Ping pong

January 31, 2014

In Florence, they have re-convicted Sollecito and Knox.

My views on this case have not changed so I won’t add to what is already filed under the Italy to Avoid tab.

The Guardian has a video interview with Knox prior to the verdict that is embedded into its news coverage.

I would also recommend Knox’s book about her experiences which I think is very good and has sold very well. It isn’t available in the UK because of spineless publishers (they would say the UK’s litigant-friendly libel law), but you should be able to order from Amazon in the US or somesuch.

 

Sounds like my book

October 31, 2013

A long trip through Malaysia, Indonesia and China leaves me more convinced than ever that east Asia has two distinct destinies in economic development terms, and that the south-east Asian states are on the wrong side of the tracks.

I start off in Malaysia, where the United Malays National Organisation (UMNO) holds power despite winning a slightly smaller vote share than the opposition in May’s elections. The effect has been a skittish, neurotic administration confronted with deep-seated developmental problems it has no desire or capacity to address. The government commissions reports from the likes of McKinsey as if believing foreign management consultants are likely to come up with some brilliant idea to solve the nation’s problems. In reality, locals know all too well what the issues are — a coddled plantation sector and ignored smallholders in agriculture, low levels of indigenous industrial competitiveness, an untamed army of oligarchs that does almost nothing to promote national economic development and recycles its cash flows offshore, a financial system that pushes out consumer debt rather than supporting industrial development, and resurgent speculation in high-end real estate. Despite oil and gas revenues that cover around two-fifths of the national budget, the government still runs a budget deficit of 5 percent of GDP as it strives to buy off discontent.

In Malaysia today, there is a general sense of malaise, compounded by a recently much increased crime rate — particularly theft, burglary and violent crime. This was never a country that you associated with crime (other than expropriation by godfathers), but that seems to have changed.

On 9 October, a nearly 90-year-old Mahathir was kind enough to grant me a meeting. After corresponding with him during the writing of How Asia Works, I was looking forward to sitting down with him. However the experience did nothing to change the conclusions I had already reached.

Here are the highlights: On agriculture, Mahathir insisted that plantations always produce better yields than smallholders. On Malaysia’s tycoons staying out of manufacturing and not contributing to industrialisation, he commented: ‘They do what they think they can do best. We don’t direct them.’ On the future of economic development, he said he never did, and does not now, see ASEAN as a vehicle for economic policy cooperation and joint development. ‘Economic cooperation is secondary in ASEAN,’ he said. Instead Mahathir talked of the tourism potential of millions of Chinese visitors and of China as a source of cheap manufactured products for Malaysia; he favours buying a Chinese high-speed rail line to run the length of the country.

For me, the takeaway was that Mahathir doesn’t think a country like Malaysia ‘ought’ to be able to compete with a country like China. His parting shot was to say that it was unfair of me to compare the manufacturing development of Malaysia and Korea in How Asia Works: ‘We are not a single ethnic country. We are a multi-ethnic country. That makes it more difficult. They [Malaysia’s ethnic groups] are not at the same level.’ It was the race-based outlook that I describe in How Asia Works as having been so devisive and detrimental to effective policy in every south-east Asian country.

Would Indonesia be any different? I spoke at an event generously hosted by Trade Minister Gita Wirjawan, who read How Asia Works soon after it was published and announced himself ‘a fan’. However, while he might agree with the analysis of south-east Asia’s problems, at the event he offered no clear statements as to policy changes he believes are required if Indonesia is to improve its development prospects. All I picked up in Jakarta was the same, general sense of discontent after 15 post-Asian crisis years of partial economic recovery based on commodity trade (principally with China) and zero industrial progress.

On this topic, I spent the day before the Trade Ministry event at what used to be called IPTN in Bandung, now known as Indonesian Aerospace. People I asked in Jakarta assumed that the aircraft-building industrial policy adventure sponsored by BJ Habibie — which the IMF insisted be cut off from further state funding as a condition of providing credit to Indonesia in 1998 — is long dead.

But not so. IPTN/IAe lends a little support to my assertion in the book that even failed industrial policy will produce some tangible benefits (just very expensive ones compared with well organised industrial policy). Up in Bandung, IPTN had 15,600 employees, including 3,500 engineers, before the Asian crisis hit. The firm was receiving monthly government remittances to cover development costs for Indonesia’s indigenous N-250, 50-seat turbo-prop aircraft. With almost no cash reserves, when the cash was cut off the firm went into freefall. Management did not stabilise the business until the headcount had been cut by more than 12,000, to just 3,000. They did so by turning what had been an aircraft building business into a low-cost parts supplier, particularly to Airbus.

Today, the two N-250 prototypes sit disconsolate in a parking area of the 80 hectare site (the one at the bottom is three metres longer and can seat 70, so was really the N-270, as in two engines, 70 seats). Suharto himself launched the first prototype in 1995, naming it Gatotkoco after a character in Hindu-Javanese legend. Something of the order of US$1 billion had been pumped into the N-250 programme by 1998. The renamed Indonesian Aerospace kept flying its prototypes — racking up 1,200 test hours — until 2007 in the vain hope of finding cash to finish the project. The outside technical reviews were generally positive, but the will and capacity of the government to back the project were gone.

IPTN N250 GatotkocoIPTN N250IPTN N270

After the state cash flow was cut, Indonesian Aerospace first obtained work making wing ribs for the Airbus A380. Then it obtained contracts for the A320, and for Boeing and other aircraft. There was no way for the firm itself to invest in development projects because residual government debt made it unbankable. Only in 2011 did the government agree to a debt write-off (technically a debt-equity swap). This was followed in 2012 by a Rupiah1.2 trillion (circa US$100m) ‘goodbye’ capital injection from the state.

Indonesian Aerospace continued to assemble small aircraft after the crisis that it had assembled before 1998 in a joint venture with a Spanish firm — now owned by Airbus Military. Gradually it has managed improve the terms of its cooperation with Airbus, moving, for instance, to profit sharing on the most popular model it builds. Critically, the post-crisis era focused Indonesian Aerospace on selling aircraft as well as making them. It currently exports around one-fifth of the small aircraft it assembles — to Thailand for rain-seeding, to South Korea for coastal surveillance, to Malaysia, Pakistan and Turkey. Exports, however, are still nowhere near as strong as they were in Embraer’s formative stages in Brazil, before that firm went on to be truly globally competitive. Indonesian non-weaponized defence procurement is the current backbone of Indonesian Aerospace’s order backlog, which stands at US$1 billion.

Perhaps most interesting is that the firm, after conducting five years of market studies (what would have been an unthinkably long period of analysis in the pre-crisis era when it was rushing straight from the N250 to the N2130, a 130-seat jet aircraft), has committed to develop a new civilian aircraft of its own. Indonesian Aerospace managers say they have 150 non-binding commitments for a very small, 19-seat passenger aircraft designed for low-cost travel between second-tier cities in the provinces. Indonesia, like the rest of south-east Asia, already has a booming low-cost sector between key cities based on Boeing and Airbus aircraft. This is an attempt to grab a bit of market share below the radar of the big boys. The aircraft will work off short landing strips, be able to carry substantial amounts of freight relative to passengers, and is designed for use with minimal air traffic control; a prototype will fly in 2015.

Indonesia’s industrial policy was badly conceived, with too little competition, no involvement of leading entrepreneurs, and almost zero export orientation. Even today Indonesian Aerospace has failed to build a supplier cluster around Bandung. But it looks like the firm may in the end produce a marketable aircraft worthy of the name of indigenous technological capacity.

The big point of contemporary comparison, of course, is China. Earlier in 2013 there was a mild panic among foreign observers that that country’s accumulation of bad debt — largely a result of the aggressive industrial policy orientation of its financial sector — could lead to imminent financial melt-down. But not so. Unlike Indonesia, which had no capital controls in 1997, China is protected from changes of sentiment about its banks by capital controls that trap money in the country and keep the system liquid. China’s capacity to grow away from debt is declining as its growth rate gradually falls, but the basic fact of capital controls still meant that this year’s panic was a storm in a teacup. There is always a lot of waste involved in industrial policy, but control of the domestic financial system allows a government to socialise the cost.

Riding the high-speed rail system (HSR) from Shanghai to Suzhou to Xuzhou to Beijing, visiting firms, I also reflected how massively greater is China’s technological capacity today than was Indonesia’s when that country hit the skids in 1997-8. The entire Chinese economy makes stuff that the world economy is willing to pay for. Manufacturing activity is not confined to one or two bellwether projects like IPTN or Malaysia’s Proton. If crisis struck China today, the country would be way more competitive, in more value-added activities, once the crisis abated than was Indonesia after 1998. And China doesn’t face a crisis today because it has not been dumb enough to abandon capital controls. I suspect the country only has one more economic cycle to go before its control over capital is insufficient to escape crisis — the irony of its present stage of development is that China must begin to deregulate finance in order to waste less capital in an era of slowing growth. But by the time crisis does strike, China’s technological competitiveness and its roster of globally competitive large firms will be substantially higher again that it is today.

So what I came back to England thinking is that there is just a lack of political will and political self-belief in south-east Asia to do things differently. I am not sure it was ever really any different. Even Mahathir, who talked the best game in the region in terms of promising a shift to a Japanese-Korean model when he was premier, says that Malaysians cannot really follow the model because they are not racially up to it. On that view, you have lost before you start.

Weekend reading: abuse of state power special

August 25, 2013

It has been a bumper week for abuse of state power. Here are some of the highlights:

Bradley Manning goes down for 35 years. On the watch of the ‘liberal’ president, Barack Obama. The FT (sub needed) argues that Manning got off lightly and may get parole in 10 years. The Guardian takes a different view on the proportionality of Manning’s sentence, a position closer to mine.

While the reaction pieces are being penned, Manning expresses a desire for hormone treatment to assist in a desired gender reassignment. Federal prisons offer this, military ones do not. Manning has asked that she [sic] be referred to henceforth as Chelsea, with the former name Bradley reserved only for letters to the the confinement facility at Fort Leavenworth, Kansas. There are worse ways to spend half an hour than writing him/her a letter of support, so why not do so?.

From, for me, the damaged but well-meaning Manning to the thoughtful, lucid and brave Edward Snowden. In the UK, Alan Rusbridger, Guardian editor, reveals threats from the British government, securocrats, and indirectly from David Cameron himself, to pre-emptively shut down further reporting of the Snowden cache using British legal powers of pre-emption.

It is depressing to read how the poodles in the UK government told their bosses in Washington that Guardian journalist Glen Greenwald’s partner David  Miranda would be detained at Heathrow, how Met police say they checked they were using anti-terrorism legislation correctly and how the police reckon they were procedurally perfect. Having taken the call from the lickspittle Brits, Washington then moved to distance itself from the Miranda detention and the seizure of his possessions, saying it wouldn’t happen in the US. As the Economist points out (sub needed), the anti-terrorism legislation under which Miranda was detained was established for the police to ascertain if a person “is or has been concerned in the commission, preparation or instigation of acts of terrorism”. To use such legislation against journalists is grotesque.

Over to China, where 70 policemen take the unusual risk of appending their thumbprints to a denunciation of the acting president of the Shanghai High Court who, they say, has been engaged in massive long-term corruption including stealing several tons of alcohol from the police booze budget each year. Court president Cui Yadong was already feeling the heat after senior Shanghai judges were recently captured on video cavorting with prostitutes. The video of the judges has had over 4 million hits.

Separately in China, the New York Times discusses ‘Document number 9′ and the alleged ‘seven subversive currents’ at large in the Chinese nation. Per my recent blog about Xi Jinping, we are starting to get more visibility on the new Chinese president and what we are seeing is not pretty. Xi’s evolving proto-Maoist approach to politics provides the background to the trial on corruption and abuse of power charges of fellow princeling Bo Xilai, which started this week. Bo was the person who invented the ‘New Red’ school of modified Maoist populism when he was running Chongqing. As Xi and pals move to crush him, the irony and hypocrisy are not lost on John Garnaut in Foreign Policy.

Here in Italy, meanwhile, we are enjoying a peculiarly Italian twist on the abuse of state power. Silvio Berlusconi, having been definitively condemned for a felony for the first time, has opted for an attack on state power that recalls, for me, Italy’s fascist past (much more so than the claims, which I previously dismissed on this site, that Beppe Grillo is proto fascist). Over the Ferragosto holiday Sil promised a programme of direct action on Italy’s beaches, with his supporters leafleting holiday makers who would otherwise be trying to catch a rest. The focus of Sil’s campaign is not so much a proposal for structural reform of the judiciary, or indeed enforcement of existing norms (which would be half the job done already), but instead a direct attack on magistrates and judges as a species. The strategy has more than a whiff of hoped-for intimidation.

Here is a lead story (in Italian) from Berlusconi’s Il Giornale during the holiday. Although the article was on the front page, it has no news content, and comprises a simple frontal assault on the judiciary, likening its perceived efforts to ‘attain political power’ over the nation to Mao Zedong’s Long March. The connection with Maoism/communism is established in the first sentence. Italy, we learn, does not have a mundanely inefficient legal system to be improved by systemic change, but an extremist, personal, visceral political conspiracy against the Italian people (to wit, Sil and his businesses).

Here are some current icons from Berlusconi’s PDL/FI site:

banner-forzasilvio pdl-logo 20ANNI-DI-CACCIA-UOMO 995980_621688441198598_1936708951_n 998453_620420304658745_378895156_n 998913_622166501150792_278588033_n 1097945_620420421325400_707118344_n slide-1-638

The manner in which Berlusconi’s personal interests, those of the Mediaset group he controls, and national politics are conflated is bewildering for anyone from the First World. But of course this is not the First World. Next month Sil will relaunch Forza Italia (FT, sub needed), his original political movement named for a football chant (in the country that now boasts the worst record of football violence and racism in western Europe). ‘Ancora in campo’ / Back on the Field is the new tag line.

To me the strategy looks more than a little fascistic, involving as it does an attack on the institutions of the state and promises of more direct action. However, as the holidays wind down I suspect that we won’t see a proto-fascist movement take hold in Italy. Instead we will see business as usual.  The main evidence of Sil’s promised campaign of direct action so far (the plan on the beaches described here in the FT, sub needed) is a few Forza Italia militants in Rome (here telling journalists they have not been paid to march, that they are ‘spontaneous volunteers’ and that they have ‘just come for Him [Sil]‘) and a pisspoor little plane dragging a bit of superannuated toilet paper above a few holidaymakers. ‘Forza Italia, Forza Sil’, I think it says.

I don’t want to do you down Sil, but I’m not sure you’ve really got the fascist cojones for this thing….

Forza Italia sul ferragosto 2013

Meanwhile, my own experience with abuse of state power occurs when I stop at Sasso, the bar on the river on the way to Citta di Castelllo. Despite the fact that there were few people around when I stopped, and lots of safe parking available, a carabinieri police car was parked across the zebra crossing that leads to the children’s playground, with two wheels outside the white parking line and hence well into the road. Thinking this a bit slack, even by Italian police standards, I took a photo on my phone. Walking into the bar, I found two carabinieri eating cream buns. I bought a small bottle of cold water and went outside to drink it in the sun.

While I was doing this, it seems one of regular clients at the bar told the carabinieri I had taken a photo. One of the carabinieri came over and demanded ‘a document’. Of course, I said, handing him my EU photo driving licence. He took it away and wrote down all the details, resting on the boot of his car. Then he came back and said: ‘I have taken down all your details because you took a photo.’ I replied: ‘Yes I did take a photo because of the way you parked.’ The policeman responded: ‘You have no idea what business we are engaged on here.’ I resisted the urge to reply: ‘It looked like you were engaged in eating cream buns.’ Both policemen were standing over me, not completely in my face, but close enough to make me feel uncomfortable.

The officers then made a series of threats:

1. ‘We have your details. If that photo is published on the Internet [he only seemed concerned about the Internet] we know who you are.’ I replied that I have no problem with them knowing who I am.

2. [from the second carabinieri, thinner and younger]: ‘That is a MILITARY vehicle. Do you understand?’ I replied that I am fully aware that the carabinieri is a para-military force.

3. The first officer mentioned seizing my phone (the verb he employed was ‘sequestrare’). I remained impassive, just looked him in the eye. There were a few people around the bar (maybe 8), plus the female boss, whom I have known for years. He didn’t take the phone in the end, just saying: ‘Get rid of that photo or I will seize your phone.’ I said nothing.

2013-08-16 11.56.41

At this point the policemen appeared to run out of threats. They went back to their car, got in it, turned around, and followed me to Citta di Castello, before turning off in the direction of the police station. Should I complain to the justice system or should I launch a proto-fascist programme of direct action? Thankfully this dilemma no longer presents itself. I now live in Cambridge. I think I’ll just go home.

More:

If you would like to harass people on street corners until Silvio is let off his felony, you should be able to sign up at the site below. (Latest talk is of a general amnesty for convicted felons facing up to as much as four years’ jail time. This would be a triple triumph — saving money spent on prisons, reducing Italy’s huge trial waiting lists, and getting Sil off his fraud sentence (plus other sentences that may soon follow). The only downside would be to put a few thousand crooks, some of them violent, back on the streets. What is not to like?)

ForzaSilvio.it

Weekend reading / Why I love Sloanes

August 11, 2013

 

Just a handful of things to look at:

 

Philip Stephens’ searing deconstruction of the fiasco in Afghanistan should not be missed. It comes from the FT (sub needed):

 

Being cheap and nosy by nature, I have been taken by the Girl Called Jack blog about cut-price-good-quality cooking and the nature of contemporary British poverty

 

And the Guardian’s article on rising militancy among the lowest-paid workers in America is worth reading.

 

The subject of poverty leads naturally to thoughts of inequality in our world. As part of my ongoing research into the nature of contemporary life itself, I recently spent a couple of days poshing it up at a sailing club on England’s Isle of Wight, favoured boating haunt of hedge fund managers and the British upper classes. When I observed to the club Commodore that its social base was somewhat narrow and overwhelmingly employed in the City of London, he retorted that this was nonsense and the club has many other members, including high court judges and one of the most senior Conservatives in the House of Lords.

I kept a few notes of conversations I overheard as I observed grazing Sloanes and men in pink shorts from the safety of the bar terrace. I have to be honest and say I rather enjoyed myself, although a couple of days was very much the limit of the potential enjoyment. More and I would have started to fray. What I liked most was the Sloane women, who haven’t changed one bit since I was a teenager. They are as unselfconsciously dim and determined as the day that the gods created them to bring a smile to the lips of ordinary people.

Sloane handbook

Sloane DiSloanes cannon

Sloanes Squad

Sloane Harry and girlSloane 1Sloane diarySloanes red sails

 

Man goes into sailing club office needing a ruler.

The Head of Sloanes (who runs the office) produces a long ruler.

Formidable!‘ says the man, attempting to banter in French.

‘Sorry dahling, that’s all I’ve got,’ says Head of Sloanes, taking back ruler and putting it away’.

Man looks perplexed.

Moral: never, ever try foreign language banter on a Sloane:

 

Sloane leans over bar terrace balcony speaking very loudly into mobile phone.

‘I will speak to Jose about that… Hang in there, dahling… It might just have to happen after the summer… Oh My God, yes… So you’ve got the quantity for Dominic?… Oh that’s fine. So shall we keep Dominic and Graham separate?… Work in progress… Yah, exactly. Yes, work in progress. Come back to you on that one. FANTASTIC. Speak to you! Okay. Byeeeeee…’

 

Below, a boy is wading up to the beach with sailing dinghy. He says to another boy:

‘Oh My God, you’re not rahly going to Marlborough?’

 

Sloane grazing on salad on club terrace addresses the group of people at her table:

‘In Zambia we only had a choice of five colours. It was totally Third World, absolute rock bottom. But the thing is that the grey we chose showed off the paintings rahly well. Absolutely fantastic.’

FT Longlist

August 8, 2013

The Financial Times published its longlist for the FT/Goldman Sachs Book of the Year today and I am honoured that How Asia Works is on it. Below is the full list of 14 titles.

 

After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead, Alan Blinder, The Penguin Press

The Alchemists: Inside the Secret World of Central Bankers (UK subtitle); Three Central Bankers and a World on Fire (US subtitle), Neil Irwin, Headline Business Plus; The Penguin Press

Big Data: A Revolution That Will Transform How We Live, Work, and Think, Viktor Mayer-Schönberger and Kenneth Cukier, John Murray; Eamon Dolan Books/Houghton Mifflin Harcourt

The Billionaire’s Apprentice: The Rise of The Indian-American Elite and The Fall of The Galleon Hedge Fund, Anita Raghavan, Hachette Book Group/Business Plus

The End of Competitive Advantage: How to keep your strategy moving as fast as your business, Rita Gunther McGrath, Harvard Business Review Press

The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being In Charge Isn’t What It Used to Be, Moisés Naím, Basic Books

The Everything Store: Jeff Bezos and the Age of Amazon, Brad Stone,Transworld/ Bantam Press; Little, Brown

Give and Take: A Revolutionary Approach to Success, Adam Grant, Weidenfeld & Nicolson; Viking (Penguin)

The Great Escape: Health, Wealth, and the Origins of Inequality, Angus Deaton, Princeton University Press

How Asia Works: Success and Failure in the World’s Most Dynamic Region, Joe Studwell, Profile Books; Grove Press

Lean In: Women, Work, and the Will to Lead, Sheryl Sandberg, WH Allen/Random House Group; Knopf

Making it Happen: Fred Goodwin, RBS and the Men Who Blew Up the British Economy, Iain Martin, Simon and Schuster

The Org: The Underlying Logic of the Office, Tim Sullivan and Ray Fisman, Twelve

Scarcity: Why Having Too Little Means So Much, Sendhil Mullainathan and Eldar Shafir, Allen Lane; Times Books/Henry Holt

Is Indonesia different?

August 2, 2013

Below is a critique of How Asia Works with specific reference to Indonesia. Indeed there is a second part of the critique that you can track down via the Lowy site. I am just posting the first part and, underneath it, rejoinders to the main points it makes.

 

Indonesia’s development formula

by Stephen Grenville - 25 July 2013 11:10AM

I share Sam Roggeveen’s enthusiasm for the iconoclastic approach of Joe Studwell’s How Asia Works (his previous book on Asian Godfathers was a great read too). I also share Studwell’s scepticism about the ‘magic of the market’, his views on the IMF, and his admiration for the achievements of the South Koreans.

But I’m unconvinced by Studwell’s three-step development prescription, not because it is intrinsically wrong but because it is too hard to implement successfully.

The Koreans might have done so, but the strategy requires a level of sustained administrative competence, single-minded toughness and luck which are rare. Just as important, there are alternative development strategies, less demanding of skilled policy-making and administrative competence. The growth outcome won’t match Korea’s, but will be more feasible for countries like Indonesia (which Studwell sees as a development failure).

Let’s go through the three elements of the Studwell strategy. The first stage requires land reform and a boost to agricultural productivity.

It’s an old and sensible idea that agriculture has to provide the investable surplus which will propel the rest of the economy along the path of development. Fifty years ago, Clifford Geertz (Agricultural Involution) despaired about Indonesia’s failure to follow the example of Japan, which shifted surplus agricultural labour into factory work to create a modern urban/manufacturing sector. This failure would lead the excess population to atrophy, farming progressively more Lilliputian plots.

But things turned out better. With the average size of farms on Java around half a hectare, the opportunity for land reform couldn’t play the key role that Studwell advocates. But Soeharto, with his roots in agriculture, gave rice production high priority (extension services, high-yield seeds, fertilizer, pesticides and attractive terms-of-trade between agriculture and urban consumers via an active price stabilisation authority). Not very free-market, but big yield increases and self-sufficiency were speedily achieved.

What about a vigorous industry policy, the second Studwell requirement? Despite inheriting the usual disaster story of failed prestige projects from Sukarno, Soeharto was ready to have a go at ‘picking winners’.

Cement, fertilizer, textiles, paper production, food processing and petroleum refining all fitted Indonesia’s comparative advantage and made sense. Others were less defensible: Krakatau Steel,Tommy Soeharto’s national car and Ibnu Sutowo’s tankers. Habibie‘s IPTN aeroplane fits the Studwell strategy and might have succeeded if it hadn’t been stopped by the Asian crisis: ex-aeronautical engineer Habibie was well-qualified to lead this project, plane construction is quite labour-intensive (all those rivets) and the Indonesian archipelago needs lots of them (one airline recently ordered several hundred in one hit).

Whether IPTN would have succeeded is not the issue here: the point is that Indonesia, for better or worse, did try the sort of hot-house industrialisation Studwell advocates, and the IMF wasn’t able to stop this, at least until the 1997 crisis. Planning retained a central role, just as Studwell wants, and state-owned enterprises did the government’s bidding. Where Indonesia had comparative advantage, this often worked out well, and where the industry didn’t suit Indonesia’s attributes, generally it was a failure.

Indonesia’s development experience doesn’t fit the Studwell formula. Java’s rice production has done well without relying on his key element of land reform, and industry policy based on domestic entrepreneurship has been tried without much success.

Governments attempting to steer the process of development need effective administrative capacity; in a follow-up post, I’ll expand on the idea that market failure is common enough, but so too is government failure.

Joe Studwell’s response:

1. I doubt, contra Mr Grenville, that there is some arbitrary minimum land holding that makes land reform unworkable. If this were the case, then the micro-plots of a few tens of square metres championed by groups like Landesa would make no sense, when historical evidence around the world shows that privately-held micro-plots produce very high yields.

I am presently up my hill in Italy, and using a very slow Internet connection, and so cannot readily check the average Javan landholding. I assume Mr Grenville means that the average Javan landholding is half a hectare now, and would therefore be less after land reform. (The average land holding in most parts of China, Japan, ROK, and Taiwan after land reform was roughly half a hectare.) If my understanding is correct, my response is that Java has some of the best soil and climate conditions in the whole of east Asia, and so even smaller plots should be more than viable — if indeed size matters at all in a downward direction, a question which I think deserves real scrutiny.

Mr Grenville is correct that yields on Java are high by south-east Asian standards. The rice yield is over five tonnes per hectare. However this is still less than the average in north-east Asia. Given its soil and climate, it would not surprise me if north-east Asian style household farming could produce as much as 9 tonnes per hectare on Java — about as high as has been managed anywhere, because the growing conditions are so favourable.

Mr Grenville is correct that Suharto invested heavily (if patchily) in agricultural extension services and (eventually) used minimum price guarantees to promote higher yields. However he is wrong to say that self-sufficiency was achieved ‘quickly’. Rice self-sufficiency was not achieved until the mid-1980s, 40 years after independence, and wheat self-sufficiency never was. So I maintain my position that Indonesia is a real relative failure in agriculture.

2. On industry, much of my criticism of policy in south-east Asia focuses on politicians’ efforts to ‘pick winners’ rather than run industrial policy that periodically culls losers. I also talk at length about the need for ‘export discipline’ to anchor industrial policy. And I avoid traditional discussions of what is or is not a society’s comparative advantage because, to my mind, development is about changing (within reason) your comparative advantage. Economic development is about investing in a learning process in order to reap higher future returns.

Mr Grenville’s points about industry in Indonesia therefore seem to me to be based on a misreading, or mere scanning, of How Asia Works. He highlights industrial projects that were picked as ‘winners’, were not subjected to sufficient competition or pressure to export, and which consequently produced a poor return on industrial policy investment. His observations are essentially supportive of the policy requisites I highlight.

The one thing I think is truly misplaced in Mr Grenville’s comments is the argument in the third paragraph that, essentially, Indonesians are politically and administratively ‘not up to’ the task of accelerated economic development, particularly compared to people like the Koreans. Is this true? In 1945, South Korea was the rural backwater of a brutally colonised state in which Koreans had been allowed to play perhaps the most restricted administrative and economic role in any east Asian colony. I cannot see that the Koreans had much political, administrative or educational capital. Elite Indonesians, by contrast, held senior civil service positions under the Dutch, could win scholarships to study in Europe, and had much greater (formal) political, administrative and educational resources. The difference was not the endowments, but the change politicians wrought over 60 years of independent government.

Why was the peasant Park Chung Hee able to achieve so much more than the superbly educated Sukarno? Probably, I think, because Park focused on the basics and got them right.

Holiday reading and viewing: booze, race, nationalism

July 23, 2013

English beach

 

Since I am sort of on holiday this week, I have decided that everybody else should be too. So here is weekend reading re-dressed as holiday reading.

 

1. First up, to get us started, a great discussion of the role of alcohol, and of alcohol addiction, in writing.

Next, the serious stuff.

Here are three articles on questions of race and nationalism.

2a. Orville Schell and John Delury offer a thoughtful piece about China’s need to move on from the narrative of national humiliation that the country’s schools and politicians have fed the population ever since 1949 (and indeed longer in the case of early converts to the communist party’s cause).

2b. In the United States, Barak Obama can no longer avoid speaking out about the Trayvon Martin case.

2c. Philip Stephens in the FT (sub needed) reflects on the mindless racism of Italian politics, but ends with his ideas that just maybe Gianni Letta represents change. Would that it were so!

3. Third, a near miss. Gideon Rachman in the FT (sub needed) has a thoughtful piece on Putin’s Russia but fails to nuance it with what Putin’s government is doing to put Russia back on an economic development path — in essence, reining in the oligarchs and bringing cash flows from national mineral assets back under public control. Putin may be a revolting man, and yet may also be a revolting man whose time has come.

4. Finally, a heartening curiosity. Teach First seems to be working. It is now Britain’s single biggest recruiter. So it turns out that smart people often do care, and don’t reflexively sell their souls to a law firm or investment bank.

 

Visibility on Xi / Heineken government

July 17, 2013

Xi Jinping close

There has been a lot of good quality think-tank and media stuff in the past few weeks about what the new Chinese president Xi Jinping may be thinking and planning. Since what his government implements in the next two to three years will largely decide how far China can go with its developmental project, I am posting some highlights here.

The big lacuna, for me, is that there is no similar debate about what premier Li Keqiang may be thinking and planning and what his capacity to act (semi-) independently of Xi may be. Premiers are also important in the Chinese system and, from time to time, you get ones like Zhao Ziyang or Zhu Rongji who define an era more than the president. Anyhow, the Li side of things is not much addressed here.

 

The background

Recall that Obama did two days of unscripted discussions with Xi in California in June in an effort to find out what is happening in Xi’s head. My sense is that Obama didn’t get a very clear view.

 

1. Francois Godemont’s essay Xi Jingping’s China, published by the European Council on Foreign Relations. Godement has Xi as the new Chinese Big Man, streamlining the bureaucracy and limiting corruption but doing almost zero at the institutional development level. I found this sort of interesting but not compelling in the sense of really giving visibility.

The blurb says Godement argues that:

  • Xi has accumulated more power and more personal authority than any leader since Mao Zedong. His top-down approach will probably leave little room for major political reform or economic liberalisation; his “hardline modernisation” approach seeks instead to combat behaviour such as corruption and loose credit.
  • The economy is the one area where Xi doesn’t seem fully in control. The price he has paid for broad support from party elders and conservatives is also an endorsement of major vested interests, which will constrain those arguing for major economic reform.
  • Xi is ignoring his predecessors’ “low profile” approach to foreign policy, and claims a role for China as a global power. Xi seeks strategic parity with the US while its regional approach is based upon China’s superior strength.

“Xi Jinping is pursuing a neighbourhood policy based on strength in which China subjugates small countries while building a “big power” relationship with the US. Xi seems to want to combine 19th century geopolitics with 20th century Leninist politics, in order to gain the upper hand in the globalised 21st century world.” François Godement

….

2. Here is a resume of what Tim Summers at Chatham House in London thinks we know so far. Again, the expectation seems to be that we are not going to get significant institutional reform or indeed incremental moves in the direction of political pluralism. However the author sees moves in social policy areas like environmental degradation as some sort of half-way house between pure economic reform and more politically sensitive reform. This would have some echoes in 1970s Japan or 1980s Korea. (There is a reference to me at the end. I don’t know Mr Summers.)

China’s Current Reform Agenda

by Dr Tim Summers, Senior Consulting Fellow, Chatham House

There is an ongoing debate about reform in China which centres around questions of how far and how fast reform – political and economic – might go.Political reform – at least in most western discussions – encapsulates the possibility of changes to China’s political system. Under the country’s new leaders there is little sign of fundamental shifts so far, though there are campaigns to clean up the bureaucracy and make the Party-state more responsive.Economic reform is often reduced to greater marketization and a reduction in the state’s role in the economy. This has been prompted partly by a sense that state-owned enterprises have become too powerful, that the private sector has insufficient space to develop, and that factor markets are still too much in the hands of government officials.

Reform in motion

The coming months will see further debate, inside and outside China, about what sort of reforms China’s new leadership might consider. President Xi Jinping confirmed to Barack Obama in California in June that the Party machine was working on a medium and long-term policy plan for comprehensive economic reforms, and precedent suggests that this will be unveiled at this autumn’s Party Plenum.In fact, the new leadership has already set in train some elements of a reform programme. At the National People’s Congress (NPC) in March it was agreed that the railways ministry would be reduced to a policy administration and its operations would be fully corporatized. Other changes to government structure included the establishment of a new, stronger agency for food safety, symbolic of the desire to respond to growing popular concerns.After a meeting of the State Council (cabinet) in May, a subsequent policy document set out the most comprehensive statement of government priorities for economic reform this year since the NPC. Some of these are economic: reforms to the fiscal system, financial sector reform such as further marketization of interest rates and internationalization of the currency, encouraging more private and flexible investment, and freeing up the pricing of resources. There do not appear to be plans to shake up state-owned enterprises. Other points address livelihood issues, such as low income protection, ensuring food and medicine safety, and dealing with the environment.The highlight so far is administrative reform, in particular reducing government approvals needed in certain areas and devolving other responsibilities from the centre to the provinces. These reforms amount to making the government more responsive and efficient, but without changing the fundamental political structures. Part of the motivation is to help stimulate innovation and economic efficiency, but there is also a social element in the suggestion that these reforms could improve the delivery of public services.Social element

Less noticed is the extent to which social and livelihood issues feature. Even when it comes to resource pricing, for example, there are aims to differentiate pricing in electricity, water and gas (planned for some time) to support livelihoods.

Indeed, the ‘economic reform’ document for 2013 has as its guiding principle dealing with the state’s relationship not just with the market, but also with society. A reference to ‘reform dividends’ benefiting people ‘more justly’ highlights the social element. This is not a manifesto for economic efficiency alone.

Social issues have also been prominent on the agenda of the State Council, under new Premier Li Keqiang. According to official accounts of its meetings, major issues discussed over recent months include air pollution, developing the solar panel industry, safety in (industrial) production, providing safe and high quality milk powder, managing the agricultural sector to ensure supply and stable prices, and dealing with the earthquake which hit Sichuan in April.

A social policy emphasis makes a lot of sense. While economists and investors have stressed their desire for market-oriented economic reforms to improve efficiency, from a political perspective the most pressing issues the leadership faces are social and popular concerns.

There were hints of this as soon as Xi Jinping took over from Hu Jintao as head of the Chinese Communist Party back in November. Xi’s first public comments highlighted people’s desire for ‘better education, stable jobs, more income, greater social security, better medical and health care, improved housing conditions and a better environment’.

All of this suggests we should rethink the way we understand ‘reform’ in the Chinese context. Social, or livelihood, issues are at the forefront of Chinese policy making. And economic reform does not just mean the economics of efficiency (to borrow a phrase from Joe Studwell’s How Asia Works), but also addressing social and livelihood issues through the economics of equity.

3. Kerry Brown, once of Chatham House, now based in Australia, has some nice bullets on what we may know about Xi. The final bullet is one I think I would have gone for. What interests me most is to understand the mechanics of the political tendency to increasing consensus and conservatism in fast-developing states. Is it just the effect having more money that encourages politicians to buy off constituencies and avoid confrontation for as long as possible?

The New Leadership in Beijing: Political and Economic Implications

Evidence to Parliament
Kerry Brown, July 2013

This is a submission to the Foreign Affairs Committee, House of Commons, on 2 July 2013.

  • China’s new leadership is one of political scientists, historians, economists, lawyers and social scientists. The era of the technocrats has come to an end.
  • This is a leadership set up for a domestic agenda and that will resist attempts to pull it more deeply into international affairs, which are seen as lying beyond what the elite define as in China’s national interests (preservation of stability, building up economic strength, safeguarding sovereignty), despite the very real pressures that will be put on it to that effect.
  • They view international relations in a more emboldened way than their predecessors, and show their awareness of their country’s new economic status and how this needs to be reflected in how the world talks to and engages with China.
  • Underneath the bolder presentation of reformist intention towards corruption, economic policy and use of political language, the Chinese Communist Party in the 21st century lives with the paradox that a movement founded in revolution has become, in its seventh decade in power, self-preserving, highly cautious, led by people with remarkably little diversity, and extremely conservative.

4. Michael Komesaroff is a thoughtful commodities specialists who writes the Metal Man column in the China Economic Quarterly. I am not posting his presentation because you should register at his Urandaline site in order to get it. However it, and other useful things he posts, are free. Who said that Australians are tighter than Scots? Here is his blurb.

After Hu: More of the same, is the title of a presentation I made in April to the Sydney based clients of UBS. The presentation develops a theme I have been articulating for sometime, namely that Western observers of China are likely to be disappointed in the reforms they seem to be expecting from China’s new leadership.The presentation includes a positive forecast on China’s need to import greater quantities of iron ore, but this is offset by changes in market power so thermal coal is less attractive. After Hu: More of the same can be found here.

You are receiving this e-mail because some time back you registered at my websitewww.urandaline.com.au to receive notification when additions were made to the site.  At the time of registration these are the log in parameters you chose:

5. A macro-economic aside. In terms of the raw economic problem that the new government faces, this graph from Gavekal Dragonomics is useful. It shows how much nominal growth banking lending produces — in other words a proxy for a pure Incremental Capital Output Ratio. The point is that chucking money around is producing diminishing returns, as one would expect at this stage of development, and so structural adjustment and institutional change are suddenly very important as means to improve Chinese bang-for-buck.

The question is whether Xi and Li do only economic structural adjustment — such as interest rate reform, a revision to the centre-provincial fiscal arrangements in place since 1994, more action on welfare transfers and inequality — or whether they add any institutional medicine from education system to legal system to media to political pluralism modernisation.

….

6. More media-type stuff now. This is an op-ed from Russell Leigh Moses, Dean of Academics and Faculty at The Beijing Center for Chinese Studies, who is writing a book on the Chinese political system.

Xi Jinping’s Rare Scolding of Top Party Leaders (Wall Street Journal)

By Russell Leigh Moses

After telling the lower ranks of the Communist Party to shape up and make a clean break from past practice, Chinese leader Xi Jinping has taken aim at a new target:  the Party leadership itself.

And he’s done so with authority and openness from the highest pulpit of politics in China–the Politburo, the very place where the senior leaders sit and make policy.

In a speech at the conclusion of a three-day special meeting that was covered across Party media and took up nearly half of the evening newscast on Tuesday evening, Xi proclaimed that senior members of the Party needed “to play an exemplary role,” and that they had to be “broad-minded enough to reject any selfishness…to adhere to self-respect, self-examination and self-admonition” in their work (in Chinese).

It’s extremely rare for Politburo proceedings to be spoken of in such detail and openness.  And it’s unprecedented in modern times for the Party boss to start taking swings at his colleagues at the top by so directly reminding them of their responsibilities—a move that suggests he might be planning something even stronger soon.

Having just admonished lower-level cadres in a salvo last week, some observers might think that Xi is simply putting on a show here. After all, it’s difficult to demand improvement in the work-styles of the rank and file without at least paying lip-service to the idea that those at the top could stand to do a little better themselves.

But the tone of Xi’s comments and the play they’ve received in the state media suggest this is far more than just rhetorical window dressing.  It wasn’t enough for high officials to “strictly abide by party discipline and act in strict accordance with policies and procedures,” Xi said. Those at the top must also “strictly manage their relatives and their staff and refrain from abuse of power.”

“The sole pursuit” of senior members of the Party, Xi insisted, should be tied to “the Party’s cause and interests” – in other words, “to seek benefits for the Chinese people as a whole.”

Whether it’s misuse of official license plates or the high-end looting of state assets (in Chinese), Xi knows that corruption is not always confined to lower-level cadres.

Xi was careful to concede that there have been some positive developments in the ways by which the Politburo and other Party bodies operate, such as “improvements in research and reporting.”  Meetings have been shortened and presentations streamlined, “enhancing the majority of party members’ and cadres’ sense of purpose, as well as the view of the masses” towards the Party leadership, he noted.

But it’s clearly morality at the top — not the way that decisions are made — that concerns Xi and his allies the most.   As Xi’s speech noted, “as long as Politburo comrades always and everywhere set an example, they can continue to call the shots, for that will have a strong demonstration effect, and the Party will be very powerful.”

But Party leaders “must follow their own strict requirements first.”

Xi’s reprimand seems to imply that some of them are not.  His predecessors talked about the general threat to Party rule from the evils of corruption; but in nearly every case they chose to scold officials in the abstract, instead of smacking them around.  As with so many other efforts, Xi’s being different.

Indeed, such comments raise the very real possibility that Xi has someone specific in mind – that he could be about to strike against one or more of the conservatives who populate the Politburo and who might be standing in the way of further reforms.

Whatever form the next round of fighting takes, Xi and his reformist colleagues are clearly interested in creating a fresh sort of politics, even at the very top of the system.  This is risk-taking and resolution of a high order–and it brings a real political showdown with opponents of Xi’s brand of reform all the closer.

7. And this is an op-ed from Ching Cheong, the venerable Straits Times journalist who was locked up in China for three years accused (among other things) of spying for Taiwan. It talks about Xi’s encounter with Hu Dehua, which was referenced above.

海峡时报 (新加坡)

Opinion  |   Others  |   By Ching Cheong, Senior Writer  2013-06-28

Outspoken China princeling takes on President Xi 

 CHINESE President Xi Jinping’s conservative stance on political reform has led to a major split within the princeling community, whose members share a common interest in preserving the ruling status of the Chinese Communist Party (CCP).

Mr Hu Dehua, the third son of the late party chief Hu Yaobang, openly criticised Mr Xi at a seminar held by the liberal magazine Yan Huang Chunqiu in mid-April. It was by far the most severe criticism lodged against Mr Xi since the latter became CCP general secretary last November.

Mr Hu Yaobang was the CCP general secretary from 1982 to 1987. He was known for “liberating” thousands of senior CCP officials purged by CCP founder Mao Zedong. For this reason, he wielded considerable moral strength within the party. Mr Hu Yaobang’s death in 1989 triggered a massive democracy movement in Tiananmen Square that was put down bloodily.

Thanks to his legacy, his two sons, Deping and Dehua, stood out as symbols of political reform amongst the princelings.

Before Mr Xi became CCP chief last November, he let it be known that he paid a visit to Mr Hu Deping and had a long chat with him. Many considered this an attempt by Mr Xi to build an image as an enlightened leader.

Now, however, Mr Xi has been taken to task by Mr Hu Dehua.

He started with Mr Xi’s speech to party colleagues during his southern tour early this year. In it, the President stated that the Soviet Union collapsed because the party had disarmed itself by allowing the army to be loyal to the country rather than the party. “One lesson to draw is that we should forever grasp firmly the gun and not to disarm ourselves,” the President said.

Mr Xi also lamented that when the country faced disintegration, given the size of the Communist Party of the Soviet Union (CPSU), there was no one “man enough” to come to its defence.

To refute him, Mr Hu Dehua cited Russian Communist Party leader Gennady Zyuganov’s view that the Soviet Union collapsed because the CPSU had monopolised resources, political power and truth. “If this was the case, then there was nothing to regret if the Soviet Union or the CPSU collapsed,” he said.

Mr Hu Dehua then hinted that Mr Xi had misread the reason for the collapse of the CPSU. Mr Hu cited a CCP document of July 14, 1964, entitled On Khrushchov’s Phoney Communism And Its Historical Lessons for the World, saying that there emerged in the Soviet Union a privileged class represented by the CPSU.

“The members of this pivileged stratum have converted the function of serving the masses into the privilege of dominating them. They are abusing their powers over the means of production and of livelihood for the private benefit of their small clique,” the document said.

“The members of this privileged stratum appropriate the fruits of the Soviet people’s labour and pocket incomes that are dozens or even a hundred times those of the average Soviet worker and peasant. They not only secure high incomes in the form of high salaries, high awards, high royalties and a great variety of personal subsidies, but also use their privileged position to appropriate public property by graft and bribery. Completely divorced from the working people of the Soviet Union, they live the parasitical and decadent life of the bourgeoisie,” said the document.

Mr Hu Dehua pointed out that this was the real reason for the collapse of the Soviet Union. Turning to present-day China, which was plagued with problems similar to the Soviet Union’s, he said pointedly: “We blame everyone else, but never try to find problems from within. Is this a correct attitude?

“Why can’t we learn from the Kuomintang (in Taiwan), reform ourselves and get elected, basing our legitimacy on people’s authorisation and not on guns and cannon?” Mr Hu Dehua asked.

He then queried Mr Xi’s remark that no one was “man enough” to save the CPSU. “What does it mean by ‘man enough’?” he asked.

“Driving third-generation battlefield tanks against your own people is ‘man enough’? Or resisting orders to kill your own people and opt to face martial court instead?” he asked.

“When the ruling party faces a crisis, there are two options: to suppress the opposition or to reach reconciliation with the people,” Mr Hu Dehua said.

“We should learn from the experience of Chiang Ching-kuo (the late Taiwanese President who scrapped martial law). Be bold enough to reflect on the Feb 28, 1947 incident (where demonstrators were bloodily suppressed) so that historical pains could be redressed without bloodshed, revenge or purges.”

Clearly, Mr Hu Dehua was referring to the Tiananmen incident.

He then turned to Mr Xi’s latest assertion that one should not use post-reform history to negate the pre-reform years.

Mr Hu argued that without turning its back on the traumatic Cultural Revolution (1966 to 1976), the CCP could not embrace reform and open the door to usher in a period of prosperity.

“If one should not negate the first 30 years, does it mean that we still have to uphold the Cultural Revolution, uphold Mao Zedong’s purges of senior cadres, including his remark that Mr Xi’s father, Xi Zhongxun, was a counter-revolutionary who used novels as a weapon to conduct anti-CCP activities?”

This last question put the Chinese President in an extremely awkward position.

Mr Hu decided recently to release the transcript of his speech on the Web.

Mr Chen Ziming, a dissident branded as the black hand behind the 1989 Tiananmen incident, speculated that the recent salvos of propaganda attacking constitutionalism might have prompted Mr Hu to take Mr Xi to task.

Mr Hu’s open criticism of Mr Xi also suggests that the princeling community is sharply divided over how to preserve the ruling status of the CCP, especially over whether rampant corruption and widespread unrest can be dealt with without political reform.

Do you feel enlightened? I feel very slightly less in the dark. Rather like thousands and thousands of Chinese cadres, not to mention the general population, who are waiting to find out what Xi4Li3 (a homonym of Heineken’s Chinese name Xi3Li4 – you heard it here first) are actually going to do. I don’t mind a bottle of Heineken. But is that all this nation of 1.3 billion can offer us?

Mutual society robber barons

July 16, 2013

I have had an account at the Nationwide Building Society in the UK for 30 years. I believe that mutual societies offer the best way to serve the retail banking needs of ordinary citizens, and that they could and should do more to provide a working capital lending function for industry. I also believe that Lloyds and RBS, most of the equity in which belongs to the public as a result of the global financial crisis, should be mutualised. Sadly, no one in politics has the cojones to propose this.

Nationwide is the biggest building society in the UK, but the people who run it don’t think much like mutual society types. Mostly they impersonate bankers. Right now they are writing down hundreds of millions of pounds of bad loans from their speculation in commercial real estate activity pre-2008. Commercial real estate is a notoriously cyclical sector in which a mutual society has no business playing with its members’ money. The management is only able to pay off this folly because of the state’s provision of nearly free funds via quantitative easing, a policy that will have a fiscal cost for the whole of British society down the road when the Bank of England sells for less the bonds it has bought for more. However the people who run Nationwide are so gormless, or so self-serving, that they believe the profits that QE makes possible reflect their management genius (they being the same people who lost billions in commercial realestate speculation).

So the top boys and girls are paying themselves millions of pounds a year and jacking up their bonuses (details here). They run a bonus structure that operates over periods of 12 months and 36 months when banking cycles in the post-war era have been more like 10-15 years. Are they stupid, or just greedy? I hope they are just stupid.

Whichever, in the Nationwide AGM whose voting closes on the 22nd, I am voting against the remuneration report and the whole miserable lot of them. If you have a Nationwide account I would urge you to consider doing the same thing. If you vote online, do NOT use their immoral and deceptive ‘Quick Vote’ button which lets the chairman vote for you. The chairman, Geoffrey Howe (no relation), trousers £300,000 just for chairing the board. If you have read Asian Godfathers, you will be interested to know he is also chairman of Jardine Lloyd Thompson, which is the modern incarnation of the insurance business of the Keswick/Jardine godfather family of shafting minority shareholder fame…

Nationwide on your side

Weekend reading and viewing

July 13, 2013

1. First up, a farewell piece from Evan Osnos, China correspondent of the New Yorker. All about his poet bin-man friend.

A BILLION STORIES

POSTED BY 
Osnos-qi-290.jpg
In my neighborhood, near the Lama Temple, the men and women in fluorescent orange jumpsuits work for the district sanitation department. Many are migrant workers from the countryside; they sweep the alleys, clean the public restrooms, and collect the trash. Some wear straw farmers’ hats that cast a shadow across their faces, and, I admit, the matching uniforms make it difficult for me to keep them straight. I don’t know if there are three of them or thirty.
One afternoon not long ago, I was chatting with my next-door neighbor, a retiree named Huang Wenyi—a proud Beijinger, born and raised—when one of the sweepers in an orange jumpsuit wandered by. He had tousled hair, sun wrinkles around his eyes, and a smile of jumbled teeth. He approached and pointed to a gray flagstone at our feet. “Can you see the emperor on that rock?” the sweeper asked.
I thought I’d misheard. He said, “I can see an image of the emperor right there on that rock.”
Huang and I looked at the rock and back at the sweeper. Huang was not interested. “What are you bullshitting about?” he asked. “You have no idea what you’re talking about.”
The sweeper smiled and asked, “Are you saying you think I’m not a cultured man?”
“What I’m saying,” Huang said, “is that you’re not making sense.”
The sweeper gave him a look, and turned, instead, to face me. “I can look at anything, and pull the essence from it,” he said. “It doesn’t matter how ordinary something is; in my eyes, it becomes a treasure. Do you believe me?”
Huang was irritated: “Old man, I’m trying to have a chat with our foreign friend here. Can you not disturb us, and go back to your work?”
The sweeper kept talking—faster now, about ancient Chinese poetry, and the great modern writer Lu Xun—some of it too fast, and the references too obscure, for me to understand. He sounded somewhere between interesting and bonkers. Huang had had enough, and he poked fun at the man’s countryside accent. “Come back after you’ve learned to speak Beijing dialect,” he said.
Under his breath, the sweeper said, “As long as it’s a dialect of human beings, it’s legitimate.” But Huang didn’t hear him. He’d waved him away and wandered into his house.
I introduced myself. The sweeper’s name was Qi Xiangfu. He was from Jiangsu Province, and he said he had come to Beijing three months ago. Why did you come, I asked.
“To explore the realm of culture,” he said grandly.
“What kind of culture?”
“Poetry, mainly. Ancient Chinese poetry. During the Tang Dynasty, when poetry was the best, every poet wanted to come to Chang’an,” he said, invoking the name of the ancient capital, the predecessor to Beijing. “I wanted a bigger stage,” he said. “It doesn’t matter whether I succeed or fail. I’m here. That’s what matters.”
It was getting late; before I went inside, Qi said he had competed in poetry competitions. “I won the title of ‘Super King of Chinese Couplets.’ ” In his spare time, he had taken to hosting an online forum about modern Chinese poetry. “You can go online and read about me,” he said.
That night, I typed his name into the Web, and there he was: Qi Xiangfu, the Super King of Chinese Couplets. In the photo, he was handsomely dressed in a bow tie and a jacket; he looked young and confident. Chinese poems are hard for me to understand, and many of his, especially, were impenetrably weird. But I appreciated some moments of grace: “Earth knows the lightness of our feet,” he wrote. “We meet each other there / Between heaven and earth.”
To my surprise, the more I searched about Qi Xiangfu, the more I found of a life lived partly online. He once wrote a short memoir, in which he described himself in the third person, with the formality usually reserved for China’s most famous writers. He wrote that his father died young, and Qi was raised by his uncle. He wrote, of himself, “The first time Qi read Mao’s poem ‘The Long March,’ he resolved that Mao would be the teacher to show him the way. Later, he studied the poetry of Li Bai, Du Fu, Su Dongpu, Lu You, and others, and he made a promise to himself: Become a master of literature.”
He described the first time he ever presented one of his poems to a large group—it was played on a speaker at a construction site—and he described a bus trip in which he met, as he put it, “a girl who sympathized.” They married and it “ended his life of vagrancy.” There were hints of trouble in his life—at one point, he wrote a plea for donations, saying, “Alas, Comrade Qi is having a difficult time”—but something in the spirit of his online persona captivated me.
So much of it was impossible just a few years ago: the journey to the city, the online identity, the interior life so at odds with the image he projected to the world. When I first studied in China, seventeen years ago, the Internet was only a distant rumor. It had reached China two years earlier, but hardly anyone had access. When I brought a modem from the U.S., and tried to plug it into my dorm-room wall in Beijing, the machine emitted a sickly popping sound and never stirred again.
When I moved to Beijing, in 2005, to write, I was accustomed to hearing the story of China’s transformation told in vast, sweeping strokes—involving one fifth of humanity, and great pivots of politics and economics. But, over the next eight years, some of the deepest changes in the lives around me have been intimate and perceptual, buried in daily rhythms that are easy to overlook. A generation ago, foreigners writing about China marvelled most at the sameness of it all. Chairman Mao was the “Emperor of the Blue Ants,” as a memorable book title had it. But in my years in China, I have been seized most of all by the sense that the national narrative, once an ensemble performance, is splintering into a billion stories.
Living in China at this moment, the stories bombard you with such fantastical vividness that you can’t help but write them down and hope to make sense of them later. Writing about China, in The New Yorker, for the past five years, I’ve tried to capture something of this age, to grab a few of these stories out of the air before they slip by. The complexities of individual lives blunt the impulse to impose a neat logic on them, and nobody who stays here for some time remains certain about too much for too long. To impose order on the changes, we seek refuge, of a kind, in statistics. In my years here, the number of airline passengers nationwide doubled; sales of personal computers and cell phones tripled. The length of the Beijing subway quadrupled. But the longer I stayed, the less those impressed me than the dramas that I could never quantify at all.
On Sunday, my wife, Sarabeth, and I are flying out. I’ll be on leave for the next couple of months, wrapping up a book about a few individuals I’ve come to know in China. It will be published next spring, and I’ll be saying more about that later. I’ll resume writing for the magazine this fall, based in Washington, D.C. China is not leaving my blood stream; I’ll be back to write pieces, and, in between, I’ll be writing at Daily Comment and elsewhere about how China looks from afar.
Since we launched this blog, in January of 2009, I’ve written about five hundred posts. This will be the last for a while, and I want to thank you for visiting over the years. There will be much more to come on China on this site, and in the magazine, so I won’t pretend to sum things up. For now, I’ll mention only the fact that returns to me more often, perhaps, than any other: never in modern history has China been more prosperous and functional and connected with the world—and yet, it is the only country in the world with a winner of the Nobel Peace Prize in prison. Contradictions like that have been the essence of this moment.
After I met the street sweeper Qi Xiangfu, I started bumping into him frequently. We swapped phone numbers, and he would send me a poem, now and then, by text message. He typed out the characters on his phone, with the help of a magnifying glass to aid his eyes. Many of his poems were heavy with Communist fervor; others were oracular and strange. But I sympathize with anyone trying to make sense of this place in writing, and I admired his persistence. “I’ve experienced every kind of coldness and indifference from people,” he told me once, “but I’ve also given myself knowledge, all the way up to the university level. I don’t have a diploma. People look down on me when they see me.”
A few weeks ago, Qi told me he had been reassigned to the sanitation department in another part of town; he said he would come back when he could. The last time I saw him, he wasn’t wearing his uniform; he was in street clothes—a crisp white shirt and a black jacket—on his way to see his daughter who worked at a restaurant nearby. He had a book under his arm: “Ten Contemporary Authors of Prose.” For the first time, I saw the two personae, online and real-world, in one. What inspires you, I once asked him.
“When I write,” he said, “anything becomes material. In life, I must be practical, but when I write, it is up to me.”
Photograph, of Evan Osnos and Qi Xiangfu, courtesy of Osnos.
2. Next, a bit of Australian fun. A Kath and Kim movie came out last year. It got terrible reviews, so don’t go see it. However this appearance on Sunrise is pretty funny. Seems like good background to the Ashes series.
3. Next: Oh. Bama! Just to keep piling pressure on the liberal president, here is a Guardian piece about the sale of ambassadorial positions. Sort of Lloyd George goes to Washington. You might want to watch Lou Reed talking about Snowden and Obama again, (if only to watch the put-down of the obsequious female journalist at the end).
4. Now something serious. Christopher Wood, one of the best (perhaps the best) equity analyst in east Asia, doesn’t like his weekly missive reposted. So I am just going to quote a couple of bullets about the income distribution effects of the QE approach to stabilising the global financial crisis. I was banging on about the same thing soon after the crisis hit in 2010 and the QE started:
<The practical way unconventional monetary policies work is to lead to ever more extreme wealth distribution. Wealth distribution would have become much less extreme as a consequence of the 2008 crisis if losses had been imposed on creditors to bust financial institutions in line with capitalist principles, as opposed to the favoured ‘bailout’ approach pursued for the most part by Washington. The ‘great reckoning’ has been deferred to another day as the speculative classes have continued to game the system by resort to carry trades actively encouraged by the Fed and other central bankers. The leverage taken on in such trades is highly risky because of the underlying deflationary trend.>
5. More serious and interesting stuff is Philip Stephens in the FT (sub needed) parsing the Anglo Saxon-created disaster story that is the Middle East.
6. Looking at the Stephens’ canon, I see a piece from June (sub needed) making the case for shutting down the UK Treasury. It would save money and get rid of dangerous incompetents whose follies we, the taxpayers, must finance. I would just add that in shutting the Treasury to save money, government could also shut the Foreign Office, another black hole of self-regarding incompetence. George Osborne is right that we should not waste money. Mainly on people he went to school and university with.
7. Finally, this looks like something useful to do if any UK university students read this blog:
Hi there, My name’s Jonathan Goggs – I’m from an organisation called Team Up, who are establishing a student committee at Cambridge for 2013/14. I would very much appreciate it if you, or one of your colleagues, could circulate the following blurb into an email to all students in the business school, including the enclosed attachments as well. Do let me know if there are any questions from students by responding to this email, or copying me in. “Team Up is passionate about improving social mobility and transforming the prospects of bright young people and we are looking for outstanding university students from Cambridge to join one of our accredited leadership programmes next year. You will be trained in the highly sought-after professional skills to make a genuine difference and empower young people in your community to academic excellence. We believe in developing our university students to foster the skills they need to tackle the UK’s biggest social problem (social mobility) and secure exceptional careers. That’s why, once we’ve processed your application and conducted a short interview, we’ll be running master classes and networking opportunities, in partnership with leading businesses and charities, to give you the tools to lead, inspire and excel. The programme runs for 20 weeks, alongside your degree, and an overview of the year is attached, together with descriptions of the roles you can apply for. Last year our programme partners were Teach First and Bank of America Merrill Lynch and next year we will be partnering with even more organisations in management consultancy, education, social enterprise and finance. Places are competitive, so early applications are encouraged. Over the past two years we’ve received over 2,000 applications and some incredible student feedback – 9 out of 10 students said they enjoyed the programme. At Team Up, we think it’s a tragedy that so many young people are still disqualified from leading universities like Cambridge and fulfilling careers, because they come from low-income, socially disadvantaged backgrounds. If you think the way we do, we’d love to hear from you. To apply, click here.” Kind regards, — Jonathan Goggs Programme Officer | Team Up 18 Victoria Park Square, Bethnal Green, LONDON | E2 9PF E: jonathan.goggs@teamup.org.uk | W: www.teamup.org.uk

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