Society has long understood that debt is a constraint on freedom. Proverbs 22:7 says, "The borrower is the slave of the lender."
Today, we are caught up in a vigorous national debate about the influence of growing public debt on our freedom and future prosperity, and the proper role of government in coping with the situation. Not surprisingly, much of the polemic is politically charged; modern Tea Parties are almost an echo of our 18th century struggle with England.
Most analysts see three possible roads back to financial equilibrium in the Western world. We can begin a long period of restrained growth and gradually reduce our loan obligations. We can balance the federal budget and let the markets sort out the credit issues. Or we can make present debts easier to repay by fostering higher inflation.
Reflation is a de facto tax on the poor and those living on fixed incomes. It punishes savers and lenders and favors debtors. Yet because it is the most politically expedient, it's our most likely policy direction. (The IMF actually recommends a 4% inflation target in developed countries.)
However the policy debate unfolds, this is about our economic freedom, not about our political freedom. And this is a distinction with merit. Our citizens themselves have the power to determine the direction of government policy. We can still replace the policymakers at the ballot box when we think it is appropriate. But that is not the case in China.
Freedom And Growth In China
China's written history dates back 3,700 years, but her culture, literature and philosophy trace back to the feudal Zhou Dynasty (1045-256 B.C.) that gave way to the Chinese empires. Over the years, the emperors developed sprawling bureaucratic systems that allowed them to control vast territories whose populations sprang from a number of different Asian peoples. Fast-forwarding 2,000 years, today those bureaucracies are the purview of the Chinese Communist Party, whose members total just 5% of China's 1.3 billion citizens.
In 1949, Mao Zedong proclaimed the People's Republic of China from atop the Gate of Heavenly Peace ("Tiananmen.") He believed that socialism would triumph over all other ideologies, and began his rule with the execution of landlords and the redistribution of land to peasants. Mao was avowedly Marxist in his belief that workers-and not the owners of land or capital-were entitled to "surplus labor" or what capitalists would ordinarily refer to as profits. Though compromises were made in subsequent regimes, this important communist principle has never been disavowed.
In 1980, Deng Xiaoping emerged as the party's leader. He was convinced that the country needed a new emphasis, one that was Marxist but less hostile to the country's traditions. He promoted "socialism with Chinese characteristics." To jump-start the economy, he reopened China to foreign investment and global markets and he permitted limited private competition in special economic zones allowed to run as a capitalist system within the communist state.
Political tensions continued between "conservatives" who were unhappy with Deng's accommodation of Western materialism, and "liberals" who protested the party's totalitarian leadership. In 1989, the year a number of other communist governments around the world collapsed, there were weeks of demonstrations by supporters of democratic reform in Tiananmen Square in Beijing. Deng authorized a military response and several thousands were gunned down.
Economic liberalization expanded under Jiang Zemin and China's growth rate had picked up by the mid-1990's. China gained membership in the World Trade Organization, and this year it will displace Japan as the world's second-largest national economy.
If China's economic-political model were more like our own, it would be easy to postulate that it will sustain or even hasten its amazing growth pace. After all, the Chinese need not patiently await the development of the internal combustion engine, telephones, plastics, robotic assembly lines, fertilizers, air and space travel, modern banking, nuclear power, the globalization of commerce, the microchip and miracle drugs that have evolved in the West during the past 200 years. All that and more is available every morning right on China's well-guarded doorstep.