Democracy can’t Buy People

I have no strong doubts that America will “only” be the second or third largest economy within two to four decades. In the meantime, while the trends will be suggesting that, many people elsewhere in the world, including Westerners who are focused on economic power alone, will start placing their political bets on China, too. In the views of many, a society where human rights only rank second or third and where democracy is deemed an unnecessary luxury will appear to be more efficient than a democratic model. Many will easily forget or push aside all evidence that democracy may be an essential human right, or an important practise to avoid untenable living conditions of the “ordinary people”, and therefore, in the end, a stablilizing rather than a destabilizing factor in the life of a country. Many people won’t see either that even under an undemocratic – i. e. inefficient – form of government, peoples’ livelihoods can still hardly drop in China. Quite naturally, the only likely direction is upwards anyway, at least for some time to come, as long as most Chinese citizens are living close to the bottom of their individual potentials.

Radio Canada International QSL, 1988

I got this feeling when I looked at the German press online yesterday. An article by Niall Ferguson, first published by Britain’s Financial Times (now only accessible for registered readers) on December 27, has since been published in German by the weekly Stern, the weekly Der Spiegel, the daily Die Welt, and probably a number of regional newspapers, too.

Niall Ferguson’s article doesn’t look wrong to me, but it can encourage short-sighted views of the future when it comes to the benefits that political concepts, rather than civilizations, can offer, or the drawbacks they can cause. The main factors which play a role in Ferguson’s article are money (American current account accounts, public expenditure and revenue) and military power (Afghanistan and Iraq). Even if democracy never becomes something most Chinese people would appreciate and fight for – and among many of them, national power may be viewed as a sufficient substitute for leading a full life individually -, China won’t be an attractive model for most other nations. A country or empire may be powerful – but it won’t be attractive elsewhere unless the citizens can live their lives to their full potentials.

That said, Taiwan before all other countries will be in a difficult position, unless a majority of its people actually like the idea of being “re-united” with China. Their window of opportunity to have their sovereignty internationally recognized – if the opportunity still exists at all -, has begun to shrink. Will the Taiwanese test their opportunities and risk to codify their sovereignty internationally? And how far will the rest of the world – most crucially America – be willing to support and help to defend them?

For those of us who live in democratic countries, China’s growing weight poses questions which would have seemed unimportant only a few years ago. It is unlikely that the average Chinese citizen will enjoy our standards of living in the foreseeable future. And besides, it is unlikely that our standards of living will remain as high as they are. We will need to save more, and to spend less – not only in America. There are ecological reasons for that, and economical reasons. Rises in productivity can’t be endless, as long as we are confined to this planet. Democracy stabilizes society when its promises are sustainable. But democracy may stop doing so if the promises made by its political class – in order to secure their election or reelection – become unsustainable. This question about sustainability has always been an issue, but it must become a central issue in our societies. Democracy isn’t here because Westerners were better people than the Chinese. And the matter of sustainability isn’t at all lofty. While China’s social insurance programs are facing huge challenges, they are only promising comparatively small benefits to the Chinese people. Our welfare systems are much less challenged than theirs, but the promises of our welfare systems to their clientele have become a great burden for every regular employee. If democracy shall stay, we must ask ourselves who we want to be, rather than what we want to own. Democracy can’t buy people. Democracy is either wanted, or it will go away.

Freedom is not a matter of where we live, and it is no matter of nationality or race. But it is, of course, a question about who governs us, which economic and political system we have, and into which direction we want to develop. As China is a totalitarian country, led by a “Communist” party which wants to stay in power (no matter if that will require Communist, Socialist or Confucian colors), its growing influence will require us to be vigorous competitors in terms of political concepts, and to some extent, in terms of power.

It doesn’t really matter how powerful the West’s position will be in the future. But there need to be democratic societies which are able to defend themselves, and which can convince the global public that people only live full rights in the light of human rights.

Once China is a country with a p0litical class that works to heal, rather than to cultivate the mortifications of its people, it can – and maybe should – lead the world. Otherwise, it shouldn’t get into that position.

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Related:
How to Corrupt an Open Society, Aug. 29, 2009
The American Era isn’t over, October 30, 2008

2010: Make-or-Break Time for “Social Stability”

2009 had been the “most difficult one” for China, writes Han Yonghong (韩咏红) of Singapore’s United Morning Post (联合早报), with a deepening international financial crisis, receding export opportunities as a result, sensitive anniversaries, public anger and resulting mass incidents, and sharp political criticism on the internet. But then again, it had also been the year where China had forged ahead, becoming a great country on equal footing with the United States. All in all, 2009 had been a successful year, writes Han, but besides the rapid economic rebound, there was still a lot of unfinished business. The biggest changes for the CCP’s policies in 2010, according to the impression the statements of its leaders are leaving, would be the people’s livelihood, the people’s livelihood, the people’s livelihood (民生、民生、民生). On the National Committee of the Chinese People’s Political Consultative Conference (中国人民政治协商会议全国委员会, or 政治协) New Year’s tea reception, CCP Secretary General and State Chairman Hu Jintao (胡锦涛) had emhasized that the quality and the benefits of economic growth needed to be improved, more attention needed to be paid to the improvement of the people’s livelihood, that lower [i. e., local] party officials needed to push the good trend of rural development further, that the peasants’ incomes shouldn’t remain static, and State Chief Councillor Wen Jiabao (温家宝) explained that the gap between small cities and rural areas should be reduced, that the treatment of migrant workers needed to be improved, and that the living standards of farmers needed to be improved.

The leadership hasn’t addressed the issue of the people’s livelihood for the first time, writes Han Yonghong. In 2009, Beijing provided free textbooks for primary and secondary schools, increased teachers’ incomes and pension funds, etc. The difference between then and now is that in 2009, those were emergency measures, with local governments reacting to discontentment, worried by contradictions.

Behind the concept of reducing the income gaps between small cities and rural areas there is the aim to increase incomes, to create domestic demand, thus creating sustainable growth, writes Han, which would correspond with a speech by Wen Jiabao in September, where he pointed out that “expanding China’s domestic demand is the long-term strategy of China’s economic development” (扩大内需是中国经济发展的长期战略方针).

Closely related to the people’s livelihood are the Three Big Mountains (三座大山), and among these – medical care, education, and housing -, medical reform may also be promoted. It was said that the medical insurance draft had gone through several discussions and amendments, and this new draft was certainly the main point in the government’s provision of public health and basic medical services, and it was hoped that urban workers, staff and residents plus the farmers’ participation in medical insurance (农民参保) would be at above 90 per cent. Besides, at the end of last year, the Central Economic Work Conference (中央经济工作会议) had pointed out that urbanization (城镇化) needed to be stadily advanced, and that the problem of how migrant workers should settle in urban areas needed to be resolved – which would also help to distribute public services more equally to the citizens.

To accomplish these tasks, the governments needed to become more determined, writes Han Yonghong, and the political system itself would need reform, too. In that field, the government’s approach was cautious, and could achieve the effect of relieving social contradictions, but in an environment where civil rights weren’t clearly stated, even revised public policies wouldn’t necessarily bring benefits for disadvantaged groups.

So is it all the usual talk with little action and even less local effects? [*)] Experience suggests that. Then again, even if the next generation of leaders should be even less inclined than the incumbents to care about the “countryside”, demographic data make it abundantly clear that it is make-or-breaktime, and that it is now.

And for avoiding “social contradictions”that could actually lead to the much-trumpeted big chaos (大乱), not only medical care, but the pensions systems too, need to be assured, even if only at a very low level. Chinese people may settle with very little, and old people with even less, but China is a rapidly-aging society. The window of opportunity has become extremely narrow. “China aims to gradually set up a series of networks for the aged, including social endowment assurance and a looking-after service, by 2010″, the Beijing Times wrote – in 2002.

Related:
2010: More Martyrs, more Permanent Residents, December 31, 2009
A Glimpse at China’s Social Security Programs, December 24, 2009

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*) Double-pasted text deleted. This post was heroically written on a very unstable online connection.

2010: More Martyrs, more Permanent Residents

China’s laws and regulations can often be confusing, writes China Daily. There are several small changes to laws regulating security guards. If one dies on duty, they will be honored with the official title of martyr, usually reserved for those the government says have died for justice. Second, security guards are banned from performing body searches or using violence.

A regulation that may change more peoples’ lives and status is Guangdong’s Provincial Service Management Regulation on Migrant Population (广东省流动人口服务管理条例), which comes into effect all over the province on January 1, after it had been tested in Shenzhen for a year. Tens of millions may bid their current transitional status in Guangdong goodbye and become permanent residents, writes Southern Metropolis Daily (南方都市报). The kind act (善举) doesn’t yet amount to a household registration reform (户籍改革), but is a step into the ideal direction, believes the paper, as it indicated the provincial government’s changing concept.

51 years ago, New China stipulated the policy that citizens who temporarily live in a city outside their regular city or district for more than three days had to carry out temporary residence registration. In 1985, given a strong current of work migration into Guangdong in the wake of the reform policies, the public security office (公安部) issued the Interim Provisions on the Management of Temporary Urban Residency (关于城镇暂住人口管理的暂行规定). The status of migrant workers was that of temporary residence. They weren’t included in the province’s GDP statistics, and they had no entitlement to governmental services. Outsiders also criticized the temporary residence permit (暂住证) as a money machine (敛财的工具) for some departments, as some cities charged several hundred Yuan RMB per temporary residence permit, and another Defense of Law and Order fee of 158 Yuan RMB was charged in Guangzhou in 2001.

The Southern Metropolis Daily suggests that the case of Sun Zhigang (孫志剛) in 2003 helped to speed up the reform of temporary residence in Guangdong. The Southern Metropolis Daily doesn’t go into details, and doesn’t mention its own role in investigating Sun Zhigang’s case (which apparently led to massive revenge by the local authorities against its editors Cheng Yizhong and Yu Huafeng).

During the new regulations’ test period in Shenzhen, Professor Zheng Xinzhen (郑梓桢), head of the Guangdong Provincial Academy of Social Sciences’ Institute of Sociology and Demographic Studies, said that permanent residence was a rational reform, but only a beginning, and its bonus could be applied more broadly.

Southern Metropolis Daily also addresses the question if Guangdong Province has the financial resources to live up to the new regulation’s promises. The article believes that as the first ground for the reform policies, with the highest incomes in China, Guangdong should be able to afford education to the migrants children, and make them a force in building the province. Besides, without proper education, the new generation after the initial migrants could become destabilizing factors.

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Related:
Household Registration System – a Personal Opinion, September 11, 2009

A Glimpse at China’s Social Security Programs

The National People’s Congress Standing Committee reviewed the State Council’s Report on the Promotion of Small and Medium-Sized Enterprises, measures for creating employment, and rural social insurance today, reports China National Radio (CNR). According to a report given by Li Yizhong (李毅中), minister of Industry and Information Technology, small and medium-sized enterprises (SMEs) that finished products and service value accounted for 60 per cent of China’s GDP, and for almost 80 per cent of jobs in cities and townships. The NPC Agriculture and Rural Affairs Committee’s vice chairman Sun Wensheng (孙文盛) explained on the same meeting that generally, the level of social security in rural areas remained low, and some were merely in their experimental phase. The agricultural affairs committee suggested that appropriate adjustments to the arrangement of social insurance testing work and its acceleraton should be made, that a stable funding mechanism for rural social security should be established, and that in accordance with city and countryside overall planning, systems of  rural social security systems should be strengthened, and that this policy which benefitted the countryside should be effectively implemented.

According to China Radio International (CRI English), the State Council report says that 320 counties, or 11.6 percent of the country’s total, had been or would be approved to try a new rural social pension insurance system, which would benefit more than 15 million rural residents.

Social security in rural China usually means that the government will subsidize individuals’ insurance premiums. According to an article by Katie Lewis in the Canadian Medical Association Journal of June this year, such subsidies will amount to some 15 Yuan RMB per person, per year. This would provide 90% of China’s population with some sort of health insurance. But that will hardly put low-income families (by Chinese standards) into the position of buying social insurance. Despite central insurance programs, China seems to be a patchwork of different local  approaches and solutions to the problem. Depending on individual incomes and the treatment that is needed, social security is still looking unaffordable for many.

850 billion yuan will be allocated for medical and healthcare reforms over the next three years, according to a Brookings commentary of April this year. This would amount to some 283 billion Yuan for 2009, if equally allocated over the budgets of three years including 2009. This would be  4.28 per cent of China’s projected 6.623 trillion total national revenue of 2009, or 3.74 per cent of its 7.6 trillion budget (including a 950 billion deficit) as projected in March this year.

Weekender: What’s Wrong with Overcapacity?

The European Union Chamber of Commerce in China (EUCCC) has warned that Beijing’s stimulus spending had fuelled massive overexpansion in steel and other industries that could force companies to boost exports, thus igniting protectionist backlashes abroad. China’s leaders themselves also appear to be worried, and the EUCCC’s findings were reported by China’s overseas radio service CRI in November.

just as if it wanted to satisfy the hunger of the whole world...

But not everyone is that worried.

In an article for Phoenix Television’s website, Hu Yuexiao (胡月晓), an analyst with Shanghai Securities (上海证券研究所), reasons that worries about China’s production overcapacities are going too far. Alan Wheatley, China Economics editor for Reuters, said pretty much the same, with similar arguments, in English some time earlier. Both Hu and Wheatley take the trouble of reminding us of what we once learned from our economic schoolbooks: that only some overcapacity will enable competition. Neither of them denies that there are structural challenges that need to be addressed, but they seem to find the current debate out of proportions.

Up to here, it all looks more or less familiar to me. A collection of articles on the other hand which puzzles me is several years older than the news above.

Henry C. K. Liu published a long series of articles on The Coming Trade War with the Asia Times in 2005. It’s an opulent lot of food for thought online, which I’d rather have expected to come as a book. In part 4 of his series, he dismisses the economic law of scarcity as a baseless myth, and blames man-made maldistribution rather than natural laws for scarcity. Apparently, his statement can only be true if peoples’ desire for material possessions is limited, rather than endless. Liu basically blames Western concepts for creating the idea of scarcity, but he also blames China for adopting the concept.

Overcapacity is not merely a temporary under-utilization of capacity; it is the systemic inability to achieve full or at least optimum utilization. Yet overcapacity is a structural condition in the world of scarcity economics, because excess capacity is the condition needed to prevent the emergence of shortages, which is another name for scarcity. But scarcity is needed to maintain economic value as expressed in market prices. Thus the market model of neo-classical economics must constantly be plagued with the curse of scarcity while simultaneously preventing scarcity with the more fatal disease of overcapacity. This contradiction is the internal paradox of neo-classical economics that traps the market economy in an arrangement of never being able to enjoy the full capacity of its productivity.

The insecurity generated by looming scarcity drives savings, which as investment add to overcapacity. And savings reduce current consumption, meaning lowering demand, which adds to overcapacity. The challenge of a market economy in an age of structural overcapacity then shifts from how to produce more to how to sell more. Marketing becomes the critical task of management. The answer for decades has been to use planned obsolescence to ensure recurring demand. Another answer was to lower prices to broaden the market. Advertising stimulates the desire for goods, but only rising income increases demand for goods.

The idolization of scarcity, Liu’s article suggests, is wanted both by the U.S.  – or OECD countries in general -, and China^*). But the illogical – or  outrageously preposterous -  thing, he writes, is that the U.S. in particular and the West in general keep blaming China for having maintained its overcapacity:

“It is not possible, let alone moral, for 4% of the world’s population to consume the full productive capacity of the world. For the global economy to grow to its full potential, the whole population of the world needs to be allowed to participate with its fair share of consumption.”

It’s an interesting read, and it’s probably no coincidence that I see myself in no position to actually assess the validity of Liu’s points. College and university taught me the basics of economics as written by the establishment, and the curriculum ended long before alternative models might have come into play.

But Liu’s idealism doesn’t really look trustworthy to me either. The main aim of his criticism is the West:

The small nations of the world, unlike Brazil, China, India and Russia, are too weak to resist oppressive policies foisted on them in the name of free trade by international trade and finance organizations controlled by the rich nations.

Yes, the small nations of the world are too weak. They will also be too weak to resist oppressive policies which will soon be foisted on them by a coalition of the West and Brazil, China, India, and Russia.

And another of Liu’s statements could come right from the desk of a tradititional Confucian scholar two-hundred years ago, living on the backs of miserable peasants (who were fortunate enough to have no jobs either, and only a bit of slave-work to do):

The job is the creation of the industrial revolution. Prior to that, under agricultural feudalism, people had livelihoods, doing what they excelled in and enjoyed. The job is a venue through which impersonal labor and time are sold for money at a rate that prevents the worker from buying and consuming all of what he or she produces so that the excessive production can be turned into profit, what Marx called surplus value.

Oh, innocent China!

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Footnote
^*) Liu differentiates between nations and elites, both in the West and in China. He believes if current terms of trade continue, much of the GDP in the newly rich nations would be owned and controlled by the currently rich nations:
… if current terms of trade continue, much of the GDP in the newly rich nations would be owned and controlled by the currently rich nations.
Yet there are signs that the rich economies are determined to resist this equalizing prospect by trying to co-opt the elite in these developing economies as a new comprador class to help perpetuate the historical dominance of the rich nations.

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Related:
Weekender – Politics and Science, August 15, 2009
Is AGOA good enough, August 5, 2009

London: A Flurry of “Justice”

The British government will reportedly advise retailers and importers to distinguish on labels whether imported goods from the West Bank were made by settlements or by Palestinians. It looks like a good decision. After all, there should be no settlements in the West Bank. And the measure doesn’t hit an Israeli government that is reeling between attempts of moderation and domestic pressures like the one led by Kadima until March this year.

I know quite a number of people here in Germany who would like to see the same move here, and if they have any misgivings at all, it will be merely for historic reasons.

But many of the people on my mind who might like the planned British import labels and see them as a good example for Germany will at the same time oppose sanctions against Iran. Besides, the timing of the move makes me wonder. Shortly ago, a super-tax on bankers’ bonuses was announced. And on or before June 3 next year, prime minister Gordon Brown and his Labor Party will have to face general elections. Why the sudden flurry of “justice”?

If Gordon Brown is just acting as the messenger boy for the American government as the Telegraph suggests, that would be good news.

But even if so, we in Europe should remember a few things:

In 2005, Israel withdrew from Gaza. Then prime minister Ariel Sharon saw the withdrawal through, despite immense pressure against it from within his own country. The Gaza Strip is now controlled by Hamas.

In 2000, Israel withdrew from Southern Lebanon. The move didn’t add to Israel’s security.

I’m not fundamentally opposed to labelling products from the West Bank. But before doing so, we should be sure about who it will serve, and who it will hurt. It won’t necessarily be the proverbial ordinary Palestinian farmer who has been denied access to his own land so far who will suddenly see his rights enforced.

Oversimplification within the Middle East has done a lot to fuel its conflicts. Oversimplification from our side of the Mediterranean won’t do anything to defuse them.

Looking at the sudden activity in itself, a lot would speak in its favor. But in the context of some other trends, it stinks.

Weekender: General Motors isn’t Papa Bush

Angie and the X-Files: The Truth is Out There

In a few days, it will all be remembered again: how the wall came down, how the British and French loved Germany so much that they preferred two Germanies, how Mikhail Gorbachev refused to play the villain in Margaret Thatcher’s or Francois Mitterand’s anti-unification screenplays, and how Papa Bush banged his fist on the table and said, “We have waited for this day for many decades, and now it is here, and PERIOD“.

German chancellor Angela Merkel probably didn’t mention Thatcher or Mitterand in Washington D.C. this week, and I’m not sure if she mentioned Papa Bush, either, but for sure, some of her words were about German gratitude for the role America played in the Cold War, and how Americans defended liberty in Europe  during the twentieth century.

So there she was, in front of a joint session of the U.S. Senate and House of Representatives, and told them the story of her humble life, and how we and she love America. And then on the plane, on her way back to Germany, she was informed that General Motors won’t sell Opel to Magna after all, and PERIOD.

Feelings here towards America might become a bit cooler in the coming months.

Which isn’t exactly fair. After all, Opel never ceased to be a GM possession. The unions, for some reasons hard to catch on with, seemed to believe that all of a sudden, the Adam Opel GmbH had turned into a nationally-owned enterprise, the federal government, and some regional state governments, helped to feed such illusions, and now they are all pretty mad at GM.

Now we know: GM isn’t Papa Bush.

Shanzhai Shandong Cars? CCTV hurts Feelings, Provincial Newspaper Heals the Wounds

Shandong Province has become a base for the production for shanzhai or knockoff cars (山寨汽车), Lu Zhong Morning News (鲁中晨报, published online by Xinhua) quotes a CCTV report, and the outside’s world’s  focus is now on Shandong’s electric car industry. The reactions aren’t always friendly, writes the paper. At the same time, according to the Shandong Province Car Industry Adjustment and Revitalization Plan (山东省汽车工业调整振兴规划) and other policies and regulations, alternative-energy cars (新能源汽车) have become a breakthrough opportunity and will help Shandong to transform itself from a big automotive province into a strong automotive province (实现其从汽车大省到汽车强省的转身), writes Lu Zhong Morning News.

Provincial cities like Liaocheng (聊城, political center of Dongchangfu District / 东昌府区) and Zibo city (淄博) encouraged the development of electric cars, and private investment (民间投资) in the industry. But technological, financial [and 牌照 - seems to refer to license and registration] factors still limit the development.

CCTV made Shandong’s car industry a topic in its Economy 30 Minutes (经济半小时) program on October 23, and stated that Shandong was known as a knock-off car industry base with an annual output of 100,000 shanzhai cars.

And with that, Lu Zhong Morning News moves away from the  offensive topic, and starts touring a beautiful garden of industrial opportunities.

When the outside world hears about the car industry in Shandong, heavy trucks (重型卡车), light vehicles (轻型汽车) and motorized agricultural tricycles (三轮农用车) come to peoples’ minds, writes the paper. Among them, China National Heavy Duty Truck Group (山东重汽), Weichai Power Company Ltd (潍柴动力), and Shandong Shifeng Group (时风集团) are familiar names. In 2008, Shandong produced 167,000 heavy-duty vehicles (重型汽车), 302,000 light vehicles (轻型汽车), and 1,499,000 motorized agricultural tricycles or low-speed vehicles (三轮及低速汽车) – 30.9 per cent, 27.4 per cent, and 74.6 per cent of China’s national output respectively.

But compared to places like Jilin (吉林), Shanghai, and Anhui, all of which are also striving for the position of a big automotive province or city to a strong automotive province or city, Shandong Province still looks comparatively slow. Lu Zhong Morning News quotes Shandong Automotive Industry Association’s (山东省汽车行业协会) executive vice president Wei Xueqin (魏学勤) as having said previously that while Shandong Province may count as a big automotive province, it can’t count as a strong one, as there were still structural conflicts (结构性的矛盾). Besides, in terms of passenger cars (轿车), Shandong’s share in China’s national output is rather small. With an output of 164,000 in 2008, Shandong only accounted for 3.24 per cent of national output. Lu Zhong Morning News cites rather low degrees of specialization and little value added in exported products, as well as traditional energy sources and low efficiency as points of criticism of Shandong’s automotive industry.

But it is exactly for these reasons that Shandong could achieve the status of a strong automotive province,  by developing an alternative-energy automotive industry, writes the paper. If the plans drawing on this assumption still shouldn’t turn out to be unbeatable, the plan’s title certainly is: Shandong Province People’s Government General Office’s Opinions Concerning the Promotion of Alternative-Energy Car Industry Development (山东省人民政府办公厅关于推进新能源汽车产业发展的若干意见). The plan will support Shandong Shifeng Group (see above), Qilu Buses Company (齐鲁客车公司), Yantai Medium and Premium Buses Company (烟台中上客车), etc,  writes Lu Zhong Morning News. The newspaper has spotted some early structural changes, such as Weichai Power Company Ltd having formed a Shandong Heavy Industry Group with two further companies in June, and other automotive companies also moving into the direction of alternative-energy cars.

Lu Zhong Morning News concludes that

one can say that under official guidance, Shandong is now accelerating its transformation from a big automotive province to a strong automotive province. Powerful private investment is also a driving force in achieving this goal. “The policies are now clear, the market has a big potential, what we are now thinking of is development”, a responsible at Shandong Tangjun Ouling Automobile Manufacture Co., Ltd earlier told this newspaper.

可以说，在官方的主导下，山东正在加快实现其从“汽车大省”向“汽车强省”的转身。而在其中，民间投资力量也成为山东实现汽车强省目标的推动力量之一。“政策已经明确，市场又存在很大潜力，我们现在考虑的是发展。”唐骏欧铃汽车相关负责人此前更是向本报表示。

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Related:
Wanted: Changes on the Global Supply Side, October 12, 2009
China-made Electric Car heads for U.S. Market, August 24, 2009
China’s Car Exports Falling, August 19, 2009