Tag Archives: the Chinese model

A vicious circle tightens



The globalized economy’s undertow is ripping all around the world.

Even the economic optimists’ two darlings, China and India, are now troubled. Seen as the world’s growth machine [along with a now overheated Brazil] in a period of advanced economies’ stagnation, their downturn produces a universally grim world outlook.

India, now the world’s largest population, had promise to overtake

China – perhaps more stable with its veteran private sector and representative government. But inflation threatens with food almost half its consumer index rising to more than 9 percent last month. Prime Minister Manmoham Singh, after all a graduate of Soviet-style Indian planning, has his foot on the brake and gas pedal at the same time. Reserve Bank of India rates force lending for preferred firms to 13 percent and notorious paper-shuffling babus [clerks] hobble initiative, sending Indian coal companies, for example, despite some of the world’s largest reserves, chasing projects from Australia to North America. A spate of influence peddling scandals, including $16-billion in telecommunications, further clouds the scene.

New Delhi’s geopolitical rival, China, has turned its back on its 25-year strategy to prevent destabilization of one-party dictatorship with maximum growth. With incipient inflation, Communist leadership enters a generational succession next year trimming its investment-led behemoth’s sails. Widespread civil violence – despite enormous expenditures for the most elaborate hi-tech suppression machine in the history of authoritarianism – jeopardizes any new tactics. In fact, all the Chinese boom’s contradictory chickens simultaneously are coming home to roost: vast overexpansion of infrastructure feeding the boom [along with subsidized exports] has produced marvels for photographers but a real estate bubble including, literally, empty new cities. There’s growing resentment over second class citizenship and lack of services among more than 200 million migrant labor from rural areas stampeded to coastal cities employment. Declining foreign markets, roaring imported commodity prices [ironically brought on in part by speculation on “unlimited” Chinese demand], wage pressure, competition from export-led cheap-wage producers, monumental corruption, all now threaten “the Chinese model”. Consumption continues to decline as a percentage of domestic product mocking talk of redirecting a growth strategy. A combination of nonconvertibility and hot money chasing an undervalued yuan demonstrates how empty talk of it as an international reserve currency is. Beijing’s capacity for foot in mouth disease is epitomized in its increasing hoard of dollars and Treasury debt [again on the upswing] while officials continuously publicly denigrate the dollar.

So much for “the emerging markets”.

Turning to the developed world, there, too, crises are escalating.

A bureaucratic hassle over the Euro with divergent views in Berlin, Paris, Brussels and Frankfurt is turning into a dragged out effort to save the 17 European Union members’ common currency. Meanwhile other integration efforts — a free labor market and common defense and foreign policy — are faltering. A Greek default could produce a European banking crisis [even contagion for North America]. In other words, a fiscal and monetary crisis is turning into a major political upheaval threatening accepted European patterns. Half-baked intervention in Libya, dragging in NATO and the U.S., was announced in idealistic terms by Europe’s leaders. But it encapsulates European concerns – unlike the increasingly hot American debate over Obama Administration’s opting for “a war of choice”. For Europe “Libya” is linked directly to falling birthrates and need for imported labor and unemployed North African, Middle Eastern and Black African youth almost literally swimming the Mediterranean at a time Muslim immigrant assimilation is increasingly questioned.

Europe faces, too, the fact the world’s window to the U.S. consumer maw which supplied the post-World War II economy not only with unlimited markets but revolutionary technology has a “closed for repairs” sign with no reopening time indicated. Whatever happens after decades of drunken sailor’s spending, there will be no substantial U.S. economic strategy in place until after November 2012. Current Washington debate, if it can be dignified with that title, over raising the debt limit and reducing government spending, is simply a foretaste of the pain necessary to get the U.S. economy – perhaps now sliding into a double-dip recession — back to its historic miraculous production of jobs and expanding markets.

It’s going to be a long hot summer and a grim fall — despite the American sideshow of political shenanigans with the curtain only temporarily coming down on the first [Weiner] scene.

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Vietnam, in sadness but not in shame


America’s more than a million and a half Vietnamese Americans this week will mourn the 35th anniversary of the fall of Saigon and the Republic of [South] Vietnam.

Defying conventional wisdom, they will memorialize the bravery and sacrifice of the Army of the Republic of Vietnam [ARVN]. They want recognition for the heroic struggle it put up against overwhelming odds after the withdrawal of American forces and the cutoff of U.S. military aid. Fortunately, a new group of revisionist scholars are setting the record straight, even in the face of the long history of American media and academic malfeasance on the Vietnam disaster.

The mourners will also recall the enormous loss of life and suffering – “the bloodbath” which, again, conventional wisdom has tried to deny took place – that followed Saigon’s fall. Thousands died in “the Vietnamese gulag”, Communist “reeducation camps”, where Prime Minister Pham Van Dong publicly admitted more than a million people had been imprisoned. Few but the Vietnamese remember that in addition to the 255,000 “boat people” who reached the misery of the refugee camps, thousands drowned at sea, often refused shelter by neighboring countries.

That is not in any way to minimize the enormous loss in life and sacrifice of Americans in what was a noble if tragic struggle. But it is an effort to retell the whole story of “Vietnam” for fellow Americans, particularly their own offspring who have grown up amidst a vast media and pseudo-scholarly distortion of facts. And it glories in the thousands of young Vietnamese serving with distinction in the U.S. armed forces.

Unfortunately, in Vietnam itself, the oppression continues unabated. The Communist regime persecutes the religious and ethnic minorities, and in its own ham-handed way attempts to stamp out political dissent. An endlessly feuding politburo guides the one-party state – so enmeshed in petty personal rivalries and ideological confusion that it publicly arrested the Communist Party official newspaper editor after he wrote an anti-Chinese editorial. And, since 1995 when Senators John McCain and John Kerry pushed for U.S. diplomatic recognition without quid pro quos – at a time the Hanoi regime desperately needed and wanted it — official Washington obfuscates the nature of the regime. U.S. policy has naively and ignominiously sought favor with economic and trade concessions in a fruitless effort to achieve political liberalization.

Although it long ago adopted “the Chinese model”, tattered Soviet-style central planning, incompetence and unbridled corruption have led to shortages, inflation, and rising debt. Nevertheless, the indomitable Vietnamese entrepreneur with his traditional thirst for education –- demonstrated so forcefully in the success of the immigrants in the U.S. — has produced a growing gross national product for a youthful population nearing 90 million.

Ironically, remittances from the American émigrés to unfortunate relatives left behind has been the most powerful economic prop for the regime, totaling as much as $8 billion in 2008, only slightly off since the worldwide recession began. [That’s compared with $5 billion annually in aid from the multilateral agencies and bilateral aid programs.] TheseVietnamese Kieu contribute 5% of the GDP adding to the money sent home by half a million workers abroad and receipts from another 400,000 annual ethnic Vietnamese tourists. Capital from the American émigrés, often arriving via the black market, fund small entrepreneurs who make greater Ho Chi Minh City-Saigon the country’s overwhelming economic hub, the cash cow for Hanoi’s kleptocrats. The US remains Vietnam’s largest official investor, as well, with some billion dollars in registered capital. More foreign investment would come were it not for the tangle of kickbacks and intrigues between Hanoi and regional Party bosses.

Attempting to counteract the effects of the worldwide credit crunch and recession, the Communist planners in 2009 threw more than $1 billion [over 1% of GDP] at the currency. But while credit expanded by nearly 40%, the price of dollars soared despite two massive devaluations. Exporters, struggling with an overvalued currency, have difficulty financing dollar imports of raw materials and components in the battle against their heavily subsidized Chinese worldwide competition. And foreign exchange outflow is draining reserves. The business community is bracing for another round of inflation, probably greater than the crisis year of 2008.

The struggle for existence, especially among the unemployed youth for whom both the French and American wars are a distant past, ignores the continued preoccupation with “Vietnam” in the U.S. Hollywood’s Vietnam war movies, for example, despite the widespread appeal of American popular culture, have elicited little interest.

Much more important now, the Vietnamese look over their shoulder at their traditional enemy neighbor, China. Despite border agreements [following the short but bitter war in 1979 in which Hanoi bloodied Beijing’s nose], disputes continue over islands in the South China Sea. And a flood of clandenstine Chinese imports have wiped out cottage industry in the North. Netizens on both sides keep up a steady chauvinist debate over old issues. And everyone waits for some new and spectacular development which will end the current malaise.