In this analysis of the current economic meltdown, John Samuel places the blame on unbridled capitalism and the lack of ethics in financial and economic policies and practices
The story of casino capitalism and deadly growth starts with the banishing of ethics from economics. It is also about lack of accountability in the political process, in corporate governance and in economic policy. Growth became the new dogma and orthodoxy. Monetarism ruled the market. Casino capitalism thrived on the subversion of politics and governance through the new power cartel -- politics, driven by media, money, markets and military.
The context of the present crisis needs to be located in the profound political transitions that occurred between 1978 and 1982 across the world. The Reagan-Thatcher formula of neo-conservative politics and neo-liberal economic policies created a policy paradigm based on military might and bulldozing finance capitalism. By cutting taxes for the rich, there was surplus money to ‘invest’ in financial markets, and the cumulative deregulation of the financial sector ensured that the surplus money of the rich then moved across the globe in search of huge profits. Speculative finance capitalism, easy money with low interest rates, and the increasing distance between the movement of finance capital and the real economy created artificial demand and artificial growth, without real assets on the ground. This is what created the bubble. Wall Street moved far away from Main Street and the financial tsunami hit with the fall of one of the biggest investment banks, Lehman Brothers. The shaky foundations of one of the biggest insurance companies, AIG, caused all inter-bank lending to come to a halt and resulted in the credit crunch.
The downward spiral was bound to happen. Many of us have warned about the consequence of neo-liberal capitalism and unregulated finance capitalism for the last 15 years.
In early-2006, in an article titled ‘American Dream at the Crossroads’ (http://infochangeindia.org/200610026715/Other/Features/American-dream-at-the-crossroads.html), I had written: “While Bush is busy fighting a shadow war in Iraq and the ‘war on terror’ globally, the shape of the American economy is far from soothing. On the surface, it looks rosy. With an estimated growth of 3.5% this year, unemployment low and fat profits, the economy looks robust. However, if we look at the other key indicators, then there is less space for any optimism. The US trade (current account) deficit for 2005 has been reported at $804 billion (nearly 7% of the GDP). Scrap metal and waste paper are two of the biggest export items. There are enough signs of an impending financial crisis on the horizon.”
Investment banks and finance capitalism have focused on economic growth at the cost of the ethics and fundamental rationale of an economic system. The finance capital market looked more like a global casino, thriving on speculation, derivatives and quick money, without having any real assets. As finance capitalism got more detached from the real assets on the ground and the real economy and wealth, double-digit returns and quick profits gave rise to even more speculation. This created short-term artificial demand, and inflated real estate and commodity prices and a high-risk credit market.
While the neo-liberal policy paradigm created a whole new generation of billionaires and new policy and political dogmas, the new conservative politics gave rise to unilateral militarism and two costly wars. The Anglo-American finance capitalism and an unethical war proved to be too costly to sustain in real economic terms. This bulldozing capitalism and militarism, presided over by the bully George Bush, also created new reactions in the form of Islamist jihad and the politics of terror.
While everyone was singing songs of “robust” growth, the health of the US economy actually went from bad to worse. Household debt rose from 50% of GDP in 1980 to 100% of GDP in 2006. Much of the new debt was invested in real estate and sub-prime lending to anyone and everyone buying a house -- without any credit rating -- creating a housing bubble which saw an annual appreciation of almost 20%. This gambling was simply not sustainable as the price of houses went through the roof -- far removed from their real value. By 2007, the debt of the financial sector was about 116% of the GDP, compared with a mere 21% in 1980. During the last few years, the top five investment banks freaked out in the market and speculators and investors laughed their way to the bank almost every day.
However, the context of this crash is different from earlier ones. Unlike in the 1930s, the active economic zones of the world have now shifted to Asia. While in 1930 most countries in Asia had stagnant markets, a much smaller manufacturing sector and less productive capacity, the situation is dramatically different today. Both China and India have a growing domestic market and productive capacity. Asian banks and the financial sector are relatively well protected. Many learnt a lesson from the South-East Asian economic crisis of 1997. Central banks of Asian countries have total deposits of around $4 trillion. The National Sovereign Funds of the Gulf countries and the savings ratio of Asian countries are still robust. While China has one of the highest savings rates in the world, and India has a savings rate of more than 25%, the public debt of these countries is also healthy. Japan, though, has a huge public debt that is more than its GDP. Many Asian companies are cash-rich so they may still invest in expansion plans and many of them could acquire new, cheap assets in the USA and the UK.
Though Asian economies will be affected in the short-term, particularly in the service, real estate and financial sectors, Asian and West Asian economies look more resilient with the potential to balance out within the next two years. China has already committed $586 billion to stimulate domestic demand and the markets. India, too, is making an effort to stimulate the economy by announcing various packages of around $150 billion.
Due to the coordinated efforts, the faster pace of communication and the internal strengths of emerging economies and markets, the situation today may not be as dire as in the 1930s. This will be a deep recession, which will affect all sectors and economies, and deeply impact some sectors, but overall the devastation will be less. It will be a long and painful period lasting upto 2012, inflicting varying degrees of pain and trouble.
The present financial and economic crisis is also located in the ethical deficit in governance, management and economy. The greed-driven and growth-oriented ideology of finance capitalism alienated governance from politics, management from accountability and economy from ecology. The fall of Enron and many other companies clearly pointed to the lack of corporate accountability and the nexus between the corporate and political elite. Citizens were transformed into consumers of credit, services and goods. Mass political leaders were replaced by telegenic technocrats who looked to the rich countries, rich corporations, and Bretton Woods institutions for ideas, ideology and legitimacy.
Such a cumulative subversion of ethics and political processes led to a deficit of accountability and legitimacy in governance and economic management. This lack of accountability and transparency and the new nexus of corporate-technocratic-political elites created the conditions for casino capitalism to thrive and grow. But the growth proved to be deadly not only for the greedy investment bankers, but also for more than a billion poor people around the world.
InfoChange News & Features, December 2008
Saturday, December 20, 2008
Sunday, December 14, 2008
Great Depression to Deep Recession
Political contexts of Economic Crises
John Samuel
Politics and economy are twins- shaped and driven by power-relations. Finance Crisis does not happen in a political vacuum. Politics and policy choices often shape, make and break economies and the financial architecture. So it is important to unpack the political contexts, causes and consequences of the financial and economic crisis. There seems to be a clear connection between war, economic crisis and political transitions.
In spite of the confident rhetoric of political leaders, economy did not necessarily dance according to their music. In early 2007, George Bush boasted that “economy is powerful, productive and prosperous”. It would be worthwhile to compare this with the message of President Calvin Coolidge to the congress on Dec 4, 1928: “Enlarging production is consumed by an increasing demand at home and expanding commerce abroad. The country can regard the present with satisfaction and anticipate the future with optimism”. Within less than a year of that statement, on 29th October 1929 the great crash happened at the New York Stock Exchange, arguably the most traumatic experience in the history of capitalism. The near universality of this economic crisis and its political implications are not too far to forget.
The political context of the great depression and the ongoing financial crisis are not the same. However, there is one shared context- concentration of wealth in few hands- and consequent increase of inequality. The prosperity of the USA in the 1920s was very fragile; five percent of the population received more than one third of the income and seventy percent of the population got an annual wage hardly good enough for survival. The roots of the great depression can be traced back to the consequences of the First World War. And the consequences of the great economic crash in the early thirties made enabling conditions for the rise of fascism as well as the context for the Second World War. This eventually led to the reordering of the world in the aftermath of the Second World War. However, there is a substantial difference between the political context of the great crash and that of the ongoing financial and economic crisis.
The present financial crisis is a result of the cumulative impact of the neo-liberal economic paradigm and unbridled financial capitalism in the last twenty years. The globalization of market, media, technology, and finance went hand in hand with the globalization of discontent and globalization of terror. They fed into each other with increasing virulence. Thus economic growth was accompanied by inequality, injustice and reactionary politics. George Bush and Osama Bin Laden fed into each other. The rise of neo-liberal capitalism- driven by hyper-consumerism and economic growth`-perpetuated a new addiction for oil. The oil addiction shifted the theatre of international politics to the West Asia and Gulf Countries. The powerful countries sought to control oil and other natural resources- through the power apparatus of the military and markets. This created new forms of imperialism and militarization. The new oil economy irrigated markets, war machines as well as terrorism. Though the gulf war in the early nineties proved to be a profitable enterprise for the USA, the Iraq war proved to be a lost game, in terms of economics and politics. The economy, military and the unilateral power of the USA got overstretched and became increasingly brittle. In spite of the boastings of Bush, the economy began to bleed in the context of a costly war. It was estimated that around US$ 3 trillions was used to blow up Iraq- killing hundreds of thousands of people, making deep wounds in the world as well in the economy. The eclipse of military adventurism and casino-capitalism- eventually shook the political power of the White House and the economic muscle of the Wall Street.
The context of the great depression in the 1930s needs to be located in the interwar economic and political order of the world. The crash of the New York Stock Exchange on Oct- 29, 1929 led to a deeper universal crisis-which at that time looked like a collapse of the capitalist world economy. However, it is important to note that at that period Communism was a viable economic and political alternative to capitalism. In spite of the great depression, economy of the USSR was less affected due to the strength of the state- controlled Soviet system of economy. The economic and political consequence of the First World War also created to fertile ground for the rise of right wing militant politics in the form of Nazism in Germany and Fascism in Italy and other parts of Europe. Though America emerged as an important player in the aftermath of the First World War, the USA was neither a unilateral super power nor the dollar became the super currency of the world. The finance capitalism was far less globalised than the preset time. The political economy of oil was still in its early stages. The world was still a big colony of the British and European powers.
Now the context is dramatically different. It is an irony of history that the USA blew up lots of money for the war in the Gulf and Iraq, and now the Economy of USA will have to depend on the money and oil from the very same Arab world. The USA has to depend on the trillions of Foreign Exchange reserve from the Gulf Countries, and other Asian countries, such as China, Japan and India. Many of the tops Banks and business enterprises in the West is increasingly owned by the rich Arabs through investments as well as the strategic use of the National Sovereign Funds of many Gulf countries. While the market in the Europe and the USA got increasingly saturated, the new power of vibrant markets shifted to emerging economies of Brazil, Russia, India and China.
The dramatic recession in the USA in 1930 spread to Germany and the rest of the world. The industrial production in the US and Germany fell about a third from 1929 to 31. There was a slump in the demand and price of primary commodities-including rice, tea, coffee, wheat and silk. Many of the Asian, African and Latin America countries- dependent on the export of primary commodities suffered due to the slump in demand. The world trade fell by 60%. The crisis resulted in the rise of massive unemployment which varied between 20 to 50%- in different countries. The epidemic failure of Banks and credit-crunch actually led to the great stock exchange crash. By the second half of 1930, 603 banks failed, including the Bank of the United States, which accounted for the loss of about one third of the total deposits. By January 1932, 1860 banks have failed. The automobile production- a key sector of the economy in those days- reduced more than 50% within two years. The combined output of the world’s seven economies declined around 20% within three years of 1929 to 32. Millions lost job and unemployment in the USA and Germany was above 33%. The depression resulted in a sharp increase in tariff and resultant reduction in international trade. And the world trade almost collapsed. In fact, Great Brittan- the original imperialist masters of the “free trade” abandoned free trade in 1931.
However, the immediate response to the depression was a series of half baked panic reactions- including protectionism, cutting deficits and more conservative budget with less public expenditure. This further made the situation worse. It took another five years of concerted effort to re-energize the economy. And as a matter of fact, the Second World War helped the USA to increase demand and production to shift the economy in to a growing pattern.
The seeds of the Second World War were very much there in the ‘reparations.’ The vast and undefined ‘reparations’, as the cost of war and the damage done to the victorious powers, was imposed on Germany in the Versailles Peace Conference in 1919. Though John Maynard Keynes – who participated in the Versailles Peace conference as a young economist in the British delegation- warned against “reparations’ through an illuminating paper, The Economic consequence of Peace (1920) - the political leaders of the day ignored his arguments. As a result Germany plunged in to an economic crisis in the aftermath of the First World War, and this is what provided the fertile ground for the rise of Hitler and that of Nazism.
There is a connection between economic crisis, political turmoil and possible shifts in the governance. Germany was indeed a major industrial power and when the crisis of Germany was followed by the crash of the US Economy- there was a much more impact- economically and politically. This gave rise to Fascism in many parts of Europe. But it also gave rise to the New Deal of President Franklin Roosevelt in the USA, following the economic model of John Maynard Keynes. The New Deal consisted of a series of policy and economic measures to address unemployment and stimulate economic demand. The first New Deal Programme (1933-35) sought to restore public confidence and resulted in a series of legislation, including the one on Public works and policy measures. The second phase of the New Deal began in 1935. Path-breaking social legislation in 1935 included Social Security Act (a scheme for unemployment insurance, disability insurance and old age pension) and Wealth Tax Act and the National Labour Relations Act. In the eight year history of the New Deal, a total of US$ 11 billion was spent and provided employment for 8 million workers in the USA. The New Deal signified the role of the state in redistribution of wealth. Though the package was a radical step in many ways, it did not help to completely address the economic crisis- as the USA again faced a recession in 1937-38. However, it represented the far-reaching and stunning socio-economic reforms and established the role of an interventionist state. Thus began the political legitimacy for the Welfare state across the world.
The finance crisis may lead to a deep recession. Such a shift is powerful enough to shape new paradigms of policy, development and institutional framework in the next five years. Great Depression was the beginning of a paradigm shift in the policy, politics and nature of the state. The political outcome of the Finance Crisis may be too early to predict. But one could see multiple shifts in the political process and governance in the years to come.
The ongoing financial recession played a very important role in shifting the politics of the USA. It is yet to be seen whether the team of Barack Obama can turn the tide of politics and economics. There is indeed a danger of conformist politics with a high doze of optimistic rhetoric. A black man in the white house may be a great political symbolism. But whether it would transform the politics and economics in the world still remains a billion dollar question.
John Samuel
Politics and economy are twins- shaped and driven by power-relations. Finance Crisis does not happen in a political vacuum. Politics and policy choices often shape, make and break economies and the financial architecture. So it is important to unpack the political contexts, causes and consequences of the financial and economic crisis. There seems to be a clear connection between war, economic crisis and political transitions.
In spite of the confident rhetoric of political leaders, economy did not necessarily dance according to their music. In early 2007, George Bush boasted that “economy is powerful, productive and prosperous”. It would be worthwhile to compare this with the message of President Calvin Coolidge to the congress on Dec 4, 1928: “Enlarging production is consumed by an increasing demand at home and expanding commerce abroad. The country can regard the present with satisfaction and anticipate the future with optimism”. Within less than a year of that statement, on 29th October 1929 the great crash happened at the New York Stock Exchange, arguably the most traumatic experience in the history of capitalism. The near universality of this economic crisis and its political implications are not too far to forget.
The political context of the great depression and the ongoing financial crisis are not the same. However, there is one shared context- concentration of wealth in few hands- and consequent increase of inequality. The prosperity of the USA in the 1920s was very fragile; five percent of the population received more than one third of the income and seventy percent of the population got an annual wage hardly good enough for survival. The roots of the great depression can be traced back to the consequences of the First World War. And the consequences of the great economic crash in the early thirties made enabling conditions for the rise of fascism as well as the context for the Second World War. This eventually led to the reordering of the world in the aftermath of the Second World War. However, there is a substantial difference between the political context of the great crash and that of the ongoing financial and economic crisis.
The present financial crisis is a result of the cumulative impact of the neo-liberal economic paradigm and unbridled financial capitalism in the last twenty years. The globalization of market, media, technology, and finance went hand in hand with the globalization of discontent and globalization of terror. They fed into each other with increasing virulence. Thus economic growth was accompanied by inequality, injustice and reactionary politics. George Bush and Osama Bin Laden fed into each other. The rise of neo-liberal capitalism- driven by hyper-consumerism and economic growth`-perpetuated a new addiction for oil. The oil addiction shifted the theatre of international politics to the West Asia and Gulf Countries. The powerful countries sought to control oil and other natural resources- through the power apparatus of the military and markets. This created new forms of imperialism and militarization. The new oil economy irrigated markets, war machines as well as terrorism. Though the gulf war in the early nineties proved to be a profitable enterprise for the USA, the Iraq war proved to be a lost game, in terms of economics and politics. The economy, military and the unilateral power of the USA got overstretched and became increasingly brittle. In spite of the boastings of Bush, the economy began to bleed in the context of a costly war. It was estimated that around US$ 3 trillions was used to blow up Iraq- killing hundreds of thousands of people, making deep wounds in the world as well in the economy. The eclipse of military adventurism and casino-capitalism- eventually shook the political power of the White House and the economic muscle of the Wall Street.
The context of the great depression in the 1930s needs to be located in the interwar economic and political order of the world. The crash of the New York Stock Exchange on Oct- 29, 1929 led to a deeper universal crisis-which at that time looked like a collapse of the capitalist world economy. However, it is important to note that at that period Communism was a viable economic and political alternative to capitalism. In spite of the great depression, economy of the USSR was less affected due to the strength of the state- controlled Soviet system of economy. The economic and political consequence of the First World War also created to fertile ground for the rise of right wing militant politics in the form of Nazism in Germany and Fascism in Italy and other parts of Europe. Though America emerged as an important player in the aftermath of the First World War, the USA was neither a unilateral super power nor the dollar became the super currency of the world. The finance capitalism was far less globalised than the preset time. The political economy of oil was still in its early stages. The world was still a big colony of the British and European powers.
Now the context is dramatically different. It is an irony of history that the USA blew up lots of money for the war in the Gulf and Iraq, and now the Economy of USA will have to depend on the money and oil from the very same Arab world. The USA has to depend on the trillions of Foreign Exchange reserve from the Gulf Countries, and other Asian countries, such as China, Japan and India. Many of the tops Banks and business enterprises in the West is increasingly owned by the rich Arabs through investments as well as the strategic use of the National Sovereign Funds of many Gulf countries. While the market in the Europe and the USA got increasingly saturated, the new power of vibrant markets shifted to emerging economies of Brazil, Russia, India and China.
The dramatic recession in the USA in 1930 spread to Germany and the rest of the world. The industrial production in the US and Germany fell about a third from 1929 to 31. There was a slump in the demand and price of primary commodities-including rice, tea, coffee, wheat and silk. Many of the Asian, African and Latin America countries- dependent on the export of primary commodities suffered due to the slump in demand. The world trade fell by 60%. The crisis resulted in the rise of massive unemployment which varied between 20 to 50%- in different countries. The epidemic failure of Banks and credit-crunch actually led to the great stock exchange crash. By the second half of 1930, 603 banks failed, including the Bank of the United States, which accounted for the loss of about one third of the total deposits. By January 1932, 1860 banks have failed. The automobile production- a key sector of the economy in those days- reduced more than 50% within two years. The combined output of the world’s seven economies declined around 20% within three years of 1929 to 32. Millions lost job and unemployment in the USA and Germany was above 33%. The depression resulted in a sharp increase in tariff and resultant reduction in international trade. And the world trade almost collapsed. In fact, Great Brittan- the original imperialist masters of the “free trade” abandoned free trade in 1931.
However, the immediate response to the depression was a series of half baked panic reactions- including protectionism, cutting deficits and more conservative budget with less public expenditure. This further made the situation worse. It took another five years of concerted effort to re-energize the economy. And as a matter of fact, the Second World War helped the USA to increase demand and production to shift the economy in to a growing pattern.
The seeds of the Second World War were very much there in the ‘reparations.’ The vast and undefined ‘reparations’, as the cost of war and the damage done to the victorious powers, was imposed on Germany in the Versailles Peace Conference in 1919. Though John Maynard Keynes – who participated in the Versailles Peace conference as a young economist in the British delegation- warned against “reparations’ through an illuminating paper, The Economic consequence of Peace (1920) - the political leaders of the day ignored his arguments. As a result Germany plunged in to an economic crisis in the aftermath of the First World War, and this is what provided the fertile ground for the rise of Hitler and that of Nazism.
There is a connection between economic crisis, political turmoil and possible shifts in the governance. Germany was indeed a major industrial power and when the crisis of Germany was followed by the crash of the US Economy- there was a much more impact- economically and politically. This gave rise to Fascism in many parts of Europe. But it also gave rise to the New Deal of President Franklin Roosevelt in the USA, following the economic model of John Maynard Keynes. The New Deal consisted of a series of policy and economic measures to address unemployment and stimulate economic demand. The first New Deal Programme (1933-35) sought to restore public confidence and resulted in a series of legislation, including the one on Public works and policy measures. The second phase of the New Deal began in 1935. Path-breaking social legislation in 1935 included Social Security Act (a scheme for unemployment insurance, disability insurance and old age pension) and Wealth Tax Act and the National Labour Relations Act. In the eight year history of the New Deal, a total of US$ 11 billion was spent and provided employment for 8 million workers in the USA. The New Deal signified the role of the state in redistribution of wealth. Though the package was a radical step in many ways, it did not help to completely address the economic crisis- as the USA again faced a recession in 1937-38. However, it represented the far-reaching and stunning socio-economic reforms and established the role of an interventionist state. Thus began the political legitimacy for the Welfare state across the world.
The finance crisis may lead to a deep recession. Such a shift is powerful enough to shape new paradigms of policy, development and institutional framework in the next five years. Great Depression was the beginning of a paradigm shift in the policy, politics and nature of the state. The political outcome of the Finance Crisis may be too early to predict. But one could see multiple shifts in the political process and governance in the years to come.
The ongoing financial recession played a very important role in shifting the politics of the USA. It is yet to be seen whether the team of Barack Obama can turn the tide of politics and economics. There is indeed a danger of conformist politics with a high doze of optimistic rhetoric. A black man in the white house may be a great political symbolism. But whether it would transform the politics and economics in the world still remains a billion dollar question.
Saturday, December 13, 2008
In the Birds Nest
Changing Contours of China
John Samuel
Today is a freezing Saturday of December in Beijing. I was looking for Chairman Mao.
People said he might be there at the Tienanmen Square- that is where the place allocated to him. I went there looking for him. His huge portrait looked in a sort of splendid isolation. Mao is a lonely portrait of an old man in the new China. There were not many visitors at the Tienanmen Square.
Taxi driver told me that I should rather spend time in the happening place- the Birds' Nest.
Bird’s Nest- the venue of Beijing 2008 Olympics- did not look lonely. Even on a freezing morning, there were more than ten thousand people. Tens of thousands are coming to Beijing to see the pride of China- the gleaming architectural marvel designed by a French architect. And it is not free. One ticket costs 50 RMB (equivalent to 300 Rs). That does not decrease the queue. It is indeed the happening place. I looked for Chairman Mao there too. I could not find him anywhere in the enthusiastic crowd. At last I found him on the leather bag of a fashionable woman- Mao too may have new market in the branded world -like Che Guevara!
Since I could not find Mao anywhere, I asked my friend. She said Mao drifted away from public space and memory somewhere in the early eighties. He walked away to the labyrinth of history. His statues slowly but surely disappeared- one by one. First, from Public Square, then from office buildings and then from Universities. There is one statue remaining in Beijing- at the University for Chemical Industries. It seems Deng Xiaoping’s team erased Mao and Maoism from the public space and memory.
The art Museum in Beijing is now celebrating the paintings of New Era (1978-2008).These paintings are actually a witness of the changing tastes and contours of the society. I could see some beautiful realist paintings of the 1970s and then slowly the coloures and contours changed. Techniques too changed. Now one could see more globalised art- abstract paintings that could be done by anyone from any country- though there is a Chinese touch here and there.
Birds Nest too is a bit abstract. It is surrounded by the gleaming building and the glow of the new China. But somewhere behind the Birds Nest- very close to it- there is a temple dedicated to the Taoist goddess of beauty. Birds Nest is sizzling with thousands of enthusiastic Chinese tourists on a freezing morning- and there is a whole bunch of tourist agencies and souvenir shops- selling the pride of China- declaring the arrival of China on the global stage. When I walked to the 15nth century temple- constructed during the Ming Dynasty- they said it was closed. No one was there. They told me that it would not open on weekends.
The CCTV9- the government run English TV Channel- keeps reminding us about the "Strategic Economic Dialogue Meeting” of the two "super" powers- between the largest economy and the largest developing country in the world. Of course, the number of Olympic gold medals and the Birds Nest auditorium- with a capacity of more than ninety thousand people- reaffirm super power perception in the collective memory of the growing middle class Chinese people. There is more nationalism and the old Maoism and communist dreams seemed to have taken a backseat somewhere.
But there is a less visible world behind the glow of the globalised China. There are so many new confusions, social trauma, new inequalities and hundreds of millions of lonely people. There are layers and layers of China- not only in terms of its depth of history and civilization- but in terms of its society, people and culture.
Mao is not the only lonely man in the new China. Amidst busy traffic and crowded streets, there is a growing burden of lonely people- who are pushed in to the rat race of economic comforts and the ever –growing need for more money to buy new homes , new cars, and the latest gadget or holiday offer.
Someone I know had to go through a difficult time. She had to undergo therapy for a serious ailment. She was in the hospital for a couple of months. She came to meet me. I asked whether anyone was there to support her during those difficult times. Tears started making channels on her face- she was overwhelmed with a sense of unspeakable sorrow. She has a good house. She has a very good car. She got her degree from UK and she is a high value technical professional. But there was no one to visit her during her two months in the hospital. Her parents passed away. She neither got a brother nor a sister. She had a partner- for a couple of years. He moved to another country and no longer in touch. She was too busy in her work and earning more to pay more mortgages. She did not have time to get friends. Then she was hit by the unbearable burden of loneliness. It is in such spaces the new spiritualism and religion is coming in. There is a very significant growth of tantric Buddhism and evangelical Christianity- largely through cell churches.
During the time of Chairman Mao, there was a huge public education against superstition. Now even big office buildings are inaugurated with all ceremonies to ward off bad omen and bad luck. New sense of insecurity, loneliness and new superstition can be seen and felt when you scratch the glow of the new era. The new era and new capitalism seem to give a sense of new pride to many middle class Chinese. But that also increased the sense of insecurity and alienation.
Before the beginning of the new era, cycles defined the streets of China. A man with a cycle and enough earning for living, was an eligible bachelor. There was a binding force of community. Within the community, many meetings and festivals gave new opportunity to discover love and life partners. Such communities are more of nostalgia in the new China. There are still cycle tracks on the road. But the roads are full of cars- and it is no longer easy to cycle on a busy street in Shanghai or Beijing.
Beijing is booming. Shanghai still shines - almost like the Manhattan of the east. But there is also a concern about the increasing inequality and migration. The population of Beijing is touching 18 million. Now there is already a move to restrict migration to Beijing. Many young people consider a registration in Beijing or Shanghai as status statement. But that can not solve the new sense of loneliness among many young people- particularly professional women-in the midst of growing buildings, new KFC chicken shops and mushrooming massage spa in Beijing.
Mao may want to sleep peacefully in his grave. Maoism is not even in the Museum. There are two statues of a sad Marx and grumpy Engels at the Shanghai Institute of Administration. Marx in Shanghai could be the title of a novel about the new China.
China is an amazing place- one can discover layers behind layers every time. One can discover some new thing- food, taste or flavor- every time. China is still an amazing place- ever waiting to be discovered.
John Samuel
Today is a freezing Saturday of December in Beijing. I was looking for Chairman Mao.
People said he might be there at the Tienanmen Square- that is where the place allocated to him. I went there looking for him. His huge portrait looked in a sort of splendid isolation. Mao is a lonely portrait of an old man in the new China. There were not many visitors at the Tienanmen Square.
Taxi driver told me that I should rather spend time in the happening place- the Birds' Nest.
Bird’s Nest- the venue of Beijing 2008 Olympics- did not look lonely. Even on a freezing morning, there were more than ten thousand people. Tens of thousands are coming to Beijing to see the pride of China- the gleaming architectural marvel designed by a French architect. And it is not free. One ticket costs 50 RMB (equivalent to 300 Rs). That does not decrease the queue. It is indeed the happening place. I looked for Chairman Mao there too. I could not find him anywhere in the enthusiastic crowd. At last I found him on the leather bag of a fashionable woman- Mao too may have new market in the branded world -like Che Guevara!
Since I could not find Mao anywhere, I asked my friend. She said Mao drifted away from public space and memory somewhere in the early eighties. He walked away to the labyrinth of history. His statues slowly but surely disappeared- one by one. First, from Public Square, then from office buildings and then from Universities. There is one statue remaining in Beijing- at the University for Chemical Industries. It seems Deng Xiaoping’s team erased Mao and Maoism from the public space and memory.
The art Museum in Beijing is now celebrating the paintings of New Era (1978-2008).These paintings are actually a witness of the changing tastes and contours of the society. I could see some beautiful realist paintings of the 1970s and then slowly the coloures and contours changed. Techniques too changed. Now one could see more globalised art- abstract paintings that could be done by anyone from any country- though there is a Chinese touch here and there.
Birds Nest too is a bit abstract. It is surrounded by the gleaming building and the glow of the new China. But somewhere behind the Birds Nest- very close to it- there is a temple dedicated to the Taoist goddess of beauty. Birds Nest is sizzling with thousands of enthusiastic Chinese tourists on a freezing morning- and there is a whole bunch of tourist agencies and souvenir shops- selling the pride of China- declaring the arrival of China on the global stage. When I walked to the 15nth century temple- constructed during the Ming Dynasty- they said it was closed. No one was there. They told me that it would not open on weekends.
The CCTV9- the government run English TV Channel- keeps reminding us about the "Strategic Economic Dialogue Meeting” of the two "super" powers- between the largest economy and the largest developing country in the world. Of course, the number of Olympic gold medals and the Birds Nest auditorium- with a capacity of more than ninety thousand people- reaffirm super power perception in the collective memory of the growing middle class Chinese people. There is more nationalism and the old Maoism and communist dreams seemed to have taken a backseat somewhere.
But there is a less visible world behind the glow of the globalised China. There are so many new confusions, social trauma, new inequalities and hundreds of millions of lonely people. There are layers and layers of China- not only in terms of its depth of history and civilization- but in terms of its society, people and culture.
Mao is not the only lonely man in the new China. Amidst busy traffic and crowded streets, there is a growing burden of lonely people- who are pushed in to the rat race of economic comforts and the ever –growing need for more money to buy new homes , new cars, and the latest gadget or holiday offer.
Someone I know had to go through a difficult time. She had to undergo therapy for a serious ailment. She was in the hospital for a couple of months. She came to meet me. I asked whether anyone was there to support her during those difficult times. Tears started making channels on her face- she was overwhelmed with a sense of unspeakable sorrow. She has a good house. She has a very good car. She got her degree from UK and she is a high value technical professional. But there was no one to visit her during her two months in the hospital. Her parents passed away. She neither got a brother nor a sister. She had a partner- for a couple of years. He moved to another country and no longer in touch. She was too busy in her work and earning more to pay more mortgages. She did not have time to get friends. Then she was hit by the unbearable burden of loneliness. It is in such spaces the new spiritualism and religion is coming in. There is a very significant growth of tantric Buddhism and evangelical Christianity- largely through cell churches.
During the time of Chairman Mao, there was a huge public education against superstition. Now even big office buildings are inaugurated with all ceremonies to ward off bad omen and bad luck. New sense of insecurity, loneliness and new superstition can be seen and felt when you scratch the glow of the new era. The new era and new capitalism seem to give a sense of new pride to many middle class Chinese. But that also increased the sense of insecurity and alienation.
Before the beginning of the new era, cycles defined the streets of China. A man with a cycle and enough earning for living, was an eligible bachelor. There was a binding force of community. Within the community, many meetings and festivals gave new opportunity to discover love and life partners. Such communities are more of nostalgia in the new China. There are still cycle tracks on the road. But the roads are full of cars- and it is no longer easy to cycle on a busy street in Shanghai or Beijing.
Beijing is booming. Shanghai still shines - almost like the Manhattan of the east. But there is also a concern about the increasing inequality and migration. The population of Beijing is touching 18 million. Now there is already a move to restrict migration to Beijing. Many young people consider a registration in Beijing or Shanghai as status statement. But that can not solve the new sense of loneliness among many young people- particularly professional women-in the midst of growing buildings, new KFC chicken shops and mushrooming massage spa in Beijing.
Mao may want to sleep peacefully in his grave. Maoism is not even in the Museum. There are two statues of a sad Marx and grumpy Engels at the Shanghai Institute of Administration. Marx in Shanghai could be the title of a novel about the new China.
China is an amazing place- one can discover layers behind layers every time. One can discover some new thing- food, taste or flavor- every time. China is still an amazing place- ever waiting to be discovered.
Sunday, December 7, 2008
China in the days of Meltdown
John Samuel
Taxi drivers are often the best barometers of a society. They are a part of the common people. They know the city- its glow and underbelly. So I began my discussion with my Taxi driver in Beijing. He told me that he got less business and there were not many foreign tourists. He was worried about financial crisis- though he hoped that government would do something about it.
It seems China has anticipated the Finance Crisis and also adopted a comprehensive strategy to address the situation. In spite of such preparedness, there is a shared sense of nervousness among people. People spend less and save more. There is an unarticulated sense of impending trouble. But there is also a sense of confidence- that the government would be able to manage the trouble.
There are around 200 million migrant labors who moved from villages and agricultural sector to the booming real estate and manufacturing sector, in the last ten to fifteen years. They are the people who are hit by the present crisis. Hundreds of factories in export zones (such as Guangdong) are shut. Maximum number of lay off are among the direct subsidiaries of Multi National Corporations or the direct suppliers of such big companies. So now there is a reverse migration from Cities to villages.
While government has announced a package of US$ 586 billion for stimulating domestic demands and building rural infrastructure, they announced 9 point economic and fiscal management programme to stabilize and manage the economy. These include a) Reducing the interest rates b) A massive programme for rural credit for new ventures- where local government will offer guarantee c) A programme to provide loans to start new enterprises d) Stock market stabilization strategy and e) Weekly risk monitoring and management .
Anticipating an urban-rural migration, there is a coordinated effort between the federal government and the provincial government, along with county administration, to initiate a whole range of projects on high quality rural infrastructure. This will include rebuilding schools, improving hospitals, constructing new roads, bridges etc. Apart from this, 140 new airports are planned across the country.
Though there is a slow down of the construction activity in Beijing and other big cities, the real estate is yet to show a serious crisis here. The demand has decreased (though loans are still available). But the price has only come down to 10% to 15% in the housing sector in Beijing
There is a conscious strategy to encourage internal tourism and the number of people traveling within China is increasing. There is also a new effort to encourage tourism to Taiwan- in the context of the new equation with the government of Taiwan. However, there are clear evidences of decreasing number of foreign tourists. This may have a direct impact on hotel and airline industry.
It seems China has a comprehensive security policy in the context of the finance crisis. There is restriction on visas. All international organizations are under new surveillance. They are now very careful about each and every business proposal or financial deal. It seems China is far ahead of India in terms of planning, risk analysis and preparedness.
There are very interesting debates about the Financial Crisis in China. The key debate is whether the first priority should be to strengthen Chinese economy or to help to stabilize the global economy by pumping in more money to the US. There seems to be fierce debate on this in the Chinese media and less debate in English- as government imposes more restriction on English media.
Unlike many other countries, China is unique in terms of the scale of operations and also the fast pace of implementing policy recommendation. China has highly centralized form implementation and a much better orchestrated coordination between the federal and provincial governments. So there is a much better chance to implement a demand stimulation programme- which will have multiple layers and dimensions- at a much faster pace than many other countries.
China seems to have a three prong strategy a) A Huge programme focusing on rural and small town infrastructure development (in the last fifteen years- it was more urban focused development) b) A growth stimulating programme by providing generous loans for small and medium level enterprises in the third and forth tier towns/cities- closer to the rural area c) A fiscal management strategy.
Last week, they finished the fifth round Strategic Economic Policy Dialog with the US. The discussions were led by Hank Paulson and the Chinese vice-premier. This is a part of the external strategy of building bridges and strategically positioning in the context of the financial crisis. Chinese leadership very well knows the USA will be more dependent on China much more than before. At the same time, it is in the interest of China to make sure that the economy of USA rebounds to its earlier vibrancy. China needs an economically vibrant USA to export its goods and services. And the USA needs the Chinese foreign exchange reserves to stabilize its finance system. CCTV 9 (English Channel) did a special programme focusing on European businessmen in various cities and how they felt about the pinch of Finance crisis. Of course, they gave the general narrative "it will be difficult- but China will come out in flying coloures".
In many ways, the situation of China is exactly opposite to the USA. In the USA, everything is driven by credit- personal spending to the consumer market to new investments. In China, it is still driven by the saving. In spite of everything, people spent only a percentage of their earning, most of the people who buy houses would prefer to take only 30 to 50% as loan- instead of hundred or eighty percent mortgage in many other countries. China got one of the best saving ratios in the world. Public debt ratio too is good in China. So the saving driven economic model may actually help China in the difficult days ahead.
There has been a cottage industry predicting the fall and doom of China. But don't underestimate the quality and caliber of the leadership in China .There seems to be a difference between the external perceptions- and the multiple layers at work in China. There is a sort of inbuilt resilience within the system of governance. Though the economy and financial sectors have opened up, there is still a strong regulation and control management system at work in China. Most of the big Chinese corporations are owned or controlled by the government. This is quite different from the free market of the USA or Europe.
Having said this, China has a huge export market- and the financial melt down may severely affect the export market, particularly if many people in the US and Europe lose jobs. Though China is confident to keep the growth rate at the level of nine percent, it may actually come down in the next one year. It may have some difficult effect in some provinces and in the short run many millions of migrant workers may move back to their villages and countries.
China, with its centralized economic management, a strong sense of nationalism (this has a psychological impact), and the possible simulation of demands may be able to cope up with the finance crisis better than many other countries.
Taxi drivers are often the best barometers of a society. They are a part of the common people. They know the city- its glow and underbelly. So I began my discussion with my Taxi driver in Beijing. He told me that he got less business and there were not many foreign tourists. He was worried about financial crisis- though he hoped that government would do something about it.
It seems China has anticipated the Finance Crisis and also adopted a comprehensive strategy to address the situation. In spite of such preparedness, there is a shared sense of nervousness among people. People spend less and save more. There is an unarticulated sense of impending trouble. But there is also a sense of confidence- that the government would be able to manage the trouble.
There are around 200 million migrant labors who moved from villages and agricultural sector to the booming real estate and manufacturing sector, in the last ten to fifteen years. They are the people who are hit by the present crisis. Hundreds of factories in export zones (such as Guangdong) are shut. Maximum number of lay off are among the direct subsidiaries of Multi National Corporations or the direct suppliers of such big companies. So now there is a reverse migration from Cities to villages.
While government has announced a package of US$ 586 billion for stimulating domestic demands and building rural infrastructure, they announced 9 point economic and fiscal management programme to stabilize and manage the economy. These include a) Reducing the interest rates b) A massive programme for rural credit for new ventures- where local government will offer guarantee c) A programme to provide loans to start new enterprises d) Stock market stabilization strategy and e) Weekly risk monitoring and management .
Anticipating an urban-rural migration, there is a coordinated effort between the federal government and the provincial government, along with county administration, to initiate a whole range of projects on high quality rural infrastructure. This will include rebuilding schools, improving hospitals, constructing new roads, bridges etc. Apart from this, 140 new airports are planned across the country.
Though there is a slow down of the construction activity in Beijing and other big cities, the real estate is yet to show a serious crisis here. The demand has decreased (though loans are still available). But the price has only come down to 10% to 15% in the housing sector in Beijing
There is a conscious strategy to encourage internal tourism and the number of people traveling within China is increasing. There is also a new effort to encourage tourism to Taiwan- in the context of the new equation with the government of Taiwan. However, there are clear evidences of decreasing number of foreign tourists. This may have a direct impact on hotel and airline industry.
It seems China has a comprehensive security policy in the context of the finance crisis. There is restriction on visas. All international organizations are under new surveillance. They are now very careful about each and every business proposal or financial deal. It seems China is far ahead of India in terms of planning, risk analysis and preparedness.
There are very interesting debates about the Financial Crisis in China. The key debate is whether the first priority should be to strengthen Chinese economy or to help to stabilize the global economy by pumping in more money to the US. There seems to be fierce debate on this in the Chinese media and less debate in English- as government imposes more restriction on English media.
Unlike many other countries, China is unique in terms of the scale of operations and also the fast pace of implementing policy recommendation. China has highly centralized form implementation and a much better orchestrated coordination between the federal and provincial governments. So there is a much better chance to implement a demand stimulation programme- which will have multiple layers and dimensions- at a much faster pace than many other countries.
China seems to have a three prong strategy a) A Huge programme focusing on rural and small town infrastructure development (in the last fifteen years- it was more urban focused development) b) A growth stimulating programme by providing generous loans for small and medium level enterprises in the third and forth tier towns/cities- closer to the rural area c) A fiscal management strategy.
Last week, they finished the fifth round Strategic Economic Policy Dialog with the US. The discussions were led by Hank Paulson and the Chinese vice-premier. This is a part of the external strategy of building bridges and strategically positioning in the context of the financial crisis. Chinese leadership very well knows the USA will be more dependent on China much more than before. At the same time, it is in the interest of China to make sure that the economy of USA rebounds to its earlier vibrancy. China needs an economically vibrant USA to export its goods and services. And the USA needs the Chinese foreign exchange reserves to stabilize its finance system. CCTV 9 (English Channel) did a special programme focusing on European businessmen in various cities and how they felt about the pinch of Finance crisis. Of course, they gave the general narrative "it will be difficult- but China will come out in flying coloures".
In many ways, the situation of China is exactly opposite to the USA. In the USA, everything is driven by credit- personal spending to the consumer market to new investments. In China, it is still driven by the saving. In spite of everything, people spent only a percentage of their earning, most of the people who buy houses would prefer to take only 30 to 50% as loan- instead of hundred or eighty percent mortgage in many other countries. China got one of the best saving ratios in the world. Public debt ratio too is good in China. So the saving driven economic model may actually help China in the difficult days ahead.
There has been a cottage industry predicting the fall and doom of China. But don't underestimate the quality and caliber of the leadership in China .There seems to be a difference between the external perceptions- and the multiple layers at work in China. There is a sort of inbuilt resilience within the system of governance. Though the economy and financial sectors have opened up, there is still a strong regulation and control management system at work in China. Most of the big Chinese corporations are owned or controlled by the government. This is quite different from the free market of the USA or Europe.
Having said this, China has a huge export market- and the financial melt down may severely affect the export market, particularly if many people in the US and Europe lose jobs. Though China is confident to keep the growth rate at the level of nine percent, it may actually come down in the next one year. It may have some difficult effect in some provinces and in the short run many millions of migrant workers may move back to their villages and countries.
China, with its centralized economic management, a strong sense of nationalism (this has a psychological impact), and the possible simulation of demands may be able to cope up with the finance crisis better than many other countries.
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