"China and Russia" - David Goldman

our next speaker is David Goldman he last spoke for the college on campus in the spring of 2017 during his his residency on campus as a Pulliam journalism fellow and I should mention that David speaks for the college both on land and at sea he was the speaker on our Alaska cruise in 2016 when he's not busy speaking for Hillsdale he is a columnist for the Asia Times where he writes the Spengler column he also writes regularly on politics for numerous other outlets including PJ media and the Claremont Review of Books and he doesn't only write on politics he's also the classical music critic for tablet magazine he's directed research departments at various investment banks and he's been a consultant for the National Security Council and the Department of Defense he's a senior fellow of the London Institute for Policy Studies and a member of the Board of Advisors of American affairs who's editor we heard from this morning he's also the author of a book how civilizations die and why Islam is dying too you will be speaking today on the subject of China and Russia would you please welcome to the podium David Goldman [Applause] Tim thank you for that very kind introduction I can't tell you how gratified I am to be among you today and how grateful I am to Hillsdale College for inviting me this is a unique group of people you're precious and important and it's a privilege to spend time with you my only trepidation is I have to follow one of the greatest acts in history Larry Oren that's intimidating but I'll do my best the one theme I'd like to keep in mind as we talk about the formidable strategic challenge that China especially and in a different way Russia posed to us is that Russia and China are motivated by insecurity and fear America has inherent strengths which they do not and our greatest danger is not our lack of capacity or lack of strength but our complacency China is a phenomenon unlike anything in economic history if I can leave you with one number to think about it's that the average Chinese now consumes 17 times as much as he or she did back in 1987 it's a difference between driving a car and riding a bicycle it's the difference between indoor plumbing and a dirt floor in an outhouse it's an absolutely remarkable and sudden change which has lifted what was a backward country into the first rank of world economies and really has no comparison just one other thing to keep in mind China has in the last 35 years moved approximately 600 million people from the countryside to the cities that's the equivalent of all of Europe from the Ural Mountains to the Atlantic Ocean and to do that they built the equivalent of a new London Berlin Rome Glasgow Helsinki Naples Lyon to accommodate them and of course as you move people who spent whose ancestors spent millennia in the tedious monotony of traditional life and bring them into the industrial world their productivity explodes nothing like that's ever happened in history now where do we stand with respect to China economists use something called purchasing power parity in other words if you take a bunch of dollars into China you can buy a whole lot more for it than you can in the United States so adjusted for that the Chinese economy is already bigger than ours if you keep it in dollar terms we're still bigger but they are certainly gaining on us and sometime the next 80 8 to 10 years they'll be at parity so unlike any competitor we've had in the past we have an economy which is roughly par with ours now most important thing to remember about Russia and China is they are empires based on coercion of unwilling peoples where the United States created a great nation out of willing immigrants who came here because they want to be part of the United States as individuals China and Russia conquered peoples different ethnicities and different languages and kept them in by force so whereas we have a pluribus unum they still have a pluribus ploor of us except for a dictatorship sitting on top now China started out as you can see as a relatively small area it's kind of like the Continental Republic which occupied a tiny part of the continent it took them about 1500 years to reach their borders but by around the ninth century China had reached the natural frontiers and didn't expand after that they can't expand over the Himalayas to India to their extreme west is desert and their East of course is the ocean so China is not an expansionist power but it's never been a unified country China Chinese culture is unique very different from ours China has two languages that as a written system of characters which requires approximately the first seven years of elementary education working four hours a day with an ink brush and ink pot and paper to master to be literate in China used to reads to the several thousand characters needed to read a school textbook or a newspaper is approximately a six or seven year exercise for Chinese kids that's how the Chinese are socialized China had a literacy rate of about 30 percent at 2,000 years ago many times higher than Europe only exceeded by the the Jewish literacy rate at the time this generation is the first where the majority of Chinese understand a common language because of the centralization of the state mass media and so forth but they still speak very different languages Cantonese and Mandarin are as different as Finnish and French in Hong Kong you'll see Chinese screaming at each other and broken English because one speaks Mandarin either speaks Cantonese and they don't have a word in common so that state is always inherently unstable because it's held together by a common Imperial culture and by the tax collector in Beijing China is like a bag of very powerful oppositely charged magnets held together by superglue it looks very stable but it inherently isn't and in fact in the memory of living Chinese you had an era of national division warlordism civil war starvation degradation the century of humiliation that began with the opium wars in 1848 and ended with a communist revolution 1947 was one in which civil war is claimed in the 19th century one claimed between fifty and a hundred million lives World War two twenty-five million Chinese died so the terror of return to conditions that are not far from the living memory of many Chinese is still a specter that haunts the Chinese leadership Russia similarly from Kevin Roos conquered its East conquered the Caucasus and parts of Persia with a result that Russia has a Muslim population that amounts to a seventh of its citizens their restive their problematic China also has a much smaller Muslim population and it's West that's the Uighur is there twelve to fourteen million of them there are turkey people there Muslim they don't really speak Chinese but Jinjiang province the westernmost province of China is inhabited by a majority of them and it's a continuous source of fear to the Chinese state so you have inherently unstable countries in the case of Russia Russia has always been a set of failed projects of Eastern expansion supported by the collection of taxes on the industrial part and the West there's always been a tendency for the West to try to secede and move towards Europe that was one of the causes of World War one and it and for the east to break off so a country like Russia has never let itself to kind gentle and rational rulers by comparison to his predecessors Vladimir Putin is certainly one of the least blood xxx thirsty at least murderous rulers that Russia has had in its long and difficult history it's variable to talk about democracy in Russia I wish them well but the imperial system has lent itself towards a centralized dictatorship in which a single man sitting in the Kremlin has to contend with centrifugal forces which require often a bloody response most important thing to know about China the Chinese don't like China China Chinese have a dual existence if you walk down the street in Beijing you see people who dress very drab lling who show no emotion in public who do their best not to draw attention to themselves but if you go to a Chinese wedding or Chinese home or even a restaurant on Sunday where families gather they're loud they're bumptious they laugh the kids run riot their real existence as a family existence that's why by the way the Lunar New Year is so important which is occurring right now during the Lunar New Year the Chinese every year have the largest migration in human history four billion long-distance journeys are undertaken because every Chinese wherever they are will travel thousands of miles to be with their family in the West in the Roman tradition we have a concept of rights and privileges you serve in the army you pay your taxes and the Roman State has certain obligations to the privileges of rights in return for the obligations that you've filled the state that there been a concept in China the tax collector in Beijing rules by whip you do everything that the emperor asks you to do and you hope that he rewards you but there's no sense of anything deserved the idea that the state is held together by a common interest as Cicero said or by a common love as st. Augustine said is unknown in China the emperor is a necessary evil China's avidin had an emperor for three thousand years well they didn't have an ampere they killed each other it's all very well to lecture the Chinese about the benefits of Western democracy but most Chinese will say we need an emperor because we'd kill each other and when we didn't have an emperor or it didn't have a strong Emperor during the century of hema humiliation that's exactly what happened so we prefer to have a strong Emperor and from the standpoint of most Chinese this imperial dynasty this communist party dynasty has brought about a golden age it's the first time in Chinese history where no one's afraid of starving to death no one's afraid of a warlord coming through and raping the women and burning the crops there's security and prosperity relative to Chinese history it's a very good period so for the time being the regime has a great deal of support and as deplorable as I find the practices of the Chinese regime which as a totalitarian entity is more comprehensive and more intrusive than Hitler or Stalin could ever imagine being as deplorable as I find it I think the prospects for transforming it by our good offices are for the time being negligible so what does the dynasty try to do to stay in power well the first thing they said as well China's basic historical problems got a lot of people but not much arable land big country mostly mountains in deserts so you've every time you had a prosperity would an increase in population there were too many peasants you know peasant rebellion and the dynasty would fall so we have a one-child policy and we evacuate the countryside no peasants no rebellion biggest social engineering exercise in human history deeply motivated by the dynasty's desire to perpetuate itself in power instead of a family-based imperial dynasty you have a party based meritocracy when I say meritocracy we say No Child Left Behind the Chinese say only the exceptional survive one of the problems the Chinese have in understanding American politics is if you're in the Chinese leadership you come from a track of high exam scores starting with 12 which means you haven't met a stupid person since you were in junior high school and the idea that democracy is can frequently advance stupid people we're entitled to do that if we wish to doesn't make any sense them so they're very clever people the one thing she Jinping president of China cannot do is get his child into Peking University the equivalent of Harvard or Stanford unless that child scored sufficiently high on the exam Harvard's easy can buy your way in by building you can't do that in China the meritocracy in that respect is absolute so the Chinese Communist Party is not a particularly efficient or good organization but others a lot of very smart people in it and along with ensuring internal stability at all costs they wish to make China impregnable from the outside I'll get to this in a second I don't know how long it's been since you've heard the term South China Sea but it's kind of dropped out of the newspapers in the last year it's become a Chinese lake the Chinese have made clear they'll go to war with the South China Sea why will they do that this is Chinese proverb kill the chicken for the instruction of monkey the Chinese concern is not the South China Sea so much as Taiwan China's terrified that one rebel province for example Taiwan could set a precedent for a centrifugal forces that the party couldn't control so the adhesion of Taiwan to the Chinese state the Chinese emperor is for the Chinese Communist Party an existential matter for the future existence of the state they will go to war over it and by demonstrated their willingness to fight over the South China Sea they're saying in effect off fortiori will we fight all the more viciously over Taiwan or or Tibet I'm going to skip over this this this is the the in terms of the Chinese economy this is the key slide it's a bit it's a bit complicated so it could be just a moment it's worth your while to stare at it for a second China does something that the Japanese do the Koreans do all the Asians do which is to massively subsidized capital investment in heavy industry from the Asian standpoint a steel mill a semiconductor fabrication plant big industrial investment is a public good the same way that we'd look at a highway an airport or something else that we'd pay for out of public funds so the result of Chinese subsidies for heavy industry is that they've pushed us out of any major capital intensive manufacturing that's the decisive thing the Japanese we're doing it and that's why we forced the Japanese to build car plants in the United States under the Reagan administration but Japan is still very small compared to the United States the difference is that the Chinese are doing this in an economy which is roughly our size so it has a massive impact so what I feel here is the capital intensity of all the companies in the major Chinese stock index and the MSCI China stock index versus their return on equity the more capital-intensive the higher the return in equity in the United States if you look at the S&P 500 the slope is in the other direction more capital intensive industries are less profitable and the trend the distortion of global investment by Athan and particularly Chinese subsidies for heavy industry has led to a stripping of capital out of heavy industry it's not that people prefer financial assets to real assets is that the Chinese have pushed us out of it and that's why we've lost so much ground in terms of industry I think Julia's crime fed a similar slide to this I published this one in the Wall Street Journal in an article I wrote jointly with Henry Purcell just as Trump was elected so China's share of high tech exports has risen from about 5% in 1999 to about 25% of present all Americas has gone for about 20% to about 7% that's not a desirable situation what it means practically is that we can't build a military aircraft without Chinese chips that's a national security issue so looking forward China wants to move into dominance in high-tech industry and when you look at this one belt one road plan to dominate industry through Eurasia it is like the Japanese greater Asian prosperity sphere but it has a different spin for my sins I spent some years as a development economist and the main thing you notice in so-called developing economies is they think they don't develop because 40 percent of the people are outside the formal economy they're in the so-called underground economy they have little market stalls or hustles or whatever and there incredible they live unproductive lives they sit waiting for someone to come along and buy a leader of cooking oil huge amounts of wasted effort what the Chinese have done is to rip out the social structure of village life and globalize it China is nothing like the Japanese economy there's no comparison there's some comparisons but remember Japan above all wanted to maintain its social structure it protected agriculture a protected small retail protected small business so in the Japanese economy you have a few great companies with global capacity sitting on top of very backward protected inefficient economy trying to suck people out of the villages put them in the cities they're equivalent to of Amazon Alibaba will take over the entire labor of Chinese villages a broadband stretching all over the country so some intrapreneur and a village will figure out something that village can make then the whole village works for him they've they've intentionally ripped out the social structure and that's why they don't have the same constraints as Japan and what they propose to do is repeat that experiment throughout all of Asia to sign off' I everywhere from Turkey through to Southeast Asia a couple of years ago I'll tell you a story I've visited Huawei headquarters Huawei is the great telecommunications company biggest in the world hardly exists at a dozen years ago now it's got 70% of the world market in telecommunications how they do what they cut prices and they got subsidies from the government they did it dirty and they have a campus that looks like a science fiction movie makes Stanford look like a slum and to get the tour I arranged to have a Latin American ambassador and his team come with me so I could I did that because I wanted to see it but after the tour of their exhibition all which took three hours and you know the incredible technologies on display the Chinese Sat these Latin Americans down Atlanta theater they said if you turn your economy over to us we will make you like China will put in telecommunications we'll put in broadband will bring in e-commerce we'll bring in finance and you will be like China to the Latin Americans didn't take them up on them but the Turks did turkey plans to be a cashless society in five years the Chinese telecommunications companies are rebuilding the Turkish broadband network the reason turkey feels comfortable cocking a snook at the United States is because they've given up on the West there the Western economic problems of China and the impact of this global plan is felt all over the world in former allies or former NATO members orienting towards China and giving us all kinds of all kinds of trouble Russia it's quadrupled its energy exports to China totally dependent on China economically China likes the idea of had to land at based energy imports just in case the United States gets it into our head to interfere with Seabourn energy traffic so Russia know with what a twelfth a population of China tiny economy relatively is really although Chinese in Ruffins certainly don't like each other is very dependent on China China's has a high-speed rail network where you have trains going at 200 miles an hour so that you know you could easily live in Tampa and work in Miami it's had huge productivity effects and they're proposing to build them all over Southeast Asia Thailand used to be an American a lot is being absorbed into the Chinese economy Thailand is an agricultural country they've figured out that with high-speed trains they can become the truck garden for China they do all of the fresh fruits and vegetables so China's being observed islands being absorbed and so forth now the most dangerous idea are dangerous misconception about China is that they can't innovate I've heard people say they can only copy but they they can't invent things well who do you think invented gunpowder then magnetic compass the clock and movable type the culture certainly can invent now of course it's a much more conformist culture on average Chinese are less likely to be innovators but there's so lots of them and they're in a ver R&D spending goes going to catch up with hours they're already producing four times as many stem bachelor's degrees and twice as many stem PhDs granted some of them are a low quality but a lot of them aren't a lot of the Chinese PhDs are terrific I've worked for several years for a Chinese owned investment bank out of Hong Kong we took some of these God's public and they were real go-getting innovators there was good as anything in silicon a Silicon Valley so the single biggest deficiency we have the United States in my view is not the industrial base that's easier to deal with than the lack of scientific and engineering education I think six or seven percent of our kids major in engineering China's you know 30 40 percent that's the real problem we've got so Julius already mentioned some of these things so the problem we have in my view is not so much that we have tariffs with trade agreements whatever we have a massive distortion of the global system by Chinese Industrial Policy there's such a large economy it has that gravitational effect not only that the Chinese also play a very dirty one of the things the Trump administration broke up brought up and mentioned in its national security strategy is forced technology transfer Intel wants to get access to the Chinese market biggest chip market in the world the Chinese say that's fine you teach us how to do everything you know how to do and will let you work will give you access now for the standpoint of Intel stock price in the next five to ten years that's a pretty good deal I mean it may not be good for the United States but it's good for Intel stock price if we were to say excuse me we're not going to let you transfer technology to China with a gun to your head the first people to scream about it would be the Intel's in the Texas Instruments of the world because it wouldn't be good for their stock price and the CEO is supposed to be worried about is about the stock price I'm a fruit trader on the free market er but national security sometimes supervenes this would be such a case if you look at where investment goes in R&D this is this I'm not going to burden you with more of the data but it it you can see that we had a lot of investment in computers peripherals telecommunication equipment that's basically zeroed out in the last few years and virtually all of the all of the investment is god of software so we've conceded to Asia not just China Taiwan and Korea as well and Japan the actual manufacturing such that as I said we can't put a warplane of the year without asian ships and since the security of ships encryption is built into the chip itself that is a serious national security concern so what do we do about it I don't care whether industrial policy is a good idea a bad idea or not or the above we Americans can't do it as Americans we have a radical conception of individual liberty we are not good at being collectivists Germany has industrial policy culturally they can deal with it we cannot if we're gonna win this one we've got to win it the American Way and that radical commitment Liberty no other country in the world told people they've got a right to pursue happiness to make of themselves whatever they wanted what we are best at is innovation my life experience is that in the 1970s all the smart people thought that Russia was going to win the Cold War all the economists thought Russia had a great economy including the CIA economists including pole Samuelson the author of the standard textbook that's what everybody said and then by 1989 we realized the whole Russian economy was one gigantic piece of junk a Matta Zola been an 8-track tape player it was worthless it was actually a negative worth because the environmental cleanup was worth more than the scrap value of whatever they were producing what happened in the interim what happened was the greatest wave of industrial innovation in American history we invented fast light and small and cheap microchips we invented sensors that didn't exist before we invented the semiconductor laser and we did virtually all of this and after the Defense Advanced Research Projects Agency and NASA in cooperation with the great corporate laboratories a Henrique Rochelle whom Julia's crime mentioned before and the excuse me the honor to co-author a number of articles with him he was then head of RCA labs they invented CMOS chip manufacturing why were American avionics so fabulous totally crushed the Russian Air Force Russian knew they couldn't win a war against us by 1983 and 1984 when in the 1978 they were pretty confident in 1978 was when we put the chips into an f15 that made look down radar possible and then the Israelis uses them in 1982 when the Bekaa Valley turkey shoot when they wiped out the Syrian Air Force don't know how many ever remember that but it was American avionics versus Russian avionics and it was aided in nothing basically and the Russians looked at and said we have a problem we turned the Russian economy into junk by creating an economy that hadn't existed before that was the Reagan economy the fortune 500 lost employment during the 1980s corruption comes from monopolies the monopolies were all ruined new companies don't ever heard of sprang up to commercialize these technologies and we had the least corrupt economy because we had challengers doing new things taking market share away from the existing entrenched interests 1983 I wrote a memo for the National Security Council arguing that the Strategic Defense Initiative would pay for itself that the impact of the new technologies that we were researching once they were commercialized to generate more tax revenue than we'd spent on the R&D when you do basic R&D you don't know the outcome the reason seamos chip manufacturing came about was because somebody at the Pentagon thought it would be great for fighter pilots that have their own weather forecasting model in the cockpit no one realized what they could do would look down radar we got the semiconductor laser and because thought of the Pentagon wanted a lot of a battlefield at nights for a night warfare and that produced consequences that ripple through the economy that nobody could imagine that's what we haven't been doing our hearts grew fat start him with a Clint administration we felt we were so powerful we didn't have to do these things anymore so the investment went into the internet bubble of the of the 1990s where the whole world will be based on downloading movies and watching pornography that was going to be the economy of the future I'm a market guy the one thing markets though cannot do is divorce themselves from culture long term expectations are cultural and when we have an ass security requirement where we have to go to the frontier of physics to develop weapons that will protect us and be better than the other fellas that's when you get the best kind of innovation so my view is yes we need to the state has a role a critical role in Chiao in meeting this Russian and Chinese challenge but we can only do this as Americans by doing what we're good at if we try to do something we're not good at like industrial policy we will fail at it even if on paper looks like a good idea which by the way I don't think so but we can't innovate and commercialize better than anyone else and if the Chinese are spending tens of billions of dollars to build a chip fabrication plant so we come up with a better way of doing it suddenly they'll have a hundred billion dollars worth of worthless chip manufacturing plants on their hands and you can't predict the outcome in advance you have to make the commitment and to have a leap of faith that American ingenuity and science will be the answer we can win this but we have to win it as Americans in the American Way thank you very much please raise your hand in the mic we brought to you you say that Islam is failing could you expand upon that for a moment please Oh Islam is a culture that goes directly from infancy to senility without passing through adulthood and I mean that in the literal sense every Muslim country that has achieved the equivalent of full adult literacy has experienced a rapid and sudden demographic collapse Iran is the great example of it this is a bit of my Tomic but since you asked when Iran had its disastrous Islamic Revolution in 1979 Iranian women on average had seven children now it's about 1.8 it's the fastest decline in population growth in all of recorded history and what it means is that as this generation retires there'll be nobody to support them you've got Iranian pension systems were already where there are more people receiving pensions than paying in in how long that's gonna last so Iran in 2025 years is going to have an elderly dependent ratio higher than Germany's with 1/10 the per capita income which means they'll implode Turkey ethnic Turks are having fewer than two children the Kurds are having three children they're having twice as many children as the Turks we did a study at this at the Defense Department and concluded that no matter what assumptions you put into the model by about 25 years from now the majority of old Turkish citizens under the age of 30 would come from Kurdish households the Kurds would no longer be a minority that's why the Turkish government is bombarding our ex-friends the Kurds in northern Syria because they're terrified of a breakaway occurred a state of course if they came to their senses they'd realize the best thing they could do would be allow the Kurds if they wanted to does carve had a state in the impoverished mountainous southeast and not fight them but they're they they're they're not sensible so you have countries like Pakistan with illiteracy of fifty percent would still have four children per female they can't feed themselves they can't produce enough electricity they have chronic power shortages they have environmental disasters they're subject to perpetual chaos and you have countries like Iran and Turkey which are suffering from demographic implosion it's the poles of infancy or senility so I don't see any of the major Muslim countries achieving a successful transition into modern economic life and they'll be in a perpetual perpetually chaotic state that's what I mean by Islam is dying the case of Iran once you get literacy you don't get a lot of Islam Iran is one of the least Islamic countries in the world on the least religious kind of like Russia in the nineteen eighties where there weren't any communists except in the Central Committee Iran's rate of mosque attendance is estimated at four or five percent unfortunately the religious loonies are the ones with all the money and all the guns but it's a very unstable mess and I think we put our mind to it we could crack that regime like an eggshell you're right on regarding the research background that we need to have in this country to go forward I spent a career in research at General Motors and I remember working very closely with Bell Labs labs at GE and Westinghouse who are now virtually gone and so I wonder what your perspective is in terms of corporate investment today in R&D that should keep our nation strong and innovative in the future corporate R&D includes a lot of things like you know making a better class of cornflake which doesn't have a lot may be good for people like cornflakes but doesn't nothing I'm not disparaging it but it doesn't have anything to do with national security I don't know the tragedy is we had great research organizations like Bell Labs RCA labs GE Labs and so forth which really don't exist anymore and it was understood that some of your best engineers would serve out their time do something innovative then they could find it saying a star throwing company so you'd have a conveyor belt really coming from DARPA with the high with the most advanced physics research going into commercialization so the one thing I can say is that we don't corporate America is gonna have to reorient towards that there are things that we could do to give them a little bit of a shock for example I mean I'm again I'm a free trader I'm a free market guy but as president Owen said this morning the one thing that supervenes is national security that's when we postpone our pursuit of happiness and stand shoulder to shoulder and defend ourselves one thing that dr. Kressel and I advocated in the Wall Street Journal piece I mentioned was domestic content for defense goods it's outrageous that were flying warplanes with Chinese chips any sensitive goods should be manufactured in the United States now we could do that by executive order and you know the first thing that would happen the Intel and Texas Instruments hadn't raytheon would all come to the Pentagon and say listen for years he told us cut costs so we moved our supply chain offshore we did what you told us to now you're telling us bring it back onshore see that's what I'm saying slick and they'll say you damage money that's gonna cost us we fear quite a lot that's gonna cut into our profits well we'll give you costs plus 10% they're not gonna like it first people will scream about it we'll be the corporate sector but if you use the power of the American state to require certain kinds of activity as a matter of our existential security interests you'll change corporate behavior real fast may not be good for some people's stock price you've got a lot of screaming it can only be done by a strong president and a strong Secretary of Defense nothing else is going to do it can't set up a commission gotta come for the top do you see do you see China making an aggressive move on its colony Hong Kong to further suppress its democratic instincts absolutely not as a matter of fact my office in Hong Kong overlooked these student demonstrations across the street from the from the government offices in admiralty in Hong Kong this was a middle-class rebellion by students who were very dissatisfied with their economic prospects they were very careful not to get themselves into trouble because they all wanted careers they were not they are gonna die for democracy it's very limited in its scope and in Beijing or Shanghai the attitude towards the Hong Kong kids was they're sort of spoiled upper-class kids and they've got all these privileges why aren't they happy with what they've got the Chinese don't need to suppress it and that movement is not a real threat Hong Kong is very important to the Chinese for a simple reason China never had a system of laws the Emperor was the system of law is I tell you to jump and you ask me how long to stay in the air China has British law so a lot of companies including major Chinese multinationals do their business out of Hong Kong because their counterparties require Western law no threat to them and it's very useful so I think status quo is what's gonna happen in Hong Kong very very good presentation thank you I'm from Michigan and we currently have a Sharia compliant running for governor the Democratic ticket we are involved in a very activist program to educate people about Sharia compliance and when you say that the countries are not reproducing our feedback here is because we're getting so many immigrants coming from those countries they're rapidly increasing their populations here praying that they're gonna have for any kids they've all got four wives and the people here really know nothing about it that your optimism about Islam is interesting but I don't think that's gonna prevail healer in the United States well I strongly support the president's merit-based immigration policy and I think if that's implemented that'll go a long way to solving our problems [Applause] returning to China is that China has had a couple of policies kind of a two-prong aspect of it what is the one-child policy which they have liberal eyes a little bit more recently and the second portion of it is that the retirement system was always the mail they went to the fam though the parents went to the mails family therefore they didn't need females and there were some of that genocide of those two prongs there what is the long-term impact on China and their culture from those decisions that's a terrific question no one knows the answer I think at a 50 or 100 year horizon China may be in very serious trouble demographically they now have a two-child policy we haven't seen any change in fertility behavior since that change though it is assumed one thing the Chinese figured out under the one-child policy is that since it's a winner-take-all system there are only a very few slots at the top and everyone fights ferociously to get into those slots it makes sense to concentrate your resources on your one princeling and prepare him or her for the University exams and aim for maximum success so for example there are a hundred million class the music students in China this is paid for of our private tuition those parents have figured out or they believe I think correctly that getting your kid playing piano or violin helps academic concentration is good overall having two children makes a little bit more difficult so fertility behavior may have changed permanently in which case China will be in demographic trouble at some point its workforce is going to start to decline probably in the next 10 years there are probably a couple of hundred thousand Chinese that are not counted by the census who were born mainly in the countryside say in the 1980s just weren't registered so it's not quite as bad short-term as it looks but long-term your point is very well taken now in the meantime if China is able to mobilize its one belt one road system they can solve labor shortages by outsourcing though for example they've just built a couple of fast railroads to Turkey they could put components on a container bring them to a plant in central Anatolia have inexpensive Turkish labor assemble it there and sell it to Europe there are several hundred million people in Southeast Asia who are have Asian values they work very hard they believe in education a lot of them are really not integrated into the industrial economy but they could be so from the standpoint of where the United States stands the Chinese demographics is not going to be the kind of liability for China in a way that enters into strategic calculations at a 25 year horizon longer than that it could be China's Achilles heel you didn't mention anything about the connection between China and North Korea and they're not deterring North Korea in their EMP endeavor to take the United States out is China going to take a any interest in that China wants to play arsonist and fireman at the same time they've encouraged the North Koreans quietly all of the North Korean missiles used Chinese components or components delivered from overseas by Chinese companies about a year ago the South Korean navy fished North Korean booster rocket out of the ocean put up a satellite they recovered the the booster and that found was full of Chinese components so we know that the Chinese are doing this no the Russians are doing it too and then the Chinese can say well aren't we being helpful by trying to help you deal with the North Koreans it's a way of you know getting leverage over the United States the Chinese want to have a nuclear war with the United States no why should they do they want the North Koreans to take us out I don't believe so because that's the kind of thing that might lead to a nuclear exchange and they certainly hope to win without fighting are they playing dirty ball absolutely my view of what how we should respond to that is by instituting a crash program for space-based missile defense we should have the capacity to shoot down anything the North Koreans put up within seconds of its being fired now that's something that Chinese and Russians will not like at all because we've refrained from doing that on the grounds that it would be provocative in other words if we were able to stop the Chinese and Russians from shooting nuclear missiles at us that would give us supposedly the capacity for a first strike I don't care if they like it or not they've got no business telling us how to defend ourselves and that was what Reagan division with SDI except we didn't do it technology has improved a great deal we certainly could do what our current missile defense is pathetic so I would like to see us respond to that by scaring the pants out of them and putting up a fully capable space face missile defense [Applause] a one thing you have in common on commented on is the economics and how China goes on affording this they've styled themselves for a long time as being a socialist economy but a politician that we're all very familiar with at Hillsdale once remarked that the problem with socialism is that sooner or later you run out of other people's money do you feel that this applies to China and why or why not well the Chinese are not socialists they are a dynasty trying to maintain its power and will use whatever means they can the Communist Party is the state point it could be communist fascist or anything in between the ideology really isn't the issue take the case of Jack Ma and Alibaba certainly one of the great companies in the world matter of fact Jack Ma bought the little investment bank I was working for and and fired all of the Westerners which is why I'm not working there anymore so if I stock in it by the way he's a great intrapreneur but he is joined at the hip to Xi Jinping and the Communist Party for one thing they want to encourage the consumer they want to keep the consumer happy and Alibaba like Amazon is doing a great job of that they're great at microfinance but remember the Chinese have massive data on everybody Alibaba and all of these companies are hardwired also into the Chinese Ministry of State Security they know everything about you in China they know they'll track your cell phone at all times and they'll make sure you're carrying it by using facial recognition and though in real-time crossbred that against social media postings and online purchases and financial transactions they have capabilities for social control that Hitler and Stalin could have only begun to imagine and the great entrepreneurs of China get to be super-rich by becoming instruments of the Chinese state as well Huawei is another terrific example so they certainly want to harness the efforts of Chinese who wish to get rich and use their creativity and they've opened things up to them have allowed a lot of people to get rich while at the same time making sure that the interests of the state and the Communist Party are paramount these guys know that they could be liquidated in a heartbeat if they get out of line now it's a very different system it's not socialism at all it's it's China being China where they will copy elements of Western capitalism and integrate them into a kind of social control which we as Americans find horrifying we have time for just one more question I'm sort of surprised but I haven't heard more about India I would think they pose some threats as well as some opportunities in India world's largest democracy friend of ours very high growth rate but India has a number of obstacles to overcome that prevent it from being in the same league as China by a long margin and one is that they've done nothing about their infrastructure they still have the same railroads the British built over a century ago China's totally transformed their infrastructure my hometown of New York looks like a third-world City compared to Shanghai or Beijing in terms of infrastructure they have the world's largest high-speed train Network they have excellent highways airports look like science fiction sets India infrastructure is catastrophic and that's because their political system has been unable to centralize the resources to make that happen they also have a cancer system they are not a meritocracy you're born into the lower castes you basically stay there forever and old future generations so India has hundreds of millions of people living in the most dire poverty illiteracy you know really primitive conditions of life and there has been no effort like this this Chinese migration of the cities the 600 million people who moved from countryside to city the vast amount of construction and infrastructure that's required to receive them Indians have done nothing like this they haven't even attempted it'd be great if they did but India as a strategic factor is decades it's not centuries behind China thank you all very much you

Channel: Hillsdale College

Views: 49,485

Keywords: Foreign Policy, Government

Id: yh5ZxuCuCdU

Length: 57min 25sec (3445 seconds)

Published: Tue Feb 27 2018