Free Markets, Free People

China


Woohoo, Marx is cool again

Marx is making a comeback?  Yes friends please read this bit of propaganda  (beside the nonsense put forward by the “Marxist thinkers” – wait, isn’t that an oxymoron?):

…The Communist Manifesto: "What the bourgeoisie therefore produces, above all, are its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable."

[…]

Today, 164 years after Marx and Engels wrote about grave-diggers, the truth is almost the exact opposite. The proletariat, far from burying capitalism, are keeping it on life support. Overworked, underpaid workers ostensibly liberated by the largest socialist revolution in history (China’s) are driven to the brink of suicide to keep those in the west playing with their iPads. Chinese money bankrolls an otherwise bankrupt America.

The irony is scarcely wasted on leading Marxist thinkers. "The domination of capitalism globally depends today on the existence of a Chinese Communist party that gives de-localised capitalist enterprises cheap labour to lower prices and deprive workers of the rights of self-organisation," says Jacques Rancière, the French marxist thinker and Professor of Philosophy at the University of Paris VIII. "Happily, it is possible to hope for a world less absurd and more just than today’s."

Can anyone spot the elephant NOT in the room?  No? 

What is missing in this supposed formula of disaster in the West?  Why Western government profligacy usually driven by what?  Social welfare programs.   And they’ve produced what?.  Unsustainable debt.  Unsustainable spending.  Crony capitalism.  Etc.

What happened in the West wasn’t, as the left keeps trying so hard to claim, a matter of capitalism or free markets going bad (or unchecked, or unregulated, or, well you name it).

What happened was mostly a product of crony capitalism, much of the problem driven by government policy.  Because of that collusion all the warning signs a market would have sent were paved over or ignored.  It was as much a problem of government policy driving perverse incentives as “greed”.   Greece did not happen because of capitalism.  And, frankly, neither was what happened here a result of capitalism.  Not, at least, as anyone who knows what the word means would define it.

So the real irony is that where a country begins to let markets work as they should – note the word “begins” – it sees rapid and incredible growth as well as spreading prosperity.  That would be China.  And the fact that China is still a Communist country doesn’t at all mean their “socialism with Chinese characteristics” is the reason they’re doing well economically (as they’ll find out soon enough when their bubble bursts).

Mostly, in China’s case, it was a matter of timing, which, by the way, is beginning to turn on them.  Some of the industries that settled in China are looking or locating in India (which, for lack of a better term, is about to become the “new China”).

Why?  Because the prosperity that China has enjoyed because it was well positioned to take advantage of the global markets at the time has driven expectations in China up exponentially.  That means demands for higher wages and better benefits.  That means a higher cost of doing business which will eventually see China priced out of certain markets and industries it now enjoys some exclusivity in.

That’s capitalism and my guess is the Chinese will do everything in their totalitarian power to fight it and thereby hold back the progress of their people.  That’s  how socialism/communism works.

So let Marx make a comeback.  As with most of these periodic absurd paeans to socialism that usually begin in academia, what is always, always, always swept under the rug is that Marxism in its various forms last century was the cause of the following deaths:

Given those numbers (by the way I think the Latin American numbers are low, especially if they include Cuba), it still boggles the mind that somehow there exist out there people who claim to be “Marxist thinkers” and that anyone takes them seriously or, in fact, gives them the time of the day.

It reminds me of the Che chic.  The elevation of a sociopathic mass murderer to cult revolutionary status.  The Horst Wessel of Communism. 

A man who spent much of his time executing helpless prisoners (to include kids) has been scrubbed by people much like the “Marxist thinkers” above to be reborn as some ideal revolutionary.  But under that veneer, he still remains a sociopathic mass murderer  that was bent on achieving the totalitarian subjugation of the people of Cuba and anywhere else he could spread his “Marxist revolution”.

That’s precisely what you’re seeing with the nonsense about Marx being reborn.  A new paint job on the same old totalitarian killing machine.  It makes you wonder about the intellectual heft of those who would, once again, fall for the false promises of an ideology which has proven its bankruptcy with the lives of over 90+ million people.

But they’re out there.


China makes reincarnation without government permission illegal

No, really, you read it right.  The Chinese government has banned reincarnation without government permission.

In one of history’s more absurd acts of totalitarianism, China has banned Buddhist monks in Tibet from reincarnating without government permission. According to a statement issued by the State Administration for Religious Affairs, the law, which goes into effect next month and strictly stipulates the procedures by which one is to reincarnate, is "an important move to institutionalize management of reincarnation."

Actually, despite the article’s claim (and as the article eventually points out), it really isn’t as an absurd of an act as it may seem, even though it is certainly representative of totalitarianism.

In fact, it is all about China’s war with the Dalai Lama.

At 72, the Dalai Lama, who  has lived in India since 1959, is beginning to plan his succession, saying that he refuses to be reborn in Tibet so long as it’s under Chinese control. Assuming he’s able to master the feat of controlling his rebirth, as Dalai Lamas supposedly have for the last 600 years, the situation is shaping up in which there could be two Dalai Lamas: one picked by the Chinese government, the other by Buddhist monks.

We can all figure out how that will work. 

The Chinese communists surface very visibly every now and then as if to remind everyone that China is far from a free country.  And, in such a totalitarian country, no detail is too small for the government to ignore … even something in which it likely doesn’t even believe.

~McQ

Twitter: @McQandO


$2 billion US dollars to Brazil, but the oil will go to China

Remember this?

The U.S. is going to lend billions of dollars to Brazil’s state-owned oil company, Petrobras, to finance exploration of the huge offshore discovery in Brazil’s Tupi oil field in the Santos Basin near Rio de Janeiro. Brazil’s planning minister confirmed that White House National Security Adviser James Jones met this month with Brazilian officials to talk about the loan.

The U.S. Export-Import Bank tells us it has issued a "preliminary commitment" letter to Petrobras in the amount of $2 billion and has discussed with Brazil the possibility of increasing that amount. Ex-I’m Bank says it has not decided whether the money will come in the form of a direct loan or loan guarantees. Either way, this corporate foreign aid may strike some readers as odd, given that the U.S. Treasury seems desperate for cash and Petrobras is one of the largest corporations in the Americas.

And  this?

“We want to work with you. We want to help with technology and support to develop these oil reserves safely, and, when you’re ready to start selling, we want to be one of your best customers.”

Mr. Obama was saying that while he was drastically slowing down leasing and permitting in the US and whining about “subsides” to US oil corporations.  We apparently can subsidize government controlled oil companies in foreign countries, but not here (and I’m not arguing for subsidies here – just pointing out the usual Obama contradiction – kind of like he’s against bailouts, except for Chrysler, GM, Solyndra, etc.)

Well, that little jump-start of ObamaDollars has indeed helped “develop these oil reserves”.  And the beneficiary?

Off the coast of Rio de Janeiro — below a mile of water and two miles of shifting rock, sand and salt — is an ultradeep sea of oil that could turn Brazil into the world’s fourth-largest oil producer, behind Russia, Saudi Arabia and the United States.

The country’s state-controlled oil company, Petrobras, expects to pump 4.9 million barrels a day from the country’s oil fields by 2020, with 40 percent of that coming from the seabed. One and a half million barrels will be bound for export markets.

The United States wants it, but China is getting it.

Less than a month after President Obama visited Brazil in March to make a pitch for oil, Brazilian President Dilma Rousseff was off to Beijing to sign oil contracts with two huge state-owned Chinese companies.

Well done, Mr. Obama.

[HT: Red Country]

~McQ

Twitter: @McQandO


Iran, the Straits of Hormuz and “Armageddon”

Iran is supposedly being sternly warned that attempting to close the Straits of Hormuz will not be tolerated.  The Iranians have put forward a bill in their Parliament which would require warships from any nation desiring to transit the Straits to get the permission of Iran first.

Of course, the Straits are considered by the rest of the world as “international waters” while the premise of the Iranians is they’re national waters subject to the control of Iran.

Most experts believe that this has been precipitated by sanctions imposed on Iran by much of the world, but especially the Western powers.  Closing the Straits of Hormuz would be viewed by most of them as an act of war.

So, per the New York Times, a secret channel has been opened with Iran’s top leader, Ayatollah Ali Khamenei, in which he has been informed the US would consider any such attempt to close the Straits as “a red line” that would provoke a response.

DoD has made the position publically official:

Gen. Martin E. Dempsey, the chairman of the Joint Chiefs of Staff, said this past weekend that the United States would “take action and reopen the strait,” which could be accomplished only by military means, including minesweepers, warship escorts and potentially airstrikes. Defense Secretary Leon E. Panetta told troops in Texas on Thursday that the United States would not tolerate Iran’s closing of the strait.

So the line is drawn.  The hand is closed into a fist with a warning.  Bluff or promise?  Will Iran test it to see?

Here’s why some think they won’t:

Blocking the route for the vast majority of Iran’s petroleum exports — and for its food and consumer imports — would amount to economic suicide.

“They would basically be taking a vow of poverty with themselves,” said Dennis B. Ross, who until last month was one of President Obama’s most influential advisers on Iran. “I don’t think they’re in such a mood of self sacrifice.”

Of course fanatics often don’t think or reason in rational terms, but Ross has a point.

Meanwhile, as the sanctions continue to bite, Iran’s president is finishing up a South American swing to shore up support (and resources one supposes) for his regime from the usual suspects – Chavez, Ortega and their band of merry socialists.  China is also a player in all of this, although not a particularly enthusiastic one.  Iran exports 450,000 barrels a day of oil, which is now not being bought by Europe or the US.  So it sees an opportunity here to up its share of that total.  John Foley thinks China will fudge on sanctions, at least partially.  That, of course, could extend the drama.

And while all of this is going on, Iranian nuclear scientists are blowing up pointing to some sort of effort by some nation(s) or group to slow and frustrate what everyone believes is Iran’s push for nuclear weapons.  That, by the way, may be part of the discussions in South America if you get my drift.

Don’t know if you noticed recently, but the Doomsday Clock has added a minute, the first since 2007 when it subtracted one.  We’re no 4 figurative minutes from “Armageddon”.  Iran certainly figures in the move.

So far, the “reset” is going just swimmingly, isn’t it?

~McQ

Twitter: @McQandO


Obama’s new defense strategy: Prescient or problematic?

Over the years I have seen more “new” defense strategies than one can shake a stick at.  And I’ve noticed one thing about all of them: for the most part they’ve been uniformly wrong.  We have mostly had an abysmal record in divining what sort of a military we need in the future, and I doubt this particular version will be any better.  Here’s POLITOCO’s Morning Defenses’ summary:

THERE WERE NO BIG SURPRISES IN THURSDAY’S ANNOUNCEMENT, mainly because the most important real-world effects of the new strategy won’t be known until the president’s budget proposal is released. Reaction was mainly predictable as well – Republicans were concerned about weakening U.S. power in a dangerous world, progressives blasted it as too timid and a lost opportunity for Pentagon reform, and veterans groups are concerned about future benefit cuts.

THE REAL TEST WILL BE whether the strategy will result in a military force capable of handling the unintended consequences of world events. The president is sitting comfortably right now – he’s ended U.S. involvement in Iraq, set a path for withdrawal in Afghanistan and seriously weakened Al Qaeda. Libya looks like a success story for the multilateral cooperation the strategy emphasizes for the future, and there are signs the sanctions on Iran are starting to bite. But any or all of these situations could turn for the worse in a heartbeat, and wake up U.S. voters who right now aren’t really paying attention. Nothing is settled.

IT’S ALL ABOUT RISK - Military leaders acknowledge and accept that the new strategy brings new risks, which they consider acceptable in the current environment. The United States can get away with a smaller army because its leaders don’t expect to be fighting any large ground wars in the future …

I’d actually argue that some of the assessments made in the middle paragraph are debatable.  Libya, for instance, seems anything but a success with Islamist militias poised to take over.  It certainly may be seen as a “military” success, but military success should tied to a strategy of overall success, not just whether it was able to defeat a rag-tag enemy.  After all the the military is but the blunt force of foreign policy, used when all less violent means have been exhausted.  There should be an acceptable outcome tied to its use.  Libya’s descent into Islamic extremism seems to argue against “success” on the whole.  Couple that with the fact that al Qaeda has set up shop there, and you could argue that even if al Qaeda has been “seriously weakened”, it has just been given a new lease on life in Libya.

That said, let’s talk about the defense cuts.  The last paragraph is obviously the key to the strategy.  It is about assessing risk and accepting that risk based on that assessment.  The problem is the phrase “acceptable in the current environment”.  The obvious point is that what is “acceptable in the current environment” may be problematic in any future environment.  

So what is happening here is a political position/decision is being dressed up as a military assessment in order to justify the political position.  We’ll cut land forces and concentrate on air and sea forces.

But where are we fighting right now?  Certainly not in the air or at sea.

The Army is already is slated to drop to a force of 520,000 from 570,000, but Mr. Panetta views even that reduction as too expensive and unnecessary and has endorsed an Army of 490,000 troops as sufficient, officials said.

The defense secretary has made clear that the reduction should be carried out carefully, and over several years, so that combat veterans are not flooding into a tough employment market and military families do not feel that the government is breaking trust after a decade of sacrifice, officials said.

A smaller Army would be a clear sign that the Pentagon does not anticipate conducting another expensive, troop-intensive counterinsurgency campaign, like those waged in Afghanistan and Iraq. Nor would the military be able to carry out two sustained ground wars at one time, as was required under past national military strategies.

The last sentence is pure bull squat.  National strategy goes by the boards when national necessity demands we fight “two sustained ground wars at one time” whether we like it or not.  The strategy would simply mean we’d end up fighting those two ground wars with a less capable force than we have now.  The other unsaid thing here is if you think we used the heck out of the Army National Guard in the last decade, just watch if something unforeseen happens after these cuts are made.

Also wrapped up in this new “national strategy” is some naive nonsense:

"As Libya showed, you don’t necessarily have to have boots on the ground all the time," an official said, explaining the White House view.

"We are refining our strategy to something that is more realistic," the official added.

Sorry to break it to the White House, but that’s not a “realistic strategy”.  It’s a wish.  I can’t tell you how many times, since the advent of the airplane in combat, I’ve heard it said that the necessity of maintaining ground troops is coming to an end.

Yet here we are, with troops in Afghanistan and 10 years of troops in Iraq.  Libya was a one-of that still hasn’t come to a conclusion and as I note above, what we’re seeing now doesn’t appear to improve the situation for the US – and that should be the goal of any sort of intervention.   I certainly appreciate the desire not to nation build, but that doesn’t necessarily mean you need less ground troops available in a very dangerous and volatile world.  Air and sea are combat multipliers, but as always, the only sort of units that can take and hold ground are ground combat units.  That hasn’t changed in a thousand years.  If you want to talk about contingencies, there are more of them that require those sorts of forces than don’t.

Finally, with all that said, what about the pivot toward China as our new, what’s the term, ah, “adversary”?   Is there some clever guy who has managed to come up with a strategy that will require no ground troops in any sort of a confrontational scenario with our new “adversary”?

Of course not.  Korean peninsula?  Taiwan?  Here we pivot toward what could be a massive threat which itself has a huge land army and we do what?  Cut ours.  Because we “think” that it won’t be necessary to have such a capability should our “adversary” become our “enemy”?  

I’m not saying they will, I’m just pointing out that the strategy – cut Army and Marines and pivot toward China which has one of the largest land armies in the world – doesn’t seem particularly well thought out.  But I’m not surprised by that.  Again, when you tailor a strategy to support a political position/decision, such “strategies” rarely are.

Oh, and don’t forget:

The military could be forced to cut another $600 billion in defense spending over 10 years unless Congress takes action to stop a second round of cuts mandated in the August accord.

Lovely.

~McQ

Twitter: @McQandO


China buys stake in US shale gas field

While we dither and delay about fracking and permits and put a critical bit of energy infrastructure on hold (Keystone XL pipeline), China is aggressively pursuing energy assets … even in the US.  The WSJ carries the story (subscription):

China continued its push into the U.S. oil patch, with a state-owned energy company striking a deal to help develop several shale fields in Ohio, Michigan and elsewhere.

China Petrochemical Corp.’s $2.5 billion deal with Devon Energy Corp., announced Tuesday morning, marks the third billion-dollar-plus joint venture that foreign energy firms have signed with U.S. explorers in as many weeks.

Known as Sinopec, China Petrochemical is making its first foray into the U.S. by buying a one-third stake in Devon’s acreage in five emerging fields—four shale plays and one limestone field.

Seems it will be up to the Chinese government to fund jobs in those areas while ours erects barriers in other areas.

While we continue to suffer from high unemployment, there are jobs all over the Midwest and the Gulf coast that could be created (and, yes, saved) by aggressive investment in oil and gas development.  Most of that investment would be private.  But it would require the government to get out of the way.  And that is something this very ideological administration can’t seem to make itself do.

Instead we have the usual war against “Big Oil” going on (ideological fights usually are against some “Big” enemy) to the point that an industry which could be pulling us out of this recession and helping drop unemployment numbers is mostly reduced to sitting on the sidelines while ideologues argue, vent and frustrate any effort to do so.

Of course the point is someone somewhere is going to try to develop and take those energy assets.  China is going to make a relatively small investment to see what it can take out of here.  And if we don’t want what the Keystone XL pipeline would bring  – besides a whole bunch of jobs I mean – China is prepared to take that as well.

Maybe its just me but for some reason I just find the worlds “myopic” and “stupid” poor descriptors for the policy this administration is following concerning oil and gas exploitation.  They’re just too mild. 

We have an economy hurting for jobs.  We have a nation that needs cheap energy.  We have an industry ready, willing and able to provide both.  And we have roadblock after roadblock placed in front of them by government.

This, in my not so humble opinion, should be one of the major talking points for the GOP.  We need energy.  We need jobs.  What we don’t need is an administration that places its ideology over the best interests of the nation and its people.

~McQ

Twitter: @McQandO


Patriot missiles found on China bound ship

Your odd and disturbing national security story of the day:

The MS Thor Liberty left port in Emden, northern Germany, on 13 December and docked two days later in Kotka, southern Finland, to pick up a cargo of anchor chains, said Finnish Customs spokesman Petri Lounatmaa.

It was bound for the Chinese port of Shanghai but there was no indication for whom the military cargo was destined.

Routine checks by Finland’s traffic safety authority revealed a load of up to 160 tonnes of improperly packed nitroguanidine, a low-sensitivity explosive with a high detonation speed.

"Actually in our investigation at the moment, we have got the information that we found 69 Patriot missiles on the ship and around 160 tonnes of explosives," said Detective Superintendent Timo Virtanen from the Finnish National Bureau of Investigation.

69 Patriot missiles is not some minor load.  That’s a bunch of missiles.  Were they hijacked?

They belong to somebody.   Of course, remember we provide Patriot missiles to our “allies” too. 

How in the world do 69 Patriot missiles go missing and end up on a ship bound for China (why spend the money to develop technology when you can steal it and reverse engineer it)?

Anyone?

~McQ

Twitter: @McQandO


Former SEIU boss: We should emulate Chinese economic model

You can wade through all the trash he throws up there as a preface to his central point, but I’ll save you the trouble.  Writing in the WSJ, Andy Stern says:

The conservative-preferred, free-market fundamentalist, shareholder-only model—so successful in the 20th century—is being thrown onto the trash heap of history in the 21st century. In an era when countries need to become economic teams, Team USA’s results—a jobless decade, 30 years of flat median wages, a trade deficit, a shrinking middle class and phenomenal gains in wealth but only for the top 1%—are pathetic.

This should motivate leaders to rethink, rather than double down on an empirically failing free-market extremism. As painful and humbling as it may be, America needs to do what a once-dominant business or sports team would do when the tide turns: study the ingredients of its competitors’ success.

No poisoning the well there, huh?  The “conservative-preferred, free-market fundamentalist, shareholder-only" model?  Really?  Where? 

And why was it “so successful in the 20th century” and why is it having problems now?  Well that’s a fairly easy question to answer.   What happened increasingly in the 20th century that is at an all time high now?

Answer?  Government.  It has increased dramatically in both size and intrusiveness.  We don’t have a “free-market” system anymore.  Haven’t for quite some time.   It’s a convenient shibboleth used by opponents of free markets such as Stern.  We have a government that has, in the century cited, turned it into crony capitalism.  Any resemblance here in the 21st century to a “free market” model is purely coincidental.  And we now have a debt drag imposed by out of control government spending that has finally topped our total yearly GDP.

As usual, with those who think China has figured out how to build the socialist dream, they never figure in the damage done to the model that was “so successful in the 20th century” because doing so kills their entire premise.   Government is their vehicle to both wealth and social justice.   They have no concept of how markets work so are gullible enough to still believe that central planning, properly done, can work.  And they take the fact that China has risen economically as proof of their premise.

What they don’t do is look behind the curtain.   Stern talks about his trip there, “a trip organized by the China-United States Exchange Foundation and the Center for American Progress—with high-ranking Chinese government officials, both past and present.”

Yes indeed, very likely to see the underside of the economy is a show tour aren’t you?

A caller to Rush Limbaugh who spends a lot of time in China lays out the reality there:

CALLER: Because once you get outside of the main cities, there are still people plowing fields behind cows and oxen, still hand harvesting corn, grains, rice. I mean, it’s still very much a Third World economy once you get outside of the main cities.

RUSH: With a First World military.

CALLER: Yeah, that’s true.

RUSH: That’s where much of their spending goes. Their infrastructure is built on the cheap, too. Doesn’t take much wind to bring down some of their so-called powerful infrastructure. But, you’re right, and this is what President Bush was telling me, that the big challenge is keeping those peasants behind the oxen. Don’t [let] them into the city. The cities can’t handle them. The cities are teeming with people already. But it’s always been the case that there is this romance — the left has romance — with the romantic attachments to all these tyrannical communist regimes, and now they’re looking at China and you’ve got this Andy Stern guy and other people telling us, "This is what we need to be. We need to emulate the ChiComs. The ChiComs are doing it right."

This is simply the usual nonsense wrapped up in a little different packaging.  It is the leftist dream – a strong central government planning the economy in which it ensures social justice as its highest priority (btw, China is an environmental disaster area, but you won’t hear that from the likes of Stern).  And that doesn’t mean market capitalism, even if the Andy Sterns of the world want you to believe that.  

While he avoids the obvious problem of government intrusion and its disastrous effect on the economy, he does touch on the political problem we still endure.   We have politicians who prefer being Santa Claus to the Grinch and whose whole political horizon never goes beyond the next election.

But the central problem we have isn’t needing a new economic model.  Instead we need to go back to the old one before it was corrupted and distorted by government.   Instead of more government, as Andy Stern wishes, we need precisely the opposite – much less government.

If we want to regain our economic footing and dominance, what government needs to do is get the hell out of the way, get spending under control and pay down the debt (which should become its primary focus over the coming decades) to eliminate the debt drag it has created.

Other than that, it’s job is to be the night watchman, not Santa Claus.  Our problem isn’t economic models.  Our problem is exactly what Stern wants more of.

Obviously economics wasn’t his strong subject in whatever schooling he received and history was apparently completely skipped.  How else to explain the utter nonsense he pushes in his article?

~McQ

Twitter: @McQandO


It has come to this–China mocks West’s political system and economics

And, at the moment, rightfully so.  That’s not to say theirs is a superior system by any stretch.  Theirs just happens to be thriving at this moment in history.  But that doesn’t change the correctness of the basic kernel of their assessment:

In extensive talks with a series of Chinese leaders, an oft-cited point of criticism is the gridlock and “dysfunction” they see in Washington. They say fawning by U.S. political leaders seeking re-election has created an “entitlement culture” where the public has grown dependent on government largesse. Now, with the United States facing monumental economic and debt problems, the political system has been unable to curb generous entitlement programs or counter the economic downturn.

I really hate to say “I told you so”, because a) as Megan McArdle said yesterday it is “so … bleeding … obvious” and b) it really doesn’t take a rocket scientist to figure this was going to happen.  No, not China mocking us – they have their own economic problems ahead of them so I’m not particularly impressed with their mocking attitude.  The idea that running huge deficits, encouraging an entitlement culture, redistributing wealth and running up unpaid future welfare obligations was sustainable.

Heck, people like me and other authors on this blog have been saying that for years – decades even – that it was just a matter of time before it all collapsed like a wet paper box.  And we always get the hand wave from the so-called enlightened that we just don’t know what we’re talking about.

To them I say, “welcome to reality”.   Like gravity, the laws of economics will finally assert themselves.

And they have.

However, the performance of the Chinese economy in the global recession has had a beneficial effect for them among other nations.

China is now at a pinnacle of global leadership and influence as a result of its emergence as an economic superpower, even as the U.S. and other major industrial powers fell into disrepair as a result of the 2008 financial crisis, said Guo Zhenyuan, an analyst at the institute.

China gained the admiration of developing nations around the world with its ability to weather the crisis emanating from the U.S., even emerging from the downturn as the world’s main engine of growth, while its superior economic performance provoked jealousy in the U.S. and other developed nations, he said.

With that said, here’s what they’re now selling:

Mr. Chan said U.S. political leaders are so focused on short-term gains that they fail to make the painful long-term choices and changes in social programs needed to ensure the solvency of the government and vitality of the economy.

Chinese leaders, by contrast, lay out plans for the long term and systematically achieve them, producing unprecedented gains in living standards and a remarkable two decades of uninterrupted growth at nearly double-digit annual rates.

This proves that the Chinese system is better than the democratic system that the U.S. promotes around the world, Mr. Chan said.

And the dictators and totalitarians around the world take heart.  

Only because Western leaders, decades ago, perverted the true meaning of Western democracy and did exactly what the critique above says – began trading goodies for votes and created the social welfare state which was destined for failure.

Whether or not you agree that democracy is the problem is a rather moot point.  That’s what China is pitching and apparently there are eager listeners.  And we all know there are those out there who think they too can implement the Chinese model.    As Dr. Kissinger said they call it, “Socialism with Chinese characteristics”.   The rest of us call it totalitarianism, but like I said, in the face of the epic failure of Western Social Democracy and the rise of China, it’s a tough argument to fight at the moment.

~McQ

Twitter: @McQandO


Chinese lecture Europe on the corrosive effect of the welfare state

Irony of ironies.  The Chinese lecturing the supposed capitalist West on economics and the welfare state.  Of course, as we’ve discussed many times, Crony Capitalism and/or Corporatism aren’t Capitalism.   At best the West has a mixed economy with various levels of intrusion and market distortion caused by governments.  In effect, what this gentleman is saying to Europe is the intrusion and distortion levels are such that they have caused a cultural malaise which is finally coming home to roost:

"If you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of the worn out welfare society. I think the labour laws are outdated. The labour laws induce sloth, indolence, rather than hardworking. The incentive system, is totally out of whack.

"Why should, for instance, within [the] eurozone some member’s people have to work to 65, even longer, whereas in some other countries they are happily retiring at 55, languishing on the beach? This is unfair. The welfare system is good for any society to reduce the gap, to help those who happen to have disadvantages, to enjoy a good life, but a welfare society should not induce people not to work hard."

Jin Liqun, the supervising chairman of China’s sovereign wealth fund

Of course that just touches the surface of the problems Europe faces, but essentially Jin is saying that the system in Europe, i.e. state welfare, is not only unsustainable, but discourages hard work – a vicious and self-defeating cycle.

Go figure.   Most rational people understand that human beings respond to incentive.  And that a good portion will always choose the easy way.   Human nature 101.   So when given the option of hard work or being a slacker and getting paid to be one, those who tend to slack will always choose the latter if an incentive to do so is provided. 

His point about labor laws that require rules such as featherbedding for instance is true.  And, by dictating wages, etc., government intrudes on market dynamics which properly price labor.   Instead we see the distortion of labor’s worth, rules that cut into productivity and spiraling costs which kick up the price of goods and services beyond what a market would dictate.

And that’s just a very small part of the problem.  Europe decided decades ago that it could use a mixed economy to somehow pay for a large welfare state.  It thought it had it all figured out and then this crisis hit.  But it was clear to many that it isn’t this crisis that precipitated Europe’s current  financial problems, it just hastened them.  Much like the revenue shortfalls we see here for the trillions in unfunded obligations for Social Security, Medicare and Medicaid, Europe has seen those for years.  Its day of reckoning is at hand.

Greece was the weakest member of the Eurozone.  But Italy, Spain, Portugal and Ireland aren’t far behind.  What critics of the welfare state have said for decades can no longer be hidden.   And, unsurprisingly, the culture that sort of a state breeds is fighting tooth and nail to preserve it, even if they really know that’s not possible.

But the irony is unquestionable.  Lectures by communists on the dangers of the  welfare state.  Snowballs in hell are obviously possible.

~McQ

Twitter: @McQandO

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