end of the last century has greatly advanced the process of globalization, which is part of the Washington Consensus. Trade promotes the division of labor, promotes economic growth, and trade is beneficial to both sides of the trade partners. This is an important conclusion of Adam Smith's "The Wealth of Nations" more than two hundred years ago, and it is also the experience of human history. The increase in GDP per capita in each country is positively correlated with export trade. The development of high technology in this century is a knowledge-intensive economy, and a knowledge-intensive economy has an economy of scale, that is, the use of knowledge will not reduce the value of knowledge. The production of 100 products is one design, and the production of 1 million products is the same design. But the R&D cost of a high-tech product is very high. High-tech products not only require international division of labor and cooperation, but also a large international market. The international division of labor is reflected in the increase in the trade volume of intermediate products, parts, and components in international trade. A product often uses components or materials from many countries. It is very difficult for a high-tech product to be completely produced within one country. The computer is designed in the United States, the chips are produced in Taiwan, and assembled in Dongguan, Guangdong. The rise of China's middle class has greatly increased the purchasing power of the Chinese market, making China a market that cannot be ignored for high-tech products. The Apple tablet has been launched in China many times, and there are basically no international brands that are without the Chinese market. Any brand that despises the Chinese market risks being squeezed out of the market. BlackBerry, the originator of smartphones, did not enter the Chinese market, which led to BlackBerry's complete withdrawal from the smartphone market.
Today, in the trade war between China and the United States, the US strategy is to de-globalize the competition in the world economy, excluding China from the global industrial chain, and moving all the chip industry chains into the United States. This is a modern Luddite movement that goes against the general trend of the world. China today insists on market opening and globalization, which is in line with the general trend of history. Trump's increase of tariffs on Chinese goods did not reduce the US trade deficit with China but instead increased it. TSMC moved to the United States and gave up the Chinese market. Giving up the Chinese market is tantamount to suicide. TSMC invested 40 billion US dollars to build a 3nm factory in the United States. 3nm chips are military-sensitive products and can only be sold to the US military-industrial complex. The market is extremely limited. A high-tech industry without a global market to join today's international division of labor is impossible. High technology is more dependent on the global market. In 2021, China's electric vehicle market will account for 53% of the global market, and China's electric vehicle market will account for 60% of the global market in 2022. Losing the Chinese market is equivalent to losing the global market. However, the national policy of Canada's electric vehicle industry is to de-Sinicize. This practice of choosing sides by geopolitics seriously damages Canada's national interests and repeats the mistakes of the decline of BlackBerry. Chinese netizens are more than three times that of the United States. Without the Chinese market, artificial intelligence chat platforms cannot last. There are 900 million people in China using mobile phones, and China's mobile payment penetration rate is second to none in the world. Industry 4.0 requires big data. China's large population is the advantage of big data. Deep learning needs to be used by many people. China's large population is an advantage.
What are sanctions? Denying market access is a sanction because if you lose the market, you will lose your scale, you will lose the basis for the division of labor, and you will lose the ability to advance your industry. China's population of 1.4 billion is actually the largest unified market with a unified language. The population of India exceeds that of China. However, India has dozens of languages, all of which are spelling written languages, and the degree of market unification is far lower than that of China. The population of the European Union is half of that of China, and there are English, German, French, etc., the degree of market unification is lower than that of China, and product manuals need several languages to enter the market.
The basis of the capitalist economy is the market economy, which is the market movement of capital, from production capital to commodity capital to financial capital, so that the cycle continues to expand. However, the United States brutally interferes with the global supply chain with state power, stipulating where chips are produced and to whom they can sell. This approach is destroying capitalism. The U.S. military-industrial complex and financial monopoly capital are subverting the Western capitalism of the past few hundred years. The deglobalization of the United States has reduced its own market. Industry 4.0 is an intelligent revolution. Many technologies of the intelligence revolution are not for the end consumer market, but for the manufacturing market. The technological revolution in manufacturing is the largest market for the intelligence revolution, and China is the largest manufacturing country in the world and the largest market for Industry 4.0. Even for end-user consumer products, such as electric vehicles, China is second to none. Looking at the general trend of the world from the perspective of economic theory, the general trend is on the side of China, not on the side of the United States.
Both Marx and Adam Smith are Western economists, and the theory of economic progress based on the division of labor is entirely a Western theory. Why do western think tanks fail to see this general trend? Probably not. They also have theories of geopolitics, specifically the theory of realpolitik. They believe that the United States is the largest military power today, can play zero-sum games, and can be the winner taking all. Although China's military power is incomparable with that of the United States, however, China and the United States have the capability of nuclear mutual destruction. It is very difficult for the United States to change the pattern of nuclear mutual destruction. The purpose of the United States' global missile defense system is to destroy China's nuclear mutual destruction capability. However, China soon developed a hypersonic missile that can directly break through the US global missile defense system. Why did a stray balloon make America hysterical? It shows that the global missile defense system turned out to be a paper tiger, and the United States can do nothing about the balloon floating over the United States for several days. China's J-20 surpasses the American F35 in many performances. Isn't the United States leading the world in technology? Why can China's hypersonic missiles and 5th-generation fighter jets catch up with the United States? The reason is that fluid mechanics is a nonlinear equation. No matter how advanced American technology is, it is difficult to develop hypersonic missiles and fighter jets without large wind tunnel experiments. China is a big manufacturing country, and China is a big energy country. China has the highest and strongest wind tunnel in the world. With this wind tunnel advantage, China's hypersonic missiles and 5th and 6th-generation fighter jets will be ahead of the United States. This is a matter of engineering and manufacturing capabilities. China has this capability, but the United States does not. Why is there a Vietnam War cemetery and a Korean War cemetery in Washington DC? The Korean War and the Vietnam War were the lost wars of the United States, the only two lost wars of the United States, both of which were defeated by Red China. The United States has never won a military war against China. Even when Red China was still in its embryonic state, the United States lost China during the Chinese Civil War, when Chiang Kai-shek, which the United States supported, lost to Mao Zedong.
The history of New China proves that the United States cannot subdue Red China through military warfare. So, why is the national policy suggested by Western think tanks still overwhelmingly supporting the United States? Do Western think tank scholars even have this knowledge of contemporary history? Yet they still cross their fingers, thinking that although the United States cannot defeat red China militarily, it can change China's color and turn red China into blue China. The US could defeat China through the color revolution, and peaceful evolution, on the ideological front. The riots in Hong Kong in 2019 showed the power of the American color revolution capability. In the field of ideology, China and the United States have fought each other before. After the founding of the People's Republic of China, Mao Zedong opposed hegemony around the world and supported the civil rights movement of black Americans. The restoration of the legal seat of Red China in the United Nations is the result of China's victory over the United States in the front of ideology. The United States is successful in color revolutions repeatedly such as in the Arab Spring and the Orange Revolution in Ukraine. But why did it fail in China? The US tried it once in 1989, why didn't it change the color of China, but changed the color of the Soviet Union instead? In fact, the petty tricks of the peaceful evolution of the American color revolution are powerless in China, because China has had The Great Cultural Revolution, a color revolution by Mao that far exceeds the sum of all the color revolutions by the United States in scale, depth, and breadth. With the experience of ten years of The Great Revolution, the Chinese understand the importance of the rule of law, and the Chinese cherish harmony and oppose turmoil. Mao the greatest statesman in human history has already prepared China to resist the color revolution, making the color revolution incited by the United States powerless against China. China has been avoiding wars on the ideological front since "keeping a low profile" by Deng, but the United States adheres to the Cold War mentality and insists on pulling China into the ideological battlefield. It seems, from the present US policy towards China, that China will not be able to avoid the new ideological war. By examining contemporary history, it is also unimaginable that China will not be defeated in this ideological war. Between human conscience and hypocrisy, between a community with a shared future for mankind and America first, between justice and realpolitik, between the general trend of the division of labor and the contemporary Luddite movement, what do we want for the human future?
The United States is now using a deceptive strategy of attacking others. On the surface, it solidifies allies to contain China and Russia, but in essence, it cannibalizes its allies. The United States harvested the wealth of the European Union in 2022, which is ugly. Now it is looting the chip industries of Japan, South Korea, and Taiwan on the grounds of national security. We hear no sound on this obvious observation. All media are pretending the emperor wearing a cloth.
The United States is declining and China is rising. This is the general trend of history, which is observed on the basis of the theory of division of labor of classical economics. The United States is deglobalizing, shrinking its market, and weakening the international division of labor; while China is accelerating globalization, expanding its market, and strengthening the international division of labor through regional comprehensive economic partners, the BRICS organization, and the Belt and Road Initiative. To fall with the US? or to grow with China? this is the question for leaders of every country in formulating its national policies.
