Is China Working At All?

Let's Talk China For A (Minsky) Moment

For over a decade now, there's been this talk about China being too indebted, and how its economy was built around real estate speculation, and how the property bubble was going to burst, and once that happened the entire Chinese economy was going to come down like a house of cards. For over ten years, I've been writing about how the wealth disparity, the education disparity, the income disparity, opaque and misleading government datas on its economy, and so on would eventually bring about a crisis. If the solution was evermore debt, there had to be a moment when China, with all its misapplied industrial might and ghost cities and multi-generational mortgages for unbuilt housing, and all the excess of their developers, would have to have its Minsky moment. 

I blogged about it a lot. And then some. In 2016 the share market bubble in China burst. Somehow the CCP government managed to stave off the inevitable once again and quarantined the fallout from bursting the property bubble. Nobody talks about it, but that's what they did. Otherwise world markets would have felt it. It worked so well and smoothly it made us all look like idiots for calling the China Bubble as having burst. And for over ten years, that Minsky moment that collapses debt-fuelled bubbles never seemed to arrive. Until earlier this year when over 300 regional banks faced bank runs. 

Now that it has, we've all got to be wondering the same thing: will Xi Jinping reverse course and let the free money flow? Because that's what they had done for most of the last decade; and after all, that's what they always do. It is possible they won't do so, and they let the whole shebang go? But then the social turmoil that would follow would become revolutionary. So if they want to stave off a revolution, they need to going back to delivering economic growth for everybody. 

Will they or won't they? Does anybody care? The weird thing is they look to be in policy paralysis when it comes to the economy. 

Not Your Daddy's China Now

The world needs a massive readjustment to China. Some parts of the world are re-orienting their stance faster than others. Certainly any time that Paul Keating pops his head up to tell us Asia is our future and China is our friend, he looks well and truly out of date. He was right between 1978 and 2012. Even with the Tiananmen Massacre of 1989, we all collectively held our noses at the the Chinese Communist Party's predilection for violent control and did business with the Chinese because it was so clearly the greater good (if by 'greater good' you mean globalised greater profits). Somehow China went from a nation where everybody was wearing heir strange national uniforms to a country where designer goods and luxury items are consumed by a fully modernised populace. We languidly thought if everybody in China became consumers, democracy would follow. I don't know why we chose to tell ourselves that, but that's exactly what we did and we couldn't have been more wrong. 

All the same, China could be counted on to be a good participant in the global trade stakes, and it behaved like an economy-first developing nation. You could charge China as having been an economic animal under  Jiang Zemin and Hu Jintao, forever seeking export markets and flooding the world with cheap goods. Across that time they exported so much deflation, it allowed Central Banks around the world to run low interest rate regimes. China plugged itself into global markets for the first time in history - I don't say this lightly - and reaped the tremendous benefits of globalisation like no other nation. 

And having succeeded in doing so, Xi's China has decided it wants to be a political animal instead. In the last decade under Xi Jinping, Chinese labour has gone up. It has started to prosecute territorial claims aggressively. It has devised a strange policy of 'wolf warrior diplomacy" where their diplomats say undiplomatic things. It has left a lot of people wondering if they are even friendly. The most you could say about Xi's China is perhaps John Lennon's refrain about revolutions, "but when you go carrying pictures of Chairman Mao, you ain't gonna make it with anyone anyhow". Xi Jinping's China is a very different animal to the China that existed before his leadership. 

Back To The Future?

The world is taking stock right now in the wake of Xi Jinping being made the lifetime dictator of China. Arguably, this was not supposed to happen. The rising living standards of China were supposed to bring about a gradual change where China would transition from a military Junta of communists towards a democracy. Of course this kind of transition happened in Taiwan, but Taiwan is not shackled with the curse of considering itself a great power. Just as Russia failed in its transition from the Politburo to democracy and ended up with Vladimir Putin, China too has utterly failed to make a transition out of its Politburo system. Laughably the CCP even argued the Politburo was democratic and therefor China had its own version of democracy - which just goes to show how little they understand of democracy. 

The strangeness of our times is such that we now have a leader of Russia with a view to turn back borders to 1955, paired with a Chinese leader who wants to go back to the leadership style of 1955. With both countries using their resources as bargaining chips, it's strange to watch these leaders try to bargain their way back to an imaginary glory in the past. The uneasy alliance between Russia and China certainly looks like a re-run of the uneasy alliance between Stalin and Mao. I imagine there are a lot of people waking up to a world with a cold war and belligerent Maoists, and feeling a bit of deja vu.  

The future of China led by Xi is distinctly unappealing. You wouldn't want to invest more capital there, and you wouldn't want to hire the labour there with its rapidly rising cost. The sovereign risk is no joke. The demographics are aligned in the direction of an ageing population with shrinking economy so it's not like there's much scope for the domestic demand to take over. The country is sliding towards an awkward 20th Century style of nationalism that may well get them into armed conflict with its neighbours and it's still a country with over a billion people with 37% food security. Now is not the time to ignore economics for their leadership, but here we are witnessing how they ditch economics in favour of nationalist ideology. 

It does make you wonder.

George Bernard Shaw Shock

Not The Guy You Thought You Studied

The shock of the week for me this week was finding out a bit more about George Bernard Shaw. My experience of George Bernard Shaw starts and stops at high school where we studied 'Major Barbara', 'Pygmalion' and 'St. Joan'. They are to some degree coloured by ideology Shaw wanted to put across, so we had to study that George Bernard Shaw was a 'Fabian' socialist; and of course we learned that the Fabians didn't want violent revolutions, they wanted gradual changes towards adopting more socialist ideas.

Imagine my surprise then when I encountered somebody who vehemently argued that Shaw was a Nazi supporter who favoured radical eugenics by wiping out people he didn't like. Yes, I did a double take when he presented that information, and this quote:

“You must all know half a dozen people at least who are no use in this world, who are more trouble than they are worth. Just put them there and say Sir, or Madam, now will you be kind enough to justify your existence? If you can’t justify your existence, if you’re not pulling your weight, if you’re not producing as much as you consume or perhaps a little more, then, clearly, we cannot use the organizations of our society for the purpose of keeping you alive, because your life does not benefit us and it can’t be of very much use to yourself.”

If you Google that entire quote, you find that it is most often quoted by a certain kind of right winger who hates socialism. It's also on his Wikipedia page, together with this description:

Shaw opposed the execution of Sir Roger Casement in 1916. He wrote a letter "as an Irishman"[70] to The Times, which they rejected, but it was subsequently printed by both the Manchester Guardian on 22 July 1916, and by the New York American on 13 August 1916.

Shaw was not necessarily better informed about actual conditions in other countries than other people were at the time, and tended to believe the best of people who professed similar principles to those he held himself. This led to him taking some positions that now seem grotesque.

After visiting the USSR in 1931 and meeting Joseph Stalin, Shaw became a supporter of the Stalinist USSR. On 11 October 1931 he broadcast a lecture on American national radio telling his audience that any 'skilled workman...of suitable age and good character' would be welcomed and given work in the Soviet Union.[71] Tim Tzouliadis asserts that hundreds of Americans responded to his suggestion and left for the USSR.[72]

Shaw continued this support for Stalin's system

Then, along came Hitler, and Hitler too got the nod of approval from Shaw, who by this time was more in favour of authoritarian regimes because of his disgust for liberal democracies, and probably the moniker where the Nazis were ostensibly National Socialist Workers Party, and the use of that word would have been a candle to the moth.

The most interesting read and probably the most relevant, quick, pivotal assessment of George Bernard Shaw the man can be found here. It's a depressing article in as much as the George Bernard Shaw presented there is utterly unlike the Fabian sociliast or progressive. It seems that in his old age, his cantankerous-ness and contrarian qualities led him deeper into espousing uglier and more outlandish sentiments:

And in lines even more extreme than his banned BBC talk, he again praised the failed Mussolini as “right” in describing democracy as “a stinking corpse”. As for Hitler, he added, “in the world war we claim to be fighting for democracy; and Adolf Hitler retorts unanswerably that British democracy is nothing but Anglo-Semitic plutocracy”. In other words, alleged capitalist injustice with a Jewish taint was an “unanswerable” fact. Had he lost his reason, or was he only remaining consistent to his cantankerous image?

He had had enough of liberal democracies; he preferred the austere, mean, authoritarians instead of the difficult compromises of democracy. By the time he is working on his play 'Geneva', he is utterly unlike the man we were led believe inhHigh school.

So I went around and asked a number of people who they thought George Bernard Shaw was, ans what kind of beliefs the man might have held. Predictably, people came back with answers that I had given - which sort of goes to show that the NSW Board of Education has somehow created this doxa (opinion) about George Bernard Shaw which is shared by many people, but is also utterly inaccurate.

Which brings me to my point. I've even asked teachers of English about this, and they didn't know about how George Bernard Shaw's intellectual life went after 1920 - after the Russian Revolution and the Bolshevik coup.  All these teachers are probably still out there teaching that George Bernard Shaw was a Fabian. Yes, he was, but he was so much more than that, and in some ways, so much more despicable than somebody who sort of wanted society to progress. I'm a little upset at my high school teachers who presented me 'Major Barbara' and 'Pygmalion' who didn't go through with telling us just who Shaw was. It seems amiss, and almost malicious to withhold  such important information that contextualises the work. They might have taught in good faith, but the net result is that they were teaching misinformation.

How is this so? How could this have happened? I imagine there was at some point a strong desire to overlook these things in favour of presenting students with works they could take on board as ideological education of sorts. In hindsight, I feel quite strongly that the students were not served well by this - for want of a better word - coverup.

These books are still on the high school curriculum in Australia. There are many teachers out there teaching these texts, who grew up on being taught about Shaw, largely as I was, thinking that he was largely a benign playwright who had socialist ideals. They're probably rerunning the misunderstanding just as it was handed to them, and it seems to me a great shout out is necessary: "George Bernard Shaw didn't finish up the way he was in the middle of his career!"

I'm still trying to pick up the pieces of the shattered idol, trying to figure out which bits can be salvaged.  I've also had a little think about it and it occurs to me that Shaw's radical tilt towards an ugly embrace of authoritarianism might have something to do with the onset of his advanced age.

The years 1920-1950 not only represent the last 30years of Shaw's life, they also represent the era of the Bolshevik revolution, through the end of World War II and the re-establishment of  world order after World War II. In these years, Shaw was aged 64-94. He was still mouthing off to the press in his advanced age - at an age where most people bow out into retirement.

It is highly probable that a younger Shaw would denounce the position of the elderly Shaw; if we are to be fair to his work, then I can only suspect that in his old age, he lost his grip on his ideas and got a little lazy. Maybe he even had Alzheimers or some degenerative brain condition that we do not know about. Maybe he just got old and impatient and decided niceties were boring, and thus was happy to give into the inner fascist more often, and even in public. And maybe I'm working hard here to let him off the hook. Well, what do we know?

Today, with rigorous thinking, we understand that there's a gulf between Socialism and National Socialism as practiced by the Nazis; and that in the practical running of the 19th century socialist ideas and ideals in the Soviet Republics, how it created brutal injustices that were largely in line with what you would expect from 'absolute power' (as per George Orwell's dictum, 'absolute power corrupts absolutely'). Hindsight is 20-20 and better. Shaw lived through this stuff and could only be reasonably asked to digest it the ay we digest events in say, Afghanistan or Libya or Syria.

Anyway, I share this with you today, still shocked to find out George Bernard Shaw was nothing like the figure I was taught he was.