Follow-Up to “Investing in a World Where Capital is Politicizing”

I think I was incorrect in my last post to imply that China is the first to politicize capital. That distinction belongs to the US. Regardless, I believe my conclusions are sound.

The truth is the US has pursued political goals through capital since as early as the 1940s. Following the end of World War II, the US used capital to rebuild war-torn Europe as a means to stop the march of Communism across Europe (as well as in Asia). And during the Cold War, our capital stock and access to our economic system often served as both carrots and sticks to eventually unite the world under our economic umbrella.

With hindsight it is clear that capital was used for political means (interestingly also against Communist labor movements). But I think it is also clear that the US made the assumption that capital, by nature, leans towards democracy. This assumption looks increasingly fragile. I think it is more like that capital, by nature, has no political leanings other than the leanings of the capital provider. When used in the hands of a democracy, it is democratic. When used in the hands of an authoritarian state, would it be surprising if it was anything other than authoritarian?

This is why the US assumption that Chinese economic development would eventually lead to democratic rule in China is a fallacy. Capital doesn’t inherently lean in either direction. An authoritarian state with capital is precisely just that – an authoritarian state with capital.

Also with hindsight, the first wave of Communism likely didn’t fail because of being authoritarian but rather because it refused to adopt Capitalism as an economic framework. Communism in its first wave was an economic movement, and there is plenty evidence that it doesn’t and won’t work in our current world. I think China already learned that lesson both directly and indirectly through watching every other Communist state collapse. But it probably learned more than that and understands how the US was able to use capital to remake the world in its image. If my arguments are even remotely true, then China likely also understands that capital is a weapon that can serve more than just democratic states since it doesn’t inherently lean toward democracy.