Deja Hu

In a news story published November 22, 2011, by Xinhua, China’s state-owned news service (or, for those who prefer their labels in English, the New China News Agency), China’s President, Hu Jintao called on China’s writers and artists to redouble their efforts to produce great works. Nothing wrong with that; great art and great literature are both to be welcomed. As Xinhua wrote:

“Great times call for great writers and artists, and the people expect great literary and artistic works, President Hu Jintao said Tuesday while speaking to an audience of 3,300 who represent the country’s literary and art circles.

Xinhua continued:

In his speech, the president called on Chinese writers and artists to persist in the principles of “Serve the People and Serve Socialism,” “Let All Flowers Bloom Together” and “Let Hundreds of Schools Contend.”

The thoughts and sentiments are certainly welcome but, as Shakespeare wrote so long ago, “To sleep, perchance to Dream; Ay, there's the rub . . .” The words themselves evoke another time in Chinese history and another outcome altogether. Here’s the story:

In late 1956, seven years after the founding of the Peoples Republic of China, Mao Zedong began one of the more infamous of the many mass campaigns in modern Chinese history up to that point. In a very well-known speech titled, “On the Correct Handling of the Contradictions Among the Masses”, Mao said “our society cannot back down, it can only progress . . . criticism of the bureaucracy is pushing the government towards the better.” Although it would be followed by the Great Leap Forward and mass starvation (1958-61) and that, in turn, by the Cultural Revolution (1966-76), the Hundred Flowers Campaign is still remembered by many. Even though it’s core period lasted only for approximately six weeks, it remains a source of controversy and disagreement. The operative slogan of the day was, “Letting a hundred flowers blossom and a hundred schools of thought contend is the policy for promoting progress in the arts and sciences and a flourishing socialist culture in our land.” There was a consequent outpouring of ideas and criticism about the operations of the new Chinese state. Then it came to crashing halt. Those most outspoken were sent off to labor camps or prison. Their response to Mao’s exhortations to be open and let the criticism flow, was turned on them in a sort of political jujitsu. Historians disagree about whether Mao planned the whole campaign in order to entice his critics to come into the open, thereby leaving them vulnerable, or whether he began with the best of intentions only to later fear the resulting waves of criticism. Either way, a current-day reference to letting many flowers bloom and hundreds of schools of thought contend is likely to prod many here to hide under their covers in an effort to avoid the intellectual spotlight.

One hopes that this is not what Hu Jintao intended.

Chinese Road Rage

Road rage is all the rage in China these days. Of course, this is not a phenomena that is limited to China; virtually anywhere there are cars and traffic, road rage pops up. In China, it comes with rather quirky trappings.

The press, not just in China, was peppered in mid-September with stories about Li Tianyi, 15, the son of the acclaimed singer Li Shuangjiang, who accosted a couple in Beijing over a traffic-induced slight. The younger Li, hopped out of his unregistered souped-up BMW and with a friend (himself driving an Army-registered Audi) proceeded to beat the crap out of the male half of the couple. He warned bystanders not to call the police. Nevertheless, he was arrested and given a years jail time. His father apologized quite profusely and publicly.

Some time ago, Li Qiming, the son of a police chief in Hebei province hit and killed a young woman while driving on a university campus. He then attempted to bully his way past security guards shouting “My father is Li Gang.”

In a less reported incident, this time in Anhui province, a young male driver was attempting to parallel park on a commercial street. On the sidewalk next to the road was a sign advertising the the adjacent shop. The driver managed to flatten the sign. To his credit, at least he was trying to actual parallel park; many Chinese drivers just stop as near to the curb as they can, altho far from parallel, and block traffic until they finish their business. At any rate, in this case, the shop keeper took exception to the destruction of his sign and came out of his shop to give the driver a piece of his mind. Things, predictably, escalated. The driver objected to the shopkeeper's objections, entered the store and trashed the place, ripping the phone out of the wall, smashing anything within reach. The shopkeeper's wife and baby were collateral damage, although, fortunately, not fatally. By this time a crowd had gathered, surrounding the store. If the driver had fantasies of a blitzkrieg and quick escape, they were firmly dashed. Someone called the police, who arrived shortly after. They took the young driver into custody.

That's when things began to get interesting, as the crowd departed from the usual passive pattern. This wasn’t just an afternoon’s entertainment. Apparently fearing that the driver would get off without punishment, the crowd took matters into their own hands. The estimated 2,000 people on the sidewalk and street surrounded the police car and refused to allow the cops to leave the scene with the young driver. They forced the cop and culprit out of the car and made them stand side-by-side next to the police car. Then, armed with the latest cell phones, they took pictures of the driver and the cop, as if to forever link the two. If the kid got off, they’d know who to blame. That was the idea, anyway.

The moral of the story, for me, is that the average people of China are getting more than fed up with the atmosphere of lawlessness, privilege and arrogance that is so much a part of some segments of Chinese society. Road Rage, Chinese style, is merely a symptom. It will be interesting to see if anything changes.

What Will China Do?

There's been a lot of speculation, in the press & elsewhere, about what the governments of every major country will do to respond to the current global economic crisis. Not only are specifics eagerly sought and eagerly speculated upon, but there is also (it seems to me) a lot of noise under the surface regarding two other aspects of the current situation. The first is about whether governments really understand what's going on. The answer to this one is two-fold, and they are both pretty straight-forward. No one knows what will happen over the next year and a half and governments are no different. Is this a severe recession with Global Characteristics? Certainly, it is. Is that all it is, or will things take a turn for the worse and will we irretrievably move away from "the world as we have come to know it"? And here is where things get tremendously speculative because, unless you can find Merlin the Wizard, or some soothsayer in a cave in Tibet, everyone is just guessing. For some its an educated guess. For others, its a wild stab in the dark. But no one I know can tell the future. And I've been to some of those caves in Tibet; they aren't talking about the global economy there. While there's a lot of guessing going on (although we might be better off calling it "scenario building"), the uncertainty remains high and the predictions are unreliable at best.

The second subject of background noise regards whether or not governments know what to do and (if they do) whether they have the will do what needs to be done. Here is where it gets a bit dicier. Certainly, there's a lot of policy debates in process. And a number of major decisions have been made. But: it ain't over yet! Like a very long and slow-paced movie, the story takes a long time to develop. Even if governments aren't quite sure what will happen next, they are certainly trying to figure out what to do to right the ship. They really have no choice. But it also seems to me that policy makers are feeling their way and searching for the right solutions for the major challenges before them. As we've seen in Washington, London, Berlin, Paris, Ottawa, and elsewhere, politics intrudes. That's the nature of a democracy.

The second & closely related question has to do with political will. Presuming the effective steps are known, do the governments of the world's major nations have the political will necessary to do what needs to be done? In my opinion, this is the major question. There is no doubt at all that, given the scope of this crisis, some -- and in all likelihood, a great many -- of the things that will be required will be difficult and sometimes unpopular.

Of one thing there is no doubt in my mind: when it comes to China, the Chinese government has the political will to take the steps it will need to take to build momentum towards economic recovery. Whatever it takes. No doubt in my mind.

None at all.

Meeting the Challenge of Slower Growth

The Chinese Central Government has floated the story, reported widely, that unemployment among China's roving migrant population has reached some twenty million workers. Reuters points out that, with additional workers just coming into the workforce, that will push the total up to about 25 million unemployed out of a total of approximately 130 million migrant workers. I believe that this actually understates the problem. Here's why: first of all, these totals are only for migrant workers, rural workers who leave their homes in search of jobs in other areas (usually urban areas, both large and small, and also usually coastal). In fact, the story was made public thru Chen Xiwen, director of the Office of the Central Rural Work Leading Group. But, again, these numbers are only for rural workers. Urban workers will also be losing their jobs as the growth rate slows, and many already have. And none of the unemployment projections around the country account for underemployment, a factor little discussed in China by labor economists. Also reported widely in the west have been the difficulties of recent university graduates in finding employment. This isn't a new problem, nor is it confined to China, of course. But everything in China, when it comes to population and labor issues is just plain bigger.

The central government (and, consequently, local and provincial governments around the country) are concerned about a probable increase in public protests. This concern is not new. China's government is nothing if not vigilant when it comes to public order and the threat of social chaos.

Western observers of China, particularly casual ones, frequently misunderstand these public outpourings. The Chinese "Laobaixing" ("Old Hundred Names", the common Chinese term for the masses of Chinese, both urban & rural) retain a strong trust in both the Central Government as well as with the Chinese Communist Party. On the other hand, distrust of local officials, particularly on the county, village & municipal level is not uncommon. When public demonstrations break out, unlike in the West, it is generally not to impress the press. It may be a spontaneous outpouring of angry emotion, a group reaction to events, a plea for attention from higher authorities, or an effort to pressure others. Despite the well known exceptions reported outside China, such as the unrest in many areas of ethnic Tibet (the Tibetan A. R. itself along with parts of Sichuan, Qinghai, and Gansu provinces) and Xinjiang in the last year, the anger and frustration are not directed at the central government.

Look for China's central government to be quite proactive in meeting the social repercussions of a slowing economic growth rate. Unlike Washington, Beijing is not hampered in taking quick and forceful action thru fiscal stimulus. The powers that be are quite sensitive to conditions in the countryside not likely to be taken by surprise. And the word has gone out from Beijing: pay attention to what the masses are saying and use a softer hand. That's good news.

What's Next?

As the global economic order collapses, most of the attention has been, for obvious reasons, on economics. After all, this is, first and foremost, an economic problem. We've all, those paying attention, become steeped in the vocabulary of economics and the financial world: credit-default swaps, hedge funds, yield curves, Treasury bond pricing, currency valuation, trade imbalances, savings rates (or lack thereof). For me, it has always been useful to try to look at problems from a completely different perspective. Sometimes its an empty and fruitless exercise -- interesting, perhaps -- but ultimately, providing no new insight. At other times, a whole new light can be shone on something and we see it in a new way.

The economic collapse we're witnessing is so complex and so multi-faceted & nuanced, that it gives us all kinds of different angles to watch from. One very popular Scenic Viewing Spot, a great Photo Op, you might say, is to look at the current situation and compare it to the Great Depression of 1929-1939 (or so). Certainly, there's a lot we can learn from the mistakes of the past that will help policy makers deal with the dilemmas of today. Its not the same, of course; it never is. But there are enough similarities, and the mistakes of the 1930's were so glaringly obvious, that the same mistakes won't be repeated. In China, in the U.S., in Europe, the media (and policy makers meeting rooms, you can bet) are filled with analysis and studies of lessons to be learned. There's been at least one thing that's been largely missing from the discussion, altho I'd bet that, at least in Zhongnanhai, the Powers That Be have been paying close attention. The media, to be sure (at least from my reading) hasn't woken up to the problem yet. What is it? Its the issue of what's next. What happens in the aftermath of an economic collapse of this magnitude? Again, a look back to the Great Depression is useful. It doesn't mean that the same things will happen; they never do. But similar things could happen, even if in different ways and in different places. Here's what I mean: the biggest & most consequential result of the 1929-1933 economic collapse was not economic, altho that was bad enough. It was political. Europe saw a turn from liberal democracy towards fascism, resulting in the rise to power of the National Socialists (who weren't really socialist at all) in Germany and the National Fascists in Italy. In Asia, Japan turned to the militarism that was latent in Japanese culture and politics. And, of course, the consequence of this broad political shift was World War Two. I'm not suggesting that the current problems will lead to another big war. Not at all. What I'm suggesting is that a broad shift downward in the economic prospects of hundreds of millions of people, if not billions, is likely to have political repercussions.

Already we have seen the Icelandic government collapse. Russians are restive, as are people in other pockets, both in Europe and in China. The U.S. has seen a peaceful, albeit dramatic, political change. With apologies to Elizabeth Kubler-Ross, I'd like to suggest that her Five Stages of Grief (Denial, Anger, Bargaining, Psychological Depression, and Acceptance) have a sociological and political application. First off, though, some caveats. These stages are not predictive, meaning they aren't inevitable. They may come in a rather random order. While, for individuals, there is a sequence, the edges are rather fuzzy (one can be alternate, for instance, between denial and anger). lastly, people don't necessarily go thru all the stages. Kubler-Ross maintained that people always experienced at least two stages, altho which two could vary. This is, in my opinion, even more true with large groups of people. Certainly, some of these stages of grief are already apparent. Who would today suggest that as recently as last summer, denial was not common? Americans were characterized as a "nation of whiners" by former Senator Phil Gramm. John McCain famously said the American economy was "fundamentally sound". If that isn't denial, the meaning is lost on me.

While some are still in denial, you can see evidence of bargaining, particularly in the halls of government. Then again, that's their job. In the U.S., at least, anger has been apparent, but it hasn't been a broad motivating factor. In other regions, it has been more visible. In China, it has sprouted up but has not been a broadly motivating factor for most of the population. For most of the world, the situation is in its early stages. There is economic pain, to be sure, but it is still characterized by early stage shock and denial. What is to be feared is the anger that may come as people realize their prospects & wealth may have been forever altered. If the world's government leaders, with their central bankers & finance ministers, are successful in limiting the disintegration that is potentially right around the corner, the dragon of political and social disruption will go back in its lair to hibernate for another eon. That's a big "if".

Upcoming Stories

Watch for these upcoming stories in Beijing Eye:

• Why the Chinese savings rate is so high & why the U.S. (and China itself) probably can't do anything about it.
• Education in China: What's right, what's wrong & what needs to change.
  

Creative Bankers

I happened on this column by Thomas Friedman in the New York Times, titled "Time to Reboot America". I was struck by a number of things. First of all, Friedman's point, that the U.S. is essentially in the same shape as GM and that the country needs a fresh start and, furthermore , that the next 3 months or so present an historic opportunity, albeit an expensive one, to start anew, is spot on.

This is something that many American expats can see with a clarity that seems to get muddier the more time one spends in the U.S. these days.

Then a few other thoughts popped up. I saw an article here in China where a chinese banker was intent on defending the value of the many "innovations" the capital markets have been witness to in the last ten years. Quickly on the heels of that was a memory, long dormant but still clear, of the late great Peter Drucker telling me that the field of finance, as he put it, was not a place that encouraged creativity. What he was referring to wasn't management creativity, nor was it the creativity financial pros bring to solving organizational financial problems. He was talking about the kind of financial engineering that became the hallmark of the modern Wall Street; the kind of "creativity" that used smoke & mirrors to create financial instruments so far removed from anything of underlying real value that they had worth only in that someone thought they could be bought or sold, sort of like the mythical emperor's new clothes (which, of course, never really existed). At the time Drucker made that comment, to call a banker creative would have been an insult. People wanted their bankers conservative, even stodgy. That's an attitude that, today, seems rather refreshing.

How ironic it would be if the Chinese, in their efforts to bring innovation to the modern Chinese world, buy that myth from Wall Street: that financial creativity (of the third kind) is the kind of innovation that China needs. Its not. As the U.S. has learned, to its horror.

Factory Workers Go Home for the Holidays

I had an interesting talk this morning with a friend from southern China. Altho he owns a factory, he has lots of ties to the migrant workers themselves. Of course, in his case, what you may think of as a factory may not match the reality. He runs his Guangdong province factory in about 300 sq. meters ( about 3230 sq. feet), with 5 workers, one supervisor - a brother - and a bunch of knitting machines; not exactly General Motors, altho he makes more money than GM these days. He says he's doing fine still, altho he has worries. Of the many laid off factory workers, he had this to say: For the most part, from what he's seen & heard, workers are angry at factory owners who they feel (in many cases, justifiably) have cheated them. In some cases, as widely reported elsewhere, factories have been shut down with no warning and migrant workers haven't received all their wages. Nevertheless, altho they've been laid off, they are mostly taking it in stride and just going home to their villages hundreds (or more) kilometers away. Since they had planned to return home, as they do every year, for Chinese Spring Festival/Lunar New Year anyway, the hardship is not major. They are leaving a month or two before they'd planned. The traditional Chinese New Year holiday this winter falls in late January and workers may often take from 10 days to 45 days off before returning to their work places. Any anger they feel, according my friend, is not directed at the government at all, but at their employers. In addition, altho wages are often meager for migrant workers, they are able to save considerable percentages of their pay, so the financial hardship is cushioned.

Of course, once the Spring Festival period is over, these workers hope to return to their migrant residences & resume work. If they can't, they can be expected to look for new jobs.
And if they can't find work, how will they react? Come March and April 2009, feelings may not be quite so stoic.

Chinese Dogs in Jeopardy Again

A few years ago, you may remember, dogs around China were in jeopardy for being, well . . . dogs. If you don't remember all of this, here's a link.

We're getting reports that, at least in Beijing, the police (or, in this case, what we might call "the Dog Nazis") are at it again. Beijing's "finest" (that's the guys in the dark blue uniforms with the shiny badges & the walkie-talkies) are entering living compounds in urban Beijing and strictly enforcing the dog rules regarding size (no medium or larger dogs) and number (only one dog per household). According to information we've been given, foreigners' dogs are not immune to this. Apparently, dogs have been unilaterally seized by the cops. As we get more information, we'll pass it along.