The Long View 2008-08-02: What is Happening in China; what is happening in America
The end of this blog post by John J. Reilly is an extended reflection on where he thought American politics was going. I’d say he guessed right.
There are, I know, benighted Libertarians who say that any redistribution of income is illegitimate. For my part, I preach in season and out that quite a lot of redistribution is necessary, not only to maintain the infrastructure of civilization, but also to keep the social peace. What the senator is proposing, however, is less like the New Deal than like sacking the hacienda and distributing the loot to the descamisados. Essentially, the senator is proposing to maintain his own popularity by imposing punitive taxes on an unpopular class of taxpayers and using the revenues to send checks to the voters. (Again I wonder: more than once?)
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However, it would be the first whiff of a trend toward the brutalization of national politics that history suggests is not reversible.
What is Happening in China; what is happening in America.
I am a great fan of the international political consultant Stratfor. Certainly their marketing is impressively persistent. I was particularly intrigued by this email teaser-copy for a free article on their website:
There's something strange underway in China. It's still at the "dog that didn't bark" stage. But here's the critical point: forecasting is art as much as science, and the trick-knees and queasy bellies in our Intel department are working overtime right now. Join Stratfor now to see what's keeping our team up nights.
The Olympics are kicking off in a week. It's supposed to be China's big party, their emergence onto the global stage demonstrating they're open for business. So why this incongruous behavior?
- Why have they stopped issuing business visas for travel to Shanghai?
- Why are regional banks defying the central government on international investment decisions?
- Why are a whole host of contradictory policies on foreign direct investment being imposed, "refined," and pulled?
"Security Reasons" - the catch-all explanation for every unexplained decision in the post-9/11 world simply doesn't cut it. (For the full analysis, read yesterday's Geopolitical Weekly on the topic.)
There's something else going on, and candidly, we're still at the stage of asking questions rather than providing answers...
If you read the article, you will learn that China has simply been following an enlarged version of the Asian Way that successful East Asian economies have been following for nearly fifty years: growth for growth’s sake, with the emphasis on increasing revenue rather than profit. In other contexts, I have seen it said that economies like this are really government-controlled currency-exchange machines. They turn soft local currencies into hard international ones, at exchange rates far more favorable than the unaided market would afford.
This kind of system does not last forever, but it is not necessarily irrational. Even after the bubble pops (as it invariably will), a nation that practices this kind of growth strategy will still be better off, provided its political system has the legitimacy and stability to weather the transition to a true market system.
Whether the People’s Republic has that kind of durability remains a question; Gordon Chang, as we have noted here before, argues that it doesn’t. However, that is not quite the point Stratfor is making. Rather, their analysis echoes that of Fareed Zakaria, who has pointed out that China’s growth strategy has required a trend toward decentralization so strong as to call into question the future ability of the Chinese state to function as a world power. Stratfor proposes that the central government believes that decentralization has gone too far. The central government is therefore trying to restrict the access of local authorities to the foreign capital they have been using to promote local growth. In other words, the government is willing to trade low growth for the continued hegemony of the Communist Party.
For a variety of reasons, the effects of such a policy could become very awkward, very fast. The local authorities may make a fuss. So may the ordinary people who had been counting on the fast growth. There will also be audible unhappiness among the international investors who had persuaded themselves that this was one bubble that would never burst.
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Speaking of awkward policies, Democratic presidential candidate presumptive, Senator Barack Obama, has connected the dots between two proposals that already appear on his campaign’s website:
The Democratic presidential contender called for an "emergency energy rebate" of as much as $1,000 to middle- and low-income families to be paid out as early as this fall and financed through a windfall-profits tax on oil companies.
Actually, radio and television news reports make the connection even closer: the windfall tax money is to go into a special fund for the rebates, which I suppose might be replenished annually.
There are, I know, benighted Libertarians who say that any redistribution of income is illegitimate. For my part, I preach in season and out that quite a lot of redistribution is necessary, not only to maintain the infrastructure of civilization, but also to keep the social peace. What the senator is proposing, however, is less like the New Deal than like sacking the hacienda and distributing the loot to the descamisados. Essentially, the senator is proposing to maintain his own popularity by imposing punitive taxes on an unpopular class of taxpayers and using the revenues to send checks to the voters. (Again I wonder: more than once?)
This would be a very Third Worldly measure, the sort of thing that might recommend itself to Venezuelan President Hugo Chavez. In the senator’s defense, we should note that he need not have gone so far afield to find inspiration for the tax-and-rebate proposal. This is very much like what a certain class of “community organizers” do: they require businesses needing government licenses in areas where the organizers have influence to subsidize the organizers and their supporters. The senator is simply proposing to introduce this arrangement to the national level.
The senator’s proposal is actually a component of a larger energy policy, the keynote of which is to depress petroleum production in order to accelerate the transition to other sources of energy. The rebates are a subtle way of making persistently higher fuel prices politically tolerable. This strategy is not irrational. However, it would be the first whiff of a trend toward the brutalization of national politics that history suggests is not reversible.
Copyright © 2008 by John J. Reilly
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