Why China will again rise to the top, and their most important advantage over America.

Summary: There is a simple difference between West and East today, the opposite of that seen during the past few centuries. Good leadership. They have it; we do not. This explains much of what we see in the news.

‘‘… moral power is to physical as 3 parts of 4.’’
— Attributed to Napoleon in Treasury of Thought by Maturin M. Ballou (1899)

The center of economic power and innovation moved during the past few centures from East to West. Now it returns home after this brief aberration. Some see these changes as resulting from physical factors (resources such as coal and iron), technological innovation, or social innovation (e.g., capitalism, the Protestant work ethic). While these are important factors, there is another dimension at work: competent leadership. Bet on brains, spirit and social cohesion rather than material factors or systems.

China down; West up. China back up; West down

Poor leadership drove China’s decline, while the major western nation’s had strong (ruthless, greedy) leadership. Now the reverse is true, as we see in the daily news. (We’re speaking here of averages, of course. Both had foolish and brilliant individuals along the way.)

We can measure leadership in action by the speed and efficiency of its OODA loop — the ability for a society (i.e., its leaders) to Observe, Orient itself to the situation, Decide what to do, and Act. Most Asian societies do this well today, and many are getting better at it. Most nations in the West formerly did this well, but have become increasingly dysfunctional during the past decade or so. Hence the irrelevance of the common reply to forecasts that Asia — with China leading — will rise to supplant the West: they have problems X. Y, and Z. But this view misleads in two ways.

First, growth makes problem-solving easier. It produces new wealth to be shared, lowering social stress and facilitating building of a consensus about national policy. It produces new income with which to solve problems. Success boosts morale and strengthen the binds between leaders and citizens. Unfortunately, these dynamics work equally strongly in reverse. Economic decline breeds disunity and dissention, saps morale, and reduces resources with which to solve problems.

Second, on a deeper level, good leadership tends to produce growth. It allows a nation to surmount problems, making wise and far-sighted decisions. Weak leadership (poor leaders and low social cohesion) leads a people to delay necessary decisions, and then make short-sighted and foolish decisions — or collapse into disunity and regime failure.

Looking at China. Looking at America

Playing baseball a .300 hitter gets the job done even though failing 70% of the time. China’s leaders are not giants. But they make good-enough decisions with a reasonable frequency. China has serious problems, but rapid growth and competent leadership can solve serious problems.

Compare the work of China’s leaders and ours. They have implemented plans to reduce pollution, increase energy efficiency with cutting-edge power systems, and build state-of-the-art transportation systems. They have successfully managed to reduce population growth, perhaps the most serious challenge for an emerging nation. They are building a network of partners around the world, linked by loans and trade agreements. They’re chief financial problems are too-large foreign currency reserves and excessive levels of fixed investment.

We’re doing the opposite situation. Our leadership team bats .100; our economy appears locked into a slow growth mode. This combination might mean regime failure if continued long enough. Decaying infrastructure, growing debt, discredited foreign policies, no rational energy policy.

Why so grim a situation? Every two years we vote, and the result is a reflection of what we are. What do we see today when we look into the mirror at America? Good leaders and citizens, working together? Or a rodeo clown show, at which the world laughs? We can laugh at the clowns in Washington and our state capitals, but we put them there.

What produces good leadership? This mystery remains for future generations to solve. All we know is that it comes from our individual actions. Even if we refuse to admit collective responsibility, together we bear the results.

*** This last section was revised for greater clarity upon reader input.

Update: for more information

“Obama in Asia – Meeting American Decline Face to Face“, Juan Cole, TomDispatch, 11 November 2010

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