Chinese schoolchildren invariably fill the highest positions in the various international maths and science tests that are held every year, way above Americans and Europeans. Yet in terms of creative thinking and discoveries in science, China is almost nowhere. Every now and again, senior Chinese officials admit that they are a seriously worried about the lack of innovative thinking among their young people.
What’s more, Chinese officialdom knows what to blame. It’s the intensive rote-learning nature of their classrooms, a product of 2,200 years of heavy authoritarianism — an unfortunate byproduct of an otherwise benign philosophy that was originally designed for relatively small kingdoms and principalities. Changing cultures, however, is not so easy and what the Chinese would like by way of a more versatile education system is probably at least a century away. Meanwhile, rich and middle-class Chinese parents are encouraged to send their children and young people abroad in the hope that, once educated in more lateral-thinking cultures, they will return to China and bring creativity back with it.
There’s little doubt that the Chinese are clever enough. On standard Western-designed IQ tests, coastal province Chinese score the same as, if not a little higher than the average European or American. So they’re just as good as any wannabe advanced nation-state has ever been at reverse engineering goods from elsewhere and then copying them. In the last 30 or 40 years since the Deng Xiaoping revolution, China has been acting no differently from several northern European countries and America in the 17th and 18th centuries when copying the new industrial techniques and consumer products of England.
One of the greatest English inventions was a financial one. This was the refinement and final establishment in the latter decades of the 19th century of a practical gold-standard financial system from Isaac Newton’s original definition of the value of a Sovereign gold coin as the same free market value as a standard weight of pure gold. So successful was this new system that, prior to World War I (1914), the Bank of England was not only by far the largest bank in the world, but the practicalities of gold standard national currencies was already spreading like wildfire to Europe, America (north and south) and Asia (Japan particularly).
What stopped the gold-standard in its evangelical tracks was World War I and the sheer scale and cost of it. If armaments had been bought only with gold-backed currencies then WWI would have been over within by mid-1915. When it became obvious that Germany would not be stopped then the Allies had no option but to start printing banknotes in huge quantities with the promise to its suppliers and those who bought bonds that, if desired, their pounds would be redeemable with gold after the war.
At the end of WWI, Germany had about four to five times the number of banknotes in its money supply as at its beginning. France, Belgium and one or two others had three to four times the number. England had three times as many, and even America, with all its vast natural resources available at lower cost, still had twice as many dollars in circulation in 1918 as is in 1914. However, all of them (starting with England), keen though they were to re-establish a gold standard and get back to normal trading, tried to put the cart before the horse. Here, national pride in their previous currencies took over. Instead of taking their punishment in a practical way by re-setting their currencies at their new depreciated values against a standard weight of gold, they tried to re-establish their currencies to pre-war levels.
It didn’t work, and we’ve had nothing but constant booms and busts ever since. And they’ve been increasingly frequent and increasingly extreme. But what if the Chinese were to reverse engineer the history of our current problem and diagnose exactly why and when it started going wrong? Their economists are surely as capable of doing this as their engineers have when copying products. Indeed, the chances are very high that they’ve done this because, for the past 10 years, they have been calling on America to jointly establish a world trading currency based on something that is both valuable in its own right and stable in quantity. China has been repeatedly snubbed. America wants to retain its dollar as the No 1 world currency.
That China is now the largest domestic gold miner and refiner in the world and, in the last two years or so, has been increasingly buying gold in the world market place as well as a few gold mines here and there around the world when allowed to (e.g. Canada and Brazil), suggests very strongly that it has a fully-designed Plan B on its drawing board awaiting only the undivided attention and agreement of both the Eurozone and America when their currencies finally come to nought.