PrintFebruary 1, 2011
China's Insight into Human Nature
During President Obama's State of the Union address, he attributed China's rise largely to its education system when he said, "Meanwhile, nations like China and India realized that with some changes of their own, they could compete in this new world. And so they started educating their children earlier and longer, with greater emphasis on math and science."
No, President Obama. That's not why China has been rising.
That's not why China's economy has grown tenfold over the last three decades. That's not why it overtook the economies of Great Britain and France in 2005, Germany in 2007, and Japan in 2010. And that's not why it's predicted to overtake America's economy within the next decade or two by professional services firm PricewaterhouseCoopers and investment bank Goldman Sachs.
China has been rising because it has been rapidly moving toward a concept that made America the envy of the world, while America has been gradually moving away from that same concept.
America's founding fathers embraced this concept back in 1776. And it made the nation the richest one on the planet by 1905, despite the fact that America represented only five percent of the world's land surface and six percent of the world's population.
Never before in the history of mankind had a nation soared to such heights of abundant prosperity. Innovation thrived. Science advanced. Lifespan doubled.
The concept? The profit motive.
In The Wealth of Nations, first published in 1776, Adam Smith argued that the interests of society as a whole are best promoted when the profit motive of individuals is allowed to thrive in an economic environment that includes capitalism, the free market, and a minimum of government interference.
Smith observed:
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.
The Wealth of Nations was one of a handful of books the founding fathers referenced when setting up America's economic system. The founding fathers shared many of Smith's views. Most importantly, they believed that people are motivated primarily by self-interest and that allowing that motivation to thrive in a conducive economic environment leads to the highest level of prosperity.
The founding fathers viewed the free market as a natural law for the marketplace, which matched their philosophy of natural law applied to politics and society. And their experience had taught them that outside of its legitimate functions, government does not perform as well as the private sector.
Thomas Jefferson argued:
Instead of embarrassing commerce under piles of regulating laws, duties and prohibitions, could it be relieved from all its shackles in all parts of the world, could every country be employed in producing that which nature has best fitted it to produce, and each be free to exchange with others mutual surpluses for mutual wants, the greatest mass possible would then be produced of those things which contribute to human life and human happiness; the numbers of mankind would be increased and their condition bettered.
Those who favor socialism over capitalism also favor ideology over pragmatism. In the real world, socialism has never worked. It's just a utopian theory. It cannot fairly be compared to capitalism, which works in the real world. Capitalism works because it accounts for human nature; socialism fails because it does not.
Deng Xiaoping, the architect of China's economic rise, favored pragmatism over ideology. He could see that socialism was not working. In 1978, he began to transform China into a market economy. It has since evolved into state capitalism, which works because it accounts for human nature.
While self-interest is dangerous in politics and may seem selfish in other areas of life, it can benefit society as a whole in economic interactions. Through capitalism and the free market, self-interest -- in the form of the profit motive -- creates wealth and raises the standard of living.
Despite human nature and the proven track record of Smith's principles, America has been moving away from the profit motive. Increasingly, the government has been embracing socialism and interfering with the free market. This has led to a crumbling American economy.
The economy is like a huge and complex puzzle in which each piece must find its own place through the free market. But government planners in America believe they are smart enough to place the pieces. They are wrong. They have been putting the pieces in arbitrary places and making a mess of the puzzle.
Deng said, "To get rich is glorious." He understood that the best way to make China the envy of the world was to grow its economy by allowing the profit motive of individuals to thrive.
That's why China has been rising, President Obama.
Bill Costello, M.Ed., is the president of U.S.-based Making Minds Matter, LLC and the author of Awaken Your Birdbrain: Using Creativity to Get What You Want. He can be reached at www.makingmindsmatter.com.
