Kingdom blog

Is authoritarian capitalism the future?

The explosion of capitalism in China has many Westerners asking when political democracy—as the “natural” accompaniment of capitalism—will emerge. But a closer look quickly dispels any such hope.

Modern-day China is not an oriental-despotic distortion of capitalism, but rather the repetition of capitalism’s development in Europe itself. In the early modern era, most European states were far from democratic. And if they were democratic (as was the case of the Netherlands during the 17th century), it was only a democracy of the propertied liberal elite, not of the workers. Conditions for capitalism were created and sustained by a brutal state dictatorship, very much like today’s China. The state legalized violent expropriations of the common people, which turned them proletarian. The state then disciplined them, teaching them to conform to their new ancilliary role.

The features we identify today with liberal democracy and freedom (trade unions, universal vote, freedom of the press, etc.) are far from natural fruits of capitalism. The lower classes won them by waging long, difficult struggles throughout the 19th century. Recall the list of demands that Karl Marx and Friedrich Engels made in the conclusion of The Communist Manifesto. With the exception of the abolition of private property, most of them—such as a progressive income tax, free public education and abolishing child labor—are today widely accepted in “bourgeois” democracies, and all were gained as the result of popular struggles.

So there is nothing exotic in today’s China: It is merely repeating our own forgotten past.

Posted by nick at 08:58 AM | Permalink

Big Red Checkbook

"The glory of Our Empire shines on this universe with brilliance," a ruler once declared in a letter to courtiers in London. "Not one single person or country is excluded from Our kindness and benevolence." He had good reason to be pleased. His country sat astride the global economy. His army was large, his domains vast. He believed his country to be the center of the world, and a good chunk of the world agreed.

And yet, despite the fulsome satisfaction of this 1805 letter, its author, the head of the Manchu Qing dynasty and emperor of China, had cause for anxiety. Less than twenty years before, China had suffered a humiliating defeat in Vietnam and continued to have difficulty besting the Burmese, Tibetans and Zunghars. Trade with Europe was still expanding rapidly. But the European powers were quickly getting the upper hand by controlling shipping and financial flows, and China was developing a dangerous dependency on silver and opium. Until the late nineteenth century, China's economy was the largest in the world, but then it headed precipitously downward. The Chinese knew practically nothing about the modern firearms with which Europe was taking over the world.

Did the advisers to the Jiaqing Emperor warn him of the coming conflict with Europe and the potential collapse of the Chinese Empire? Perhaps some courageous and far-seeing mandarin spoke of Europe's rise, of the dangerous trajectory of the terms of trade, of the military modernizations of Britain, of the equally pernicious soft power of missionaries and merchants. The documentary evidence makes no mention of such a pundit. In 1816, after dealing with barbarians from Britain who refused to kowtow to the emperor, the Chinese court sent another letter to London: "The Celestial Empire has little regard for foreign things." By the time China learned the value of foreign things and adopted the Japanese approach of "Eastern thought, Western machines," it would be too late. The Chinese Empire had been carved up like a crisp Peking duck.

Two hundred years later, the roles are reversed. As John Quincy Adams once accused the Chinese of "arrogant and insupportable pretensions," so now America is subjected to the slings and arrows of the world's disgruntled and disaffected. Yet the US President surveys his realm and sees only cause for satisfaction: America is God's country and Americans his chosen people. There are barbarians at the gate, of course, repudiators of American benevolence who must be crushed. A small clutch of imperial cheerleaders, the Max Boots and Niall Fergusons, thrill to the President's muscular stance. Pundits, meanwhile, play the latest intellectual parlor game: name that imperial analogy. Will the US empire end with a Roman bang or a British whimper? Or, blind to the desperate need for reform and a tempering of arrogance, will the United States suffer China's nineteenth-century fate? In place of opium, there are the distracting pleasures of Chinese goods for sale at Wal-Mart. Instead of the redoubtable Vietnamese, there are the recalcitrant Iraqis.

Posted by nick at 10:45 AM | Permalink

Historian Niall Ferguson's theories compare the world today with the world before World War I, and the rise of "Chimerica"

The defining feature of the current world economy is not an excess of liquidity or a shortage of assets, but the gap between company profits and the level of real interest rates. This wedge between the return on capital and the cost of capital is in large measure attributable to the spectacular rise of what we call "Chimerica": the sum of China, the world's most rapidly growing emerging market, and America, the world's most financially advanced developed economy.

One of Ferguson's themes is the shift in power from the West to the East. "It suddenly hits you that it's been downhill for the West since 1900, when the West ruled the world," he says. "It has become a cliché to think of the 21st century as an Asian century, but it has already happened. Americans like to think of the 20th century as an American century, which was supposed to be the consequence of victory in World War II. I think that never happened. Throughout the Cold War, only half the world enjoyed the benefits of American hegemony."

Ferguson calls the U.S. an "empire in denial." To be an empire in denial, he wrote in the September/October issue of Foreign Affairs, means "resenting the costs of intervention in the affairs of foreign peoples, and underestimating the benefits of doing so."

Ferguson's message isn't entirely gloomy. While many worry about the enormous U.S. trade imbalances with China, Ferguson sees the U.S.-China relationship in a more favorable light, referring to these intertwined economies as "Chimerica." As a student of history, he knows it is unusual for a relatively poor country like China to finance the richest nation on earth. But he thinks the system can be sustained because the Chinese may be willing to add enormous dollar reserves and tolerate a strong currency in order to support their critical export industries and expand employment.

Ferguson calls China "East Chimerica" and the U.S. "West Chimerica." "East Chimericans save and West Chimericans consume," he says. "East Chimericans put together flat-screen TVs and West Chimericans are responsible for the knowledge frontier."

Posted by Andy at 10:54 AM | Permalink

Dump Trash, Add Scavengers, Mix and Get a Big Mess

Scavengers sifting through the trash recently at Shanghai's largest dump, which is bigger than Central Park

SHANGHAI, March 28 — Song Tiping, a peasant from rural Jiangsu Province, and Bernie Kearsley-pratt, an Australian executive, would not at first glance seem to have much in common, and they do not, except for one thing: both were drawn here by the unlikely financial promise of garbage, towering mountains of refuse that attest to this city's status as a raging boomtown. And now they spend their days in a cat-and-mouse game, Mr. Song joining throngs of poor Chinese scavenging in the trash and Mr. Kearsley-pratt, who manages Shanghai's largest municipal dump, trying to keep them out.

The Australian, who works for a French company that is helping manage this city's garbage, says his difficult job is made all the harder — indeed on some days he himself would say impossible — by the cruel fact that even in the heartland of a booming China, peasants can make far more money collecting plastic trash bags, tin cans and the rubber soles of shoes than they can as farmers or ordinary day laborers.

Most days Mr. Song, who came to Shanghai seeking a way to pay the hefty tuition fees for his eldest daughter, who had been admitted to one of the country's best high schools, spends several hours dodging monstrous earthmoving equipment in the landfill, one of the largest in Asia, to pick trash.

Were it not for dangers of the job, like being crushed by a bulldozer, inhaling noxious gases while wading knee-deep in fetid refuse or being beaten by warring gangs of scrap pickers for the mere prize of an unbroken bottle, it might even be considered a good job.

Posted by nick at 10:58 PM | Permalink

Hollywood's newest business model?

The video pirates of Shanghai, China, have developed an amazingly successful business model for exploiting the home market. In the back rooms of video stores, shoppers fill their baskets while choosing from an almost endless inventory of DVDs that includes all of the new movies playing in America, Europe, and Japan, as well as a full complement of Oscar screeners. You can also buy current television series—even the latest episodes of Lost, 24, and Desperate Housewives. In addition, these stores stock a huge number of older movies and provide boxed sets of the complete works of noted directors. Finally, in a modified form of video on demand, if a title is not on the shelves, the store gets it from some other location in a matter of minutes.

With these pirated editions, there are no "windows" or artificial delays before a new movie is released on DVD and no zone restrictions that can prevent DVDs from being playable. Most are professionally burned from digital masters, with 5-channel sound, multi-language menus, and high picture quality. The DVDs cost about $1.25, which is less than a movie ticket in Shanghai. As a result of this aggressive pricing, people in China rarely go to movie theaters—ticket sales amounted to only 17 cents per capita in 2005. Instead, they buy shopping baskets full of DVDs.

Posted by nick at 11:08 PM | Permalink