In William Easterly’s post “Why can’t leading conservative magazine understand freedom?” he refers to a National Review article “China Teaches US Lessons About Economic Freedom“. I replied in the comments:

William,

I’ve read this post four times, and it’s still not very clear what you’re arguing for and against.

I think you’re reading far too much into a what are simple, broad analogies that express a sentiment not a formula. All he’s saying is that small increases in freedom produced a great impact on china. And he’s implying that small decreases in freedom here in the USA, will have as grand a set of effects.

I think you’re both confused and you both overrate government, overrate individuals, and underrate demographic migration and change.

Growth was easy for the USA during the 1800’s: buy half a continent from Napoleon and import millions of Europeans into it. Sell them all sorts of consumer goods so that they fill up the territory, and so that you can collect profit and create capitalist barons doing so. Use the cheap land and labor to produce commodity goods and sell them to europe. Cause a price catastrophe in europe. Let them have a horrendous civil war and inherit their intellectuals and england’s naval empire.

Now, take a country like china, forcibly held back in ignorance and poverty by Mao who decided it was better to have everyone poor and suffering than a wealthy south and a poor north and west — fragmenting the chinese empire. Now, import vast amounts of western technology, western banking and accounting technology in particular, and use your inexpensive labor to produce goods based on that technology cheaply and sell back to the westerners.

China’s growth is largely in the form of construction: moving people from hovels in the rural areas, to apartments in urban areas. The country is vastly poor. And it’s per-capita GDP is horrid. They used totalitarianism and capitalism to manage their expansion, we used republicanism and capitalism to do the same thing. There is nothing interesting about china. Nothing. There is nothing interesting about america, either, which is why you’re both confused.

What’s interesting is how Europe in general, and England in particular, created so much innovation, how Americans capitalized on it, and how we can use that tradition and culture of innovation to compete in a world where we are no longer the one making money from a huge demographic change.

Once cheap labor stops, and marginal differences in knowledge are exhausted, what remains is a nation’s ability to dynamically reorganize production in real time, and to competitively innovate in real time.

The question is, whether Americans will maintain their innovative risk taking speculative culture without the military and economic dominance they possessed in the last century, and the resulting control over the international banking and trade system.

William Easterly wrote:

Curt and Sam, thanks for your comment. I was making a simple point: the article had a double standard for the Negative Changes in Economic Freedom in China and the US.

And, 2nd, in giving so much general credit to Deng Xiao Ping vs. America’s leaders, it ignored Deng’s despicable actions against individual freedom in Tien An Men Square, and continued violence against and imprisonment of dissidents in China.

William, thank you for replying.

Let’s define Freedom. Because unless we define it, I’m not sure what you’re talking about.

Let’s see:

Freedom: absence of external constraint.

  1. Individual freedom: freedom of thought, action, property exchange. The freedom to cooperate for INDIVIDUAL ends.
  2. Political freedom: speech, assembly, leadership, concentration of wealth. (The right to cooperate against others who have a similar right) The freedom to cooperate for GROUP ends.

3)Legislative Freedom: This includes the freedom to establish property definitions (real, several, built) as well as abstract (patents, options), as well as enforce normative opportunity cost payments, including manners, ethics and morals, and normative tax payments for a multitude of purposes.

  1. National freedom: freedom to control and compete for resources by establishing legal monopoly on violence over geographic territory. (In other words, adding territory to legal freedom.)

  2. Cultural Freedom: Freedom to employ, coerce, convert, and compete using different opportunity cost norms (opportunity cost payments required of members) as a means of competing against other groups who have different opportunity costs, and different capital structures.

  3. Redistributive Freedom: Freedom to claim a share of proceeds of production, earned by virtue of adhering to norms (bearing costs of adhering to norms), despite lack of control over resources, participation in production, or influence over the productivity of those resources, except by voluntary restraint. (Restraint is a real opportunity cost to individuals.) This is the correct non-platonic definition of economic freedom that describes human actions in the productive process.

The only form of ‘freedom’ you can have, that is non-contradictory (you can equally grant it to others and they to you) is personal, individual freedom. And even then, the only form of political freedom you can have is to DENY others the right to their political freedom.

And at that point you are stuck with the problem of either getting to the point where you can convert the barbarians into paying the opportunity cost of becoming property holders in the first place, (establishing the system of property definitions) and without that need for coercion, you’re stuck in poverty even if you want to change the established order. But the only freedom you can have is individual freedom – the freedom of constraint. We can grant it to others equally.

The rest of the freedoms are not ‘freedom’. They’re rights to take from others. All political freedoms are rights to take from others. They are rights of coercion, oppression. But then one cannot have a division of labor, a complex society, economic calculation, and the incentive to participate in productive activities unless you apply the ‘coercion’ of private property – at least to some degree.

Confucianism is a high-opporunity-cost social order. It is very conservative. It requires respect for hierarchy and authority (opportunity costs). It requires consensus (opportunity costs but with risk reduction). It is an almost entirely shareholder-property society with low rates of creativity, low risk, slow moving social and economic model. But if it is BIG enough that people cannot sense external competition from OTHER social orders then internal status symbols can be preserved by way of nationalism or culturalism and the social order can work. (it doesn’t: the south is a competitor with the north of china, which is their whole cultural problem – that’s what Mao did. He destroyed the country economically to keep the south from outpacing the north.) This is not necessarily ‘bad’ in Confucian society.

It may bear understanding that Confucius failed to solve the political problem (it is somewhat evident that he understands this) and directed everyone to hierarchy and family. So the Confucian model is not republican at it’s base. It is not tribal. It is hierarchical, and familial. The entire nation operates as a family. This is not a bad strategy unless you are competing with a group of high-risk, highly-innovative, fast moving westerners, for whom individual heroism, innovation and achievement are viewed as ‘keeping the group strong’. Competition and individualism are a ‘group good’ in the west. They are not in the asian societies. we are free to copy the innovators, and in doing so, everyone has the opportunity to be ‘better’. The west is an innovation and adaptation society.

Freedom as we understand it, is not possible, and probably not necessary under Confucianism.

Economically speaking, a nation that does NOT participate in heavy research and development will eventually fall behind, and governments can concentrate more wealth than the private sector on Research and Development. (What would the impact be of 200 new nuclear power plants in the USA? We have people feeling good about not wasting energy but manufacturing is the greatest energy consumer, and we need more manufacturing. Economizing is a spiritual act, not a material one.) China is making productive investments. We are making redistributive expenses, and spending trillions defending oil and trade routes, and our primary export – the dollar.

And we will not get anywhere thinking that some very small minority of a Confucian population, or our odd obsession with the religion of Universal Democratic Secular Humanism will have any long term effect on the Sinic culture. The rest of the world is clearly condemning it. There isn’t even any evidence yet that our UDSH values will persist in the west without the Militial and Commercial balance to it, that is the foundation of western civilization.

The calculative institutions of capitalism, which provide incentives in the form of pricing, sensory information in the form of objects defined as property, expressed and manipulated quantitatively, and the technologies of intertemporal collaboration and coordination in the form of money, interest, banking, fiat money and the technologies of dispute resolution in the form of contract and law, have little or nothing to do with the technologies of redistribution, and the methods of capital concentration, as well as the ‘forgone opportunity costs’ which citizens pay for participation in society and market’. Political freedom is not economic freedom. Political freedom exists either to defend ones self against a predatory state, or to use the violence of the state to put extra-market pressure on competing groups with competing interests.

The reason for the western matrix of freedoms is to promote innovation, competition and wealth, so that the nobility, the upper middle class, and therefore prosperity will be maintained, and management elites, will rotate keeping the society competitive. At least, that’s the implied theory: meritocratic rotation of the elites – a thematic value system inherited from western heroic competitive militarism. ie: it’s a knowledge production engine.

China values stability and security, not change and innovation. It is a culture where conflict is a sin. Where the individual is subordinate to the state. Where virtue is not heroic excellence, but duty. (At least, until the middle class is large enough.)

Conservatives are in large part, whether knowingly or not, subscribers to ‘natural law’ theory, which states that human behavior is what it is, always has been and always will be. They do not subscribe to the philosophy that all men would work happily for the common good, nor, if given the opportunity, that they would do some common good in political power, or even know what such a good would be, simply because of the number of trade offs and secondary causes. Nor, that we are capable of implementing any designed change in our social orders without horrific consequences.

And under that view, they would say that you are making a moral equivalency where there is none.

Moral statements are economic actions, and either economic payments or theft. Ethical statements are economic actions, and either economic payments or theft. Manners are economic demonstrations, contributions, and payments. But these payments are made against a vast, habitual, rather than written set of legal, cultural and class body of accounts – and vastly different concepts of property definition, and they exist largely to ‘pay for the social order’ by reducing opportunity for friction and conflict.

In the west, we have a very different payment system. We are all trying to be noblemen or priests. In the east, they are all trying to be Confucian – to hold their place. More like the German model prior to ww1. Our anglo model, is very rare. And it may simply be the artifact of a thousand years of wealth generated by expansion under the reformation.

So before I get too far into this (I already have gotten way too far into it) I think you are being literal with conservative (allegorical) language. Conservative language is allegorical because conservatives have failed (especially during the 1870’s and 1930’s) to articulate a causally sufficient social science. (Myself and two or three rather off the wall libertarians, excluded perhaps.) Where the social democratic method can rely on the coincidence and correlation between easily collected monetary transaction information the Dynamic Stochastic Equilibrium model, and christian egalitarian sentiments, and Jewish anti-western-militial sentiments. But that does not mean that conservatives sentiments, expressed in allegorical language are false. It means they are insufficiently articulated. (and worse -foolishly wrong as in the case of many libertarians.) It simply means that they don’t yet know how to do otherwise.

I think furthermore, that

a) China is simply importing knowledge at very low cost. It is not producing it. Wealth may make knowledge production possible. But we have seen the Asian model is great for incremental improvement and the western model is better for radical innovation.

b) cultures do not change. There is a high cost of changing norms. And Sinic civilization is very resistant to change. It is highly racist and highly culturist. (And it has a huge chip on it’s shoulder.)

c) Their entire obligation structure (morals, ethics, property rights, manners) is a set of established costs. Our values are antithetical to them.

d) their identity ( the means by which they judge the world) and their status signals (the human natural intuitive economy of events and consequences) will continue to force them in their native direction.

And lastly, (why am I just getting to this now?) all the conservative writer was saying is that ‘a little momentum made a big difference’, and that ‘even if we make a little momentum in the wrong direction it will make as big a difference’.

He is not comparing statements, he is comparing trajectories in time.

And that’s what it means to be conservative: taking the long view.