A defense of economic nationalism

Darren Beattie provided (in 2017) a much-needed defense of the ideological foundations of economic nationalism:

It is entirely possible therefore to support tariffs, immigration restrictions, and various other restrictions on the free market in a manner that benefits the American worker and that is also consistent with the highest respect for individual freedom, enterprise, self-reliance, and other virtues of capitalism.

He makes a great point about the Cold War context which spawned free-trade ideology:

The Soviets who posed an existential geopolitical threat to the United States embraced a generally classical Marxist philosophy that was both an economic and a moral doctrine.

Free-trade doctrine provided an ideological foil to an expansionist Marxist regime. From that standpoint, it has served its purpose.

But today’s threats of concentrated power do not seem to conform to the “government dangerous, private sector benign” picture as easily as they may have during the Cold War. This is because 1) the distinction between public and private seems to no longer apply to many of the most powerful sectors of the economy, and 2) new forms of technology have enabled equally dangerous concentrations of power to accrue in the private sector (think of Silicon Valley). So, with the end of the Cold War, we must reevaluate the relationship between economics and liberty.

Furthermore, several structural features in the economy have accelerated since the end of the Cold War that severely threaten the middle class, whose robust health is often considered indispensable to a culture of individual freedom.

It is also indispensable to political stability.

Beattie is right that the public discourse is very superficial on this issue, as I pointed out with reference to trade policy in my post on Ian Fletcher’s book Free Trade Doesn’t Work: What Should Replace It and Why. In fairness, trade policy is boring and makes for poor clickbait. Also, most pundits and politicians have absolutely no clue about economics. Fortunately, this article is free of economic jargon and just addresses the ideological assumptions underpinning most people’s thinking on the trade topic.

The Party wears the pants

There is a widespread misconception that China is actually a capitalist country that for some reason calls itself Communist. For example, Rupert Murdoch is said to have remarked (in the late 1990s) that he had yet to meet any communists during his trips to China.

Certainly, it’s easy to see how a tourist spending a week in an economic hub such as Shanghai or Shenzhen would get this impression, especially today:

But like many beliefs based on surface appearances, the idea that China is not really Communist is mostly false. As Australian journalist Richard McGregor argued in a 2011 article:

If Vladimir Lenin were reincarnated in 21st-century Beijing and managed to avert his eyes from the city’s glittering skyscrapers and conspicuous consumption, he would instantly recognize in the ruling Chinese Communist Party a replica of the system he designed nearly a century ago for the victors of the Bolshevik Revolution. One need only look at the party’s structure to see how communist — and Leninist — China’s political system remains.

Sure, China long ago dumped the core of the communist economic system, replacing rigid central planning with commercially minded state enterprises that coexist with a vigorous private sector. Yet for all their liberalization of the economy, Chinese leaders have been careful to keep control of the commanding heights of politics through the party’s grip on the “three Ps”: personnel, propaganda, and the People’s Liberation Army. […]

Perhaps most importantly, the party dictates all senior personnel appointments in ministries and companies, universities and the media, through a shadowy and little-known body called the Organization Department. Through the department, the party oversees just about every significant position in every field in the country. Clearly, the Chinese remember Stalin’s dictate that the cadres decide everything.

In his astonishing 2010 book The Party: The Secret World of China’s Communist Rulers, McGregor points to a study by emerging markets brokerage CLSA that estimated that China’s private sector contributes 70% of the country’s GDP and 75% of its workforce. As he notes:

A week later, a rival and equally respected China research unit at UBS, the Swiss bank, put out a rejoinder, saying the private sector ‘accounts for no more than 30 per cent of the economy, whichever indicator you use’. The report said: ‘In China, the big sectors are either 100 per cent or majority controlled by the state: oil, petrochemicals, mining, banks, insurance, telcos, steel, aluminum, electricity, aviation, airports, railways, ports, highways, autos, health care, education and the civil service.”

I believe that last sentence (the report was published in 2005) is still true today. The media is also state-controlled. The internet sector is ostensibly dominated by private firms, but the government keeps Alibaba, Tencent and Baidu on a fairly tight leash and is reportedly considering buying direct stakes in Tencent as well as Youku (the YouTube of China), which is owned by Alibaba.

Why is it so hard to nail down the size of China’s private sector? According to McGregor:

“The confusion about what is public and what is private is a deliberate result of the system’s lingering wariness about clarifying ownership. Ask any genuine entrepreneur whether their company is private, or ‘siying‘, literally ‘privately run’, it is striking how many still resit the description in favour of the more politically correct tag ‘minying‘, which means ‘run by the people’. […] Most economists now skirt the issue, by dividing companies into two categories, state and non-state, and leave it at that.

The issue gets murkier the closer you look at it. John Robb cut through the complexities most succinctly by describing China’s politico-economic system as “capitalism in a Leninist cage.”

Now it is certainly true that China has a large and wealthy entrepreneurial class, which was born out of the liberalizing reforms that began under Deng Xiaoping. That is the “capitalism” in the aforementioned “Leninist cage.” The Party realized it needed entrepreneurs to build China into the massive economic juggernaut it has become since the 1970s. The tycoons had their heyday after the mid ’90s and into the 21st century, as the Party unleashed private businesses to create jobs for the tens of millions of workers laid off by a shrinking state sector. Today, the private sector is reported to contribute over 60% of China’s GDP growth and over 90% of new jobs (take those figures with a grain of salt).

However, even while fostering the rapid growth of the private sector, the Party has also taken pains to infiltrate and co-opt it. This is where the Leninist cage comes in. China’s leaders have carefully studied the example of the former Soviet Union and in particular, the rise of a powerful class of corrupt oligarchs who carved up and destroyed Russia’s economy during the botched privatization of the ’90s. The Party is determined to avoid a repeat of the Russian oligarch scenario in China, and will not permit the country’s tycoons to challenge state power.

This message has been sent in recent years with the disappearance and detention under bizarre circumstances of a spate of Chinese billionaires, including Xiao Jianhua, the businessman who was abducted from Hong Kong by mainland authorities — whisked away from the Four Seasons hotel, reportedly in a wheelchair with a sheet over his head. The disappearance of Wu Xiaohui, who bought New York’s Waldorf Astoria hotel, in June of last year seemed to indicate that the Party was cracking down on the private sector in earnest.

The New York Times, in a story this week, finds further evidence that China is turning its back on free-market policies:

For 40 years, China has swung between authoritarian Communist control and a freewheeling capitalism where almost anything could happen — and some see the pendulum swinging back toward the government.

State-controlled companies increasingly account for growth in industrial production and profits, areas where private businesses once led. China has stepped up regulation of online commerce, real estate and video games. Companies could face higher taxes and employee benefit costs. Some intellectuals are calling for private enterprises to be abolished entirely.

The political winds are shifting, but the discontinuity is not as sharp as it may seem at first glance. China has never had “a freewheeling capitalism where almost anything could happen.” All that we’re really seeing here is that the cage around the private sector is getting smaller and more restrictive, but the cage was always there. The Party is simply reminding China’s entrepreneurs who wears the pants in this relationship.

Communism is cool

Black Panthers

Black Panthers

The late 1960s are calling and they want their ideology back:

“Learning from the New Communist Movement”

Socialists today don’t have to reinvent the wheel — we can learn from the successes and failures of past American radicals, including the New Communist Movement.

With the popularity of politicians like Bernie Sanders and Alexandria Ocasio-Cortez and the explosion in membership in the Democratic Socialists of America (DSA), socialism is suddenly central to the national political conversation. And it’s happening in the United States. Despite being a country long argued to be uniquely allergic to all talk of class conflict and any alternative to capitalism, here we are, watching many Americans question whether we should remake our political and economic systems from top to bottom.

DSA membership has mushroomed since the 2016 election from 7,000 to more than 37,000 today.

But this isn’t the first time mass numbers of people in the United States have considered socialism. It also happened half a century ago, when the New Left raised questions about capitalism, imperialism, racism, sexism, and much more. At the end of the 1960s, those questions were taken up by the New Communist Movement (NCM), a collection of groups in the Marxist-Leninist tradition. While the movement was made up of organizations that had different answers to burning political questions, on the whole, these groups were inspired by the left-nationalist projects of the day, including domestic movements like the Black Panthers and Puerto Rican nationalist groups, and international communist movements in Cuba, Vietnam, and especially China.

Speaking of China, the officially Communist country is increasingly discovering that it has little use for actual Communists. It would kind of ironic if China ended up leading an anti-Communist crusade against the US.

Direct-democracy-as-a-service

Luigi Di Maio and Davide Casaleggio

Luigi Di Maio and Davide Casaleggio

A brief explanation of Italy’s Five Star Movement, which won the biggest share of the vote in this month’s general election:

Davide Casaleggio is one of the top leaders of the Five Star Movement. He is president of the Rousseau Association, which created the movement’s digital platform. […]

Our experience is proof of how the Internet has made the established parties, and the previous organizational model of democratic politics more generally, obsolete and uneconomic. The Five Star Movement garnered around 11 million votes in the recent election. Each vote cost us about 9 cents — a cost covered by micro-donations from about 19,000 citizens who donated a total of about $1 million, supporting all the costs of our election campaign. For the traditional parties, according to the political group More Europe, a single vote cost nearly one hundred times more, about $8.50 per vote.

The platform that enabled the success of the Five Star Movement is called Rousseau, named after the 18th century philosopher who argued politics should reflect the general will of the people. And that is exactly what our platform does: it allows citizens to be part of politics. Direct democracy, made possible by the Internet, has given a new centrality to citizens and will ultimately lead to the deconstruction of the current political and social organizations. Representative democracy — politics by proxy — is gradually losing meaning.

The platform also allows registered users to choose parliamentary candidates through online voting and to propose, discuss and vote on legislative initiatives which, if approved, are submitted to parliament. This is direct democracy on the intraparty level, it’s very cutting-edge and frankly very cool. I suggest keeping an eye on Italian politics as I think they are simply ahead of the curve on this, and much of the West will soon catch up.

Anti-politicians

Beppe Grillo

Italy’s Beppe Grillo

The enigmatic Five Star Movement (Movimento 5 Stelle, or M5S) is now Italy’s biggest political party:

One person notably absent from the Five Star Movement’s triumphant celebrations at a plush hotel in Rome in the early hours of Monday morning was Beppe Grillo, the comedian who less than a decade ago founded the party that seized the biggest share of the vote in Sunday’s inconclusive election. […]

Grillo, who was instrumental in turning the movement built by a rabble of rebels into Italy’s strongest political force, said in January that unless it won an outright majority in the election it should remain in opposition. “It would be like saying that a panda can eat raw meat. We only eat bamboo,” he said of the prospect of sharing power.

But Di Maio, said to have been groomed by Grillo for the leadership, has other ideas. On Monday he said he was open to talks with all political parties, and he has already presented his would-be cabinet – a list of what he calls “anti-politicians”.

In light of the news from Italy, I remembered this prescient article by Francesco Sisci — from April 2013:

Italy over the past century was a staging ground for experiments with new political solutions that had global consequences. Fascism was born in Italy in the 1920s, although it also flourished elsewhere and caused the start of World War II. In the 1970s, the Italian pro-Soviet Communist Party supported coalition governments that included pro-American parties, showing that communism could be adapted to a democratic environment. Thus, it inspired reforms in Gorbachev’s USSR some years later, something that led to the collapse of communism in Europe altogether.

One then wonders whether the new Italian political entity the “5 Star Movement”, created by comedian-turned-politician Beppe Grillo, will also lead to something else – and what that could be. The “5 Star Movement” scored a huge success in the recent Italian elections while refusing to reach out to voters through talks and debates on TV, the traditional means of political campaigning for the past five decades.

It canvassed votes by means of old-fashioned public meetings and by modern web chats and Tweets shot through the Internet and mobile phones. He and his followers explained that this is the new web democracy. In fact, there is something extremely modern in Grillo’s political movement. Certainly, US President Barack Obama understood the importance of the web and relied on songs spread on Facebook and Twitter slogans. But he still went on TV and engaged in all the traditional campaign activities.

Grillo, conversely, refused TV appearances, political debates, and even interviews in the Italian press, and this magnified his image, bringing him almost 25% of the vote. The Internet is and was the ground for internal debates. Candidates were selected through mock elections on the web among Grillo’s supporters; policy discussions were held in web chats rather than in smoky rooms. There were no meetings, no cells, and no steering committees.

Actually, this is not the only new element of Grillo’s party. Contrary to all past practices, Grillo and his main partner, Gianroberto Casalegno, chose not to run for parliament. Notwithstanding that, these two extra-parliamentary leaders control all their elected deputies in parliament through a series of binding agreements. Meanwhile, the few top leaders decide the party line in informal gatherings on phone calls. It may not sound good – the party looks more like a private entity than an organization to promote political change and effective popular participation – but it has so far provided an organization that works similar to, if not better than, the old party systems.

Social networking is devouring the political systems of the West, starting in Italy and the US. It’s easy to imagine that in another five or 10 years, online networks will have taken over the machinery of the major parties, turning politicians into puppets for internet movements/mobs. Which may or may not be an improvement over the existing, obsolete party systems.

In any case, China’s prescience in censoring the internet more severely than Saudi Arabia is now clear. China’s rulers are extremely uninterested in dealing with uncontrollable, socially networked movements that could destabilize the country and threaten the Party’s grip on power, so it has opted to wall off China from huge swaths of the global internet.

Under this brutal logic, all major foreign social media platforms are blocked, and the domestic platforms are heavily censored and monitored. Weibo, the closest thing to Twitter, has recently been chastened (again). The closed nature of WeChat, which now has a billion active monthly users, does not lend itself to hashtag activism. There will be no Beppe Grillo on China’s watch.

Striking while the iron is hot

Just about everyone has something to say about the recent political news out of China. This limerick pretty much sums it up:

I was impressed by this analysis by Jerome Cohen, expert on Chinese law and government, who (rather amazingly) practiced law in Beijing back in 1979:

Xi’s move will have a profound effect on world order. It will enable him to move more boldly and increases the risk of his acting arbitrarily and perhaps mistakenly in international relations. It will surely hinder China’s efforts to be respected for “soft power” as well as military and economic prowess.

Xi decided to strike while the iron is hot rather than wait for later in his new term when increasing problems might have made the change more difficult. His brash step has undoubtedly aroused profound concern among the elite. Many high Party personnel, bureaucrats, judicial officials, lawyers, intellectuals, academics and business people, mindful of the past Maoist dictatorship and the increasingly repressive and arbitrary government under Xi, have seen this coming and now, in social media and other informal ways, are showing their anxieties and opposition.

But not many public signs of protest can be expected, since he has stifled free expression in the past few years.

At least it’s a relief to be able to quit pretending that the spread of liberal democracy has ushered in the end of history. Nope, the party is just getting started… and it’s gonna be lit….

Term limits

Impressive shilling here:

What’s more, America’s belief in the redemptive value of term limits merits further examination. In some political jurisdictions, it has helped bring in new blood; but, in others, it has replaced seasoned leaders with fresh nonsensical amateurs, to the detriment of good governance.

Indeed, in the 20th century, most assessments of presidential performance would place Franklin D. Roosevelt, our 32nd president, at the top of the list. He was elected not just to three terms but four. In 1951, the 22nd amendment to the US Constitution was ratified, which seemed like a good idea at the time; and perhaps even more so now. But there were moments in-between when America had its doubts about the constitutional dogmatism of having to force someone out of office who was doing the job well.

The problem with citing America’s “doubts” about the wisdom of term limits to defend another country’s scrapping of term limits under completely different circumstances is that it’s risibly stupid. With the notable exception of FDR, the consensus in the US has always been that a president should not hold office for more than two terms. What this signifies is not a “belief in the redemptive value of term limits,” which is just a dumb strawman, but a profound unwillingness to be ruled by another monarch.

Formal term limits weren’t needed for most of American history because the informal convention of a two-term limit, established by Washington, prevented nearly all presidents from even seeking a third term until FDR. After FDR was elected for an unprecedented four terms, Congress adopted the 22nd Amendment creating a formal two-term limit in 1951.

The key point here is that Americans decided it was time to slap some term limits on their leaders, and then did so. The 22nd Amendment was enshrined in the Constitution through a lawful, public and consensual process, which required ratification by three-quarters of the states of the Union. And public opinion is strongly against repealing it.

Compare this process to the shady, unilateral power-grab that is the topic of Tom Plate’s article, and laugh.

Sakdina: a prototype social credit system

Reading about the Siamese kingdom of Ayutthaya, which reigned from 1351 to 1767, I was struck by a description of the feudal ranking system called “sakdina” that was put in place by King Trailok in the early 15th century. Here’s the Wiki summary:

Sakdina (Thai: ศักดินา) was a system of social hierarchy in use from the Ayutthaya to early Rattanakosin periods of Thai history. It assigned a numerical rank to each person depending on their status, and served to determine their precedence in society, and especially among the nobility. The numbers represented the number of rai of land a person was entitled to own—sakdina literally translates as “field prestige”—although there is no evidence that it was employed literally. The Three Seals Law, for example, specifies a sakdina of 100,000 for the Maha Uparat, 10,000 for the Chao Phraya Chakri, 600 for learned Buddhist monks, 20 for commoners and 5 for slaves.

China’s rulers may have learned something from Thai history, because they are now rolling out a dynamic, interactive, socially networked sakdina system for their own people. It is called the social credit system.

Whether it can successfully keep 1.4 billion people in line, in an advanced, high-tech and globally connected society, remains to be seen.

Social credit system

I used to think that between the two great dystopian novelists, Huxley was more prophetic than Orwell. Not so sure anymore:

First envisioned in the mid-1990s, China’s social-credit system would assign a ranking to each of the country’s almost 1.4 billion people. Unlike a Western rating based on financial creditworthiness, China’s social-credit backers want their system to be all-encompassing, to evaluate not just financial matters but anything that might speak to a person’s trustworthiness. In modern China, “trust-keeping is insufficiently rewarded, the costs of breaking trust tend to be low,” a 2014 Chinese government document describing the government’s plans notes.

The social-credit system aims to change that – raising the penalties for poor conduct and the rewards for deferential behaviour.

It is the most ambitious attempt by any government in modern history to fuse technology with behavioural control, placing China at the forefront of a new kind of authoritarianism, one that can mine a person’s digital existence – shopping habits, friends, criminal records, political views – and judge them according to the state’s standard of reliability.

One early encounter with the system is described by a Chinese journalist who found himself on a government blacklist after he (inadvertently) defaulted on a court fine:

What it meant for Mr. Liu is that when he tried to buy a plane ticket, the booking system refused his purchase, saying he was “not qualified.” Other restrictions soon became apparent: He has been barred from buying property, taking out a loan or travelling on the country’s top-tier trains.

“There was no file, no police warrant, no official advance notification. They just cut me off from the things I was once entitled to,” he said. “What’s really scary is there’s nothing you can do about it. You can report to no one. You are stuck in the middle of nowhere.”

More details on that here.

Another example of the nascent system at work:

It is hard to imagine a more perfect system of social control. This is not so much ruling with an iron fist as ruling with a joystick. The largest society in the world is being turned into a video-game simulation.

The social credit system seems perfectly adapted for a Confucian, group-oriented society, which also happens to lead the world in mobile payments and video surveillance. Of course, China is not the only country on the road to socially networked repression.

One possibility that occurs to me is that the government could use this apparatus to tackle China’s demographic crisis by pressuring people to have more babies. This piece in Wired talks about how Alibaba’s Sesame Credit (a potential precursor to the nationwide system) factors people’s shopping habits into an assessment of their character, an example being that “Someone who frequently buys diapers would be considered as probably a parent, who on balance is more likely to have a sense of responsibility.”

What if “a sense of responsibility” was defined to include having two or more children, and the nationwide social credit system linked your “score” to how many children you have and the age at which you have them? I could easily see this being rolled out if more traditional pro-natalist policies fail to boost China’s birthrate to an acceptable level. (Note that China ended its one-child policy in early 2016, allowing all married couples to have two children.) In fact, I would be surprised if it hasn’t already been considered.

This all reminds me of the “credit poles” from Gary Shteyngart’s 2011 dystopian novel Super Sad True Love Story. As he explains:

A credit pole is a way for the government to know what your creditworthiness is, because the big problem in the society is that nobody has enough credit. Credit poles are found on sidewalks in major metropolitan areas, and as you walk by they tell you what your credit rating is.

And:

The apparat is worn around the neck as a pendant, and it has what’s called RateMe Plus technology. Let’s say you walk into a bar; it says, “OK, you’re the third-ugliest man in here, but you have the fifth-best credit rating,” things like that. Everyone is constantly ranked and constantly assessing everyone else’s ranking, which is similar to the society we already live in.

Life imitating Shteyngart…