The U.S. and China: Who Wins Which Race – To The Top Or Bottom?

During the recent Christmas holidays, the Financial Times noted a popular email lament circulating in China: “Can’t afford to be born because a caesarean costs…can’t afford to study because schools cost at least…can’t afford to live anywhere because each square meter is at least…can’t afford to get sick because pharmaceutical profits are at least tenfold…can’t afford to die because cremation costs at least…” – wry evidence of the growing backlash generated by unbearable income divides accruing in the face of China’s unsustainable growth model.

Social turmoil created by China’s extreme economic inequality is a harbinger of increasing internal instability elsewhere and the potential it poses for class warfare. Ironically, global competition between China and the U.S. for natural resources and economic leadership masks domestic-focused struggles over which nation will best solve relative severe income divide conflicts that threaten internal prosperity and wellbeing.

We are immersed in a new soft-power, post-cold war, global hand-to-hand match to see whose founding principles, culture, and values predominate. Both China and the U.S. possess a choice either to condemn the world to higher levels of debilitating conflict, continuing to extend suffering downwards, or to project higher wealth distribution standards to elevate the greater majority to a greater well being.

The world is watching to see which nation matches culture to execution; how a nation’s core values can provide for and defend a diminishing middle class, take its structurally unemployed citizens out of poverty, and somehow curb and redirect elitist market excesses toward meaningful societal benefit. At this point, the winner is not obvious.

Trends illustrate that oligarchy-directed, ‘trickle-up” and “trickle-down” economic and political values and practices, exacerbated by criminal and incompetent financial sector machinations, have caused structural, systemic damage to both “the American way” and the “China miracle,” creating greater inequalities between haves and have-nots in both nations.

In both countries, the rising rich are contrasted with the falling poor who remain hamstrung by anemic wage growth, impossible property values, and high and stubborn structural unemployment rates. Hyper concentration of wealth and income, and the overwhelming social, economic, and political distortions produced as a result, drastically erode the moral will and executive capacity of either governmental system to respond to the needs of its drowning middle class and those mired in a downward poverty spiral.

This new, bipolar-domestic race to the societal extremes, exemplified by rebounding stock markets that benefit only a few and by trillions of dollars in corporate and state reserves enriching small population elites, is creating a nascent labor movement in China and a lost and disenfranchised generation in the U.S.

Indeed the U.S. is well on its way to dismantling its middle class. The richest 20 percent have managed to accumulate 93 percent of the country’s collective wealth. U.S. Census data shows that the richest one percent of all Americans now account for 43 percent of national net worth, if housing is not included (and this number further disintegrates if housing is included, as most middle class Americans have tied their personal wealth to their homes). There are now millions underwater in their mortgages, plus additional millions facing the prospect of losing their homes in part through fraudulent foreclosure practices.

Lost in the debate over who qualifies for middle class tax treatment is the fact that for the first time since the Great Depression generation, the American dream for the second class 80% is much more about surviving next week’s bills and dramatically less about equal opportunities to achieve any measure of economic security or progress.

America’s growing structural income divide is marked on the downside by 25 million unemployed, underemployed, or millions who have given up in despair. Policies deliberately crafted and implemented by elites have fulfilled their goals to the point where the top one percent of tax-paying Americans now enjoy tax rates a third lower than the same top percentile in 1970.

From a citizen-victim standpoint, there is little difference between opaque decision-making in highly restricted private sector corporate boardrooms aggregated by dues-for-hire influence players like the U.S. Chamber of Commerce secretly funding high-impact political campaigns through anonymous donors, and invisible China Central Committee deliberations resulting in public sector control edicts that further empower party elites.

Manipulation is manipulation whether it comes under the guise of financial and multinational corporate oligarchies selectively shaping and funding representative democracies or hardened political structures enriching central committees. The result is similar: a new, dual-caste ownership society featuring growing numbers of citizens, workers, and those unemployed relegated to owning their individual share of misery, who stand in line and toe the line as perennial sharecropper outliers while powerful elites pursue expanding bottom lines to self-legalize the theft of an ever-growing relative share of national wealth.

More than just an ideological debate over American social mobility as opposed to “one-China”, both societies are enlightened by increased access to information and knowledge, and simultaneously burdened by a growing sense of economic unfairness and redistributive injustice that threatens social comity… unless a new direction is forged.

Ideologically-driven deregulation without an accompanying ethics template that shows clearly who controls profit streams, who benefits, who is served and who serves – blows up key parts of respective systems as evidenced by the past decade’s Wall Street-induced great recession. Growing, 21st century, dominant country leaders (i.e. Germany) appear to be those who increase their national manufacturing base and industrial competitive advantages which in turn create sustaining middle class jobs for their people.

Tomorrow’s triumphant countries discard today’s failing models marked by cheap labor arbitraging, global supply chains that skip the domestic reinvestment category, trade laws that succumb to “do as I say but not as I do” practices, and national tax systems that prove too complicated to understand and too conducive to abuse. Instead, they develop metrics and policies favoring societal wellbeing and income transparency. In this scenario, the “American Dream” could end up being “Made Elsewhere” like everything else.

Odds are that the elites in both societies will make wrong choices and opt for continued aggregations of wealth, as they consistently have over the past several decades, with serious implications for national security in a world of harsh competition for declining resources. Flat wage cycles and higher unemployment rates cripple reindustrialization, community and municipal reinventions, national research prowess, deployable inventiveness, and the ability to finance growth. Militaries crash and burn or rise on these developments, hampered by ever more costly but shorter product deployment cycles exponentially eroded by technology advances. Competing national budgets are funded by those populist and populous hearts and minds searching for their piece of “America” somewhere.