China Leadership and the Peter Principle

China Leadership and the
Peter Principle
By www.ProfitableInvestingTips.com

http://profitableinvestingtips.com/profitable-investing-tips/china-leadership-and-the-peter-
principle
Investors are taking note as the
Chinese economic miracle is
cooling off.

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What is happening and how
should it affect investments?

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The Great Recession certainly
hurt China as well as the rest of
the world.

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Slowing demand for consumer
goods produced in China and
demand for Western produced
goods in China are part of the
picture.

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What we think has been
overlooked is the competence
needed of national leadership
and the structure of that
leadership in China.

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When looking for good
investments and safe
investments sound
management/leadership is
essential.

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That is lacking because of the
China leadership and the Peter
Principle!

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The Peter Principle

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Forbes wrote an article about
what the Peter Principle means
today.

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You may think you’ve heard the
Peter Principle before-something
to the effect that, “In a hierarchy,
every employee tends to rise to
his level of incompetence.”

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But the Peter Principle was more
than an alarmingly nasty motto.

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It was an alarmingly nasty book-
and a funny one at that,
illustrating the efforts of many
managers to seem productive
when in fact they’re in over their
heads.

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Published nearly a half-century
ago, the book is now a refreshing
tonic for all the feel-good,
impossibly Pollyannaish
management wisdom being
passed around.

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To a certain degree the inevitable
outcome of anyone’s career can
be the fulfillment of the Peter
Principle.

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You do well and get promoted
until you are in over your head.

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This applies to national leaders
and leadership models as well.

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Order versus Disorder
and Managed Economies

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It is true that primitive economies
grow more rapidly if managed
from the top.

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But there comes a time when top
down management does not
work.

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Economies that move from top
down control to a consumer
driven model are able to evolve
to a higher level.

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Japan made the transition around
1970 and South Korea got there
around 1990.

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China is at that point and it
remains to be seen if China will
be able to make the switch or if
the Peter Principle will take effect
and further stagnate Chinese
economic growth.

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Philly.com understands this and
writes about how the Chinese
leadership cannot control
things.

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The perceptions about Chinese
omniscience were created by
years of upbeat economic
numbers.

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More recently, the Chinese data
indicated the economy was
slowing.

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But now, people are unsure by
how much.

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Why the change in attitude
toward Chinese data?

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The belief that the numbers were
accurate and not managed has
been called into question.

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Actually, as we all probably
recognized for a long time but
were unwilling to admit, the
figures were always managed, at
least to some extent, for political
purposes.

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When reality and image diverged
significantly, the truth emerged.

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The article goes on to say that
crude counter-productive
interventions have hurt instead of
helped and that government
planners are less efficient than
the market.

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This is the Peter Principle in full
force.

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What worked in a more primitive
economy will not work if China
wishes to move on to the world
stage in a bigger role.

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China leadership is fulfilling the
Peter Principle and will take its
economy down with it.

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Going by What Has
Worked Before

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Many leaders get to the top by
mimicking the success of others.
They do what has always
worked.

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Top down “managed capitalism”
certainly worked to bring China to
the level of being the second
largest economy in the world.

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But, China leadership and the
Peter Principle have come to
bear.

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The people in charge in China
need to loosen control of their
economy and their society.

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That is not their mindset and it is
why these people fulfill the Peter
Principle. Investors beware.

China Leadership and the Peter Principle

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