This is How We Outcompete China

By Garvin Jabusch

China today is embarked on a program of standardizing and homogenizing its population (often by large-scale incarceration), to fit within the ruling party’s definition of what it is to be Chinese. Actions toward that goal have been labeled genocide by the two most recent U.S. administrations and by the UK’s Parliament; and yet we recognize that in some political circles of America there are those who wish for a similar scope of population-level standardization within the United States. Right now, though, homogenization of the population is formally state-sanctioned and enacted from the top down in China. That fact is a source of shame for China, and also a weakness in their economic potential.

Diversity Drives Economic Competitiveness

The U.S. – and the West more generally – and China are engaged in an economic struggle to determine whose innovative and technological prowess will own the next century. Ethnic homogenization and economic competitiveness may seem like unrelated topics, but if history and cognitive science have shown us anything, it is that more diverse groups have greater cognitive capacity, thrive economically, solve problems faster, and are more innovative in general. This is thought to be because more and better inputs yield better outputs at the group and population levels. The diversity of inputs are derived from diverse academic disciplines, genders, population or culture of ancestry, and many, many more factors. These allow any one individual or group to see alternatives to their (often unconscious) biases, eliminate groupthink, and unleash new connections along with, perhaps most importantly, the greater level of creativity that emerges from those.

If America’s desire is to remain more competitive than China, it can and should exploit the flaw in the Chinese central plan of engineering a homogenous population. To fully exploit this mistake, the United States must double down on its melting pot heritage, welcome the world’s best and brightest, of any national, ethnic, or religious derivation, and allow (or better yet, enable) them to thrive and create in peace. In this simple way alone, America can out-innovate, outcompete, outgrow, and out-earn China for decades to come.

How important is creativity to economic competitiveness, really? On the April 22nd edition of the podcast The Economist Asks, Henry Kissinger said, “the United States, in this case, is capable of meeting Chinese competition in the technological field, and the United States’ creativity can balance the Chinese apparently superior organizational ability. If that is not the case, if we, and with us, the West, fall strategically behind in the field of technology, then the commercial competition will become probably untenable, but certainly very hard to maintain, and that would be a situation which I would consider to be a significant failure by the West.” It seems creativity can be a powerful counterbalance to authoritarianism.

Winning Factor

We urge the Biden/Harris administration to be as welcoming of the citizens of the world as America safely can be, and to overturn the previous administration’s policies of hate and xenophobia. From an investment management point of view, this will be a “winning factor.” If we desire to keep the United States on the sharp edge of global competitiveness, removing fear and hate will pay dividends potentially for generations.

There was a time, not that long ago, when America was a magnet for diverse global talent. If we want to remain the vibrant, innovative, massively economically-productive juggernaut that we are, we need that time to come again.


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