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Post Why Is China's Government Smarter than Ours?
Created by John Eipper on 01/03/19 4:34 AM

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Why Is China's Government Smarter than Ours? (Tor Guimaraes, USA, 01/03/19 4:34 am)

Eugenio Battaglia (January 1st) made some interesting historical observations about China. But to me the neglected lesson about the PRC as a US partner and rival is the reality of how much smarter their Communist government (which I would have expected to be dumber and more narrow-minded) has been in playing the social political economic game.

China turned the invitation to become the cheap manufacturer/provider of all sorts of goods and services for the US and world markets into a powerful strategy to quickly become the second most powerful nation in the world. And today such strategic reality is sustainable whether we like it or not. In contrast, the only benefits the US received in return is a few millionaires/billionaires and a lot of cheap, mostly low-quality consumption goods. Whose decision was it to make China our manufacturing outsourcer? Certainly not the American people who also got the NAFTA treaty jammed down their throat with great benefits for Mexicans and drug traffickers. No democracy usually produces bad decisions except for the interested private interests.

On the same topic, a few WAIS colleagues were very critical of my response to JE's "concrete steps" to get US democracy operational again. Some people (most?) prefer the status quo. To me it is abundantly clear that their criticisms of my bitter medicine are not valid and the status quo is only destroying US democracy and justice at an increasingly faster rate. The American people know they have been had, they representatives don't represent them, they are being ripped off by special interests and corrupt politicians, nothing seems to work as it should, and increasingly chaos reigns everywhere.

Feel free to criticize mine, but what are your three "concrete steps" to restore US democracy and justice?

JE comments:  Democracy is messy, yes, but is it also stupider?  I'm still struck by the eagerness of many monied Chinese to leave the country.  The central question:  how truly "sustainable" is China's system of free-wheeling capitalism mixed with political totalitarianism?  Doesn't this model present internal contradictions?  To be sure, we said the same thing ten or twenty years ago, and the Party seems to be more in control than ever.

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  • China's Multiple Major Challenges (Istvan Simon, USA 01/06/19 12:00 PM)
    Tor Guimaraes (January 3rd) thinks that "China's Communist government has been much smarter in playing the social political economic game."

    Tor predicts that China will be the hegemon of the 21st century, an idea anticipated by John Eipper. He further excoriated the outsourcing of manufacturing to China as an "anti-democratic bad" decision, and likened it to NAFTA on which he echoes the Trump administration's views. Needless to say, all of these sweeping statements and generalizations are not beyond dispute. I will oppose them all in this post.

    I do not believe that the emergence of China as an economic power was either a bad decision nor against Western interests. Apparently Tor sees these relationships as a zero-sum game, in which one side benefits at the expense of the other side. Nothing could be further from the truth. Trade is beneficial to both parties, and both China and the United States gained mightily from Chinese development. The same way, NAFTA has been hugely beneficial to Canada, Mexico, and the United States. This is a win-win situation to be praised not excoriated.

    On the issue of the future of China, I likewise believe that Tor is wrong. China's communist government has not been particularly smart, nor is it playing better the "social political economic game." I put Tor's phrase in quotes not only to indicate that the words are his, but also because I find it offensive to call the lives of billions of people a "game."  But quite aside from this point, I do not believe that China's development is sustainable as Tor states it is, under the current conditions. China has multiple major challenges, huge problems and vulnerabilities which are amplified by Xi JinPing's policies. Xi JinPing is actually undermining China's future success.

    I have written on this before, but it seems necessary to bring these ideas to the fore once again, because they have bearing on the current topic.

    China's model of development is unsustainable. It is challenge number one, because there is no indication that Xi JinPing's government is even aware of the limits of this model. It has been primarily based on real estate, put in place by Deng XiaoPing.

    Deng's major crime was the massacre at Tiananmen Square. But on the positive side, he was responsible for the incredible economic success of China in the last 40 years. When Deng came to power China was an impoverished devastated country with 80% of its huge population toiling as peasants, eeking out a living by farming infertile lands using ancient labor-intensive methods. It was a country in ruins after Mao's last unpardonable crime, the Cultural Revolution. Mercifully, Mao did then the best thing he has done in his entire miserable life for both the world and China. He died. Deng XiaoPing took the ruins left by Mao and transformed it into the amazing China of today.

    He did this by taking land away from the peasants, building housing, offices and factories on the land, and unleashing the power of capitalism in China, which did the rest. Peasants moved from the rural areas to the cities, and provided cheap labor for the factories. Contrary to what Tor said, it was not the West that provided the capital for this initial development--it was the Chinese of Taiwan and Hong Kong, who established modern manufacturing facilities in China. Eventually the West noticed what was happening and joined in taking advantages of the new opportunities provided by a finally a competent Chinese leader at the helm.

    Deng's model was a mixture of state capitalism, in which enterprises deemed strategic by the communists were kept in the hands of the government, and private capital in everything else. The banking sector, railways, energy, and communications are state monopolies kept by the government.

    The communist elite became super rich in this process, rife with corruption, but private enterprise also prospered, and China became a country of incredibly rich people at the top, and the rest of the country still relatively poor, but certainly much more prosperous than under Mao.

    One of the greatest of the many contributions of Deng to China was the limiting of the term of the top leader to 10 years. This eliminated the possibility of a new Mao. But Xi JinPing, reversed this wise reform, and became the newest emperor of China. I will argue that by so doing he undermined the long-term success of China. However, this is only one of China's multiple major challenges that threaten the sustainability of its economy.

    Deng created the one-child policy, fearful that China would not be able to feed its enormous population. Only a totalitarian leader could ever imagine such an intrusive rule into the lives of hundreds of millions of people. It is an enormous disrespect for human rights, for China's people, deemed unable to decide for themselves how many children they should have. But China has always been a totalitarian country, even before communism. Deng's one-child policy created a demographic time bomb, with negative effects that were entirely predictable, yet ignored by the Chinese.

    After 40 years the government finally woke up, and eliminated the policy. But even if Chinese women started having more babies, which might not actually happen, the effects will take decades. In the meantime, China's population is rapidly aging, creating huge problems. Think of the enormous effects of having fewer and fewer children to educate in Chinese schools, year after year of the one-child policy, for example. There are a myriad of other economic distortions caused by this violent contraction in the number of children allowed to live. In a few decades, it clearly creates a large number of old people with few people in their prime that have to support them. These effects are aggravated by the Chinese preference for male children, which created an unhealthy in-balance between men and women. China will have to import women to find mates for their single-child men.

    The reliance on real estate created a bubble in the Chinese economy. There was excessive construction that created an inventory of empty buildings. Buildings are capital-intensive investments. Empty buildings create defaults on bad loans. Bad loans that need to be absorbed by the monopolized banking sector. Furthermore, the price of real estate shot up in the last 40 years, which in turn creates ever-increasing costs for the factories built, which make Chinese manufacturing not competitive with other countries eager to repeat the Chinese economic miracle, like Vietnam and others. Meanwhile Chinese labor costs also increased. Deng's model has reached its limits, and China's growth has already slowed.

    Unlike Mao, Xi JinPing, the new Chinese emperor, is no longer the only power in China. Deng's reforms created a large new class of highly successful unbelievably wealthy businessmen. They have a lot of money, and are doing what anybody with money would do in similar circumstances: protect their hard-earned assets from the new emperor that might take it away at a moment's notice. That means massive flight of capital and expertise from China. It also means bad news for the sustainability of China's economy. Jack Ma has retired. So will many others.

    China's terrible pollution is also the legacy of its economic development without paying attention to environmental protection. China is still using coal, in spite of its large investments into solar energy. Climate change is hitting China hard, and will continue to do so just like any other country on Earth. Note that the climate of China is very unpleasant to begin with.

    China must import food, a major long-term strategic weakness. And though China, under assault by the foolish Trump administration, has been lately flirting with Putin's Russia again, threatening the United States geopolitically, this union will not last, because both countries fear each other, and are natural historical enemies.

    Mao knew that Russia and China are natural geopolitical rivals, in spite of communism, which was then still a major ideological affinity. Mao never trusted the Soviet Union, partly the result of being treated with disdain by Russia when Mao visited its communist big brother. Mao never forgot the slight and reciprocated when Khrushchev went to China. But quite apart from this personal animosity, Mao recognized that Russia on its borders is a far greater danger for China, than the far away "paper tiger" United States. Furthermore, Mao always had a genuine general admiration for the United States.

    In the United States, Henry Kissinger engineered the United States reapproximation with China under president Nixon, but in China Mao was an eager and willing participant.

    I related above the multiple major strategic challenges faced by China, all of which puts in doubt their supposed inevitable hegemony in the future.

    Meanwhile, undoubtedly, we have our own problems. The most urgent is having a Russian mole in the White House, a mentally ill, erratic narcissist, publicity-seeking, lying corrupt fool, with no ethical standards. No semblance of strategic thinking. An ignoramus systematically assaulting our democratic institutions, the free press, sabotaging governmental agencies, and so on. In short, Trump is an absolute disaster, the worst president this country ever had. And it can be said that he is the symptom not the cause of the disease.

    But, on the positive side, this country has always reacted healthily through our history to similar challenges, and though we have major problems to overcome, there are definitely signs that once again the country is reacting well to the abysmally bad choice made in 2016.

    As Churchill said so wisely, democracy is the worst possible system, except when compared to all the others. This remains as true today as when Churchill uttered it, and is the ultimate best strategic advantage that the West has against our geopolitical rivals. Besides all the much worse problems that China and Russia face, they lack this major long-term advantage, because neither have democratic institutions to defend them against bad dictators like Putin and Xi JinPing.

    JE comments:  Istvan Simon's China analysis sounds spot-on to me.  One follow-up question:  Tor Guimaraes recently pointed out that China now outspends the US in scientific R & D.  Istvan, won't this investment go a long way towards counterbalancing China's rising costs of manufacturing?

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    • My Predictions on China: A Correction (Tor Guimaraes, USA 01/08/19 10:31 AM)
      Once again I must object to Istvan Simon putting words in my mouth (January 6th). I did not predict that "China will be the hegemon of the 21st century."

      Based on economic theory, trade is supposed to work for the benefit of both sides. But regurgitation of how the theory is supposed to work is no substitute for reality. It does not take a rocket scientist to that the strategic results from blind faith in economic theory has produced little good for the US while catapulting the PRC to prominence as nation in a few decades.

      Ditto for NAFTA, where the strategic results for Mexico and US are more appealing but only if one neglects to consider that the greatest beneficiaries are the drug traffickers who know only a small percent of their drug shipments by trucks will possibly be checked at the border.

      Last, contrary to John E's assertion, I hope to have never said that China spends more on R&D than the US (including private R&D). That is different from saying that China has more research publications that the US.

      JE comments:  My apologies to Tor Guimaraes--I did mistakenly confuse "number of publications" with "investment in R & D."

      Still, let's get out our long-term crystal ball.  What nation(s) will be hegemonic in 50 years?  Does the US have any legitimate challenger other than China?

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      • Hegemons of 2069 (Brian Blodgett, USA 01/09/19 4:10 AM)
        In regards to future hegemony, I believe that we must avoid just looking at the present and the near past and future, but look further back in history and try to project trends that we see. The US, without doubt, is currently waning in power and has been for some years, as it remains bogged down in internal political squabbles as well as external military conflicts. If I look back, it appears that the US really had its shining moments after World War II as it gained supremacy as a world power due to its military, but the years have not been kind to the nation and it is far from the superpower that it once was.

        The obvious contender to the US is China, which while having a far inferior naval and air force, is not lacking in the ground-based area nor in the world of potential future wars, that of cyber. China is no longer a sleeping giant but is spreading itself around the world, dabbling not in politics in the way that the US had, nor as the colonial powers of the past did, but rather by making themselves helpful to countries in ways that tie them economically--which is far stronger than military can hope to be in our present age.

        Yet we must not dwell on countries as we know them today since in 50 years will a country per se really matter as much as perhaps a collective group of countries? One can look at the European Union of today and say that it would not be able to match the US or China, but can we say that would be the case in 50 years? Remember from the mid-1800s to the start of the Great War, Britain was clearly the hegemonic power and then it was not until nearly 40 years later, after World War II, that the US picked up the mantle. Right now we are, to me, in a lull as the US wanes and China rises, but what will we have in 50 years remains the question.

        I believe that the US will, not in the near term, but eventually reverse its trend and begin to rise, but that it will not be enough to allow the country to be the sole hegemonic power. China will also continue to rise but it too will only go so far and the two may not be equals, but above most individual countries. However, I am including two other possibilities, that of a conglomeration of European countries joining together unlike they are not in the EU, but rather more like a real united European union (note the small u, not a large U) and as one be on a level that allows them to be seen as a third hegemonic pillar. The fourth leg pillar will be individuals / mega-companies that join together in a true unbreakable monopoly of world power. They will not have a military, but they will also not need one. What they will have is the economy and all that goes with it. It may not be Gates, Amazon, or other rich individuals and companies that we have today, but rather those that are the fittest for 2068, a world that we do not know yet what will be the predominate measure of power.

        Then there is the chance, the odd chance that we cannot rule out, that the hegemonic power will be none of the above, but rather a civilization yet unknown on earth, one from the stars that rules supreme over not only this world, but others.

        However, the best hope for our world is that of a genuine World Federation, a world from Star Trek where the nations of Earth come together to end the problems that currently plague our orb; economically, socially, medically, etc., and we are reaching out to the stars. If one follows Moore's Law states that we are doubling our knowledge / technology every 18 months or so and expanding it beyond science, and even if it scientifically flattens out at some point in the future, we may find ourselves far enough along to live in the world that our science fiction writers are already in--after all, consider what the Jetsons and Kirk had that most everyone thought was unrealistic and see how much we have already surpassed it--or if you really want to step back in time and look towards the future, take a few hours and read Lord Lytton's 1871 book, The Coming Race and see how much of his novel is now our past of 50 or so years.

        JE comments:  Brian Blodgett puts his finger on the essence of futurology:  we cannot know.  In any case, we're going to revisit this post in 2069!  Brian actually wrote 2068, but that's close enough.

        Lord Lytton is best known for Literature's most iconic opening line, "It was a dark and stormy night."  His The Coming Race is available on Project Gutenberg.  Click below.  Brian, can you give us a synopsis?  What was the essence of the Coming Race?


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      • China's Explosion of Patents: Quality or Quantity? (Henry Levin, USA 01/09/19 4:38 AM)

        Any discussion of scientific articles or patent applications must consider both quality and where the ideas came from originally. As somewhat of a China specialist who has taught at several of China's leading universities, I can provide some testimony on this.

        The first is that Chinese scholars and scientists are under tremendous pressure to produce articles and apply for patents. Unfortunately, analysis of both forms of accomplishment suggest that there is a considerable "borrowing" of intellectual property from the US, which is only thinly disguised. I am preparing classes for this coming semester and cannot get into detail, but I offer a reliable article as well as suggesting that interested readers use Google to check on this topic. The only articles that rave about the quality of Chinese patents are found on websites of Chinese patent lawyers.


        JE comments:   The 2018 article from the Federal Reserve Bank of St Louis reports that the majority of Chinese patents are in the "utility" category--meaning, new uses for existing technologies--rather than "invention."  Still, the sheer numbers are worthy of note.  As recently as 2013, China lagged far behind Japan and the US in the number of patents granted.  Now it is in the lead.

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        • Chinese Patents: Quantity over Quality? The Sinek Thesis (Rodolfo Neirotti, USA 01/14/19 3:11 AM)

          As usual, I enjoyed Henry Levin's post (January 9th), as well as reading the article on Chinese patents, grants and comparison with the leading countries.

          I wonder if the subsidies encourage Chinese researchers to prioritize quantity over quality. In addition, I am curious if for the
          same reasons they do not follow the sequence suggested in the following


          JE comments:  Simon Sinek's TED talk suggests that truly innovative leaders focus on the "why" rather than the "what" of their product.  (He cites Apple, Martin Luther King, Jr., and the Wright Brothers as examples.)  His 2009 book (one of five) is titled Start with Why.

          Mediocre leaders, in Sinek's view, focus on the what.  Might this hierarchy translate to invention itself?  I'm wondering where Amazon fits in the Sinek model.  Don't we buy from Bezos because of the stuff?

          A very happy 2019 to Rodolfo Neirotti.

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        • China's Scientific Output: "The Economist" (Henry Levin, USA 01/16/19 3:04 AM)

          For those who have access to the Economist, January 12, there is an long article starting on p. 68 called "Chinese Science: The Great Experiment."

          It lauds Chinese growth in science and technology relative to the past, but emphasizes concern about Chinese treatment of intellectual property which is obtained from other countries in clandestine ways or through reverse engineering. Even Chinese scientists agree that it is a numbers game, where "People fabricate or plagiarise papers so that they can pass their annual performance evaluations." Although the Chinese are making great strides to improve, the use of metrics like patent applications or articles is a misleading indicator without measuring the quality of the results and the origin of the ideas.

          This also seems to fit the dilemma of an authoritarian system of measurement and control in an endeavor where thinking outside the box is key. One advantage of the Chinese use of science and technology relative to the West is the focus on application that is paramount to scientific activity.

          JE comments:  The article is below.  Unfortunately, I've been "maxed out" on this month's free Economist content, so I can link it but not read it.


          With China's moon landing, new aircraft carrier (Type 001A--must be a clean sheet design), and the J-20 stealth fighter plane, the Chinese have chalked up one triumph after another in the field of "application."  Just last night on NPR, I learned that Chinese consumers have largely transitioned to a cashless economy, using phone-based payment apps for most purchases.  We tend to think of totalitarianism as less "nimble" than democracy, but the counterexamples are also numerous.

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      • China as Hegemon of 21st Century? From Ric Mauricio (John Eipper, USA 01/10/19 4:59 AM)

        Ric Mauricio writes:

        This is why I read my daily WAIS. A lot of interesting discourse. From Tor, Eugenio, Istvan, Brian, Henry, and of course, John E. I believe it was JE that brought the idea that China may be the hegemon of the 21st century, not Tor. Lots of interesting theories and predictions from all different perspectives.

        As a global investor, I am a student of global economics and history. I find it interesting that history repeats itself over and over again. Empires and dynasties rise, then internally, self-destruct as their citizens grow complacent with the status quo. The leaders of these empires and dynasties seem to make the same mistake over and over again. They grow their empires, then find that governing their far-flung conquests and their cultures become unwieldy. Over and over again, we see Genghis Khan, Caesar, Alexander, the Ottomans, the Persians, the British Empire (the reason most of the world speaks English in addition to their native languages), the Russian Empire, and today (as Eugenio would aptly point out), the American empire, overextend their power beyond their original borders.

        The PRC will make the same mistake, but how long it will play out in the future is anyone's guess. Are the Chinese smarter because they are utilizing economic power rather than military power? Perhaps so, perhaps not. There is always the temptation to utilize totalitarian power (via military power) to extend their economic (capitalistic) power. People tend to call the PRC a communist nation. In reality, when I visited Beijing and Hong Kong in the last 10 years, I tend to see the PRC as more capitalistic but still totalitarian than we (the US) are. But I am seeing, with the current administration, a move towards a more totalitarian system. So, looking forward, it is quite possible that a bird's-eye view will reveal that the PRC and the USA will be quite similar in makeup.

        As for the saber rattling between Taiwan and the PRC, I have to laugh. Taiwan is the conduit of venture capital funds between the West (US and Europe) and the PRC. The saber rattling is just for show. Like a magician, you look at this, while I am doing that.

        So what do I do when my country becomes less democratic and more totalitarian? I adapt, as the billionaires in China have done. Are there wealthy South and Central Americans who have come out of Argentina and Venezuela? You bet there are. How is that when most Argentinians and Venezuelans are suffering with their rapidly depreciating currencies, there are those who retain their wealth or even become wealthier? I can make you an instant millionaire, I promise people. Give me a dollar (US) and I will give you a million bolivars. Voila, instant millionaire. Don't like bolivars. Then give me 10,000 US dollars and I will give you give you a million Japanese yen. I used to have lots of fun with the Italian lira. One must invest accordingly. One must think. I find most people don't think. Just too hard to think.

        As we start our new year, it reminds me of people and their insanity of making the same resolutions and doing the same workouts year after year and expecting different results. Insane. And really, if they just stop and think, apply smarter ways of working out, they can stop the insanity. (Yeah, as a personal trainer, I teach people the principles of exercise sequencing, muscle confusion, and metabolic finishers and not overtraining; more exercise is not better; marathon runners have a lower life expectancy than average). Ditto for investing. More trading is not better. Investing is better than speculating.

        JE comments:  A joyous 2019 to you, Ric!  Can you tell us more about the symbiotic "love-hate" financial relationship between Taiwan and the PRC?

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        • China's "Long Game" and a Zhou Enlai Quote (John Heelan, UK 01/11/19 4:32 AM)
          Ric Mauricio (10 January) writes an interesting view of the future global hegemon. However, I suspect he ignores the different concept of time held in Chinese philosophy. I have often argued in WAIS that the Chinese play the "long game," and after 2000+ years of quasi-civilisation who can blame them?  (See link below.) Not only does the philosophy recognise "linear time" (as does the West) but also "cyclical time" (which might support Ric's comments).

          About the impact of the French Revolution, Zhou Enlai said it was "too early to say."  Given that the French Revolution of 1789 had occurred nearly 200 years before, Zhou was expressing the long view of history in a very witty and Oscar Wildean way.

          News of this quote flew quickly around the chattering classes in the West, and it was soon used as evidence that the Chinese (especially Chinese intellectuals and leaders) took the long view of things, that they were a patient civilization, and that, when they thought about the future, it was hundreds of years distant. Although critics suggest that Zhou was referring to the 1968 student revolutions that France suffered rather than the original 1789 one.


          JE comments:  "Professor Buzzkill" argues that the question was mistranslated for Zhou, but it's one of those countless quotes that should have been.  (When I watched TV news as a child, I always wondered why the Chinese would have a leader named JoAnn.)

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        • On Hegemony and Imperial Decay (from Gary Moore) (John Eipper, USA 01/10/19 4:00 PM)

          Gary Moore writes:

          Ric Mauricio (January 10), in his observations on imperial decay, might find
          a supporting voice in Toynbee, whose whole deal was that the consolidation
          of the greatest extent of an empire, in itself, is a sign that its decay is already
          well begun.

          Well, okay. And the earth will be a cold cinder someday. Who could
          argue with that? The difficulty is in Ric's own specialty, numbers. If the "decay,"
          as seen in thousand-year hindsight, started at, say, the beginning of the Augustan
          consolidation, then for any given individual there, or their children, or grandchildren,
          or grandchildren's children, the earth was unlikely to become a cinder that they noticed.
          Technology makes the world an ever-new riddle--and the speed now makes any assumptions
          seem old. Three hundred years hence, I'm going to be checking sharply on Ric's impression
          of a possible rise and fall of China. Speed? In an age that is collapsing even such cultural icons
          as homophobia, smoking, and mere language translation, might even the word "hegemony"
          become somehow a musty over-simplification? Probably not. So don't hold me to this,
          three hundred years hence.

          Coming soon: analysis of Trump's Tuesday night (January 8th) wall speech. Short answer: too dismal
          for words--because not just Trump but all of them, on both sides, are distorting the facts.
          Should we apply for membership in some more logical species, like the tapeworms or botflies?
          The slow, fragmentary, painful, illogic-strewn continental rapprochement of Spanish-speaking
          North America with English-speaking North America may be a historic imperative that will
          continue to produce surprises. Who would have thought, as recently as 2014, that a wall could
          even be proposed? In the Mexican Revolution a century ago, as a catastrophically convulsing
          nation's population dropped by a million, people on the US side of the border sat on rooftops
          and watched, as an entertaining but contained spectacle, the disastrous battles just over on
          the Mexican side; there was already some kind of wall, not a material one but dramatically
          sealing off the chaos (Pancho Villa's saddlebag jerry cans of kerosene at Columbus, New Mexico,
          only proving the rule). The deeply mystical-seeming differences have now produced another
          landmark, a few nights ago.

          JE comments:  In the long term we're all dead, but you and I are going to revisit this topic in three centuries, Gary!

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        • Taiwanese Investment in PRC; from Ric Mauricio (John Eipper, USA 01/16/19 3:36 AM)

          Ric Mauricio writes:

          John E asked about Taiwanese investment in the PRC.  I found this:  "Since the 1980s, Taiwanese companies have been investing heavily into China (the PRC), primarily through Hong Kong. The large flows of Taiwanese capital into the PRC and Southeast Asia reshaped the economic and political ties amongst these countries in Asia Pacific, with significant regional and global consequences. While the investment in China is well documented, there is relatively little literature in English on recent Taiwanese investments in Southeast Asia." (Asian Survey © 1996, University of California Press)

          The best-known Taiwanese company in the PRC is Hon Hai Precision Industry, better known as Foxconn, maker of the Apple iPhones.

          On the discussion of totalitarianism vs. democracy, capitalism vs communism/socialism, if one were to study the history of China, one would see a common thread of capitalism governed by totalitarianism. Only during Sun Yat Sen's Republic of China in the early 1900s did we have a semblance of democracy in China. The issue is our cultural perspective. We see things not through the eyes of a Chinese person in China or an African person in Africa or a person in Mideast. So when we say we prefer democracy, it is because we have grown up in a democracy and been taught democratic principles.

          Can capitalism and totalitarianism coexist? One need only look at Singapore to answer that question in the affirmative. But it takes a different culture and a benevolent leader to make it work. That my friend, is the crux of the discussion. Even in companies that I have had to consult with here in Silicon Valley, you will find very few benevolent managers. Don't even get me started on the personalities of a Steve Jobs or a Carly Fiorina. There are so many pointy-haired managers that I lost count. Fortunately, they do create problems and as "The Fixer," I am well paid to come in and "fix" or "clean up," as in Pulp Fiction.

          JE comments:  Newer WAISers may not remember one of Ric Mauricio's classic posts, the 2014 "I made Carly Fiorina mad."  Ric gives us a textbook example of "pluck."  Note that Ric prophetically references another prickly CEO, Donald J. Trump:


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      • Hegemons of 2069: My Thoughts (Tor Guimaraes, USA 01/11/19 4:17 AM)
        Commenting on my post of January 8th, JE asked an intriguing question: "What nation(s) will be hegemonic in 50 years? Does the US have any legitimate challenger other than China?"

        Fifty years is not a very long time for addressing such questions. After the old US-versus-USSR contest for hegemony, there is no major hegemonic power on the horizon. The US is slowly losing (or frittering away) its ability to lead on all fronts: social, political, technical, economically speaking. Contrary to what the European Union's rabid critics seem to think, my bet would be on it as a potential economic rival for the US (after China). However, they seem unable to sustain their social, political, and economic integration in an effective way.

        We must never underestimate Russia as a major potential player. I share Cameron Sawyer's laments of how several US administrations were incapable of responding in kind to several Russian leaders over time who were wise enough to see the unproductive results from rivalry versus greater cooperation and partnership. Again I blame the disconnect on stupid ideology and private interests from our side. In my opinion, we engaged China way beyond the wise and pissed on the Russians in the same fashion.

        Japan has amazing capability for leadership but is relatively shy (for historical reasons) and seems to avoid the hegemonic role altogether. Countries like Brazil, Argentina, Indonesia and India are too corrupt to get out of their own shadow. They don't have the credentials for hegemony beyond their immediate neighborhood.

        Last, fifty years is not enough but perhaps in a hundred years, Canada and Australia may expand their own identities and become major players in the world stage. Most other countries are just too small to project an image significant enough for overall leadership, even though some might be quite capable of hegemony in specific narrower areas.

        JE comments:  The EU's existential struggles have prevented it from hegemony until now.  Twenty years ago, wouldn't most people have predicted that by 2019 it would be more integrated and powerful?

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  • Is the Chinese Model "Sustainable"? (Tor Guimaraes, USA 01/13/19 11:58 AM)
    Commenting on my post of January 3rd, JE stated: "Democracy is messy, yes, but is it also stupider? I'm still struck by the eagerness of many monied Chinese to leave the country. The central question: how truly 'sustainable' is China's system of free-wheeling capitalism mixed with political totalitarianism? Doesn't this model present internal contradictions? To be sure, we said the same thing ten or twenty years ago, and the Party seems to be more in control than ever."

    There are several interesting dimensions to this commentary. The most important is that true democracy is never stupid because it represents the will of the people's majority, which I normally trust more than any small oligarchy or dictator. In the case of the PRC the democracy is limited to the members of the Communist Party. That is not a true democracy, but it has worked quite well for China in the last few decades when they got a "get out of the economic jail free" card from the Western world by becoming their cheap manufacturer. In that way Chinese "totalitarian democracy" seems more effective than US corrupted democracy.

    Regarding John's characterization of "China's system of free-wheeling capitalism mixed with political totalitarianism," I think the system is very sustainable as long as the totalitarian side does not commit horrible mistakes. There is no basic contradiction: one is free to make money as long as one doesn't contradict Party rules and edicts; they both can be on the same side. I believe the buzzword for this combination is Fascism, which worked reasonably well for the Nazis until their crazy party leader started WWII.

    JE comments:  Totalitarian democracy--I'll have to chew on that one a bit, before I file it in the "oxymoron" drawer.  Tor Guimaraes's comment raises a fundamental and unanswerable question:  what do people prefer, prosperity or freedom?

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    • Prosperity or Freedom? Maslow Hierarchy of Needs (Tor Guimaraes, USA 01/14/19 9:16 AM)
      Regarding John E's question, "what do people prefer, prosperity or freedom?" I believe the question has been answered by Maslow hierarchy of needs. Prosperity, which can be reasonably well defined as freedom from want, is thought most important among hungry and destitute people. Once people are reasonably free from these needs, they want security, freedom to travel, to express themselves, to do whatever they want. Needless to say, wealthy people understand the need to increase their wealth further to secure their freedom to influence their social, political and economic systems.

      The word "freedom" is meaningless unless qualified as freedom to do what. Thus in a hybrid (capitalism mixed with political totalitarianism) nation like China today, there will always be political tension between the Party and the people. Very likely the totalitarianism will have to give ground slowly but inexorably, unless external forces provide the excuse for tighter controls. The clash may come if their capitalist system fails to deliver prosperity to the masses. Rest assured the Party is keenly aware of the importance of a reasonably "fair" income distribution, which is really never achieved satisfactorily to all.

      On the other hand, it is also interesting to note that countries with dramatic gaps between the wealthy/high income oligarchy and the people, growing poverty can be slowly introduced to the masses even though the nation is supposedly democratic. Thus I hypothesize that under these conditions the growing poorer masses care less about political freedom and settle for getting money, religion, political ideology, and misinformation.

      JE comments:  Or the clash may come because the Party delivered prosperity.  Perhaps this is why Xi seems to be doing his damnedest to achieve absolute power.

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