Sunday, June 2, 2013

How China Squanders

"I will begin with a basic fact: The living organism, in a situa­tion determined by the play of energy on the surface of the globe, ordinarily receives more energy than is necessary for maintaining life; the excess energy (wealth) can be used for the growth of a system (e.g., an organism); if the system can no longer grow, or if the excess cannot be completely absorbed in its growth, it must necessarily be lost without profit; it must be spent, will­ingly or not, gloriously or catastrophically."


Like entropy in a closed system, all the excess profits must be squandered irrationally, like “coffee thrown into the sea”, and our only choice is whether to squander “gloriously or catastrophically”. If the idea of compulsory squander bothers you, try ask yourself a series of questions: the reason I want A is because of B, the reason I want B is because of C, pretty soon you will realize the last thing you want has no reason or logic, except it makes you happy (admit it, you are squandering after all!).

For individuals, the act of squandering can be conspicuous consumptions, i.e. buying things we don’t need, or spending less time at work and more on leisures. For companies, squandering takes the forms of uncertain R&D and unprofitable investments. For example, Google tries to squander the $50 billion accumulated profits in projects like Google Glass, self-driving cars, Google Fiber, etc. However, if any of these becomes future profit makers just like the past squanders (i.e. AdSense, Android), then Google would have more billions to squander! Eventually, Google will have to return profits to the shareholders if it runs out of ideas of squandering.

For economies or the planet as a whole, the need to squander is even more acute since we can not pay dividends to Martians, and historically each society squanders in its own ways. Aztec had daily human sacrifices and constant wars with its neighbors. Europeans started WWI and WWII. Squanders can also come in the forms of conservations: Tibetans send their (excess) children to monasteries and support large population of monks to avoid overpopulation and over-exploitation of their environments. Countries set aside huge swath of lands for national parks or ban developments in some area. Arts and leisure are alternative forms of squandering - until the recent century, we used to work 12 hours a day and 7 days a week. Bertrand Russell and John Maynard Keynes had predicted in 1930 that as our productivities rise, by 2000 we only need to work 4 hours a day and spend the rest in leisures.

There are glorious squanders too, like the grand churches, religions and clergies, philanthropies, international aids, universal health care (which will never make money), scientific researches, art and music, etc.. None of which are rational investments or have any practical purposes. Ironically, some irrational squanders can turn into great investments, like the effort to build particle accelerators (in the words of the physicist Robert Wilson: “has nothing to do with defending our country, except to make it worth defending for”), ultimately lead to CERN and the invention of World Wide Web. Philanthropies may not achieve their intended goals, but they redistributed the chips and make the economy more sustainable. Religions may not deliver eternal life, but strengthen the communities. Meditations, the most useless human activity, can make you smarter and more successful. Democracies, borne out of the Christian faith that all men are created equal, was deemed less efficient than Fascism, yet in the long run prove to be more prosperous because open societies folster better innovations.

Because of its culture, China tends to squander catastrophically. Confucians dismissed religions as superstitions, and place filial piety and individual virtues as the core values in society. Lacking transcendent values as the escape valves, the ‘rational’ Confucian society kept reinvesting the excess profits into growth and reproduction, until overpopulation ran into the environmental limits, resulting in cycles of catastrophic squanders of wars, famines and diseases.

Even worse, unlike Mohists and other religions who built their own organizations to advance their social agenda, Confucians seek to ingratiate themselves with the regime, and their founding myths of ancient sage-kings demanded a strict chain of obediences of sons to father, wives to husband and subjects to ruler. “The sage-king stands alone, unchallenged and unchecked except by self-imposed restraints”. This blind faith in human rationality caused Confucians to accrue all their faith and profits to the supreme ruler, who is only human and had no problem squandering them in corruptions, wars and slaughtering of his own people.

The 1911 Chinese revolution intended to build a modern society by adopting western technology only, without changing the traditional values. This became a complete disaster and resulted in two decades of civil wars. The 1949 Communist revolution continued the catastrophic squanders by waging wars in Korea and Vietnam, and massacres and famines that culminated in the Culture Revolution which squandered a decade of Chinese lives.

After the collapse of the Berlin Wall and massacre of Tiananmen Square in 1989, Chinese has adopted capitalism to replace the bankrupt communism. Although capitalism has raised the economic throughput, it has no core values and still offers no solutions to how China should squander its new wealth. As a result, China continues the catastrophic squanders by keeping the largest standing military in the world, and an even larger ‘public security’ force to watch over its own people. It continues the exploitations of its environment instead of conservations, and continues to perpetuate the low trusts society with rampant corruption and lack of NGOs. When it couldn’t squander all by itself, it exports the saving glut to the rest of the world, which squandered them in the 2007 financial crisis.

Some Chinese now begin to identify the lack of transcendent values as the core problem of the society. In order to squander gloriously instead of catastrophically, China needs to rise above its traditional utilitarian values and stop seeking purposes in everything it does. Whether it’s in arts that have no practical use, in democracy that lack efficiencies, in philanthropies with no payoffs, in faiths that reward the next life instead of this one, in social security and universal health care that will never turn profits, and most importantly, in trusting each other and respect each other’s dreams, which may not make this life richer, but will make it worth living.


  1. This idea that the pursuit of profit is equivalent to "squandering" doesn't jive on the surface. I haven't thought about it in depth, mainly because I strongly disagree with some of the surface issues like dictating how anyone should have to spend their free time or resources (that's tantamount to socialism or communism). But I'm open to new ideas as long as they allow me to keep my freedom of choice.

  2. Frank: why don't you eat only biscuits and drink water every day, work 12 hours a day, 7 days a week, meanwhile stop listening to music, taking vacations, donate to charities, and use all the time & money you save to marry more wives and have more kids? In other words, why don't you live like a Confucian? The point is, we ALWAYS have extra energy, profits, and time to squander, unless at this very moment you're starving and you have no idea where your next meal is coming from. If we all can acknowledge this, then the only question left is whether we should squander gloriously or catastrophically.

  3. Capitalism has no core values...Hmmm I don't think that is entirely what history shows us. Marx may have been wrong about many economic principals but his analysis of history and class struggles are spot on given todays news.
    Capitalism does have fundamental values. In it's most pristine form it depends on liberty of the individual to associate with others and that this right is protected by law as well as being a common right of human kind. When the evolution of capital becomes monopoly then it becomes co-opted with favoritism, price fixings and aberrations. I am not a libertarian mind you. I always recommend that people read works of Adam Smith not only the first chapter by later on where he abhors the division of labor and businesses that would set workers against each other. There is more to say, but I am compelled by the "invisible hand" to move on.