Over three years ago Publius gave Xi Jin Ping his marching orders and predicted that he would be unable to execute them. Xi has fulfilled all Publius expectations and more. What is happening in Hong Kong shows that the people of The Center of Everything (China in Chinese) must pay a high price.
To succeed, Xi had to reverse the Party’s post-Tiananmen course and install a liberal regime quickly. This would have ensured political, social and economic stability for The Center and a platform for growth for the next century at least.
A smarter leader would have insisted in having no control over Taiwan, an independent nation that The Center claims as its own, and over Hong Kong, a former British colony returned to The Center in 1997 with the right to self-governance. He would have used these two to get ahead of The Center’s liberal transition, seeing in advance what would work and what would not. Risks would have dropped and most of The Center’s trade and other disputes with Dumb Don would never have happened.
The Center today would look like Canada or Australia, models of middle class stability, and regional balance. No Xinjiangs or Tibets there.
Unfortunately, Xi instead used the most bankrupt of Western ideas, the Mussolini system: control the media, the military, a few strategic industries and let the rest fend for itself. He is is forcing The Center into Mussolini’s model, no matter the cost.
Naturally, The Party, or the center of The Center, has gone to huge lengths to control information in The Center.
Xi's number one problem is Cloud Inflation. The Cloud is universal access by every person and thing to unlimited computing power at marginal cost. The Cloud inflates at the rate of the power of devices, growing exponentially, times the number of devices growing exponentially, times the number of apps growing exponentially. That’s fast!
We have never seen anything so powerful in human history. Marginal cost computing on this scale is having a staggering impact. It is a sudden, sharp and very quick move down the Information Cost-Velocity Curve where information velocity is always increasing and costs always falling.
The last time this happened in a really big way was Gutenberg’s printing press of 1440. Every organization of every type in all Europe was ripped to shreds in a bloody, two and a half century-long Reformation and its aftermath. Not what Xi wants.
To contain Cloud Inflation and its effects, the Party built a Great Firewall around The Center. Behind the Firewall, the Party is racing to limit Cloud Inflation by controlling every device and piece of software in The Center on Party servers.
But, the problem, as Jack Ma pointed out, is that Center companies like Alibaba and Huawei cannot afford to support two, unintegrated information systems: one, Party-controlled, inside the Great Firewall for Center consumption and one outside growing at the Rate of Cloud Inflation for foreign consumption. Two, unrelated, unintegrated and so unscalable information systems would kill The Center’s ambitions to be The Center of Everything.
The events in Hong Kong show that Xi’s Mussolini imitation has blown up in his face. Xi, from inside the Great Firewall, foolishly decided to clamp down on the freedoms of the people of Hong Kong outside the Great Firewall. Naturally, they rose up against him in huge numbers. Live on TV and video streaming for all the world to see.
All of this is happening at a point of great weakness for The Center where very little in its Mussolini system is working. As we said in Xi Jingping Drives China Down over three years ago, The Center has:
An economy that entered a deep recession early in 2012 and shows no signs of recovery.
Jury-rigged GDP data that everyone knows bear no relationship to this reality.
Mounting pollution problems that make living there extremely dangerous. Air pollution in the Center is so bad that at least 200 million of its people will leave the work force with lung disease long before retirement. Who will pay the up keep for these people as they slowly expire?
A spectacularly overheated real estate market that collapsed precipitately; recovery will take well over a decade.
A Party-centric government that is stumbling as it realizes that it cannot outrun the rate of Cloud Inflation.
The Party must insert itself in any deal, whether above board or below, to rake off enough in cash and commissions to ensure the wealth and power of its members.
The Party is at war with itself over who gets this massive wealth.
An 18th century-style banking system that is neither mature nor stable enough to manage economic calamities like the real estate implosion, deep recession and a massive debt overload.
Excessive reliance on unstable state (Party)-owned companies that exist outside the discipline of markets or the rule of law.
Grossly overblown claims on the South and East China Seas that could ignite a global conflict of unknown dimensions and outcomes at almost any time.
A very bad Party-led “blame the foreigners first” attitude for even the slightest domestic problem. This is already hurting many foreign businesses from cars to computing.
A massive and fast secular shift away from manufacturing to service for which the Party did not prepare, causing widespread unemployment and social unrest for which the Party has no cure.
Roads and buildings that are crumbling visibly as fast as they are built.
A Party-manipulated stock market that creates global problems.
A Party-managed exchange rate that undermines the Center's credibility.
Massive capital flight generated by anyone with enough brains to count to five on this list.
A pro-liberal, anti-Party rebellion in the media and business.
A Party that is beginning to panic over the implications of all this.
All these problems have gotten worse over the last three years, not better. Notably, as the Wall Street Journal recently pointed out, debt is crippling Center companies.
So, the idea that The Center of Everything can overcome even a few of these problems is preposterous. In Hong Kong, the massive shift away from Party rule has begun. The Party will fight back. Hard. Blood in the streets, and lots of it, is easy to foresee.
Many China experts say that while this outcome is likely, they cannot tell when it will happen. This, Publius says, is nonsense. The rate at which the Cloud inflates is, as we saw, simple math. It is easy to fix a date on the Moore Curve beyond which the Party will fall behind Cloud Inflation and collapse. See Publius on Xi Inflates The Great Firewall.
That date is sooner than you think. To delay the inevitable, Xi must arrest Cloud Inflation.
But the numbers say that Xi cannot force the Cloud to stop inflating. The Party long ago made the mistake of allowing the people of The Center access to all the means of its own destruction—smartphones, PCs, laptops and now cars and soon healthcare devices and the Internet of Things. It also allowed the people of The Center to travel, work and study all over the world. This made building the Great Firewall immeasurably more difficult than it needed to be.
Another threat to Xi comes from the need to shift The Center from manufacturing to information age services. And do this fast enough to take up all the unemployed in the Center’s recession. To succeed—Jack Ma again—the Center’s companies must have a access to a completely free and open Internet outside the Great Firewall. Without open access they cannot manage their global customer and supply chain relationships to scale profitably. The Center cannot get back on a growth track.
Xi has a choice: an open Cloud and growth or his Party and no growth. Not complicated.
To keep the Mandate of Heaven, Xi must dismantle the Party.
Every day that Xi delays means that, the way time operates on the Moore Curve, where a year is the half-life of a microprocessor, or a couple of months, he must act very quickly indeed. As Hong Kong is showing, the consequences of even a small delay will be far more violent and unpredictable. Like a fool, Xi is trying to run back up the Moore Curve, something that the math says he can’t do.
Cloud Inflation has already eliminated Xi’s time margin. Publius has tried to lay out Xi’s options on a manageable timeline and cannot.
In Hong Kong, Xi can back down at this time of Center weakness. But he will look like a fool before the rest of The Center. Or, he can suppress the people of Hong Kong with full, post-Tiananmen vigor, destroying one of The Center’s most important markets and its financial core. Global confidence in The Center will evaporate. As will all Xi’s goals.
Either way, Xi loses. And The Center loses. Bigly.
The top question is, why did Xi put himself in such an untenable position?
Either, Xi knew that the Mussolini system is long dead and that Hong Kong would blow up if he applied it there and didn’t care. Or, he did not know anything about broken Western ideas and didn’t care that he didn’t know.
Xi cannot avoid serious questions about his judgement.
To deflect these questions, Xi has started a blame the foreigners campaign. Very Dumb Don of him. It suggests inadequacy and management failure on a colossal scale.
This can only get worse. The people of Hong Kong are desperate. Thirty years after Tiananmen, The Center is still moving backward. But the world markets to which Hong Kong, outside the Great Firewall, is attached, are moving forward ever-faster at The Rate of Cloud Inflation.
The gap between The Center, locked up inside the Great Firewall, and Hong Kong outside can only get bigger. Remember Hubble’s Law: The farther something is away from you, the faster it is moving away.
How far away is The Center from Hong Kong?
Hong Kong exists in a world like ours that is over 800 years after Magna Carta, which King John signed at Runnymede on June 15, 1215.
The people of The Center, by contrast live in a world that has centuries to go before it gets to its Magna Carta. The Center operates as if this is the year 1019, not 2019.
Cloud Inflation grows this gap in Moore Time. So, what looks like 1,000 calendar years is way, way bigger longer than that.
Lay Hubble’s Law onto this vast distance and you see the magnitude of Xi’s challenge and why he understands so little of what he must do. The laws of physics say that we can see The Center in the past, but it cannot see us in the future. The light now reaching The Center from us is light that we emitted well before Magna Carta. This light-time law shapes how Xi thinks. And it shows why the Party so badly miscalculated at Tiananmen and why it will miscalculate in Hong Kong again today.
Prevarication over Hong Kong just delays the inevitable. Xi has a choice: he can race from 1019 to 2019 and turn The Center into a liberal democracy in Moore Time; or he can crush Hong Kong with all the force and violence that this will take.
Doing the latter means that there is no path forward for The Center in global markets. Hubble’s Law will descend on all The Center’s companies, separating them from their customers at ever faster rates. You can see this happening with Huawei as it heads for the breaker’s yards.
Is there an alternative? The Center thinks so. It could use Artificial Intelligence (AI) in even the simplest electronic devices that we buy to inflate the Great Firewall, enclosing all of us on Party servers and managing us the way it manages the Uighurs in Xinjiang.
Great examples of what to expect, if Xi could do it, are Grindr, 蜂采(Fēng cǎi) and The Center’s social credit system. Using AI globally would put the “center” back into The Center of Everything!
But crushing Hong Kong will foreclose this path immediately, limiting the reach of The Center’s AI and therefore of its Great Firewall. Moore Time and Cloud Inflation will do the rest.
So, no matter what XI does, The Center will not be at the center of everything. This will get ugly.
You will not hear any policy makers in any U.S. political party thinking this through, however. As Publius has demonstrated many times over the last three years, even if Dumb Don could read this and he can’t, his intellectual incontinence prevents him from understanding even the first sentence. When it comes to The Center, he is AWOL.
None of us are ready for what is coming.
August 28, 2019
Yoko Kubota's piece in the Wall Street Journal today has a photo of Huawei's Social Credit Tracking system. It is easily the most damaging piece of publicity that Huawei has ever had. Impossible for Huawei founder Ren Zhengfei to back down now.
October 1, 2019
Great piece in The Wall Street Journal today by Shen Hong on how The Center is nationalizing businesses at a fast clip to reverse the recession the country entered in 2012 and companies across The Center entered a massive payables crisis. The shortage of funds has come home to roost and the state is being forced to bail out companies to prevent Hong Kong from becoming a national problem.
October 7, 2019
In one of Xi's biggest mistakes ever, as The Wall Street Journal's Ben Cohen reports, he is trying to extend The Center's Social Credit System to the NBA in the United States by crushing an NBA GM's sport for Hong Kong. The NBA capitulated and will adhere to Social Credit System strictures. US Politicians have gone nuts. XI will have tp pay for this.