China spilled the Magic Beans all over the World
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Maya Suresh Kannan, is an Entrepreneur, a Venture Capitalist, a Geoeconomic Architect, and a Life Strategist.
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Before I go ahead with this topic, I would like to clarify one thing. Being a Libertarian, I might have a personal inclination toward free market economics, but I will never have any bias on any system around the world geoeconomically or geopolitically because I look at the world from not just a few hundred years of History, but from 7000 years. Yes, I said Seven Thousand years. Why and how? - I hail from a trade and business Community in the southernmost part of Tamil Nadu (currently under the Union of India) where Athichanallur, one of the oldest civilizations (possibly the oldest through archeological findings), and Korkai, the port used by the Tamil Civilization for a few thousand years. While studying Greek Philosophy and the Roman Empire, I had to travel back in time to find the history of my back yard and it was amazing to find how Tamil Civilization existed and flourished for thousands of years before the Romans and in many ways provided the framework of the Re-Public(Rule by People) which later become a success framework for not just the Roman empire but most of the modern-day republics. So, when I talk about the West or China and their system of engagements, I present a non-biased outlook through the History of human civilization and trade. Let's get into the topic,
While most people engaged in arguments about China’s Belt & Road Initiative (BRI) success Vs failure, Good Vs bad, and Profitable Vs unprofitable for the past decade, something profound is happening across the world that hardly a few are talking about. It's not about the direct effect of BRI but an indirect and systemic Geo-Economic change that started happening around the world and we must have a microscopic analysis on it.
Post-BRI, nations started looking at foreign investment very differently than before. For a very long time, neo-liberal institutions like the World Bank, IMF, World Trade Organization, United Nations, The Financial Action Task Force (FATF), etc. kept the world tuned to funding as Aid, monetary flow, and getting development contracts to the champion organizations in return, two birds in one shot. I.e., keep the nations indebted to the Western Economies while flushing out the euro-dollar through the system and have a Geopolitical grip on the nations. It is an undeniable fact that, Over the period of the last half-century, nations gained from the roles of such international Institutions, especially in the nation-building exercise. However, nations started looking at the pieces of evidence over decades and realized that such contractual deals came with a huge indirect cost down the line. Most nations stuck with the deals thanks to the failure of corrupt local governments and the non-availability of alternate deals.
With the expansion of the Chinese economic integration, the world nations started learning alternate methods of nation-building and economic expansion. It's not about whether BRI is a better deal than those they had before. It’s about the alternative mechanism of funding and International economic development. As of today, BRI is a decade-old practice with 155+ nations taking part whose cumulative population is 75% of the world population accounting for more than half of the world GDP. With the arrival of BRI, the terms of the international economic cooperation agreements started taking new forms. Remember, the Chinese have been doing business with the world since 500 BC and highly streamlined it through the “Silk Road” well before the so-called Western economic blocks appeared. So, neither China nor its international trade acumen is new. BRI should be seen through that lens to fully understand its nature.
The entire Africa is a transformed land post-BRI. While there is a split verdict on the financial benefit of the BRI deals, almost everyone agrees with the Economic benefit to the host nation both in the short and long run, something they never saw from the West. It's not just Africa, even Asian countries started looking at BRI as the way to grow. These things are clear for those who follow international trade and politics. What is not obvious and openly clear is that nations have now started feeling liberated and pursuing economic and financial models of their own. The West ran out of powerful tools (except the military might – even that is questionable) to dominate the world. The Euro-Dollar currency system started taking short life cycle routes, losing the power of value creation as more options and competitions appeared. The neo-liberal institutions started gaining competition from other local, regional, and economic blocks. Nations started creating their own International Champion organizations giving tough competition to the West Created champion organizations not only at local markets but also globally. One may argue, the multi-polar world has already been the reality, and what is unique about this trend?
Well, the unique thing is the nation's ability to customize the Financial and Economic system where the primary beneficiary is the local economy. I know the currency’s power, GDP, and Global Trade Deficit, may all work against a nation to run their own Finance-Economy double engine system. But that’s where I see that Post BRI world is different. The West always kept things like, asset accounting, Currency, and other financial derivatives as the structural components of international trade and pushed back the infrastructure, Products, and Intellectual Properties under the hedge so that nations could not play by those components. The BRI broke the ice and provided the taste of these components to these nations. Now, every other nation around the world is creating financial and economic deals wrapped around their products, solutions, commodities, and Intellectual Properties. Infrastructure and development Banks are appearing in every part of the world, not capitalized by just the dollar but by a basket of currencies.
This is the strange water and tides where the West should adopt and adapt for coexistence. The West can no longer be a wise man or a bully in the game. If they continue to play with their old books (it seems still the US has not fully understood this as their arrogance blindfolds their eyes), they will be doomed to fail. It is unfair only to point fingers at the West. Even the rest of the world, including China, should be aware of this development and learn to coexist and cooperate with nations of the new world. The new world order is not just about currency, but of trade, economics, Financial Engineering, and Innovation. To baseline such an argument, I take the Five major aspects of differentiations between the West-driven nation-building package and BRI. They are: 1) Natural Resources 2) Intellectual Properties, 3) Treaties/Legal Contracts, 4) Human Capital/Resources, and 5) Assets & Financial Accounting.
Natural Resources: For centuries, the West-led world conquest was about natural resources (even today the Geoeconomics of the world is primarily driven by it). During the colonization era, natural resource exploitation was done through sheer military power. In the Modern era, it was a mix of power and diplomacy, and during the Post World War era, the trend continued but other tools like treaties and neoliberal organizations were used to continue the trend of use of natural resources. But, over the last decades, nations started realizing that they are the losers in the relationship and have been exploited by the West in the name of nation-building. So, many of them started looking at BRI as a better deal as they are not predatory in nature.
Intellectual Properties: The West always worked based on “Monetizing the IP” in the form of royalty, Licensing, etc., Such monetization created the provenance and time for those Intellectual Properties that made the host nation, and the companies don’t try to copy or compete. Japan, South Korea, and Germany had the opportunity to stand up to the West to build a nation of IP and Capital Machines, instead of playing a game of investing back into the US assets and capital machines. One thing that is common in all these post-World-War economies is that wealth is accumulated and controlled by a small group of Private People. There is no National Interest, only Private Interest, which leads to securing wealth far away from the nation. Culturally China has always been one nation, one civilization, and one culture of Conformative Society. As most of the Capital and Asset making machines are National Assets (owned by the Government), the books get balanced at the end of the day. Coming to the Intellectual Property game, China systematically changed the game to its favor by becoming the nation owning most of the Patents, surpassing the USA, and the most interesting part of it, they could do it without taking part in the International Patent Laws. They could circumvent the entire system.
Human Capital / Human Resources: Across times of change, one thing always remained constant. Human as Assets remained a dominating practice throughout history. Why? Because humans as Capital Machines can produce unlimited capital through their physical and mental abilities. Even with AI taking away some part of their Asset-creating ability, humans are still the dominant capital-making machine. For an exceptionally long time, the West was able to gain access to human capital assets for free through forced labor. I am not suggesting the West started slavery. But it is a known fact it has mastered the art of transforming forced labor into assets and capital machines. From feudalism to Communism to Capitalism, everywhere you can find evidence of it. Post-world-war, it took a different turn with the West continuing to dominate this space by Renting the Human as resources to build capital asset-making machines. With tough “Hire to Build”, “Non-Compete”, “Non-Disclosure”, and “non-Circumvent”. So, they did not bother about Knowledge transfer through human resources as they owned Human Capital. Countries like the Union of India fell prey to this, thanks to insensitive leadership and private wealth builders who call themselves capitalists but truly prove the nature of private feudal lords. This was never the case with China. China played the game of Capital Building for the World using its human resources, but it never pledged the royalty of human capital to the West, meaning, they can reuse the human resources, with much more knowledge to rebuild the capital and thus the assets. The World is catching up amazingly fast on this model making it rough for the West to Own the human Capital and thus, the asset column of the West is declining rapidly.
Assets & Financial Accounting: China had created or championed alternatives like AIIB, and BRICS to Western-dominated neoliberal institutions like the World Bank to hedge itself and its trading partners in Asia. And now, it has started expanding that hedge in Africa and South America as well. So, while the Western propaganda machine keeps talking about Derisking and Decoupling, China is already practicing it. The west-dominated asset accounting is no longer a secret or limited to the West. To Capture something as an Asset in your Balance sheet you need to have some liability somewhere. The art and math of transferring your physical assets' “Value” into either derivative or to a foreign entity, is now a well-learned practice not just in China, but the other nations around all economic blocks. Japan, Germany, and other economies, including the Union of India played along with the US-driven Dollar-Trade system to fan-in/fan-out cycle and forgot(deliberately) to build the Asset-making capital machines i.e., just gave that “Right” to the US. China never gave that up, thanks to their wisdom from the past in Culture, Civilization, and the practice of trade. And, now China spilled the magic beans around the world as we started seeing.
Treaties / Legal contracts: The Western Capital system and the asset machines it developed for centuries could not be done without the major Vehicle – Treaties. The monetization of Resources, Human Capital, assets, tradable commodities, and Intellectual properties was possible only because of such treaties and the other international legal binding developed and enforced by the neoliberal institutions. Such International and Intra-national treaties, policies, and agreements led to the host nations and organizations being pushed back through the non-compete, non-disclosure, and other items of such contracts and treaties. China, while conforming to international treaties, keeping in mind its nation-building interest, had systematically developed hedges and alternatives with policy space.
Almost every nation is focusing on national wealth, Capital System building, creating Champion organizations, etc. So, there is no doubt that China is not only instrumental in pushing itself into a relevant force in the new world order but also played a key role in spilling the magic bean around the world making the world a multi-polar one with every other country negotiating special treaties, policies and custom-made deals.
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