China’s clash with Western power shattered its civilisational self-image; Europe is heading for a similar reckoning.
Perhaps the most consequential development in the history of China was the intrusion of Western nations on it’s eastern seaboard.
Chinese regimes like the Yuan, Ming, and Qing dynasties had, for centuries, been solipsistically focussed on Inner Asia — the most likely source, as any scholar versed in the classics would tell them — of any potential rivals for power, whilst limited Western seaborne trade brought in a steady supply of specie. However, to fix this trade imbalance — which soon generated a silver shortage — British traders soon sought to bring in Indian opium, which was significantly more potent, addictive and stupefying than that already commonly found in China. Attempting to block this supply, the Qing dynasty’s technological shortcomings in view of the west were laid bare.
Despite it’s humiliating defeat at the hands of the barbarian westerners in the first Opium War, efforts at modernisation during this period were — to put it mildly — mixed, thanks to “exuberant growth and lethargic institutions”.
The natural conservatism of the Confucian system and the husbanding of power by the Qing regime made reform a slow process: modernisation was generally confined to Southern China, particularly in the rapidly-growing treaty ports, and the projects of individual officials. Unlike in Meiji Japan, the Imperial Court gave no backing to ambitious projects: progress was further retarded by the cheapness of human labour, devalued thanks to a huge population boom driven by improved South Asian rice strains and American maize crops. As John King Fairbank noted in The Great Chinese Revolution: 1880-1985:
In economic life the superabundance of human muscles made labor-saving devices uneconomical. Why dam a stream for waterpower, as the Europeans were doing, when labor was dirt cheap and could continue to be used instead for textile spinning and weaving? Indeed, why use mules and a cart when porters were so available?… On land or water, mechanical transport by steampower would face stiff human competition.
Successful examples of modern industry or methods were rare, small-scale, imported and almost entirely dependent on the direct involvement of Westerners. China had installed just 240 miles of railroad by 1896. The end of the century, which involved three successive losses to the the western barbarians and their now-undeniable superior technology, would culminate in the occupation of Peking and defeat in the first China-Japan War; the dynasty, and 2,000 years of Chinese imperial governance, would die shortly after.
It is hard to communicate how much of a civilisational psychological shock this represented
It is hard to communicate how much of a civilisational psychological shock this represented. China’s traditional view of itself of the ”Middle Kingdom” , as the central civilisation between heaven and earth, was entrenched by it’s contact with other societies. The main focus of their foreign policy was on peripheral regions they considered backward — Mongolia, Xinjiang, Tibet — whilst their commercial contacts were primarily in Southeast Asia in countries like Malaya and Vietnam, where Chinese merchants played a decisive role in the development of the polity.
Then the Treaty Ports appeared — wired with telegraphs, driven by steam power, protected by modern military equipment. The encounter was not just unfamiliar but totally destabilising: it had scarcely occurred to anyone in any position of power within China that they might not be the most advanced civilisation on earth. The realisation triggered an existential crisis of confidence.
Likewise, many of in Europe have never known a world that is not Western-led. We study western history, western ideas, western geopolitics, western economics: the world is led by a hegemon that is an extension of Europe. It scarcely occurs to us that we may not always be the central civilisation. But like Qing China, increasing technological backwardness and sclerotic institutions has set us on a course to be superseded by powers we have scarcely bothered to understand or learn from.
European economies — particularly the four major European economies of Britain, Germany, France and Italy — have been stagnant for decades, self-hamstrung by political commitment at the highest level to the green transition over cheap energy, the idea of the bloc as a “regulatory superpower” choosing constraints over entrepreneurial and innovative freedom, steadfast commitment to importing immigrant workers instead of increasing productivity and a failure to tackle the spiralling costs of welfare systems that have seen a relentless rise of public debt. As David Marsh writes in Can Europe Survive?: “the EU has been an excellent club for the middle-income ex-Soviet bloc countries which joined twenty years ago, much less so for the higher-income pre-existing members, which have seen their relative prosperity diminished.”
Facing such unhappy political choices — and disturbed by the protectionist turn of America — many European nations are seeing Chinese foreign direct investment (FDI) as a way to sidestep the awkward decisions of improving economic competitiveness and sustainability. As reported in the FT’s marvellous China Shock 2.0 series, Chinese firms are ready to open new factories. The automotive sector is an early mover: MG have just announced that Spain will host its first car factory in Europe, Hongqi is reportedly planning to establish an electric vehicle manufacturing base in Europe, Great Wall Motors have announced plans to build a 300,000-capacity factory by 2029.
Brussels, wary of the implications, is insisting that any company opening factories in the EU transfer know-how and hire local workers. The arrangement looks strikingly familiar: much like the deals European firms struck when entering China from the 1980s onwards, where market access came with strings attached. Back then, Western companies eager to tap China’s vast market were required by the Communist authorities to share technology, train local workers, and source components domestically in service of a rapid Sino catch-up.
Chinese foreign direct investment in Europe has rebounded over the past three years after a prolonged slump. Much of it has flowed into sectors where China holds a clear technological edge and which Europe sees as vital to its industrial future: clean energy, electric vehicles and batteries. These sectors have been specifically selected: Europe imports 80 per cent of its digital technology, and Xi Jinping has been explicit about his strategic aim of deepening foreign dependence on China’s advanced manufacturing, which Beijing views as a source of leverage in an age of geopolitical disruption.
The EU itself has settled into a horrible homeostasis
The problems that bought the continent to this position are so deeply entrenched within Europe’s political and economic mindset, it is hard to see how they will be overcome. The EU itself has settled into a horrible homeostasis: much like the Confucian systems, it has institutionalised a whole series of practices, learnings and assumptions that that lock it into pre-set political trajectories, largely indifferent to changing circumstances.
The recent announcement that the bloc has opened talks with Bangladesh — which will include migration — is an excellent example. We stand on the brink of a fourth industrial revolution, in which robotics and AI could dramatically increase productivity, as well as a collapse in global fertility. Instead of taking the far-sighted decision to harness the former in order to position itself as a leader in the latter, Europe is continuing to pursue Human Quantitive Easing, an economic project that has long since passed the crossover point at which disutility exceeds utility, and thus become what the economists Herman Daly termed uneconomic growth.
Again, we have a warning from Fairbank: “One can only conclude that China was too stuck in her old ways, which were marked by growth in volume of people, product, and exchange, but not in the efficiency which constitutes productivity per worker, which in turn amasses capital for investment in the modern mechanized type of economy.”
In the coming struggle between American and China, the most benign possible outcome for Europeans is to build a great degree of self-sufficiency and competitiveness, whilst continuing to accept a a substantial measure of American leadership. As Marsh warns, however, it’s refusal to make difficult decisions is already beginning to tell: “Already, the benefits of the European way of life – shorter working hours, longer holidays, better chances for family life, improved health care, maternity leave, higher life expectancy – are incontestably declining. They will disappear altogether unless Europe makes the right choices.”
It took a series of wars to convince the conservative Confucian system of the need for change. Nuclear weapons will spare us being taught the important lesson of our own weakness, but the increasing fragility of European economies means
It took a succession of wars to force the conservative Confucian system to confront the need for change. Nuclear weapons may spare us a similar lesson in the costs of weakness, but the growing fragility of European economies will nonetheless compel difficult choices. Chief among them is that, under severe fiscal pressures both now and in the future, Europe cannot do everything. It will have to set clear priorities and make hard choices to rebalance competing demands: sustaining social cohesion through expensive welfare provision, securing economic advantage with expensive green energy, the battle between commercial dynamism and regulatory control, the choice between seeking migrants to supplement an ageing society and harnessing technology to improve productivity, the strengthening international competitiveness through effective industrial policy, and meeting NATO commitments to spend 2 per cent of GDP on defence.
For all our sakes, they must choose the right path. Otherwise, as the rebels of the White Lotus chanted, “it is the officials that make us rebel.”
