Communism is back

Liberal democracy seemed invincible, triumphing over the forces of fascism and communism. Two decades later, this supremacy is seriously questioned. Information dynamics in the technological age and geopolitical alliances threaten liberal democracy in the 21st century. Will we move towards communism in the years to come?

On the triumph of liberal democracy

Liberal democracy won the 20th century, fascism and communism all collapsed, and by the end of the century the United States and its democratic allies in Asia and Europe were on the rise economically and militarily.

Even China, which remained an autocracy, liberalized its economy and parts of its society during this period. Even those scholars who refused to accept Francis Fukuyama's “end of history” were generally sympathetic to arguments that capitalism and/or liberal democracy promoted peace, happiness and prosperity.

Two decades later, this idea is deeply questioned.

The wave of democratization and social liberalization has reversed.

Meanwhile, China, the ascendant superpower of the early 21st century, has returned to a more interventionist economy and a more totalitarian society under the leadership of Xi Jinping.

The Chinese rival

There is no doubt that Chinese cities are much cleaner and safer than San Francisco or New York.

During this time, China can make electric vehicles, batteries, and computer chips in abundance, while America has yet to be shown to be able to do the same.

China can provide abundant housing for its population (sometimes too much), while America is facing a chronic housing shortage.

China's strength is not limited to manufacturing either: TikTok is so well-designed and addictive that it has outperformed American short-video services in their home market.

And despite the difficulties of the United States, the situation of their liberal democratic allies is even worse.

Meanwhile, China is gathering a powerful network of allies – Russia, Iran and North Korea – putting an end to the idea that autocracies cannot cooperate, and forming a coalition that could already surpass the West militarily.

Towards an export of Chinese communism

Will the Chinese model prevail?

Can universal surveillance, control of speech, suppression of religion and minorities, and command and control of the economy really be the keys to national power and stability in the world? 21st century?

How could this be true, when these same things failed so completely in the 20th century, with the collapse of fascism and communism?

Why did the market economy prevail over communism?

Hayek had a theory that explained why capitalist economies performed better than managed economies.

His theory focused on the aggregation of information. Fundamentally, the function of an economy, as he conceives it, is to giving people as much of what they want as possible, given limited resources.

Et people themselves have much more information about what they want and how to use productive resources efficiently than a central planner.

The function of a market, according to Hayek, is to aggregate these small bits of dispersed useful knowledge in order to better inform production decisions.

According to Hayek, markets achieve this through prices. Prices are information.

If broccoli is expensive and cauliflower cheap, that tells farmers that they should produce more broccoli and less cauliflower. And so on. In a planned economy, ill-informed central planners might wrongly decide that cauliflowers are perfectly good and we should produce more of them.

Tesla or BYD?

Let's compare the Chinese EV flagship, BYD, with the American flagship, Tesla.

Both are approximately equivalent in terms of turnover and are generally considered two of the best manufacturing companies in the world.

But the financial contribution necessary for their construction was very different. The growth of Tesla required the extraordinary efforts of Elon Musk, the country's most flamboyant business star, when it comes to sales.

Although the company's Model 3 eventually became a runaway success, the capital cost of producing the vehicle almost bankrupted the company.

Musk had to engage in constant public fundraising, spending a lot of time on Twitter.

He had to show great creativity in terms of financial engineering, going so far as to cannibalize some of his other activities. And it's not even clear that this effort would have been successful without relocating much of Tesla's production to China.

BYD, on the other hand, has never had to scramble and desperately ask for funding. Although she went through a number of very difficult times, she continued to benefit fromgenerous and often subsidized financing from Chinese state-controlled banks.

Today, it has matched Tesla in terms of sales and, arguably, in terms of technology.

The end of liberal democracy

We can sketch a general theory about the way in which liberal democracy might be far less suited to the 21st century than it was in the 20th century.

With advances in information technology, the costs of collecting information may have fallen to such a low level that the advantages of liberal institutions – markets, elections and freedom of expression – can be mitigated.

So it could be that while China is building cars, Americans are arguing about transgender athletes.

While China builds microchips, Americans spend their time debunking false economic statistics.

While China builds submarines, Americans spend their time doing high-frequency trading.

While China builds trains, Americans are raising money for elections.

And so on. Meanwhile, thanks to the Internet invented by America, Chinese leaders can make up their own minds, still inferior but much less bad than their Maoist and Stalinist predecessors, products to make, policies to implement and ideas to adopt.

Goodbye Liberty, make way for Communism

If liberal democracy is simply not the most effective way to organize society in the age of cheap information, it simply means that the individual freedoms we have come to know and love are disappearing.

Sometimes one system simply replaces another after a major technological change – agriculture mainly led to the end of hunter-gatherer groups, industrialization led to the end of monarchiesAnd so on.

If the information age has overtaken liberalism, we will live in very dark times, and there is not much we can do about it.

We should continue to fight for liberal democracy, and hope that technology and human nature can continue its victory. Or invent a new system, new non-democratic, but liberal institutions.