Frank Li – Prophet or Don Quixote?

Written by Sig Silber

Is Frank Li a prophet or a Don Quixote? You’ll have to read his books to find out. Here I will give you my thoughts. He presents many of his central ideas with diagrams, one of which is below:

It takes a little patience to get through Frank Li’s latest book (American Democracy) but it is well worth it. The author covers a lot of ground and displays a lot of knowledge of history enhanced by the perspective of being the son of one of the most important members of the Communist Party of China.

Frank Li, living in China and later in Japan, Europe, and for over thirty years in the U.S., easily came to understand the evils of Communism and the benefits of the evolved version which he refers to as State Capitalism, a system he believes is better than what most in the U.S. continue to call Communism and better than the crony Capitalism of the U.S. Dr. Li describes U.S. democracy as ultimately the majority suppressing the minority as compared to the meritocracy of the elite which governs China and which considers what is best for the Nation.

For Frank Li, State Capitalism trumps U.S. Style Democracy. Government, as he observes it in the U.S., inhibits Capitalism and leads to equality in the form of poverty for all. As you can see, it gets complicated – the author uses terms probably correctly but differently then commonly used in the U.S.

Not sure this will help but I have attempted to create a translation from the usual meaning in the U.S. of terms that Frank Li uses to what I think he is trying to convey.

The above is my interpretation and part of the fun for me of reading Frank Li’s writing is attempting to do this translation which represents his outsider view of the U.S. Political Economy.

The author is quite witty and my favorite Harry Truman quote from the book was: “A bureaucrat is a Democrat who holds some office that a Republican wants“. That kind of sums up Frank Li’s views on our political system: He is very cynical.

Kindle Edition

I read the Kindle Edition of the book which converts the book into a massive encyclopedia because of all the links. That is a good price for an encyclopedia. There are many reasons to buy this book. Learning more about China and Japan was of most interest to me. I am fairly well informed on the History of WWII and Frank Li added a lot to my knowledge in those areas. It is a long but good read for High School Students as well as older students and adults who are still learning. I would not recommend it for Neocons unless it was part of a Twelve-Step Program for Recovery.

Frank Li uses a number of different teaching methods in his book. The clever use of these methods is itself a reason to read his book. I am not an educator but did for a short time teach a graduate level course in economics so I admire his way of using simple techniques to drive home his points.

His methods and examples of how he uses his teaching methods follow:

A. Comparisons: The below is a link to an article that Frank wrote and the same material is in his book. I have provided links to some of his earlier articles which he has expanded on in his book to provide the reader with a preview of parts of the book as I do not know another way to do that.

Democracy and Communism: Are They Really the Same?

B. Ranking: Again the below is a link to an article that Frank wrote and the same material is in his book.

Top-10 American Misconceptions about China

C. Reductio Ad Absurdum: The below is an example of how Frank argues that Capitalism is better than the alternatives.

Choice #1: 30% of Americans will live “poor”, but 70% of Americans will live fine. This is the best scenario if we become better by metamorphosing now. Specifically, we must change the political system, and restore America as the “Land of Opportunities”. Alarmed by this number of 30%? Read: “more than 1 in 5 children in the U.S. live in poverty” or “altogether, there are now almost 46 million in the U.S. on food stamps, roughly 15% of the population. That is an increase of 74% since 2007”. Still think we are okay without the big changes? Pull your head out of the sand and think again! More profoundly, we may have to largely un-do the 2nd half of the 20th century, from Social Security, to Medicare & Medicaid, to the public-sector unions! Impossible? China largely undid its 2nd half of the 20th century! Why can’t we?

Choice #2: 100% of Americans will live “poor”. This will happen if we continue on the current path of out-of-control government spending. In that sense, democracy, as we know it today, looks more and more like de facto communism (e.g. China under Mao and the Soviet Union), which destroyed capitalism first, and ultimately the country, for the sake of “the people”. The result will be communism too: being dirt poor – Been there, done that!

Choice #3: WWIII! After all, it was WWII that finally got America out of the Great Depression, although Keynesians like to credit the massive government spending, which is the biggest lie of the 20th century. In other words, America did win WWII. But more significantly, America’s competitors either destroyed themselves through the war (e.g. Germany and Japan) or screwed themselves up badly after the war (e.g. China and the Soviet Union). As a result, America was left as the only game in town – It made virtually everything and it named its own prices. This not only got America out of the Great Depression finally, but also created the prosperity in America for the ensuing five decades. Analogously, it may well take WWIII to get America out of the Great Recession. The only difference this time is America may be the culprit, as America has both the capability and incentive to provoke WWIII, especially if the neo-cons get their way! In fact, WWIII might have already begun with the Iraq War.

D. Simple Diagrams. And here is an example.

Here is how Frank uses this simple diagram.

Pyramid Theory I

Everything substantive in our society is pyramidal, with the “winners” sitting on the top and the majority filling in the middle and bottom. Three examples:

1. Wealth: Bill Gates and Warren Buffett are on the pinnacle. The rest of us fill in the middle and bottom.

2. Jobs: There are always more low-pay jobs than high-pay jobs (relatively). If you are good, get a high-pay one!

3. Business: There are always more workers than owners. If you are really good, be an owner!

The pyramidal shape not only follows physics (e.g. gravity), but also is the result of our free enterprise system at its best: You can make it if you work hard and if you are good (and lucky), even all the way to the 1% club! I am a modern-day example of an American dream come true (My American Dream Has Come True).

However, no matter how much our society advances (e.g. computers and the Internet), there are always the needs of having garbage collected and lawns mowed. In other words, while we are the best on earth to give anybody and everybody opportunities to move up (i.e. success), the majority of us will end up in the middle or bottom, as it should be. But politics changes that.

Then Frank expands on the simple diagram to make a further point.

Middle-out economics

During the 2012 campaign, President Obama fashioned something called “middle-out economics”. What is it? The diagram below visually compares it with Pyramid Theory I.

As is easy to see, middle-out does not even follow physics (e.g. gravity). Therefore, it is either trivial (e.g. just a token shape) or unrealistic if it is presented as anything serious in life.

Here is my take: middle-out economics is unreal – it’s just politics for votes!

No matter how hard you try, you can’t ignore or circumvent physics! Pyramid Theory I has been proven for centuries while middle-out economics is just an impossible dream, or a political game!

Remember , Frank Li is Chinese and the Chinese Language is based on Logograms. So it is no surprise that Frank Li uses Logograms to make his points

But then he goes beyond the simple Logograms to take the argument to the next level intellectually.

Pyramid Theory II

• Wealth and power: There will always be a handful of countries sitting on the top, with more countries filling in the middle and the majority at the bottom.
• Business: The big business must be global, not only for the resources, but also for the markets. The small business must have its own niche.
• Jobs: Jobs of low skills (e.g. assembly work) will be further automated or migrated down the food chain from advanced countries to developing countries, where hundreds of millions of laborers will eagerly compete for these jobs.

What did Pyramid Theory II mean to China and America from 1820 to 1952?

• In 1820, China’s world share of GDP was at 32.2%, while America was at 1.8% and Europe at 26.6%.
• By 1890, China was at 13.8%, while America was at 13.8% and Europe at 40%.
• By 1952, China was down to 5.2%, while America and Europe were both at ~30%.

The exact numbers are not very important, but the trend is: China went from the heaven top to the hell bottom from 1820 to 1952, while America traveled the other way!

What does Pyramid Theory II mean to America and China today? [Editor’s Note: More recent data on GDP and its share by country is in Frank’s new book] Here is the message: The table is about to turn between China and America! Specifically, here is what’s coming:

• Wealth and power: China will surpass America in GDP by 2030, thus becoming the #1 power in the world, both politically and economically.
• Business: Unless the American government becomes even more anti-business than today, American business will continue to do well, thanks to our deep capitalistic roots. The big companies (e.g. GE and Exxon) will become more global; the new companies (e.g. Apple and Facebook) will become bigger and better; and the small companies (e.g. National Scale Technology and W.E.I.) will become more nimble.
• Jobs: The real unemployment rate in America will remain way above 10% for a long time. How long? One decade at least! Yes, America has forever changed in this sense – Get used to the new reality! Note that it takes ~2.5% growth in GDP just to accommodate our population growth. The forecast is well below that (e.g. 2Q2011 GDP has been revised down to 1%), which means the real unemployment rate will only go up – Simple math, no matter how many more speeches President Obama will give in the future – Actions speak louder than words! Now, what’s beyond the next decade? It depends on what we do today, and we have three clear choices.

E. Maps Frank Li makes good use of maps. The below is just one example. In most cases he uses maps to show that the actions of nations are not haphazard but consistent with the reality of the situation and their plan.

What is below is not intended to be an alternative to buying Frank’s book. It could be because his book is to a large extent based on prior articles he has written which are accessible at no charge and below are links to his most read articles. But if one approaches the study of Frank Li that way, one has to go through the exercise of organizing the information and eliminating redundancy and filling in the gaps and that is exactly what Frank has done in his book. So I present the material below for two reasons:

1. It allows one to sample the writings of Frank Li.
2. It confirms that Frank is someone who has developed quite an audience for this writings.

Here is Frank Li’s top 10 list of post on Global Economic Intersection (GEI) based on the popularity:

Frank’s entire school of thought has been summarized in his new book (American Democracy), which includes an updated version for most of the top 10 articles.

Frank Li – Prophet or Don Quixote?

How can we tell? Does Frank Li bring new insight to our thought processes or is he simply enamored with the “the glory of fantasy over a real world” as Don Quixote has been described by Harold Bloom?

To answer that question you might consider buying and reading this book. (American Democracy), by Frank Li, Ph.D.