Bill Costello

    U.S. President Obama recently attributed China’s rise largely to its education system when he said: “Meanwhile, nations like China and India realized that with some changes of their own, they could compete in this new world. And so they started educating their children earlier and longer, with greater emphasis on maths and science.”

    No, President Obama. That’s not why China has been rising.

    That’s not why China’s economy has grown tenfold over the past three decades. That’s not why it overtook the economies of Great Britain and France in 2005, Germany in 2007, and Japan in 2010.

    And that’s not why it is predicted to overtake America’s economy within the next decade or two by PricewaterhouseCoopers and investment bank Goldman Sachs.

    China has been rising because it has been rapidly moving toward a concept that made America the envy of the world, while America has been gradually moving away from that same concept.

    America’s founding fathers embraced this concept back in 1776. And it made the nation the richest one on the planet by 1905, despite the fact that America represented only 5 percent of the world’s land surface and 6 percent of the world’s population.

    Never before in the history of mankind had a nation soared to such heights of abundant prosperity. Innovation thrived. Science advanced. Lifespan doubled.

    The concept? The profit motive.

    In “The Wealth of Nations,” first published in 1776, Adam Smith argued that the interests of society as a whole are best promoted when the profit motive of individuals is allowed to thrive in an economic environment that includes the free market, and a minimum of government interference.

    Smith observed: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”

    “The Wealth of Nations” was one of a handful of books the founding fathers referenced when setting up America’s economic system. The founding fathers shared many of Smith’s views. Most importantly, they believed that people were motivated primarily by self-interest and that allowing that motivation to thrive in a conducive economic environment led to the highest level of prosperity.

    The founding fathers viewed the free market as a natural law for the marketplace, which matched their philosophy of natural law applied to politics and society. And their experience had taught them that outside of its legitimate functions, government does not perform as well as the private sector.

    Deng Xiaoping, the architect of China’s economic rise, favored pragmatism over ideology. In 1978, he began to transform China into a market economy, which works because it accounts for human nature.

    While self-interest is dangerous in politics and may seem selfish in other areas of life, it can benefit society as a whole in economic interaction.

    Through the free market, self-interest — in the form of the profit motive — creates wealth and raises the standard of living.

    Despite human nature and the proven track record of Smith’s principles, America has been moving away from the profit motive. Increasingly, the government has been interfering with the free market. This has led to a crumbling American economy.

    The economy is like a huge and complex puzzle in which each piece must find its own place through the free market. But government planners in America believe they are smart enough to place the pieces. They are wrong. They have been putting the pieces in arbitrary places and making a mess of the puzzle.

    Deng said: “To get rich is glorious.” He understood that the best way to make China the envy of the world was to grow its economy by allowing the profit motive of individuals to thrive.

    That’s why China has been rising, President Obama.

    (The author is the president of U.S.-based Making Minds Matter, LLC.)