Historical Materialism and Technology

What Xi Gets Wrong and What That Means

Tanner Greer’s recent piece in Palladium The Theory of History That Guides Xi Jinping” describes key elements of Xi’s view of history as such:

In address after address, Xi teaches that the arc of history bends towards “multi-polarization,” “globalization,” and “peaceful development.” Each faces its own obstacles (in Maoist fashion, he describes these obstacles as “contradictions” linked to the productive forces that create the trends themselves) but those obstacles cannot overturn the general trend.

What is interesting is what is assumed: what in turn drives these forces? If it is driven by the usual forces of capitalism: network effects, scale economies and the like then as far as the production of goods does, I am far from convinced, in fact, quite the opposite.

For example, the trend towards renewable energies and electrification pushes towards tighter national or subregional networks to provide reliability of energy supply but makes much of the global energy supply chain redundant. If you can source energy from the sun or wind, store it locally, and then use it for more or less everything then what is the rationale for energy supply chains spanning across the globe? This has some pretty clear capital allocation implications: why would anyone bother building more ports in a belt and road program when this is the breakdown of shipping volumes which would appear to be facing structural decline in a world where energy is sourced locally?

Similarly if production costs become less fixed then scale matters less. There are numerous innovations I could point to but this article on Yet Ming Chiang’s battery company 24M represents a trend towards lower unit capital expenditures and other innovations along the lines of 3D printing done by Arevo represent a fundamental challenge the economies of scale of a place like Guangdong. With limited scale economies production can be arranged to minimize working capital, transport costs or other things - all of which undermines China’s industrial model of development and would drive a drop in world trade with no loss of consumer welfare. From the point of view of consumers and producers this does not matter: the customer gets the product, the producer gets the sales and life goes on. For a leninist party state that derives power from network centrality in global value chains this represents a major problem. “Multi-polarization” in production hurts the incumbents and in particular China. Add other priorities like supply chain security and a rift in values between China and the West on numerous issues and these trends will accelerate.

As for peaceful development, the mutually assured destruction of having heavily integrated value chains falls away and other priorities may come to the fore. Acquiescence on non-economic issues may be much harder for China to achieve going forward for no other reason than it having reduced leverage. There are still “commanding heights” to a green, technological civilization but efforts to move leading edge chip fabs out of China and to the US and Europe represent a real challenge to them.

There is of course still intellectual property and know how, but that is something that China does not have enough control over nor enough history as a good actor to be well integrated with the world. Most indications are that this is running backwards as the rest of the world takes very seriously its intellectual property and research capabilities and the safekeeping thereof.

So is China’s “view” on foreign policy and its deterministic view of history wrong? In my opinion it is, and this represents a profound strategic error on their part.