In our globalized economy, highly mobile capital works in favor of investors and consumers who value democratic protections. That dooms China's authoritarian model unless Beijing can force the world to submit to its peculiar form of feudal mercantilism.
Just look at Hong Kong.
Multiple reports on Thursday suggest that Alibaba, China's equivalent of Amazon, has suspended its plan to float shares on the Hong Kong Stock Exchange. That's just the tip of the iceberg. The head of Hong Kong-based Cathay Pacific Airways recently resigned, and the head of a subsidiary airline's union, Cathay Dragon, has been forced out. Qantas airlines is reducing flights to the Chinese territory, and Hong Kong's service economy is in free fall. The simple takeaway: Witnessing Hong Kong's battle between individual freedom and state authoritarianism, international businesses are turning away.
That Chinese weakness is America's opportunity. Our countermanding investment model: one that balances democratic protections and the rule-of-law to free-market capitalism is one that can attract those investors now disillusioned by Hong Kong. Defending against Chinese aggression and strengthening an investor-friendly stable economy, we can take advantage from China's economic isolation.
Still not convinced?
Then just look at the Hong Kong Stock Exchange (with my annotation). It has been spiraling downwards since the start of protests in April. Market stabilization has been impossible in face of oscillating protests.
Again, this is Beijing caught between reality and ideology.
The reality is that people do not want to kneel in submission to Chinese President Xi Jinping in return for whatever scraps he throws at them. They prefer to earn profits under protection of democratic law. But because Xi's ideology is centered in a long-term project to reshape the world under Chinese rule, he cannot yield to the protesters, which further hurts China's investment appeal.
It's not just absent freedom which makes China weak. It's the very model that Xi pursues. Where free markets allocate capital based on objective assessments of a return, Xi burns capital at the altar of his all-knowing delusion. Xi and his cronies believe they know better than the invisible hand. They are manifestly wrong.
Still, America must not take for granted our great systemic comparative advantage over China. President Trump's cultivation of chaos over the Federal Reserve is extraordinarily misguided. So too is it alarming that Democratic presidential front-runners now deride free markets. We should refocus on that which makes us economically great: freedom matched to capitalism.
If we do, Hong Kong shows that we'll win this new struggle for the 21st century.