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Politico: China’s Implosion Could be Worse Than the Spanish Empire

This article was written by Jacob Soll and originally posted by Politico:

The Chinese turmoil roiling markets right now presents a fresh and profound challenge to the world economy: For the first time, a giant, non-European superpower threatens world financial stability and the powers that be seem at a loss. If the IMF and World Bank have stumbled with Greece, how are they going to get a hold on the stock market travails of Communist China? What tools do we even have to affect how it plays out?

But if the particulars are novel, in the bigger sense this is a movie we’ve seen before. Though China has been the global economic star of the last low-growth decade, it remains a totalitarian dictatorship, with its economy shrouded in state secrecy. What we’re encountering in this crisis is the spectacle of a closed society colliding with the forces of complex, free-market capitalism. If we look beyond China, we can find a long history of these collisions, dating back hundreds of years, as both closed societies and capitalism evolved and became more complex. And the history has a clear but unsettling lesson to offer: When such a collision happens, it’s a moment to genuinely worry.

Since the dawn of capitalism, closed societies with repressive governments have—much like China—been capable of remarkable growth and innovation. Sixteenth-century Spain was a great imperial power, with a massive navy and extensive industry such as shipbuilding and mining. One could say the same thing about Louis XIV’s France during the 17th century, which also had vast wealth, burgeoning industry and a sprawling empire.

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