Capital Flows

There is a lot of fear in the United States that China will upend US economic systems and that we will find ourselves in a global order defined by the Chinese Communist State. A portion of this fear has to do with the fact that the Chinese government doesn’t protect the same rights that our Constitution upholds, and Americans have a very sensitive view toward their constitutional rights and freedoms. While I often do think the rhetoric is overblown and xenophobic, I think it is fair to be concerned about the Chinese surveillance state, whether China adheres to Western ideas of human rights, and whether China is willing to uphold the rule of law.
But Yuval Noah Harari might argue that we don’t have to be too worried about the Chinese state. Harari may look back in history and suggest that we really don’t need to fear states like Russia and China that don’t uphold the rule of law or protect private property in a fair and equitable way. In his book Sapiens, Harari presents historical examples of global capital flows to argue that dictatorial states are less trustworthy in global economic systems and ultimately lose economic respect and credibility, hurting the governments and making them weaker. Harari writes, “capital trickles away from dictatorial states that fail to defend private individuals and their property. Instead, it flows into states upholding the rule of law and private property.”
Capital flows are important because they can shape a country’s political influence, living standards, political stability, and population wide prosperity. A country that fails to uphold the rule of law, fails to protect private property, and is a threat to the lives and liberties of its people is a country that will not attract investment, Harari’s argument would suggest.
China is a big and scary country, but if China cannot demonstrate to companies and corporations that it will protect intellectual property, that it will protect individual liberties, and that it will uphold international rules of law, then capital flows will ultimately be reduced and directed elsewhere. This was seen recently when the Women’s Tennis Association severed tied with China after a female tennis player accused a high ranking male member of the Chines Communist Party with sexual assault and then disappeared. Capital flows away from demagoguery and dictatorships to more safe and secure locations, where risk is reduced and where there is a greater guarantee of liberty and freedom of person and property. Personally, I hope that Harari’s theory holds true, and that any countries on the rise adopt better governance systems to improve rule of law, personal liberties for their people, and and to adhere to human rights.

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