How and Why China Has Succeeded Where USSR Failed

A few days, I started writing a post about why China will defeat USA in any long-term trade or ‘cold’ war. However, it quickly became obvious that many concepts in that post had not been well explained in previous ones. I then realized that an older draft post (abandoned over a year ago) contained enough elements for a prequel post. Readers should, therefore, see this post as a partial explanation for why the challenge posed by China to the terminally-ill american empire is fundamentally different from anything the later has encountered in the past, and indeed beyond what the anglo- mind is capable of imagining. As you will see in a future post, there is a reason why I chose to say that it is beyond the comprehension of “western” minds.

Let us now get back to the topic of this post, namely why China succeeded in spades at what the erstwhile USSR failed. USA, since its inception, has faced only two semi-credible threats, the first being Japan during WW2. However, as any person with a half-decent map and some basic stats about the two countries in 1940 can figure out, the manufacturing base of USA at that time was about 10 times larger than Japan. Moreover it’s land area was about 1/20th of contiguous (lower 48) USA and hence had far fewer natural resources. And ya, I am aware that Japan had occupied Korea and some parts of China- but it was never a close fight. Even Isoroku Yamamoto (of Pearl Harbor attack fame) was quite open about USA being the inevitable winner if the war lasted over one year. In other words, neither pre-WW2 nor post-WW2 Japan was ever a real threat to USA.

USSR, on the other hand, was land and resource rich (about twice the area of lower 48). While its population was a bit less than USA, especially in the immediate aftermath of WW2, it rivaled and often surpassed USA in areas ranging from high technology to the manufacturing and deployment of large numbers of diverse weapon systems. Furthermore, it was able to build its own sphere of influence in eastern Europe after WW2. So why did a country with more natural resources than USA, about the same population (in aftermath of WW2), tons of very smart scientists and military tacticians finally implode in 1991. Many Americans attribute it to all sorts of solipsistic bullshit, ranging from “socialism”, “Reagan”, “Afghanistan” to even more ludicrous ones such as “race” and “people yearning for human rights”.

In my opinion, the real reasons why USSR finally collapsed in 1991, but China just kept going and went on to become the world’s largest economy in real terms about a decade ago has to do with reasons which the vast majority of Americans are either unwilling or incapable of understanding. So let us start listing them, though not necessarily in order of importance.

1] China had both the size and population advantage. While is has about half the area of USSR, China is a bit larger than the lower 48 of USA. Moreover, unlike USSR (or Russia) it’s population has been at least 3-4 times larger than post-ww2 USA. Possessing a large enough landmass and population translates into a very respectable amount of natural resources and enough people to properly exploit those resources. With the exception of oil and a handful other minerals, China is large and populous enough to be internally self-sufficient. It also helps that most of China is neither too hot nor cold and the only limiting factor for human habitation is availability of water in its western half. But that is no different from the South-Western quadrant of USA being either a desert of semi-arid region. In other words, China is more than the equivalent of USA in Asia.

2] Issues surrounding race and culture. One of the most infrequently talked about, but important reason, why USSR seemed like a follower to the “West” and generally susceptible to its influences has to do with how most people in that country (and in Russia today) saw themselves. For a number of historical reasons, Russians have always seen themselves as white and western, perhaps a bit distinct from the “western” mainstream- but still white and western nonetheless. In my opinion, this inability to create a distinct cultural identity led to many other pathologies and bad decisions which shall be partially enumerated later in the post. Chinese, for obvious reasons, did not have that option and neither were they interested in being white (at least most of them).

3] Many of you might have noticed that post-1980 China seems to have stable and good to OK relations with a very diverse range of nation states all over the world. Contrast this to USSR, whose relations with countries in Africa and Latin America were colored with racial paternalism- though not as bad as USA. But why was that so? Well.. USSR (and Russia today) unfortunately bought into the whole white racial supremacy bullshit- which is ironic since we all know what Hitler thought of Slavic people. To be clear, I am not implying that Chinese people are not racist- just far more pragmatic and not so obsessed with race.

4] One of the other visible differences between China of erstwhile USSR concern administration. It is no secret that China, and east-asian countries in general, seem to have this bureaucracy thing figured out far better than the west. The most relevant differences between the two, in this area, concern how responsibility is delegated. More specifically, east-asian bureaucrats have far more latitude and autonomy to get things done- as long as they didn’t fuck up too badly and embarrass the central government. This translates into a far more robust, flexible and innovative system run by fairly competent people with skin in the game. There is a reason why China achieved in 20-30 years what took many other nations over a century.

5] Pragmatic and flexible ideology. Unlike USSR, China (except between late 50s-late 60s) was never obsessed with ideological purity. They just tried to solve problems facing them in the most optimal manner, given their resources and ability. That is why, for example, China was fine with people becoming rich after 1980s. They, correctly, saw the influence of capitalists on governance rather than its mere presence as the real problem. One of the reasons why things went so bad in Russia between 1991 and 2000 was that the system was run by capitalists at the expense of everybody else. China, on the other hand, focused on curtailing the political power of capitalists rather than making sure nobody got rich. We can all see who got it right.

6] China never really bought into western ideas of money, finance and “austerity”. Many of you heard about how material conditions for average citizens in USSR weren’t that good and quality of consumer goods were bad. But why was that so? Why couldn’t USSR spend enough to ensure that the quality of life for its citizens was good. Well.. it comes down to how they saw money and finance in general. Long story short, they bought in the “western” idea of money as a limited resource over which the government has little to no control. China simply decided to go down the MMT route, before it was even a thing. That is why China never seemed to be short of money to build new cities, apartment blocks, roads, airports, high-speed railways, factories, shopping malls, universities, research institutes etc. It is profoundly ironic that an allegedly communist country displays the best practical understanding of economics.

7] China understands censorship far better than USSR and the supposedly “free West”. One of the other realities of life in USSR, as told to me by former inhabitants, was that open humor and mockery of the establishment was not a good idea. Contrast this with how the Chinese system works, where polite criticism of the government (especially as far its ability to solve problems) is not especially problematic. While making off-color jokes about the government on the internet might get you temporarily banned or a visit from the authorities, very few end up in prison for being loud on social media. Also, unlike USSR, the Chinese government is not interested in regulating the private lives of its citizens beyond what is necessary to keep up external appearances. But by far the best censorship of dissent involves making sure that people have enough jobs, opportunities to make more money, reasonably good and affordable consumer goods and no persistent shortage of essentials.

And now I can write up the rest of that post about why China will prevail over USA in any long-term trade or ‘cold’ war.

What do you think? Comments?

  1. nyolci
    June 13, 2019 at 1:26 pm

    ” Contrast this to USSR, whose relations with countries in Africa and Latin America were colored with racial”
    While I kinda agree with some your post, this is definitely not true. The old Eastern Block was definitely non racist, and racism was actively suppressed. This is not just first hand experience on my side, but it was deep part of the ideological setup.

    Was the Eastern block significantly less racist than USA? Sure! Was it racist enough to make non-whites uncomfortable and resentful. Yes. Remember that both statements can be true at same time.

    “Long story short, they bought in the “western” idea of money as a limited resource”
    This is another point you are completely off the mark. This is definitely not true. It would be long to get into the details, but they applied Marxist economic theory all along (actually just like China behind the scenes). This was the fundamental part of their system, not just this-or-that theory. Western economic ideas (in their current form) are actually built upon the active denial of Marxism (but they won’t admit that, most economist aren’t even aware of this).

    I look at how people act rather than what they say. If you look at how USSR actively tried to cut costs (and often quality) in services and goods, while spending tons of resources on military and other glamour technologies- it is clear that they perceived money as a limited resource. This is especially obvious when you compare that behavior to how how China went about building things in from the 1990s till today.

    “how material conditions for average citizens in USSR weren’t that good and quality of consumer goods were bad”
    They actually could reach the standard of living of the USSR just cc 10-15 years ago. So it wasn’t that bad. Even the East Germans have very well measurable nostalgia for the GDR.

    And a good part of that nostalgia has to do with having stable jobs and livelihood- as it should be. My point is that China was clever enough to manage the entire system in a manner that this problem never really arose in the first place.

    “as told to me by former inhabitants, was that open humor and mockery of the establishment was not a good idea”
    As a former inhabitant, I can tell you this is BS. The same applies to regulating private lifes. To tell the truth, to me China is no different than the Eastern Block regarding these stuff (like censorship and bureaucracy).

    I am aware of the extensive number of anecdotes and Russian humor prevalent in USSR- especially during the 1970s and 80s. My point is that actively protesting and complaining about official incompetence was always far safer in China (after Mao died) than USSR. More importantly, the Chinese system does actually try to address negative feedback from its populace.

    All in all, if the USSR simply hadn’t given it up, they would be the Russia of today, without the 15 years of misery in between.

    And that is sorta correct. The real problem faced by USSR during the late 1980s was the quality of its leadership.

    • nyolci
      June 13, 2019 at 10:55 pm

      “Was it racist enough to make non-whites uncomfortable and resentful.”
      To be sure, there were not too many non whites around. Anyway, there was nothing like clinging to white supremacy as in the USA.

      “it is clear that they perceived money as a limited resource.”
      They perceived _labour_ as a limited resource. It wasn’t some western monetary theory that snaked in. In Marxist thought, labour is the ultimate source of all value. I didn’t claim they didn’t see limitations, and actual limitations do exist, you can’t build a nuclear power station in a single day.

      “And a good part of that nostalgia has to do with having stable jobs and livelihood- as it should be.”
      In the former USSR, people actually starved in the 90s. The situation was dramatically worse than during Soviet times.

      “I am aware of the extensive number of anecdotes and Russian humor prevalent in USSR”
      For the specific example of Hungary, the 80s was probably the _freest_ period of the country. Anyway, we always saw (during Soviet times) the Chinese as some kind of closed and extremely controlled society compared to the Soviet bloc. Now this is perhaps something anecdotal, not based on hard evidence, or generalized out of the Cultural Revolution times, but anyway that was the general perception.

  2. nyolci
    June 13, 2019 at 11:13 pm

    Actually, your argument about the quality of the leadership, incompetence, etc., so this argument actually resonates well what we thought. This is something that we did feel problematic. There is a caveat.

    After 1990 or so, when “capitalism” came, the situation got worse, and we became familiar with the Western leadership that turned out to be even less competent. Okay, this is unfair, they themselves experienced a dramatic decline in leadership quality starting with the late 80s. It is extremely “rude” to compare Angela Merkel to Willy Brandt, or Bush the Younger to Bush the Elder 🙂

    The other thing is that I have to admit I don’t know a thing about Chinese leadership after Deng, and especially on the low and middle level (eg. like up to provincial or metropolitan).

  3. nyolci
    June 14, 2019 at 2:52 am

    Actually, to tell the truth the Deng era looked quite like the (contemporary) Kadar era in Hungary. The Chinese under Deng did actively study the Kadar-economics. This latter was famous in the Eastern Bloc for letting small scale private farming and industry (“petty bourgeois” in Marxist terms), and some joint ventures with Western companies. Especially the so called “Around the House” cultivation (this was an actual term, cc. backyard or kitchen garden) scheme was copied by the Chinese and used as a template for domestic private business.

  4. nyolci
    June 14, 2019 at 1:50 pm
  5. MikeCA
    June 15, 2019 at 4:26 pm

    I have a PhD in one of the sciences. I remember in the 1970s meeting some Russian scientist in the same field. The Russian theoreticians were among the top in the field, but the experimentalist were kind of joke. After talking with them it became obviously why. In the US you could buy amplifiers, discriminators and counters from a number of suppliers. In the USSR they had to buy transistors, resistors, capacitors and build their own amplifiers, discriminators and counters. There were large vertically integrated companies in the USSR that were building equipment like that for their own use, but they would not sell them to other companies or to researchers. In the US there were companies producing these sorts of niche products mainly for researchers.

    You might have noticed that China has not only avoided that bureaucratic trap, but done much better than USA. In everything from industrial chemicals to electronics, they have not only captured most of the global market- but also made sure that oligopolies and monopolies are not allowed to form.

    In the USA many of the electronic advances in the 1960-90s were derived from military and NASA funded development. In the US most of that work was done by private companies. Either those companies recognized civilian markets for similar technology or the engineers working there did. In Silicon Valley many times engineers left one big company and started a new company to purse an application for the technology that the original company did not want to purse.

    And once again, China is fine with some of its people making tons of money. The only non-negotiable part is that they cannot meddle with strategic decision-making by the government. In other words, capital is subservient to the government.

    Having worked in US companies for many years, I can tell you there is nothing magic about them. When they are making healthy profits, they become fat, dumb and happy. It is only when they start losing business that they look critically at what they are doing and why people don’t like their products.

    And that is the case everywhere in the world. The big difference wrt China is that the system actually encourages competition and actively discourages corporate monopolies.

    I have been under the impression that in the USSR industry was too concentrated in vertically integrated companies that had narrow missions. There was no competition to drive them to improve their product.

    Partly, but they also had too many administrators who were incompetent brown-nosers aka apparatchiks.

    In the USA Robert Bork’s “The Antitrust Paradox” turned US anti-trust law on its head in the 1970s and 80s. This allowed US companies to become larger and reduced competition which is a big part of the problem today.

    Yes. Bork’s judicial tenure was one of the worst things to happen to USA. His judicial philosophy did far more damage than he is popularly credited with.

    • MikeCA
      June 15, 2019 at 10:06 pm

      “Partly, but they also had too many administrators who were incompetent brown-nosers aka apparatchiks.”

      All big corporations have too many administrators who are incompetent.

      and they proliferate in systems full of state-sanctioned oligopolies and monopolies, like the erstwhile USSR and ironically post-1999 USA.

      “Yes. Bork’s judicial tenure was one of the worst things to happen to USA. His judicial philosophy did far more damage than he is popularly credited with.”

      Bork was a judge on the Court of Appeals for the District of Columbia Circuit from 1982 to 1988. He was nominated by Reagan to the Supreme Court, but his nomination was rejected by the Senate.

      Bork did most of his damage before he ever got on the court through his books and papers.

      I am aware of the Borked saga, and that is why I talked about his ‘judicial philosophy’ rather than this rulings.

    • doldrom
      June 16, 2019 at 4:26 am

      You touch on something completely at odds with THE narrative. A huge part of the innovation that private capital is being rewarded for actually comes from public institutions (and somtimes from small timers), be it pharma, biotech, software and hardware innovation, etc. But the narrative systematically obscures this and is all about how IP rights and licenses reward innovators, how pharma needs the money to do research, how Google etc by rights owes their position and money to their “wealth creation” genius, etc. The narrative is all about how public spending is wasteful and never productive, and we owe everything to private capital, when in fact, this is simply an arrangement to milk the system for everything it’s worth, capturing anything of value and “stealing” the yield.
      The whole “public sector bad, wealth creators good” paradigm only got started in the 80’s. The term “wealth creator” only became current after financialization had already gotten underway, and the most important asset/collateral is still real estate (talking of “creation”!).

      • MikeCA
        June 17, 2019 at 9:26 am

        Companies generally do not do basic research. There have been a few exceptions. ATT Bell Labs did basic research back when ATT was a monopoly phone company. The C and C++ programming languages plus UNIX were all started at ATT. Another example is Xerox PARC, a lab owned by Xerox. PARC developed Ethernet, the idea of networked personal computers, the modern multiple window graphical user interface and object oriented programming. Neither ATT or Xerox got much out of all that basic research, but the technologies flowed out of those labs into the electronics and computer industry. I was fortunate to work under someone who came from Xerox PARC early in my career. I was working on multi-window graphical UI tools before the either the MAC or Windows.

        Xerox Star? That machine was amazingly advanced for its time.

        Companies sometimes do applied research but mostly they do product development. Generally basic research needs to be funded by the government, both federal and state. ATT Bell Labs and Xerox PARC are the rare exceptions. The vast majority of basic research is funded by the government.

        The Ayn Rand like admiration of innovators is largely a con job. Rand’s “Atlas Shrugged” is all about the rail road industry, but the US rail road industry was created through huge government grants of money and land. Many of those early rail roads were operated by con men who just took excessive profits from the construction grants and then let the rail roads go bankrupt. In her book Rand claims that her heroes rail road took no government grants, but that just means they bought up cheaply the bankrupt rail lines from all the con men that had taken the government grants.

        But a lot of idiots, still, believe that bullshit.

      • MikeCA
        June 17, 2019 at 9:32 pm

        “Xerox Star?”

        The system I was talking about was the Xerox Alto. The first Alto was built in 1973 at PARC. PARC used them to do software and hardware development for networked workstations/personal computers with window based GUIs. By the late 1970s Xerox had 1000 Altos internally and a few hundred loaned out to researchers outside Xerox.

        In the early 1980s Xerox brought out the Xerox Star which was based on the Alto but redesigned slightly for the commercial market.

        Cool! So you were actually involved in development of the first modern PC. I have seen many YouTube videos of what it was capable of and noticed that the Alto had many features popularly associated with computers which came a decade or two afterwards- and all of this was achieved with a ersatz CPU made out of TTLs and what we today know as custom ASICs.

  6. marlon
    June 23, 2019 at 4:13 pm

    Great article.

    I think your point on ideological flexibility cannot be overstated.
    China’s focus is on what works.
    I understand they sent party officials to the US (in 70s I think) to even consider democracy!

    As long as they maintain that flexibility their ascent is assured no matter what the US does.

  7. P Ray
    November 29, 2020 at 5:35 am

    Somewhat related (and also expanded upon in “Hidden Hand”) – when China doesn’t get its way, there is a list involved.
    Other people would get laughed at for such a list, but because China’s money is accepted worldwide, their complaints have weight.
    Basically, be rich if you want others to listen to you.

    China’s 14-point complaint to the lucky c(o)unt(ry) Australia:

    • P Ray
      November 29, 2020 at 7:03 am

      A big omitted variable in this article is the idea that the Chinese leadership had periodic changes before … now with Xi Jinping as “president for life” with the removal of the 2-term limits (in place since 1990s) … the opportunities seem stagnant, because the same people will be in charge for a long time.

      Never trust countries with fixed governments or theocratic governments, because both bunches have their own fixed interests … meaning the room for opportunities is small, because they have already been staked out by incumbents.

    • P Ray
      November 30, 2020 at 8:34 pm

      Oh ya, and also the Twitter image from China that offends Australia
      (actually, Australia should start showing pictures of Tibet not as part of China, for example):

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