The Myth of Chinese Meritocracy

 November 10, 2012

The day after the close of the presidential election in the US has marked the start of the 18th National Congress of the Chinese Communist Party (CCP), whose agenda is that electing China’s new leader, Xi Jinping, and his new Politburo colleagues.

Incumbent president Hu Jintao leaves behind a country whose GDP has quadrupled under his 10-year tenure, even as CCP intellectuals are fretting about the party’s future. For, today’s China is being led by a power elite who lacks legitimacy.

The triangle of business leaders, army top brass and party officials has a near-total control over the destinies of ordinary Chinese citizens. Huge amounts of money are allocated to an equally large and tentacular security apparatus meant to control dissent, prevent social unrest and perpetuate the monopoly of power held by the sons and daughters of the Maoist revolution.

Before the congress was underway, the Western media (The New York Times, France 2, Deutsche Welle among others) has announced to an astonished international audience that the families of Chinese presidents and prime ministers have become extremely wealthy, in most cases billionaires, and are in control of huge chunks of the national economy, be it state or private enterprises. To give but a few examples, former premier Li Peng of Tiananmen Square fame has become China’s energy mogul and owns one of its biggest coal mines; Wen Jiabao’s son owns a large sportswear company, while other members of his family control 2.5 billion dollars’ worth of shares in telecommunications and insurance companies; former prime minister Zhu Rongji’s son is the CEOof one of China’s largest investment banks; and the list goes on.

Clearly, China’s current leadership has transformed itself from a communist caste into a kleptocratic one. As free elections are totally out of the question for the foreseeable future, many CCP intellectuals are striving to legitimise their leaders in the eyes of ordinary Chinese citizens by claiming that their powerful political positions are obtained on merit and not through connections. In so doing, the experts – or, more appropriately, the spin doctors – wish to imply that the so-called “meritocracy” at the country’s helm is simply carrying forward the Mandarin tradition of the cultivated scholars who occupied ministerial positions in imperial China only after passing extremely difficult exams.

Rhetoric aside, China and the United States have more in common than one would think. Today’s Chinese power elite, for example, closely emulates its counterpart in the United States. Like in America, power is centralised at the top (in the hands of the 350-strong Central Committee and the PLA’s Military Commission). All economic, political and military decisions, like in the States, are the work of an extremely narrow group of people. To be sure, the American power elite’s way of controlling US society is much more sophisticated than the Chinese approach, but the results are largely the same. Between a controlled press via media trustification, like in the US, and a censored press, like in China, the difference lies only in the methods being used to disseminate official propaganda and discourage or quash independent thought. At present, both elites seem highly disturbed by the activity of bloggers, who are blamed for exposing abuses of power, corruption and dysfunctions afflicting the two societies. In both countries, the major beneficiaries of the neoliberal model of economic development over the past 30 years have been…the top 1 % layer of the population, in terms of revenues.

Writing in the ‘fifties, sociologist Charles W. Mills wrote that

“the top of the American society is more unified than ever and it seems to be the theatre of an organised coordination: at the summit, a power elite has appeared. The middle levels of society are made up of an ensemble of unorganised forces which are mutually blocking each other; the middle class does not connect the base to the top.

The base of this society is fragmented and […] its power does not cease to diminish.” (C.W. Mills ,L’elite du pouvoir, p.331)

In the same vein, Chinese intellectuals attending a government conference have recently described China as

“unstable at the grass roots, dejected at the middle strata and out of control at the top”. (The Economist, November 2, 2012, p.9)

Unlike the power elite in the United States, which has not as yet gone through a social revolution, today’s Chinese leaders are the product of an egalitarian ideology and revolution. Accordingly, the huge American-style wealth gap which has developed in China over the past 30 years is not sustainable in the long run, neither on political nor on ideological grounds. In an effort to contain the damage to the party, President Hu’s speech at the conference has formally incriminated corruption.

Unfortunately for all those involved, corruption in China does not amount to a few rotten apples growing on an otherwise healthy tree. Corruption is systemic and cannot be controlled through propaganda drives, symbolic arrests or a few highly publicised trials.

A Possible Exit from the Euro Crisis

 

October 14, 2012

Slowly but surely, the set of remedies employed in the hope of solving the euro crisis is now spreading recession from the periphery to the core of the eurozone. Austerity measures, accompanied by an increase in taxes, will bring France’s economic growth to a halt next year. Germany’s growth rate, based on its solid export machine, is also showing signs of slowdown. As the European Union is the world’s largest economy, its troubles are spreading economic stagnation to its main trading partners – China, the US, Japan and Brazil – as well.

The launch of the European Stability Mechanism (ESM), currently hailed as a kind of European monetary fund, has recently re-ignited hopes of appeasing financial markets. Alas, the only lasting solution to the euro’s woes is that of allowing EU national governments to sell their treasury bonds directly to the ECB, thus totally bypassing financial markets.

In truth, no state should be subjected to the same financial pressures and performance criteria that private corporations normally are. To give but one example, prior to 1973 the French government was able to borrow directly from its national bank at zero interest. Through the introduction of private or institutional investors into the equation, as market intermediaries between national banks and their governments, the stage is set for astute financial speculators to increase returns for their clients on the backs of states in need. Rating agencies, acting on behalf of investors, are able to exert pressure on governments to reduce expenditure on essential public services, as it has happened it the EU over the past few years.

Keeping tabs on major corporate borrowers and their economic performance makes sense. Putting states on the same footing as commercial entities does not, however. The role of government is not that of producing profits for its citizens, but that of ensuring their safety, health and general well-being. Sure, governments could, on occasion, be wasteful in providing these services, but the watchdogs are the democratic institutions supposed to check and approve of how the money is being spent.

Hence the need to separate sovereign from private borrowers. Governments should be able to sell their debt, at least within the EU, directly to the ECB. The latter, in turn, should be able to buy treasury bonds not from commercial banks that currently use them as collateral, but from the states concerned. Thus, as The Economist has recently pointed out, the ECB’s new Spanish and Italian bond purchasing strategy has proved more successful in calming financial markets than any other measure undertaken so far. The ECB’s role should therefore be expanded to all eurozone members without further delay.

Enlarging the ECB’s role in solving the euro crisis is strongly opposed by inflation-obsessed Germany. To be sure, in the current economic circumstances, inflation might prove salutary, as it significantly reduces the sovereign debt burden (inflation makes debtors pay less in real terms). A moderate rate of inflation could also prove instrumental in reigniting economic growth and in reducing unemployment, which has risen to depression-era levels in countries like Greece, Portugal, Spain and even Italy.

Allowing EU national governments to sell their debt directly to the ECB would also save them tens, maybe even hundreds, of billions of euros in interest payments demanded by private investors.

In today’s world, where corporations like GDF Suez are able to sell corporate bonds maturing in 100 years’ time while states like Spain find it hard to find investors for bonds maturing in 5 years, solutions like the one above could go a long way towards re-balancing the situation.

Romania's Never-ending Constitutional Predicament

 September 23, 2012

My regular readers might have been left with the impression that, whilst displaying a keen interest in global geopolitics, I tend to shy away from Romania’s problems. These, to be sure, have recently boiled over into a fully fledged conflict between members of Parliament and the President. Nor is this a new development. For the second time in five years, the Parliament has impeached the President, who got his job back only via two referenda, the latter of which has had to involve 50 percent plus one of the Romanian electorate.

In 1995 I have attended a Roundtable with the Romanian Government conference organised by The Economist in Bucharest. On that occasion, I have circulated a geopolitical essay, “A Vision of Romania in the Third Millennium”, dealing with the country’s most pressing concerns and their possible solutions. Unfortunately, although it had gathered a following in far-flung places like Kazakhstan, the arguments fell on deaf ears in Bucharest. One of the main points I was making was that Romania’s 1991 constitution did not respect the principle of the separation of powers, which in fact was found to be at the root of the country’s institutional blockage today.

In 2003, some recommendations from my essay were incorporated via referendum into the Romanian constitution by the social-democrats, whilst others – notably the restitution of the former king’s properties – were adopted after 2004 by the liberal administration that governed the country for four years.

This time around (2012), the President has fallen victim to his own, ill-inspired, austerity measures. In truth, the immediate cause of the 1989 popular uprising in Romania was the savage austerity program adopted throughout the 1980’s by the late dictator Nicolae Ceausescu, aimed at reducing Romania’s foreign debt. The methods were different. The popular discontent provoked was very similar.

In a place like Romania, today’s austerity measures have come on top of a 20-year-long liberalisation drive deemed by specialists as misguided:

“The various tentatives of imposing, by forceps, economic liberalism on peoples who were ill-prepared for it, have contributed to a large extent to the unravelling of their social fabric, and have proved disastruous from this point of view. These gave way to an explosive cocktail of nationalism and populism […] and favoured separatisms, the dismemberment of Yugoslavia remaining in this respect the most striking example.” (Pascal Lorot, A qui profite la guerre ?, Paris, 2003, p.50 ; translation of quotation by FP)

Romanians’ anti-Western misgivings of late (or those of Hungarians, for that matter), are a logical reaction to the beastly way in which the principles of the Washington consensus have affected their living standards – a point I was trying to make as early as 1998 in one of my articles in Curentul (“The Privatisation Policies of Central and Eastern Europe”) and again in a more comprehensive study of 1999-2000, “Romania’s Lost Decade”.

Any serious effort of tackling Romania’s institutional, economic and political problems should start with the adoption of a new fundamental law, to replace the 1991 constitution whose flaws led to the 2007 and 2012 deadlock (for details, see my e-book “Reconstructia Constitutionala in Romania”, link on my Romanian language blog).

Moreover, Romania’s politicians should pay much closer attention than in the past to the country’s geopolitical position within its region and within the European Union as a whole *. In practice, this means that the polity can no longer avoid subjects such as territorial organisation on a regional basis, as well as the rest of the geopolitical solutions treated in my 1995 essay.

 

* Alas, because of Stalin’s aversion to it, after initially falling for Mackinder’s “pivot of history” theory which led to the Ribbentrop-Molotov Pact and to Romania’s loss of Bessarabia (nowadays the former province is the Republic of Moldova), geopolitics became taboo in Romanian academic and political circles, to this day.

A US Military View of Global Geopolitical Shifts

 April 24, 2012

A year ago, a group of superior US officers with Republican credentials were involved in a geopolitical brainstorming session at the National Defense University in Washington. The group was asked to provide answers regarding the US’ place in the world and to outline a ten-year national security plan. Edward Luce was invited to attend and he subsequently summarised the group’s findings in a book, Time to Start Thinking, America in the Age of Descent, published in 2012.

The sixteen officers arrived at the conclusion that the biggest threat to US national security was not represented by the country’s external enemies, but by America’s decaying economy, infrastructure, education and health systems, and by its ballooning public debt. In their assessment, it will be next to impossible to keep the US as a world hegemon after 2020 : eventually, America could continue to provide the public goods associated with international law and order only if it were to share domination of the world with equally powerful nations, like China or super-states such as the EU.

The brainstorming group advocated reducing by 100,000 soldiers the numbers of the military, as well as cutting US military spending by 20 percent. It also proposed to close down military bases from Germany, South Korea and elsewhere, and to allow China to rule over Taiwan in exchange for accepting the reunification of South and North Korea.

The amount of money thus saved from military spending should be used to improve America’s infrastructure and to greatly expand foreign aid programmes, which currently stand at only one percent of every $100 the US spends every year.

Their assessment of the dire situation of the US economy was reinforced by Admiral Mike Mullen, who said that, as a country

“we are borrowing money from China to build weapons to face down China, which is clearly a broken strategy”.

The conclusions of the brainstorming session are echoed in the article “A National Strategic Narrative”, by Captain Wayne Porter and Colonel Mark Mykleby writing under the pseudonym “Mr Y”, in Foreign Policy magazine. The two officers claim, quite rightly, that the US should – in order to practise “smart power” abroad – practise “smart growth” at home first.

As anyone would agree, the ranks of the US military do not seem to conform to the cliché of a military caste bent on world domination. If anything, the two examples above go to show that the enlisted men and women of the United States army are perhaps more patriotic in their approach to their country’s problems than many Washington politicians up to the highest level. This happens, unfortunately, because the latter all too often fall prey to well-written but deeply flawed articles and studies such as Robert Kagan’s “The Myth of America’s Decline”, that represent the views and ambitions of the neo-conservative political fringe.

The "Rise of the Rest"

 April 17, 2012

In an intelligent and highly readable essay, Fareed Zakaria, a close Obama adviser, analyses the fundamental changes in the distribution of power in international affairs, away from US dominance. He claims that what we are witnessing today is one of geopolitics’ “tectonic power shifts”, the third in the last five hundred years in order of magnitude. The first such power shift started in the 15th century, propelling the western world to global dominance. During the period, which peaked in the 18th century, the modern world was shaped by the agricultural and industrial revolutions.

The second power shift occurred at the end of the 19th century, with the rise of the United States of America. For 120 years, Zakaria writes, the US economy enjoyed an almost constant 25 percent share of the world’s GDP. The country’s political, military, economic and cultural predominance peaked between 1945 and 1975, remaining to this day the dominant political and military power globally.

The third and latest major shift in geopolitics is currently underway, being labelled by Zakaria as “the rise of the rest” (Japan, China, India, Brazil). As a result of this, the economic and financial power is moving away from the US, even if technically speaking the world is still being dominated politically and militarily by it. This veritable “imperial decline” of the United States is squarely blamed by Zakaria on a dysfunctional political system, one that is unable to correct the malfunctions affecting the US’ economy. Still, he is optimistic that “the US will remain a vital, vibrant economy, at the forefront of the next revolutions in science, technology and industry”.

From an international relations point of view, the problem left unsolved by “the rise of the rest” is the reallocation of political and military power among the main protagonists of the new age. The danger inherent in the current situation is that the new economic superpowers might in turn join the ranks of the EU, as the political dwarves and military worms of our time.

If during the 18th century the world’s affairs were dealt with by “the concert of European powers”, in a multipolar fashion, during the 20th century leadership in global affairs was exercised in a bi-polar manner by the US and the USSR. Since the USSR’s implosion, we continue to live in a unipolar world, although efforts are being made to suggest a variety of new leadership formulae, from G2 to G3 to G20. For IR specialists, politicians and geopoliticians alike, the challenge is to select the best possible leadership arrangement, one which would reflect – from a military and political point of view – the new shifts in economic and financial power that have taken place over the past two decades. Failing this, global governance could remain the sole preserve of the United States, which in turn could generate significantly increased international tensions and anti-American sentiment.

Is the EU Ready for a G3 World ?

 April 10, 2012

One of the key issues in IR & geopolitics is that of hegemonic transition. In the space of only thirty years, the world as we knew it has gone from bi-polar (international affairs dominated by the USA and the USSR) to unipolar (with the US as the only superpower left), to what is now a disorganised and anarchic state of affairs most commonly known under the label of G-zero.

As much as we would like to see a multi-polar world order emerging, the most touted options in IR to date are that of a G-2 order (“Chimerica”), or a G-3 world with the USA, China and the European Union in charge of global governance.

The G-2 formula was first advanced in US academic circles in 2006 by Jimmy Carter’s former national security adviser Zbigniew Brzezinski. In his view – and that of many IR specialists or diplomats like Henry Kissinger – the US and China should cooperate in order to reduce the threat of nuclear proliferation and to address together global problems such as trade surpluses, world hunger or climate change. The idea of a G-2 world order, however, has left both Washington and Beijing unimpressed. Its echoes were found only within some EU policy-making circles.

Thus in 2009, during a Sino-EU summit in Prague, the Chinese premier Wen Jiabao has stated that

“it is totally ungrounded and wrong to talk about the dominance of two countries in international affairs”. Indeed, as professor Jian Junbo from Shanghai comments in an article on this issue, “the responsibility of a G-2 member to jointly shape the world’s economy and international affairs is too far beyond China’s ability and ambitions”.

As he rightly points out, China is still a developing country with huge under-development problems, low per capita income and inferior military strength if compared to that of the United States.

China’s refusal to endorse a G-2 formula does not mean, according to ECFR specialists, that it would be adverse to the emergence of a G-3 order which would include the EU as well. As Mark Leonard and Parag Khanna argue in an article originally published in the New York Times, we are already living in a G-3 world,

“one that combines US military power and consumption, Chinese capital and labour and European rules and technology. The United States, the European Union and China are the three largest actors in the world, together representing approximately 60 percent of the world economy – with the EU being the largest of the three”.

Unfortunately, the EU’s strengths – the largest trade bloc, foreign investor and aid donor in the world – are constantly being undermined by an irresolute common foreign policy, or as former UK foreign secretary David Miliband put it, “confused messages, patchy coordination and relationships with global powers that lacked clarity, strategy or purpose”. (sources: Asia Times, Financial Times, Foreign Affairs, NYT)

The ASEAN Summit Prepares for Economic Downturn

 The 20th ASEAN summit took place last week in Cambodia. It ended after two days with a Phnom Penh Declaration, which basically reiterates the members’ commitment to establishing the ASEAN Economic Community by 2015. The summiteers were greeted in the capital’s Peace Palace by huge billboards depicting the smiling faces of the Chinese president Hu Jintao and that of the king of Cambodia. The official Chinese visit took place only two days before the opening of the ASEAN summit, leaving participants in no doubt as to the political allegiance of premier Hun Sen.

Thus during the summit Hun Sen insisted that China should be involved in the drafting of the Declaration of Conduct, a code of conduct meant to settle territorial disputes peacefully in the South China Sea. Given the reluctance of some of the participants, the drafting was not finalised on this occasion.

One of the most important decisions reached was that of increasing the emergency funding available to member countries in case of an economic downturn, from 120 billion to 240 billion US dollars, mirroring similar efforts undertaken by the EU’s political leaders with regard to the ESP. The so-called Chang Mai Initiative (CMIM) sets the rules for bilateral swap arrangements established in 2009 between the ten ASEAN members plus China, Japan and South Korea. The biggest contributors to the pool of money are obviously China and Japan, followed by Indonesia, Singapore, Malaysia, the Philippines and so on. The initiative’s authors were careful to point out that this was not meant to replace the IMF’s role in Asia – as much as they’d probably like it to – but rather to supplement it. (sources: Singapore Institute of International Affairs, Jakarta Post, Xinhua News, Huffington Post)