Why bureaucracies win….

Being an “angry youth” at a demonstration is quite an experience.  You are full of youthful energy and idealism uncorrupted by real world experience.  You think you are going to change the world, and sometimes you just might.

The problem with passion and energy is that it quickly burns itself out.  After a month of demonstrations, you just want to get some sleep since changing the world is just plain exhausting.  At this point the bureaucracies start to win, because bureaucracies are slow, plodding, and boring, but they don’t get tired.  In a bureaucracy, you come in, you write reports, you file papers, and then you leave.  This is why bureaucracies are so effective.  They don’t get tired because they don’t get emotional.

To quote the fictional Star Trek character Khan Noonien Singh

“Improve a mechanical device and you may double productivity. But improve man, you gain a thousandfold.”

What Singh misses is that if you improve the relationships between people who can improve productivity a million-fold or destroy it all together.  There is a story about Lu Xun in which he was studying to be a doctor and then saw a film in which Japanese solidiers were executing Chinese, and then became a writer because what was the point in saving lives as a doctor if you could save thousands as a writer.  That sort of enters my thinking which is why I’ve ended up spending a great deal of time studying bureaucracies and being a bureaucrat myself.  The worst serial killers in the world can kill dozens of people by themselves, but put one in charge of a bureaucracy and tens of millions of people die.  But it works in reverse, a doctor can maybe save hundreds of lives, but an efficient healthcare bureaucracy can save tens of millions.

Great articles on Tibet

The great thing about the internet is that you can find in-depth, thoughtful articles that tell you thing that you didn’t know before. The bad thing is that you have to go through a lot of trouble to find them. Anyway here are two articles.

http://www.feer.com/essays/2008/may/the-gulf-between-tibet-and-its-exiles

http://www.columbia.edu/cu/weai/tibetan-issues.html

Trying to understand what is going on is like putting together pieces of the puzzle. The reason I like these two articles is that they “fit” into pieces of the puzzles that I already know about. I don’t know that much about Tibetan exile politics, however I do have first hand knowledge of Han Chinese exile politics, and what it’s like on in the inside of a Buddhist temple. I’ve also met people from the National Endowment for Democracy (and been highly unimpressed). A few comments:

• happy people do not become Buddhist monks or nuns. People who are content with their life and satisfied with their material standard of living, just don’t become Buddhist monks. People who do become Buddhist monks and nuns tend to do so because of some huge trauma. I’m guessing that as a result Tibetan monasteries are filled with angry young youths.
• I’ve also seen how devoted people can be to their Lamas. I’m pretty sure that any efforts by the Tibetan regional government to try to reduce the connections between monasteries and the high Lamas are going have a rather bad counterreaction.
• Finally, one of the interesting parallels is between religion and language. I’m pretty sure that in a generation or two, most of the Tibetan exiles in India would have melted into the general population, but religion is one area were you can keep a culture alive. The reason this matters to me is that one reason I’m trying to make sure that my kids are Buddhist is so that they maintain knowledge of Chinese growing up in the United States, so naturally I’m sympathetic to a Tibetan parent who is trying to keep their kids interested in Buddhism so that they keep the culture in either China or India. One group of people that I’ve studied where this has been successful are the Amish, who have managed to keep alive Pennsylvania Dutch since this the language they use to separate themselves from the outside world, which they call “English.”
• I’m also fascinated with “priesthoods” and the point that you just don’t become a high lama by reading books makes sense to me. The reason why is that physicists form a “priesthood” and you have the same sort of dynamics among scientists and mathematicians that you have among high lamas. When you get a Ph.D., you don’t merely learn a skill, you become in a very real sense part of a “priesthood.”

One piece of the puzzle that I’m missing is interviews with people from within the Tibetan regional government. Particularly ethnic Tibetan officials. There are two assumptions that people seem to be making with regard to Tibet. One is that the ethnic Tibetan officials in Tibet are “puppets” of the central government, and second that the anti-Dalai Lama impulse is coming from Beijing. Based on similar situations, I suspect that the actual reality might be much more complex. One thing that was the case with Soviet officials is that it turned out that the regional officials actually did have quite a bit of power, and second that non-Russian officials in the Soviet Union tended to try to be “redder than red” and “more Russian than Russians.”  This also seems to be the case with African-American Republicans, and looking at Tibet, I wouldn’t be surprised to see a “Clarence Thomas effect” among ethnic Tibetan officials in the Communist Party. Again, this is all guesswork, but part of the purpose of making up these hypothesis is so that you can see where your preconceptions are wrong if you do manage to get some new hard evidence.

One other thing to point out that people have missed. There is this idea that Chinese have been brainwashed by the Communist Party and those outpouring of nationalism is an example of people mindlessly repeating government propaganda. The trouble with this explanation is that I haven’t really seen any Han Chinese who hate the Dalai Lama and think that he really is this evil demon that the People’s Daily makes him out to be. The hatred and anger has been directed at the Western media (particularly CNN), the anti-Olympic demonstrations, but not so much at the Dalai Lama. The worst thing that I’ve heard anyone say about the Dalai Lama is that he is a puppet of American intelligence agencies, but even there, the anger is directed at the CIA.

Also, you have to approach politics with a sense of humor and irony if you aren’t going to go insane. One thing that amused me when I read the article on Tibetan exiles was the degree to which the monasteries in India have been funded by overseas Chinese. This is funny to me, since I’ve given not a small amount of money to Buddhist charities, and I’m amused by the thought that I may have given more help and money to the Tibetan independence struggle than the CIA has.

A one paragraph summary of the Bush administration

Part of the grand bargain that happened in 2004-2007 was mainly not to overturn agreements and understandings that had been made earlier. In the 1940’s, Roosevelt came to some understandings with King Saud and Chiang Kai-Shek. In the 1970’s, Nixon and Kissinger came to some understandings with OPEC and Chou En-Lai. Bush the younger came in with a domestic and foreign policy agenda that involved revolutionary change. He wanted to vastly reduce the size of the US Federal government while at the same time making the world safe for democracy which would have involved eventually overthrowing the House of Saud and the Chinese Communist Party and replacing them with liberal democracies. Iraq was merely the first step in the global march of freedom. The trouble was that what they were doing made no economic sense, but the people making these plans weren’t listening to anyone with any economic sense. By 2005, it became pretty obvious that all of these massive plans were coming to nothing, and at that point the Bush administration changed their policies to go back to the understandings that had been reached in the 1970’s.

http://www.rgemonitor.com/blog/setser/252597/

Notes on the China Investment Corporation

http://www.rgemonitor.com/blog/setser/252534/

HZ: The pension funds/social security funds should instead be required to hold a percentage of their assets in foreign assets and be required to only invest through broadly diversified index.

The problem is that once you get over $30 billion in assets index investing no longer works, since you just have too much cash, and you’ll move the index against you. The other problem is which index, and who decides what stocks are in your index? Whoever decides what is in the index has become your fund manager.

HZ: CIC, on the other hand, should be strategic investors not financial investors.

China only allocated fraction of its foreign exchange reserves to CIC, and can easily start another investment fund if CIC is successful. The reason that China started with CIC first is several-fold:

1) it’s a pressing need. Shanghai had just had a major scandal in which city pension money was pilfered and everyone knows that the PRC pension system is broke. Hu Jintao came to office on a “Great Society” platform so fixing the pension system is very high on their priority list,

2) there are lots of people in the world that you can hire to manage a pension fund. There aren’t that many people who you can hire off the street to manage a national strategic investment fund.

3) If you have a pension fund, the people that you hire to manage the fund don’t have to be Chinese, and there are good reasons to hire lots of non-Chinese. In you have a fund whose goal is strategic investment to advance Chinese national security interests, then the people you hire pretty much have to be Chinese, and that means that you can’t tap into global expertise, and you run into local political issues.

4) the goals of managing a pension fund are pretty clear (keep old people from rioting), and so you have more investment discipline and fewer bureaucratic battles

HZ: What CIC could do is to provide a transparent lower rate and stable debt financing to companies engaged in agriculture, mining and energy industries. As only a debt investor, it would disavow of control of where the end products should go.

That’s actually what China Development Bank was supposed to do, but CDB hates this job because by having low interest loans, CDB doesn’t make any money and gets saddled with bad loans it doesn’t want. I wouldn’t be surprised if in the next five years, the PRC forms a development bank which combines the Agricultural Development Bank and some other institutions. However, that will involve looking over CIC’s track record and it’s mistakes.

One step at a time…

Cynicism and Paranoia

I’m a rather cynical person and rather paranoid.  I really do believe that there are people with political agendas trying to manipulate the media.

For example, there are these stories that the Chinese government is planning meetings with envoys of the Dalai Lama.  So if the Chinese government is planning meetings with the Dalai Lama then how come you have these newspaper articles about him having horns and being demons.  Well…..  If you look closely, you’ll see that the people trying to make the Dalai Lama look like the spawn of Satan are people from the Tibetan regional government, and I think they are trying to make the Dalai Lama look as bad as possible in order to make it impossible for the Central Government to talk with him.  There’s actually a battle for public opinion going on, and fortunately the people who are opposed to conversations with the Dalai Lama seem to have lost.  There is a lot of passionate emotion in China, but you sometimes have to look very carefully about where this emotion is directed.  All of the demonstrations in the past few weeks have been against France for the situation with the olympic torch and CNN, and there really isn’t that public emotion I can see about the Dalai Lama or about Tibet, that I can see.

But this tactic is not just confined to the Chinese press.  What thing that I found interesting was that a few days ago, the Prime Minister of Israel mentioned that he might consider negotiating with Syria on returning the Golan Heights.  You probably missed it because it was overshadowed by these stories on these videos of North Koreans helping Syria build a nuclear power plant.  The interesting thing is that all of these videos are two years ago and they involve a plant that Israel blew up.  But by putting it in the news, you stir up public opinion in such a way that it is impossible to discuss the Golan, at least for a few weeks.

It’s nothing to get mad or indignant about.  It’s all part of the political game.  The problem with the media is that in order to tell a story briefly, you need to simplify things, but in order to to political things, you have to realize the complexity of what is going on.

Cool… Another entry in the “let’s bash China contest”

http://chinadigitaltimes.net/2008/04/chinese-troops-are-on-the-streets-of-zimbabwean-city-witnesses-say/

Looks like China is going to be held responsible if things go bad in Zimbabwe.  You have to maintain a sense of humor about these things if you won’t want to go completely crazy or burn out.  There are people out there who see (honestly) the current Chinese government as the source of all evil in the world, and are likely to believe and report anything bad they can find.  And there is a lot of bad stuff because China is a huge country, and even more bad stuff if you let down your standards of evidence.

So once you resign yourself that China is going to be portrayed as the “bad guy” it then becomes amusing how the story is shaped so that China becomes evil.  If things go bad in Zimbabwe, then I’m expecting the editorial from Howard French talking about how China was responsible for Mugabe staying in power, ignoring the ten thousand other factors that go into Zimbabwean politics.

The big problem with this view of the world, is that it really doesn’t improve it.  What inevitably happens when you focus on trivial factors that don’t make any difference is that you get into the politics of symbol.  The argument becomes that whatever guns China sends really doesn’t may the difference, but that China needs to “send a message” at which point everything starts becoming things about sending messages rather than getting anything accomplished.

Keep your enemies close but your friends closer

One problem with the idea that “we are good and you are evil” approach to politics is that it ignores that fact that there are a lot of idiots on your side and some pretty smart rational people on the other.  There is the “traitor reflex” that when people suddenly get nationalistic it’s easy for people that call everyone else “traitors” to gain attention even if they can’t really get power.

Fortunately, in the case of China, the “call everyone traitor” group gets a lot of internet exposure, but they aren’t in a position to get power.  It seems that the Chinese government is calling on people to be “rational” which also fits in with the fact that it’s really, really difficult to sustain anger and fury for long periods of time.  So we are probably on the tail end of the anti-anti-China demonstrations.

The classic example is the dangers of “idiot nationalism” is Serbia.  If you are a nationalist, then presumably you want your nation to be rich and powerful, and if you look at Serbia now, its much less rich or powerful than it was in the late-1980’s.

Subprime mortgages and food prices

In economics everything is connected with everything else, and the difficulty is to figure out the connections.

Right now I’m trying to figure out

subprime mortgage collapse -> **** -> rising global food prices

One problem here is that I’m not a farmer so I know nothing about the economics of agriculture.  In particular, I don’t know how a farmer interacts with the credit markets.

Michael Pettis has argued that the inflation in China is due to monetary policy, but the one thing that makes me suspect that there is much more to the story is that it isn’t obvious why RMB exchange rates should increase food prices in Haiti.

Climbing Mount Nebo and reading Chinese GDP figures

One odd thing about globalization is that you end up with different ideas hitting each other.  Every time I read GDP projections about China, I always think about a passage from the Bible in Deuteronomy 34, which I learned when I was very small.

34:1 Then Moses went up from the plains of Moab to Mount Nebo, to the top of Pisgah, which is opposite Jericho. And the Lord showed him all the land, Gilead as far as Dan 2. all Naphtali, the land of Ephraim and Manasseh, all the land of Judah as far as the western sea, 3 the Negeb, and the Plain, that is, the Valley of Jericho the city of palm trees, as far as Zoar. 4 And the Lord said to him, “This is the land of which I swore to Abraham, to Isaac, and to Jacob, ‘I will give it to your offspring.’ I have let you see it with your eyes, but you shall not go over there.” 5 So Moses the servant of the Lord died there in the land of Moab, according to the word of the Lord,

Even given the most optimistic growth rates, the GDP and standard of living of China is not going to reach developed world status until at least the second half of the 21st century.  With all of the talk of China’s rise, people forget these constraints which were known by Deng Xiaoping when he started all of this in 1978.

The result of this is that I can see the promised land, but I’m not going to ever live in it.  It’s interesting to be part of a massive historical drama that started long before I was born, and is going to continue long after I die.

How to rule the world

I’m actually getting a bit tired of talking about Tibet, so let me talk about something related.

How does a group manage to stay in power and end up ruling the world?

In the 19th century, there were two groups that were elites that managed to control their bit of the world. The Protestant Ascendency in Ireland and the Boston Brahmins in New England. No one hears about the Protestant Ascendency anymore (even in Northern Ireland, the Church of Ireland Ascenency lost control to the Prespertyerians that run it now), but it turns out that the ideological heirs of the Boston Brahmins managed to end up ruling the world.

The center of Brahmin power was Harvard University, and rather than fight the inclusion of new groups (like the Irish), the people running things came up with a new definition of “elite” that ended up incorporating any group that could possibility challenge them. Gradually, one ended up with an institution that ends up being one of the centers of power for the groups that rule the world.

Conspiracy theorists are right that the world is basically run by a rather small number of people (at most 10000 people on a planet of 6 billion). Where they get things wrong is they underestimate the ability of the people that run the world to get the cooperation of the remaining people in the world. Most middle class parents in the United States (and in fact most in China) are trying to get their kids in Harvard rather than trying to overthrow it. Also the most successful conspiracies are “hidden in plain sight.” Harvard has a website, with rather detailed instructions on how you can have your son or daughter join the people that run the world.