Monday, March 13, 2006

3/13: Fair, honest, responsible news China, India, U.S.

"FHRN" is a regular feature which gives links and excerpts from selected recent key stories, followed by my bold italicized comments. Also see 3/11 "Digests of my previous posts for busy people," link, which gives blog's core ideas. Thanks.

This edition of "FHRN" focuses on China, India and the U.S., with a mini-essay and an FHR editorial. The 3/12 edition focused on recent key economic/financial developments link.

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3/10 NYT "As Trade Deficit Grows, So Do Tensions With China" link "With the United States reporting on Thursday yet another surge in its trade deficits with China and the rest of the world, economic tensions are rising again as Washington prepares for the long-delayed visit of President Hu Jintao late next month. But international trade rules and a tight Congressional calendar are limiting the options of American politicians and trade negotiators, who are under increasing pressure to find some way to curb the growth in China's exports....Preliminary results from a survey by the American Chamber of Commerce in Guangdong, one of China's largest exporting provinces....Well down the list was any interest in bringing in American goods and services to China, a finding that Harley Seyedin, the chamber's president, attributed to a lack of national attention in the United States on improving the competitiveness of exports."

FHRN: The comment by the ACC Pres above is similar to those recently made by Cheng Siwei, an influential Chinese "law-maker and economist," according to a 2/14 Reuters story, "China chides U.S. for criticism over trade, yuan." link "China sourced only 10 percent of its high-tech imports from the United States, [Cheng] said. This was not enough. China had to be allowed to buy more than Boeing Co. aircraft. "If the United States doesn't want to export, how can we achieve balance in our trade?" Cheng asked."

The NYT story ends: ""If we don't have a deficit with China," said R. Glenn Hubbard, once President Bush's chief economic adviser and now the dean of the Columbia University Business School, "we'll have a deficit with someone else."" I suppose that neatly sums up the attitude of much of the U.S. financial/business/political elite, and thus why I think an eventual economic crisis is possible unless there is drastic change in U.S. course.

3/13 AP "China Approves Two High-Speed Railways" link "China announced $22 billion plans Monday to build two new high-speed train lines linking Shanghai with Beijing and another city, including one using magnetic levitation technology that can reach speeds of 260 mph. Both lines are among the world's most ambitious railway-building projects. They had been long-awaited by international suppliers of railway technology, but the announcements did not specify which companies would be involved in constructing them....Japan lobbied China to use its Shinkansen bullet train technology, France its TGV system and Germany its maglev technology. But China says it wants to build the line with domestic technology adapted from that in use overseas....The world's only commercially operating maglev train, built with German technology, links Shanghai's main airport with its financial district....Hangzhou is currently about two hours by train from Shanghai at the center of a growing high-technology corridor that is attracting foreign telecommunications and computer companies. ...China has invested billions of dollars in expanding its railway network in an effort to ease congestion and promote economic growth in isolated areas....Foreign suppliers of railway equipment have found only limited opportunities in China. The country manufactures most of its own equipment and exports locomotives and other gear to such low-income markets as Bangladesh. The government plans to build more than 7,500 miles of high-speed railways in coming years at a cost of $250 billion-$310 billion, according to Xinhua."

FHRN: Recent news stories on China, including two in today's blog, have tended to focus on rising tensions between the U.S. and China over trade and currency, and within China itself. This article is a reminder of the profound, rapid economic transformations that China is achieving, sometimes as in the case of rail transport in advance of the most highly developed economies. Though China already has an excellent highway system which greatly facilitates economic development, unlike India, needless to say with 1.3 billion, a full-scale copying of the American suburban "car culture" without rail is probably not viable, for several reasons, including energy security, congestion, etc.

3/12 NYT "A Sharp Debate Erupts in China Over Ideologies" link "For the first time in perhaps a decade, the National People's Congress, the Communist Party-run legislature now convened in its annual two-week session, is consumed with an ideological debate over socialism and capitalism that many assumed had been buried by China's long streak of fast economic growth....The divide does not appear likely to derail China's market-led growth.... the leadership may find it harder to pursue market-oriented solutions to some pressing problems, like providing health care to rural residents, grappling with rampant corruption in the state sector, expanding access to education and overhauling banks, insurance and securities companies....The tensions reflect rising concern that breakneck growth averaging nearly 10 percent annually over 20 years has left China richer but also dirtier and, by the standards of the one-party state, politically volatile. Corruption, pollution, land seizures and arbitrary fees and taxes are among the leading causes of a surge in social unrest."

FHRN mini-essay: Americans tend to be ahistorical, so it helps to try to put China's "peaceful rise" in a little historical perspective.

Since 1979, but especially since Deng Xiaoping's "Southern Tour" in February 1992, China has been by far the most rapidly growing economy in the world, lifting more people out of poverty than has ever occurred in such a short period of time. This was unprecedented and astonishing, given China's immediate prior history of upheavals during the Cultural Revolution and its huge, largely very poor population of 1.3 billion people.

During such a period of rapid industrialization and urbanization, social tensions are naturally bound to rise in any society. The same could be said for the United States from the period 1877 to 1941, i.e from the end of Reconstruction to the end of the Great Depression.

To give you a little flavor of what the U.S. went through, here are a few relevant quotes from Eric Foner's excellent recent one-volume "Give Me Liberty! An American History, 2005"
link (at just $35 a very good value).

"Between the end of the Civil War and the early twentieth century, the United State underwent one of the most rapid and profound economic revolutions any country has ever experienced....By 1913, the United States produced one-third of the world's industrial output--more than the total of Great Britain, France and Germany combined." pg 513

"1886, also witnessed the "great upheaval," a wave of strikes and labor protests that touched every part of the nation. Six months before the unveiling of the Statue of Liberty, police had killed four striking workers who attempted to prevent strikebreakers from entering a Chicago factory. This was only one of many violent clashes that accompanied labor unrest between the end of Reconstruction in 1877 and the turn of the twentieth century....Nor did the celebrations [at the Statue] address the crucial questions that moved to the center stage of American public life during the 1870s and 1880s and remained there for decades to come: What are the social conditions that make freedom possible, and what role should the national government play in defining and protecting the liberty of its citizens." pp 511-512

"By 1890, the richest 1 percent of Americans received the same total income as the bottom half of the population and owned more property than the remaining 99 percent." pg 520

I could go on, but I hope I've made my point. It took the United States, in far better circumstances than China found itself in after the Cultural Revolution, 65 years to adjust to rapid industrialization and urbanization. As late as the 1930s, there were massive strikes of industrial workers organizing into the CIO, once again met by violence.

During and even after that 65-year period through 1941, American democracy was still very uneven. Women did not get the Constitutional right to vote until the 19th Amendment in 1920, and blacks in the South were effectively disenfrancished until the Voting Rights Act of 1965, nearly 200 years after the Declaration of Independence in 1776 proclaimed "All men are created equal."

In general, periods of rapid capitalist development have resulted in growing inequality and financial crisis which disrupt the real economy (btw, inequality, as measured by the Gini coefficient, is currently about the same in the U.S. and China, the otherwise excellent article is misleading on this point).

A growing sense of unfairness eventually result in mass movements of those negatively affected, and in a political response by "enlightened capitalists" to defuse the situation, as during the Progressive Era and New Deal.

From the viewpoint of the global financial elite, the problem of political/social opposition has been "solved" in the U.S. over the past few decades. With the defeat of the labor movement, indicated when one of Pres. Reagan's first priorities was to break the air traffic controller's strike in 1981, and the demise of the civil rights movement, there is no strong, organized source of protest in this country to speak of anymore.

Simply put, temporary workers at Wal-Mart desperate for a job without benefits are not going to lead a powerful social movement, nor are middle-class homeowners sitting with their fingers crossed on large home equity gains as interest rates start to rise. (We will not address here the role of so-called "culture wars" in also greasing the way for political acceptance of great inequality.)

That is why there has been little political backlash to the fact, which I've pointed out several times already on this blog, that worker average real (inflation-adjusted) weekly earnings have declined 17% since 1972 (according to Table B-47, pg 338 of the "2006 Economic Report of the President,"
link), while over the same period CEO average compensation has exploded to about 400 times that of their employees.

But that doesn't mean the problem of social resistance to "globalization" has completely gone away. Along with the factories, it simply has been transferred to China, where a one-party state maintains labor discipline for global multinationals, but does so still governing in the name of communist ideology. Needless to say, it's an interesting balancing act.

If they thought about it, it might seem odd to most Americans accustomed to a compliant and complicit corporate mass media that a public debate over growing inequality is far more vigorous in "authoritarian" China than it is in the "democratic" U.S.

The NYT article says that this socialist vs capitalist debate is "for the first time in perhaps a decade." I am no China expert, but I have read several books which covered those earlier China debates, the latest being John Gittings' "The Changing Face of China: From Mao to Market," 2005

Having done so, I'm convinced that perhaps less than 0.1% of Americans, 300,000, almost exclusively academics and international businesspeople, have a clue as to what such a debate in China is about, perhaps a slightly higher number than those who understand what the debates about Islam in the Mideast are about.

I simply make this observation as a reiteration of my strong belief, which was the subject of my 2/27 article on Silicon Valley and the mass media
link, that it is a potentially very dangerous situation for the U.S. to be both so heavily indebted to the rest of the world, including China, and also actively intervening around the world, with the vast majority of the American population having little idea of how the rest of world actually thinks or feels, mainly thanks to the dreadful shortcomings of the U.S. corporate mass media.

Generally nations that are rapidly modernizing and joining the elite group of most powerful nations are sensitive to perceived sleights. The U.S. was certainly this way in the 19th century with respect to perceived European meddling in its affairs and "its" hemisphere.

For very understandable historical reasons due to unfair treatment at the hands of imperialist powers, both western and Japan, China is sensitive to perceptions of how it is being dealt with by the other major powers of the world. Unfortunately, most American don't seem to be very aware of this.

/9 Economist "Dr Strangedeal: Congress should veto George Bush's nuclear agreement with India" link "This week America and others were insisting at the International Atomic Energy Agency that Iran not be allowed to bend the anti-nuclear rules out of shape....So why does Mr Bush propose doing just that for already nuclear-armed India?....[In signing the NPT, America] promised not to help other countries with their nuclear-weapons tinkering. It also pioneered the reinforcing principle that only countries that have all their nuclear facilities under international safeguards (India doesn't now and won't in future) should benefit from trade in civilian nuclear technology....[India] has also accepted few, if any, of the real obligations of the five official nuclear powers....Instead of a virtuous anti-nuclear cycle, there is now more likely to be a vicious nuclear one."

FHRN editorial: This week's "Economist's" lead article, with a clever reference in the title to Peter Sellers' 1964 movie "Dr. Strangelove" that might be lost on its younger readers, makes the case against the India nuclear deal from the viewpoint of its negative impact on NPT. Not mentioned is the just as important issue of whether the U.S. is attempting to contain China's "peaceful rise," which I will deal with another time also.

"The Economist" and others (e.g. see 3/7 NYT editorial
link), have raised the issue of the perception of double standards (perception alone is enough) in the India nuclear deal. ("The Economist" backed Bush in 2000 and supported his invasion of Iraq, but flipped to back Kerry, "with a heavy heart," in 2004.)

I believe that, especially with growing global inequality, one of the biggest threats to a viable, globalized, democratic capitalist future is the lack of traditional American straight talk by the big winners of speculative financial globalization.

Culture wars notwithstanding, most average Americans still seem to know when they're being snookered when it comes to being asked to make economic sacrifices by those standing to benefit the most, standard operating procedure the past few decades.

(A good current example being the new personal bankruptcy law which is mainly impacting not spendthrifts but those caught by real emergencies. See "Bankruptcy filers not deadbeats as many assume,"
link. This law will be even more onerous if/when reset mortgages very popular the past two years really start to bite with rising interest rates. Yet corporations continue to routinely use bankruptcy, e.g. the airlines, or its threat, to abrogate binding legal contracts on wages, benefits, pensions, etc.)

Regretably, the average American still seems rather oblivious to the same lack of traditional American straight shooting when it is employed in U.S. international policy.

A good recent example was that in a poll of American troops in Iraq, "eighty-five percent of those surveyed thought that the war was "to retaliate for Saddam's role in the 9/11 attacks," although the 9/11 commission in 2004 found "no credible evidence" that Iraq had cooperated with al-Qaida in the attacks." link How do such drastically mistaken opinions come about?

Unfortunately for Bush, and even more unfortunately for America, the rest of the world just isn't buying this lack of candor anymore, leading to a great loss in U.S. international standing, because it is increasingly difficult to cloak the real intent of policies in the Internet world.

Throughout modern history, nations easily have been stampeded into wars through strong appeals to nationalism and patriotism. Even today, they still can be, witness the U.S. invasion of Iraq.

Regardless of the various rationales for a policy, if the public is misled, for whatever reason, and then the results turn out not to be as expected, then public opinion eventually can turn sharply, especially in the Internet era, even despite a compliant mass media.

Again, witness the sharp decline in public support for the Iraq invasion, which changed not so much because WMD were not found, but rather because "Mission Accomplished" proved to be false.

As I wrote in my 2/27 "The New, Old Thing: Silicon Valley, Hollywood, Madison Ave," link :

"here are a couple of quotes made on March 16, 2003, three days before the U.S. invaded Iraq, by Vice President Cheney on “Meet the Press”: "And we believe he [Saddam] has, in fact, reconstituted nuclear weapons. I think Mr. El Baradei frankly is wrong." “We know he’s [Saddam] out trying once again to produce nuclear weapons and we know that he has a long-standing relationship with various terrorist groups, including the al-Qaeda organization.”"

"Cheney never has been held accountable by the corporate mass media for this and similar statements of alleged “fact,” under the same standards the media used when Pres. Clinton was impeached over lying about sex. Such blatant double standards are not bought by the rest of the world, to the detriment of the international standing of the U.S."

Let's hope, for the sake of the U.S., that there will be a far more credible performance in the eyes of America and of the world if there is another run-up to possible wars with Iran and/or Syria.

There is a well-known saying about fooling the people attributed to the first, and greatest, Republican president. If the current Republican president wants to improve his abysmal poll ratings before the upcoming elections, then he, and Karl Rove, should perhaps recall Lincoln's purported advice, "you can't fool all of the people all of the time."