31 January 2010

China at the 2010 Davos WEF

Today’s (31 January 2010) NZZ am Sonntag  (Neue Züricher Zeitung), my favourite Sunday newspaper, in the Background Section carried a full page feature article on the Chinese presence at the WEF in Davos titled “ China demonstriert am WEF seine neue Machtposition” (At the WEF China showcases its new power). Alas, the article is ,of course, in German and I am too lazy to translate it in its entirety, so I shall treat you only to some excerpts:

“In the past at WEF it has always been the United States on centre stage with the CNN interviewing and dancing in attendance on a hefty high level US delegation. This week the staging changed dramatically.

This past week the highest profile American was Barney Franks, a Democratic congressman holding forth on discussion panels. The low profile of the US  at the WEFF was signalled by the change in administration and the tone of Obama’s State of the Union Address. In contradistinction to the US presence one saw a high calibre Chinese contingent headed by the Vice Presidential Minister, Li Keqiang, tipped to be the successor to Hu Jintao. Also, interestingly, more Chinese was heard spoken in Davos than any time in the past.

The US is turning inward absorbed by its own difficulties, polarised by domestic politics and severely hit by the economic downturn. Into this gap enter China, and how!  The Middle Kingdom has replaced Germany as the number one exporter in the world and supplanted Japan as the second largest economy.

China now produces more automobiles than the USA and is home to four of the five largest banks on the planet. China, not the moribund EU, has the resources to provide a Greece verging on bankruptcy with funds to prevent it going under.

Ironically, the global financial crisis was the springboard which launched China into prominence. In Copenhagen, China flexed its muscle confronting and denying the USA leadership on the issue of climate change. Negative as that might be seen, on the positive side of the ledger, a recovery from the global recession would be very difficult without the Chinese locomotive.

No one is more conscious of this than the Chinese themselves as evidenced at one of the discussion panels in Davos. Some Western participants called once again for the exchange rate of the Renminbi to be adjusted and declared that China must finally “play by the rules”. To that, responded the head of one the largest Chinese banks, “those are your rules, not our rules. Why should we play by these rules?” Lecturing by the West is no longer welcomed by the Chinese.

The time is long past that one must blindly follow the US capitalistic recipe said one Chinese economist. The central question for China is “what is best for China?”

With respect to relations with the USA, one representative of this new China said to a representative of the USA, “We are not friends, we are business partners”

This sea change and shift in global power couple with continuing economic problems in the USA could give rise to resentment amongst Americans and engender increasing protectionism leading to a trade war.”

Finis

My Italics and Comments
At end of the day, should it come to a trade war, both parties would be sorely wounded. But China holds more economic weaponry in the form of disposable capital, and has a more disciplined population behind it than the USA. The Chinese, having endured sorrow and misfortune over the last two hundred years have steeled and toughened themselves, and the domestic economy of China will soon decouple China from its present dependence on exports, and the USA. This, while the US has grown soft, spoiled,  politically inept, debt ridden and intellectually dissolute.


For China, a double standard


This morning’s Washington Post (31 January 2010) raised flags of concern over a change in China’s tone described as “triumphalist“ and “tough” in its response to US arms sales to Taiwan.

It would be almost amusing if not for the potentially serious nature of this conflict.

The US State Department justifies the sales saying "Such sales contribute to maintaining security and stability across the Taiwan Strait,".

Oh, come now let us be frank. The arms are to support continuing America influence in the Pacific theatre and ensure Taiwan could eventually used as a base of operations in event of open conflict with China.

The US cannot seem to accept that the Pacific Ocean is no longer an off-shore American lake over which it has dominion. With the rise of China to its former glory after two centuries of exploitation by the West, China is resuming its role as one of the great nations of the world and the dominant force in the region.

Taiwan will, in the not distant future, revert to its former status as a province of China, otherwise it will find itself isolated economically, militarily and politically. Economically, because China is its major trading partner, militarily because Taiwan cannot stand up to China’s might and with America’s financial woes and multiple wars cannot expect to be propped up by the US. Politically, Taiwan is also being marginalised by the change in political climate in Japan where the new government led by Hatoyama is moving Japan out from under the wing of the US and toward closer relations with China. Again, as with Taiwan, China has replaced the US as Japan’s biggest trading partner. In fact, China’s dramatic recovery from the recent global economic downturn has served to rescue Japan from recession.

From the assumption of power by the communists in China in 1949 until recently, Taiwan could rely for support on both Japan and the US, but no longer. As Japan logically moves out of the US orbit, so will Taiwan be forced back into China’s fold, whether the US likes it or not.

The reaction and hand wringing concern expressed by Europe, as well as the US, is symptomatic of their inability and unwillingness to relinquish the colonial hold they  held over China for two hundred years. The centre of gravity of global power is moving inexorably to the East and the sooner the European/Transatlantic alliance accepts and accommodates themselves to this the better for them and the world.


25 January 2010

For China the Economic Nuclear Option, option



Much has been written about mutual self assured destruction should China use its ultimate economic weapon as reprisal for US potectionist legislation and interference in internal affairs.

Indeed, by cashing in T-Notes and/or diversifying its enormous US currency holdings away from the US dollar China risks killing the golden goose, its prime export market. Fortunately, however, China’s domestic economy is improving and growing fast and much of its current growth now stems from burgeoning domestic consumption. It is slowly reducing its depndence on exports in general and exports to the US in particular.

However, it will not be wholly independant in the short term and until it is, China will be hostage to a US Democratic congress which is, in turn, hostage to US labour unions.  So, what to do?

Although a full scale counterattack at this stage would harm ist own interests, China could nevertheless fire a warning shot across the bow of the US. China could bring home to the US the eventual risk it faces in provoking the Dragon by simply suspending for one or two months purchase of Treasury notes and, at the same time, devote a large sum of its massive dollar holdings to increasing its Gold reserves, already the world’d largest holdings (1000 tonnes). The US needs a constant infusion, a fix, of several billion  dollars from sale of T-notes each month to keep its financial head above water, and the withdrawal of Chinese support would serve as a loud wake-up call to the present myopic US administration.

18 January 2010

Democracy as a global concept - an observation from the past, a warning for the future

I first posted this blog on 26 March 2005, and because it remains a salient topic I am republishing it.

With reference to my previous posts expressing doubt about the validity and global application of democracy, a friend recently sent me the following:

“At about the time the original 13 United States adopted their new
constitution, in the year 1787, Alexander Tyler (a Scottish history
professor at The University of Edinburgh) had this to say about "The
Fall of The Athenian Republic" some 2,000 years prior.

"A democracy is always temporary in nature; it simply cannot exist as a
permanent form of government. A democracy will continue to exist up
until the time that voters discover that they can vote themselves
generous gifts from the public treasury.

From that moment on, the majority always votes for the candidates who
promise the most benefits from the public treasury, with the result that
every democracy will finally collapse due to loose fiscal policy, (which
is) always followed by a dictatorship."

"The average age of the worlds greatest civilizations from the beginning
of history, has been about 200 years. During those 200 years, these
nations always progressed through the following sequence:

From bondage to spiritual faith;
From spiritual faith to great courage;
From courage to liberty;
From liberty to abundance;
From abundance to complacency;
From complacency to apathy;
From apathy to dependence;
From dependence back into bondage."

End of quote

In that sequence of events I would place the United States somewhere between dependence (depending on foreign financial institutions to buy over $2 billion a day in US T-Notes to finance America’s burgeoning debt and consumer appetite) and bondage (when countries decide not to buy the wonky T-Notes and US dollar, or decide to foreclose, leaving the US up for sale).

17 January 2010

A Swiss View of the USA

A Swiss View of Obama
This one centres on an article in today's Neue Züricher Zeitung, the premier Sunday German language newspaper in Switzerland to which I subscribe and read with my Sunday morning breakfast at a local Café. The article today deals with Obama's first year in office with an assessment of his performance in various sectors where he promised "Change". I should point out that the newspaper, the NZZ, like most European media was harshly critical of Bush and welcomed Obama with open arms. Now, a year later, the ardour has cooled considerably and criticism of Obama throughout Europe has mounted.

Herewith the NZZ analysis of Obama's polices and what he has achieved with respect to the following issues:

The Economy and Employment in the US: Obama claims two million jobs were saved with the stimulus package, a number widely disputed, while unemployment in the US continues to rise.

Financial System: Despite bailouts and multi billion dollar handouts, banks have not relaxed credit and despite threats of reprisal by the Obama administration, the banks continue to award huge bonuses to executives

Healthcare: A health care package has been agreed but the cost of the programme remains unclear, and could further exacerbate the indebtedness of the US.

The Wars in Iraq and Afghanistan: Troops are being withdrawn from Iraq as promised but now, as many expected, unrest is once more on the increase. At the same time troop levels in Iraq are drawn down, the number of boots on the ground is being increased in Afghanistan, so there is no net gain and the war in Afghanistan is becoming increasingly unpopular in the US and seen by many as already lost.

The Middle East Peace Process: Failure. Obama has been unable to rein in the pro-Israeli Lobby in the US, and Netanyahu in Israel, nor stop construction of new settlements.

The Battle against Terrorism: The global terrorist networks continue to flourish and expand and the conundrum of closing Guantanamo is unresolved, the result of the latter being that initial goodwill toward Obama in the Arab world has all but evaporated.

Disarmament: Negotiations with Russia are dragging on with no resolution,

Climate: Obama's performance at Copenhagen was received with disappointment throughout Europe. They looked to him for leadership and got none.

As you see, the only issue on which the NZZ sees significant progress is Healthcare - everything else is is awarded a failing grade.

In addition, the front page headlines today on the NZZ read: "New Pressure on the Swiss Economy by the US". This stems from the threat of the US Treasury to impose a tax of $1 Billion per year on Swiss banks operating in the United States. The Swiss citizenry are justifiably angry.

This, mind you, is coming from a country and newspaper that has been traditionally very pro-American, but which now perceives the US as more of threat to the country than an ally. Whatever goodwill Obama brought with his election has now been dissipated by his policies.

Finis

Reprint China/Democracy Blog



Today's blog, a reprint of one from March 2006, is a long one and, although dated, it still reflects my controversial views about Democracy and in particular how it applies to China. 


Harking back to previous observations on Asia, and China in particular, I should preface my remarks with two of my favourite homemade adages:



1. Democracy is not a panacea for all of a society’s ills
2. American Democracy is like some wines - it does not travel well, and is best consumed in the country of origin.



In order for a democracy to be fully functioning, there are a few basic requirements – a relatively well educated population, cultural cohesion, security, good nationwide communications, and some experience in self government (my requirements).

With respect to China and the first posit, I am not convinced that Democracy is the answer at this stage of China’s development. China is an enormous landmass with a population in excess of 1.3 billion, many of whom are ill educated, low per capita income and with limited health care (like the USA). Cultural cohesion is also not fully developed, only having been begun under communists and central rule since 1949 in recent history; communications are improving rapidly but are not yet ideal. In other words, there are more pressing priorities than free elections, multi party systems and the right to stand on the street corner mouthing obscenities and promoting religion.



In 1960, I read a book, “The Soul of China”, by Amaury de Riencourt. It may be out of print now, but I remember it well because of its revolutionary thesis (for me), namely that Communism fitted Chinese culture and history “like a glove”. The author argued that the Confucian tenets of obedience to central and senior authority were incorporated into Chinese communism. There was more, but that was the essence of his position. Since then, I have read at least three histories of China. In those books they present the view that Communism in China is merely the successor to the world's oldest and most successful autocracy. China, they argue, "is trying to achieve economic modernisation without the representative political democracy that Americans view as their special gift to the world's salvation." They also caution Americans who are prone to bash China's autocratic government to avoid attempting imposition of the flawed American model on China's unique culture.



A longtime Chinese friend, who with his family fled China and the communist take over in 1947, returned to China in recent years and surprised me with the comment, “the best thing to happen to China was the communist assumption of power in 1949”.



As it turns out I, a dedicated capitalist, had already reached the same conclusion, but I was surprised that a dedicated Chinese capitalist such as my friend would have the same point of view. Communism freed China from the grip of the colonial powers – Great Britain, France, Untied States, and Japan and although it took WWII and the invasion of China by Japan to initiate the process. Communism, with the exception of the years and madness of the Cultural Revolution, maintained and strengthened China’s cultural traditions. Communism united China and its disparate parts for the first time in its 4500 year long history and began to implement a policy of cultural cohesion making Mandarin Chinese an official language of communication; it has harnessed the brilliant and innate Chinese intellect and is on the road to making China a superpower in every respect.



China today has regained the pride it lost under the rule of the colonial powers in the Treaty Port “agreements” forced upon them in the 20th and 19th centuries. It has the fastest growing economy in the world; it has education and the free market economy as its major priorities. Security, in a land as large as China, with a large segment of the population still not educated in the ways of democracy can only be possible with a strong central control. Some day China will evolve in the direction of democracy but China recognizes it should not make the mistake of Russia and rush will nilly into the arms of democratic capitalism in which it has no experience or background. I personally do not believe it will ever have a Western style democracy.

As for suppression of religious freedom, organised religion is more of a liability than a blessing. First, religion has never played a major role in Chinese history or culture. If you examine Chinese history you will see that religious influence, with the exception of Taoism (Daoism), in China always came from outside China and has been pluralistic – Islam, Christianity and Buddhism, all foreign influences. Even Taoism never developed into a religious organisation or institution having been practiced as an individual philosophy. None of the religious doctrines have gained universal appeal to the Chinese. The closest to acceptance could be Confucianism’s moral and ethical tenets which people sometimes confuse with religion. Religions such as Christianity ran counter to and conflicted with the imperial claim to divinity and omniscience and the importance of filial obedience and respect. So, when the Christians tried to preach their doctrine of obeisance to an other-worldly authority, they got very short shrift from the powers that be. As much value as there may be in religious philosophy as ethics, I see no value to organized religion. It is a divisive, not a uniting force in society – just look at the history of Western Civilization and the wars that have been (and still are being) fought for religious motives. If China is wise, it will keep religion institutions under firm control.



I frequently hear the term "afraid" when the subject of China is raised, but China need not be feared as an aggressor. China, unlike its former communist cousin the USSR, China has never aspired to world domination or territorial acquisition. Colonialism has never formed part of Chinese history even in its golden Ming period (1368-1644) when its huge maritime fleets navigated all the way to today's Somalia (with compasses unknown at that time in Europe) in 1403 before Columbus lucked and stumbled his way across the Atlantic pond. Its interests then as now were in creating political and commercial alliances not in imposing its culture on others. Any involvement in wars has been to protect its borders. During the Korean War it became enmeshed in that conflict because of the threat of a superpower, the United States, occupying territory contiguous to China. Taiwan is regarded as a legitimate part of Chinese territory and as such, in China's view, has to return to the fold, and will do so in the not distant future.



Taiwan, held up as an icon of democracy, was ruled by a dictator and thief, Chiang Kai Shek, from 1950 until the 1980s and during the 1950s Chiang instituted a wave of political repression called “The White Terror”. So democracy, aside from being a recent phenomenon, has not necessarily been responsible for Taiwan’s success. Hong Kong was also under an imposed government, the British, from 1842 until 1997, the Brits having allowed democratic elections only when HK was about to be turned over to China – perfidious Albion indeed. Hong Kong flourished because it was in a controlled, secure environment, not riven by internal dissent or threatened by external forces. That political and social situation and the inherent Chinese entrepreneurial spirit were responsible for Hong Kong’s progress which was in place long before elections in 1997.



Those points deal just with China and the Chinese. Then, look at the effect and impact of democracy on former colonial territories in Africa. Are they really better off? I for one do not think so – those countries are totally corrupt, engaged in vicious tribal warfare and subjected to horrific atrocities that seldom took place under firm colonial rule. Look at Russia – now with endemic crime, and rampant corruption that I never saw in the years I worked in that country. Russia, under the inept, drunken and corrupt Yeltsin caved into to US pressure and its ideologues to move the country, before it was in any way ready, into democracy and capitalism. Had they followed instead Gorbachev’s formula for gradual change from communism to democratic socialism to democracy the evolution to democracy would have taken longer but it would have had more positive results. Putin is now trying to hold the line and reverse the rot, but it may be too late. Result – the Russians, with the exception of the Oligarchs and local mafia, are increasingly disenchanted with both democracy and capitalism and long for the good old days of Communism and security.



Many of these countries were catapulted from either stone-age cultures or feudal governments into a full blown democracy without any historical reference points. Using the analogy of wine again, for democracy to flower, it requires time and a process of maturation. Democracy is not a system that can be imposed externally (as we are trying to do in Iraq) on an alien culture, any more than one can transplant flora and expect it to flourish in alien soil conditions.



This is particularly true of American Democracy which has its dubious appeal to Americans but does not necessarily suit other cultures. In Francis Fukuyama’s classical book on liberal democracy “The End of History and The Last Man” Fukuyama argues cogently but not (for me) convincingly, that liberal democracy (liberal in the philosophical sense, not political) is the epitome of political evolution. I disagree. There are too many shortcomings, too many inequities in the system to satisfy me and justify such an assertion. Furthermore, I believe there is an inherent defect in democracy raised by both Aristotle and Alexis de Tocqueville (“Democracy in America” – 1830). Aristotle argued that democracy unrestrained can only lead to mobocracy. De Tocqueville, over 2000 years later, after observing democracy in the making in America in the 1830s, posited that “democracy contains within it the seeds of its own destruction”, a theme echoed from Burke to Tocqueville to Ortega de Gasset to Mencken, related to excessive freedom and misguided egalitarianism.

Finis