The last few months haven’t been kind to those who think that if we just bring China into the world economy Western-style political democracy and legal rights will follow.
I think you have to be in deep, deep denial to continue to believe that political liberalization automatically will follow upon China’s economic development after recent events: China’s open refusal to follow through on pledges it made when it joined the World Trade Organization to open its economy to foreign goods (including foreign media) and to protect intellectual property, it’s insistence during the Copenhagen on the world according it the status and respect that a Great Power deserves while still demanding compensation from the West as a developing nation, and, most recently the revelations from Google (GOOG) that Chinese-based hackers have systematically attacked its Gmail system and the computer systems of two dozen U.S. companies.
The belief, James Kynge, the Financial Times’ long-time Beijing correspondent wrote in a piece in the January 16/17 issue of the paper, fails to recognize just how effectively the Communist Party has moved to assert control over China’s brand of capitalism.
For example?
For example, in 1991 only 7% of entrepreneurs in China were party members. By 2003 the percentage was up to 34%. Hard to see a loss of control or the development of an economic sector independent of the party in those numbers.
But if the belief that democracy would inevitably follow capitalism is a myth, what’s the alternative for developing a realistic policy toward the world’s second largest economy? Kynge’s piece is a thoughtful summary of the ideas that look like the best bet for a foundation of a new policy.
Unfortunately, there’s not a magic bullet in the bunch. Most likely forecast: increasing economic and political tension between China and the United States and the rest of the liberal democracies of the West over the next few decades.
Worth signing up for the paper’s electronic edition just to read this piece.
ponymagic:
As I wrote, I sympathize with the Chinese. Raising so many people out of poverty trumps the moral issues of stealing technology and stealing business. I don’t speak to the morality of authoritarianism. I agree that it’s not really our business.
However, it’s not OK to route our middle class for profits based simply on facilitating trade at any cost. Tariffs won’t equalize their manufacturing costs with ours and they shouldn’t be made to. However, they should be used as a mechanism for decreasing the strain of the vacuum and giving the developing economies incentives not to externalize their costs to non-market mechanisms. De-valuing the currency isn’t useful in this either. That’s one reason that the yuan is pegged to the dollar and we know from Jim’s posts that China is just as adept as we are at flooding the streets with money.
We all lose in a race to the bottom when developing economies destroy the environment and when they are allowed to be unaccountable for toxic and faulty products. Ask the 100,000 US families who own uninhabitable homes built with toxic Chinese drywall how they feel about the fact that most of the manufacturers are totally beyond the reach of litigation. Ask the parents of children who are permanently damaged by melamine-milk, how they feel about lack of regulation. The current trade regime is a race to the bottom and only encourages more trans-national, anti-capitalist regulation which weakens our sovereignty as well as theirs.
I don’t know about you, but I’d at least like to have the theoretical chance to elect the criminals who run my government, rather than have almost no chance of affecting the international agencies that are increasingly responsible for setting policy and regulating trade. International climate change treaties? Please, please, don’t lets start overruling our constitution and hamstringing ourselves based on some rather speculative science.
apology accepted; good luck to you.
southof8:
I apologize for offending you and twoyrfixed. I will make one more comment to respond to your assumption. I am not getting paid by the government here. I actually had better after tax income and quality of life when I lived in sunny CA, as you do.
I just honestly get tired of what I perceive as uninformed and reflexive criticism of China and the Chinese government. My understanding of China definitely changed since I got here. I don’t know if you’ve visited for an extended period of time (the black lung comment is dead on unfortunately), but I think it’s worth trying if you have time. Also take a trip to North Korea (what China was like a generation ago–and trips are legal now) and you will get a better sense of how things have changed in China. Then, take an extended trip to India and you’ll see what China could be like without strong central control.
We’ll have to agree to disagree about certain economic issues and the Chinese government in general (nobody that I’ve talked to here perceives them to be a “brutal regime of dictators…” though I did before I moved out here and saw the tangible improvement in people’s standard of living–as crazy as it sounds, I honestly don’t think an immediate transition to full scale Western style democracy would help China or the average Chinese person at this time).
I’m not advocating Chinese stocks now by the way. I think the odds of a big correction this year outweigh potential gain in the near term, but we shall see.
Pony, I make no tacit assumptions. But let me make an explicit assumption.
I assume by living amongst and being an apologist for a brutal regime of dictators in a country whose national policy is to imprison, maim and kill anyone perceived as a threat, including the poor slob whose job it was to negotiate iron ore pricing, you profit handsomely. Good for you; I hope the silver in your pocket justifies the black lung you’ll no doubt have in a few years time. With a little luck, you won’t wind up on the other side of a negotiation that lands you in prison.
But personally attacking those with whom you disagree is juvenile and beneath someone who obviously is quite thoughtfull.
Suggesting that reason we’re all concerned about a command economy run by, in your words, “a kind of government meritocracy” that is a dictatorship chosen by none other than dictators because we’re latent racists is somewhat facile, don’t you think? Who is to say who merits deciding who gets to be a governor and who gets to be a governed? Some asshole who did well in school? You?
In my view, the world demanding fair trade with China, who has subsidized its exports in a manner that makes virtually every other country uncompetitive- not because the chinese make a better mousetrap at a better price but because the government artificially allows it to be sold at a low price- is not akin to the protectionism in the 1930s and 1940s. You might disagree; fair enough.
But to suggest our disagreement is because I’m a racist, and you’re not, or that I’m simply anti-chinese but you are a benevolent friend of the chinese is a frigging joke. Get over yourself you pompous asshole.
twoyrfixed:
I’ll also end here, out of respect for Jim’s site, and not for the views you expressed.
By way of explanation, first paragraph of last post is primarily attributable to labradore and those who agreed with his rant (to your credit you did not specify which portions of his post you agreed with when you agreed with him generally).
Second and third paragraphs respond to you specifically. Sorry for not making sense to you. Clearly your comment “Nice. The Chinese have $18 to play with, without cheating. I forgot to mention there [sic]propensity (and talent) for cheating. Thanks for reminding me. I think……” can speak for itself.
Interesting discussion but a couple of posts missed my point completely. It’s not that liberal democracy is better and deserves to triumph or that a state controlled system is somehow economically more or less efficient than a U.S.-style market system. My point is that the economic policies of these two countries are in conflict. Stretching back to Clinton at least the U.S. has mostly been willing let the current conflicts between those two systems take a back seat to a belief that in the long term the two systems would come to see eye to eye on things like allowing the rise of competing centers of economic power that would set market prices and the freedom of individual consumers to decide how much they’ll spend on what. If the U.S. comes to believe that that’s not going to happen and that the current conflicts need to be moved front and center, then we are in a new ball game that makes it harder to settle global problems and likely increases economic tensions between the two countries. Nothing there about whose values are superior or anything like that. Just a belief on my part that increased economic tension betwen the U.S..and China isn’t a good thing. As to what economic system works best, I think we’ll have a better read on that in 30 years or so.
I don’t want to argue on an financial websites comments board. You’ll look like an idiot and I’ll feel like one. If you don’t invest, at least partly, on what advantages one society enjoys over another, good luck. You could do me a favor though….. I never mentioned (and, like you) don’t agree with the thoughts you attribute to me in your first paragraph. Also, I mentioned cheating/IP rights and you responded to me. Brand me a racist if that makes you happy but can you do it in a way that makes some sense? Please?
twoyrfixed:
The anger is because the tacit assumption that it’s somehow better to keep 1.3 billion people (and, by extension, most of the rest of the world) in dire poverty for the supposed benefit of some portion of the U.S. population through inefficient, protectionist measures is pretty offensive if you’re a thinking person.
You say we’re heading towards the “same place”. We’ll see if we end up with another Great Depression. I hope not.
Also not sure how IP rights have anything to do with my last post. Saying Chinese have a predilection and talent for cheating (as you did) is blatantly racist, but it seems to be more permissible to express overt racism against a “foreigner” than someone in the U.S. That was the point of my comment.
Hope all is clear now.
I go even further than ponymagic – why is there an assumption that western economic and political systems will win out over the Chinese system? Their systems just might prove capable of overcoming our rather sloppy systems of doing business. They are pursuing a system patterned based on the Japanese economic ‘miracle’ after WWII. Maybe, in a generation or 3, we’ll all speak Mandarin, eh?
Pony,
Sorry to offend you. Clearly the Chinese have a (relatively) poor record when it comes to intellectual property rights. Not sure how that has anything to do with sending people “back” somewhere, but I am sure that you’ll figure out a correlation. BTW, in case you care, Govt’s the world over have replaced tariffs with devaluing their currency. We’re still gonna end up in the same place. Why the anger? I’m curious?
labradore:
This is bloody brilliant. Thank you for sharing this. If we could just “tariff up” I’m sure we could solve this financial mess our country is in. It’s strange how all the major economsists missed this one. Maybe they’re all crooks (does it include Jim???)?
If memory serves me right, it was raising tariffs that helped us get out of the Great Depression so quickly. Can one of you gentlemen please confirm?
If we could only get back to the real American innovation of the 70s (before China and Japan started flooding us with cheap exports), we’d all be much better off I’m sure. Stagflation or not, we’d all be proud of our Ford Pintos at least and unskilled Americans would have good jobs!
Also, thanks to labradore, southof8 and twoyrfixed for noting that Chinese have a propensity and talent for cheating. It’s what everybody knows but is afraid to say. The other thing was that blacks and Mexicans are more likely to cheat and commit crimes. So, if they could be sent back to Africa and Mexico, respectively, then it would just be great in the U.S., and we wouldn’t have any of these problems.
Again, thanks to you gentlemen for your courageous stand on this message board!
Lab,
Nice. The Chinese have $18 to play with, without cheating. I forgot to mention there propensity (and talent) for cheating. Thanks for reminding me. I think……
amen labradore. amen.
Respectfully, I think the Rio Tinto employees rotting in jail for having the temerity to play hard ball with the chinese would strongly disagree that the Chinese goal is to “do what’s best economically.” So would the rest of the world’s workers who can’t compete with slave wages and deplorable working conditions. To pretend we’re comparing apples to apples is worse than a fantasy; it’s an offense.
Out here in sunny (rainy) California, our democracy is as dysfunctional as any in the world, and our economy is sliding into the Pacific as a result. But I sure wouldn’t trade it for a technocratic dictatorship, regardless of the benevolence of the dictators. Who is to say the technocrats know best?
The Chinese (at least the ones in charge) have no qualms about stealing as much as they can get their hands on. Hacking Google is just one of the more public indications of that. In one sense, I can’t blame them. The government has (as it sees things) the responsibility to raise another half billion people out of poverty while at the same time making themselves even richer and more powerful. They need to take whatever they can get.
We are the ones who should be scolded for letting them take so much. The reason we’re in the beginning of a decade of jobless recovery is because the jobs were all exported. We make almost nothing of value. Our service economy is a great big washing machine for money that spins it around and drains it out but never really adds any material wealth. We continue to export jobs and import goods so our standard of living is being eroded at almost the same rate that theirs is rising. Their cheap goods are based on what we would consider slavish labor conditions and nearly non-existent environmental and product liability standards. Thus we have lowered the price of what we consume by externalizing most of the costs and destroying our middle class. Half of the reason that healthcare is such a massive cost headache is because its standards have been continuing on a normal trajectory while nearly every other industry (except the crooks in finance) has had its guts sucked out by the huge vacuum of “globalization.” It’s time to hold the Chinese and every other would-be low cost foreign supplier accountable for what they sell. If they can’t enforce effective cross-border liability protections, and make their products under labor and environmental production regimes that are up to our standards, and if they won’t allow us unfettered access to invest in their markets, we must tariff their exports up to the point that the labor, liability and environmental standards are priced back in. Finally, we must prevent them from investing in our markets to the same extent that they limit foreign investment in theirs.
The Chinese know the rules and have played this game in sterling fashion for 30 years. They’ve leached out the marrow from our bones for long enough. I am no enemy of capitalism, but I am no friend to crooks. This legalized looting of our society has got to stop. We must have an even playing field.
Not exactly to the point but “developed” countries workers make $20hr (with benefits) and Chinese workers make $1 or $2. Same brain power, same dedication of employees.
Eventually, assuming global trade, those numbers will meet. The Chinese have $18 or $19hr. to play with. They win.
Georic:
Can’t speak to specifics regarding PLA control. SOEs still have a hand in a majority of the big businesses here, but they’re privatizing pretty rapidly.
The government is not opposed to change, it is all just very controlled. The government wants to avoid massive amounts of displaced workers. Though wages are very uneven, labor law is actually a lot more developed and worker-friendly than you might think.
Jim, and Georic- I know that in the mining business at least, the PLA owns, operates, or influences almost all the industry. They are involved in other businesses as well.
I agree with all the opinion expressed here: the Chinese people are more concerned for the good of their society than they are for their personal “rights” or “freedom”. This is Confucian philosophy and probably much older. They also “believe” strongly in education- that “meritocracy” mentioned above. Combine these societal traits with the fact that China has 4 times the population of the US- and widespread poverty that simply does not exist in this country- it is plain that they have a different set of problems to solve, and a different approach, historically and philosphically, to solving those problems. None of the Chinese I have ever known see the need for a “liberal democracy” such as is practiced in the US. For sure, tho, there will continue to be great changes in China- politically and economically- as you point out.
ponymagic, 15 years ago, the military used to own and rule a very large chunck of the Chinese economy. What is the situation nowadays and are any statistics available?
South Korea, Taiwan, Hong Kong, Singapore, the Phillipines, Indonesia, Malaysia, Turkey were all (some of them still are) dictatorships in the past. I do not remember anybody in the West criticizing their horrendous regimes. Was that because they were US-friendly dictatorships as opposed to China which threatens US interests and does not take its orders from the US?
Jim,
I do not want to be too political, but I like the way Chinese are doing recently. They do what they think it is economically justified, not what is politically justified.
Chinese Communist Part is not the same as it was in the times of Mao. Its leaders are different. So far (over than past 20 years) they are more successful than ANY liberal democracy. Now, where is the proof that liberal democracies, the way we define them in Western societies, are more reliable?
Lived in China since 2007, couldn’t agree more with ponymagic. Moreover, forcing one’s philosophy on others often turns to more resistence.
I agree with ponymagic. I would even generalize his/her observations to Eastern people. Can we say with a straight face the the capitalism in iJapan is the same as in the West? Eastern people value harmony over conflict. Jim, go see the writing at the base of the Conficius statue in New York China Town. It says Ta-Tung (The Great Harmony). Another example, the Russians (Christian but “Eastern” orthodox) got rid of the monarchy then the communist dictatorship but they found themselves any new tsar, Putin, and they seem to be happy with him. So, let’s not try to teach the Easterners what is good for them because they would not understand just as we don’t understand them.
Jim:
Writing from China here. Luckily, they still haven’t blocked your site!
In all seriousness, you’re right that immediate material change is unlikely. However, a whole generation is getting exposed to Western thinking and Western culture on an unprecedented level here. Party membership now, for younger people at least, does not mean much for ideological leanings (my best friends here are party members, and none of them seriously considers “communism” to be viable). Party members are chosen primarily on the basis of scholastic achievement these days.
It means you have a kind of government meritocracy. Less talking heads than in the U.S. for sure, but a lot of very smart people. There is a genuine sense that the leaders of the country want what’s best for the country and are doing their best to get China there. People here are happy with their government. I’d be happy if they lowered taxes and unblocked facebook.
Right now, most people honestly don’t see much benefit to increased personal freedoms, if those would entail possible government weakness and derailing of the Chinese miracle in progress.
Open criticism of the government is stilll not permitted, and the value of such criticism, given the danger that chaos and internal fighting has posed in China’s history over the past century, is not really appreciated by Chinese people yet. That will take more time and another generation of leaders that did not live through the social chaos that was the cultural revolution.
Anyway, change is coming in the next generation. No one in charge here would try to deny that.
Jim,
Anyone can take the “glass half empty” view of China’s liberalization, and be correct. China is not going to adopt freedom of speech anytime soon.
But economic success provides the environment for liberty to thrive. Liberty doesn’t grow from poverty, otherwise the nations of the Third World wouldn’t be stuck in a never-ending rut of poverty & rebellion.
China will not change overnight. But it WILL change, IF you let it.
The problem with China, is that “communism” will continue to be in power untill the economic system breaks, and breaks BADLY. But, unfortunately, the chances are that China will still be an authoratative oligarchy as it has been for much of it’s history. Now, if Google can awaken the beliefe in individual rights in the Chinese as a modern version of Thomas Payne… maybe. Ultimately, the rights of government are always given by the governed.
That and the USA has been complicent in this ‘engagement’ buy not insisting US companies cannot be part owned in order to operate in China. (Not like we believe that ourselves… AIG) Nor to expect a foreign gov. to get court aproval to search a companies computers. Nor to expect the freedom of speach AND press. Nor to allow freedom of religion.
Nope, we bribe China by making them rich and allowing the Chinese citezenry to be happy with production so we can be happy with consumption.
Jim, Could you give the name of the article? I checked his column and found no articles on those dates or remotely addressing the topic you mention.