I was able to go to law school in my late 30’s after making money investing in stocks. When I was in law school I took a number of business classes and earned a concentration in business organizations. I didn’t do much with that information after I graduated, but I did get some insight into the thinking of publicly traded companies.
Wall Street is essentially a nickname of sorts for the market in shares of publicly traded companies. A share is a fractional ownership interest in a company. Share owners don’t run the company day to day but elect a board of directors that oversee the company and hire the officers that run the company. The board of directors’ responsibility is, in theory, to maximize and protect the value of the share owners’ investment in the company.
There was a time when people would have considered it surprising, even ironic, that large international corporations from seemingly free market, capitalist, and democratic countries would do business in communist and avowedly Marxist countries. Now it is not only unsurprising but not even really questioned why Wall Street not only does business in communist China but seems to love to do business with the dictatorship of the Chinese Communist Party. Below is my own attempt to answer this question. Why does Wall Street love to do business with the Chinese Communist Party?
Wall Street loves monopolies
The Chinese Communist Party, or CCP, runs the largest and most complete monopoly of power the world has ever seen. Even the Soviet Union, which sought to control ever aspect of its citizen’s lives in the same way, didn’t have the degree of control of the CCP. The Soviet Union, compared to China, was much more diverse ethnically and had a much smaller population spread over a much larger area, making centralized control much more difficult. The technology available to the Soviets to spy on their own citizens was rudimentary and primitive compared to the vast array of technologies the CCP has available and uses to control their populace. From ubiquitous cameras with facial recognition, artificial intelligence, and mountains of data stored in the “cloud,” the CCP’s tools of tyranny would have been the envy of the Soviet KGB with their quaint paper files.
Investors on Wall Street love monopolies. The terms used when talking about whether or not to invest in a company are terms like barriers to entry and building a moat around your business, but the ultimate goal is the same as the goal of the CCP, to limit competition. It is true that free markets are about encouraging competition, but Wall Street is not about encouraging competition. Wall Street is about the centralization of power for the purpose of accumulating wealth for investors on Wall Street. Wall Street is not about developing and maintaining a healthy and efficient free market based economy to benefit the people of the world or even the United States. Ultimately, Wall Street is about centralizing power and wealth on Wall Street.
Monopolies and their ability to restrict competition, allow the monopolists to extract wealth from others in a way that free markets do not. The CCP’s ability to either approve or deny access to the cheap labor abundant in China or China’s 1.4 million consumers, and to thus give a great competitive advantage to those blessed by the CCP, is too attractive of a carrot for Wall Street. As abhorrent as the CCP’s monopoly may be to others, including the citizens of China as well, the advantages are too enticing to Wall Street.
Wall Street hates the ability of labor to organize
There is no organized labor in China to speak of. The Worker’s Paradise does not allow workers the ability to organize independent unions or collectively bargain. No centers of power and influence outside the CCP is allowed or tolerated. The undeniable laws of supply and demand certainly give some ability to individual workers to better their working conditions or pay, but redress to the government monopoly to address the grievances of workers is limited. And history has taught us clearly that Wall Street hates the ability of labor to organize, so that labor in China has virtually no ability to meaningfully organize is only a positive. If Wall Street can go to China and not have to deal with organize labor and the cost perceived to be associated with it, why not?
Wall Street does not care about individual liberties
There is simply no argument that any serious person can make that the degree to which the peoples in the West enjoy individual liberties is not present in China. Freedom of speech, freedom of the press, freedom of religion, freedom to associate, due process. All are absent in China to a degree that would not be tolerated anywhere in the West or even most other areas of the world. And Wall Street simply doesn’t care. In fact, Wall Street will go out of its way to demonstrate they do not care about the individual liberties of the Chinese people for fear of offending the CCP. As far as Wall Street is concerned, the CCP can do whatever they want as long as Wall Street is allowed to do business in China.
The United States and other developed nations certainly have their problems with individual liberties, but they pale in comparison to those in China. In the United States we argue about a woman’s reproductive rights constantly, especially when a national election or Supreme Court confirmation is pending, but too many have excepted as a matter of course that the CCP could dictate that a Chinese woman could have only one child. Until very recently and for about 40 years in China, a Chinese woman was only allowed by the CCP to have one child or face the threat of a forced abortion or other negative consequences if she chose to have a second. Only one of many, many exampled of the limits of individual liberties by the CCP in China.
Wall Street hates environmental regulations
Environmental regulations in the United States are proposed for many reasons. There are some who seek to use environmental regulations as a means to limit competition, or use concerns about the environment to build self-perpetuating special interest groups, but, for the most part, environmental regulations are at least in theory intended to protect the environment and people. No one should want businesses or anyone else needlessly or recklessly polluting the environment in which we live in a significant way. People want safe water to drink. People want clean air to breath. People want food as free of pollutants as possible to eat. We want to preserve our natural wonders, and nature in general, for future generations. For these reasons, however imperfectly, in the United States and elsewhere in the developed world people have developed laws protecting the environment.
Wall Streets loves that the environmental regulations that apply elsewhere, however stringent, simply don’t apply in China. Whatever the CCP says is ok is ok. This is why the coal fired power plants that power China’s factory to the world are continuing to be built. This is why China is one of the most polluted and polluting countries in the world. Environmental concerns are a cost of doing business and impinge on short term profits. For Wall Street, better not to have to deal with them. And besides, Wall Street, unlike the masses of Chinese people, do not live in China. Wall Street is only extracting wealth from China. So why care?
Wall Street does not care about the greater good
As stated earlier, the board of directors’ responsibility of publicly traded companies is, in theory, to maximize and protect the value of the share owners’ investment in the company. The board of directors may consider the greater good of the broader community, and the world, in their decision making, but that is not seen as their ultimate responsibility. The company’s responsibility is not to care about the greater good. Investors invest on Wall Street to grow their investments, not to serve the greater good. The board of directors, and Wall Street as a whole, does not care about the greater good unless not caring about the greater good negatively impacts share value. When you hear about the “charitable” work of large publicly traded companies, understand that this is to protect and promote the brand, not the purpose of or reason for the existence of the company. Charitable work is only justifiable if it increases shareholder value.
I think it is very unwise to assume that Wall Street on a whole considers the greater good, even what is ultimately in the best interests of the nation or state or city in which Wall Street is located, unless forced to take those interests into consideration. Wall Street is about power, money, and control, as is the CCP.
Walls Street Cares About Positioning
In a short work published in 2019 by Australia’s Lowy Institute titled “Xi Jinping: The Backlash,” Richard McGregor gives a very succinct, and I think accurate, view of China today under the Chinese Communist Party of Xi Jinping.
The Party’s overarching aim…has remained consistent: to ensure the private sector, and individual entrepreneurs, do not become rival players in the political system in a way which threatens the single-party state. The Party wants economic growth, but not at the expense of tolerating and indeed nourishing any organized alternative centres of power. In the sessions on the Soviet Union ordered by Xi, officials studies not just the collapse of the Soviet Union but also its aftermath, when a new class of Russian oligarchs enriched themselves with the virtual theft of state assets. Chinese leaders watched in horror as the Soviet Union disintegrated and its assets were privatized. Having seen business threaten to take over the state in Russia, Beijing has been determined to make sure that the same disaster does not befall China.
Wall Street has no illusions about the long-term viability of the CCP and Xi Jinping. Wall Street, though, remembers how many billionaire oligarchs rose out of the rubble of the collapse of the Soviet Union, as does the CCP. Wall Street wants to position itself to get a share of that wealth. Wall Street pretends to trust and respect Xi and the CCP. Xi and the CCP pretend to trust and respect Wall Street. Each has an unquenchable distrust and hatred of the other. Each will use the other to their own ends. Each will not consider the greater good in their calculations unless made to do so.
Nice rant