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.

The Wrong Conspiracy

http://tenementpalm.blogspot.com/2008/01/coming-attractions-in-china-threat.html

Something that I find rather amusing is how people focus on the wrong conspiracy and miss things that are happening under their noses.  Tenement palm talks about a “China threat” writer that warns about the Chinese conspiracy to attack the West via nanotechnology, while missing completely the true devious and underhanded plans Beijing really has.  The real conspiracy is that China plans on becoming a great power by convincing people that they will become very rich and benefit them personally if they help China become a great power.  The most devious and sneaky part of the plan is that the easiest way that Beijing can convince people that a rich and powerful China will make them rich and powerful is to undertake policies that will actually make people rich and power if China becomes rich and powerful.

Beijing figures that if most people have their interests aligned with China’s, that there will be much less resistance to China becoming a great power.  So it is useful to Beijing to have lots and lots of cash to shower on people.  Now in order to have lots and lots of cash, you need a good economy, so part of this underhanded and devious plan is to restructure the economy so that China generates lots and lots of wealth.  This is where Wall Street comes in.  Since people on Wall Street know how to make money, China is bringing in lots of expertise so that it can figure out how to create wealth that will make lots of people rich.

Of course the China threat theorists would have us believe that China is really intent on using military force on destroying the West and taking over the world.  This notwithstanding the fact, that China is in no position to undertake an arms race with the United States, and history has shown that more weapons often leads to less security, both by diverting money that could be used to fund civilian ventures, and by scaring away your potential allies.  By contrast, you make more friends by smiling and throwing around a lot of cash, and if your friends can figure out ways that you end up with even more cash…. Well so much the better….

China does have this advantage of having had people think about how to structure a state for several thousand years.  The notion that the basis for a powerful state is strong economy rather than a strong military can be found in pretty much any writer from the Warring States period.  There has been several thousand years of discussion on exactly what economic and political policies are most beneficial and the latest discussions are part of a conversation that has been going on for a long, long time.  There is a similar body of knowledge in the Western canon, which unfortunately seems to be unused.  All of the stuff that is happening in the news today would have been familiar to Confucius, Sun Zi, Aristotle, and  Thucydides.  The difference is that in developing and thinking about grand strategy, the Chinese leadership does try to make use of history, while I don’t think that similar discussions are happening in Washington.

Not short sighted at all….

http://www.rgemonitor.com/content/view/219003/86/
No one I know in business is being short-sighted at all here. Everyone is doing what they are doing with full knowledge of the consequences. If low end manufacturing is moving toward China and India then why lose money by fighting the flow rather than make money encouraging it? The only two reasons that come up are sentimental national loyalties and fears of a protectionist backlash.

The trouble with national loyalties is that while a Swede can reasonably be expected to site factories in Sweden over China, there’s no reason why a Swede would want to site a factory in the United States over China or any reason why an American would want to site a factory in Germany over China. Multi-national corporations are increasingly multi-national which makes arguing for political siting difficult. The Americans on the board of directors might want the company to do things that especially benefit the American economy or American national interest, but that’s not going to convince the Swedes, Italians or Brazilians in the room, and over time you are going to find more and more Chinese and Indians in the board rooms.

The trouble with protectionist backlash is that the fundamental driving forces behind globalization don’t have much to do with trade law. They have to do with the fact that I can instant message someone in Hong Kong at no cost. As long as you can have people talk between Hong Kong and New York City, people will find ways around the barriers.

People in finance and business have seen the writing on the wall, perhaps a bit earlier than people in politics or main street. If world economic and political power is moving from Western Europe and the United States to China and India, then you have lots of people who have seen the writing on the way, and figuring out how to get in good graces with the new people with power.

That’s being realistic and far-sighted, not blind and short sighted……..

Dark matter – What the trade data doesn’t show

http://www.rgemonitor.com/content/view/217775/86/ 

Someone is typing in NYC. The computer that they are typing into is located in Hong Kong (or quite possibly in some data center in India). While they are typing, they are instant messaging and on the phone with people in London This is all happening real time, and I’d be curious how this gets reflected in the trade data.

My guess is that it doesn’t, and where is where “dark matter” comes in. This also explains a lot about why I don’t think that there is such a anti-globalization backlash. When you get to work, and you start e-mailing and IM’ing people around the world as part of your daily routine, the idea of anti-globalization seems rather quaint…….

As far as fear of job losses…… Well you can move an individual programmer from NYC to India. You can’t easily move Columbia University, NYU, about a hundred skyscrapers in midtown, all of the computers, all of the support staff, all of the headhunters, etc. etc. to India. It’s easier and a lot cheaper to move someone from India to NYC. A tree you can move easily. An entire ecosystem is hard to move. Even convincing people to move thirty blocks from midtown Manhattan to downtown Manhattan is proving to be a challenge.

Disaster Capitalism – Comments on Naomi Klein

http://www.naomiklein.org/main

Interesting book that is worth reading.  However, there are some important points here.

First of all, it always fascinates me that the people who are most in favor of privatization and lassiez-faire capitalism are people that have spent most of their lives outside of business and finance, just like the people who are most in favor of military intervention are people who have spent most of their lives outside the military.  There’s something ironic and disturbing that the economists of the World Bank and International Monetary Fund that are telling third world nations to privatize everything are people who generally have never worked in a private company in their entire lives.

It’s also telling that the people who were the most skeptical about military intervention in Iraq were people who were the professional soldiers, and the people who are some of the loudest voices against the excesses of capitalism are professional finance people like George Soros and Warren Buffett.

“Being there” changes your perspective in a lot of ways.  For example, pretty much everyone who has worked in a private corporation has lost their job at some point, and knows in an emotional way, the consequences have being unemployed.  So when I see angry people on the streets of Baghdad and Jakarta, I know what they are feeling because I’ve been there in a way that I doubt most of the economists in the World Bank or IMF have.

I do think that Klein is a bit too much a believer of “incorrect” conspiracy theories, and doesn’t quite appreciate the breathtaking amount of incompetence there is out there.  There are people in this world that truly, honestly believe that government is the problem, and that totally privatized world will create a utopia.  These people are for lack of a better word, dangerous idiots.  Private corporations and private capital can do a lot of good, and the profit motive and pure greed can do some incredibly wonderful things, but you have to consider the entire social system.

I seriously doubt that anyone in the Bush administration intended that New Orleans and Iraq would be in such the awful mess that they are in.  Even in cases where there is obvious greed and cronyism, then attitude of the people getting the checks toward society is neutral.  People who are making big money off New Orleans and Iraqi reconstruction, frankly don’t care if New Orleans or Iraq prospers or burns, as long as they get the checks, so the trick in getting something useful done is to set up the incentives so that people make more money if New Orleans prospers.  This is one reason why you really want local people running things.  A corrupt political boss that is located in New Orleans at least spends the proceeds of their corruption locally and has some connection between their political/economic well-being and those of the community.

Finally, I think that Klein totally misses the really, really, really scary implication of her work.  One thing that you learn to ask yourself in business is “Who is the competition and what are they doing?”

So who is the competition and what **are** they doing?

Hezbollah and the Islamic Brotherhood has managed to capture the support of large numbers of people because they run schools and services that are competently run.  The reason that Islamism has become such a powerful force is because they provide a lot of social services and reconstruction aid.  The United States promised freedom to Iraq, and it brought devastation.  Meanwhile Islamist groups are getting the job done.  If things go on the way that Klein says they are going on, then we are going to lose this war……  And let me say something obvious, in the Middle East, we are losing this war….  We haven’t lost, but we are losing……

Two posts on the Chinese savings glut

http://piaohaoreport.sampasite.com/blog/China-and-the-savings-glut-1.htm

The trouble with “blaming” anyone is that anything that happens in political and economic systems is usually the result of lots of people making lots of unconnected decisions which interact in unexpected ways.

One interesting point is that age structure has a huge impact on economics, and countries benefit from having lots of working age people to support old people (Ireland and China-today) and the get hurt by having an aging workforce and fewer working age people (Japan-today and China twenty years from now). It’s interesting to see why the United States has escaped this problem.

Immigration…….

The United States is not only the sink for the world’s capital, it’s also the sink for the world’s labor. Without continuous immigration the United States would be faced with a negative population growth and an aging population and would end up with the same sorts of problems as Japan.

Also the fact that China’s population is aging is why I think that the idea that China is “saving too much” is incorrect, and why I think that the trade deficit isn’t just a bad thing. What the big problem is right now is that there is too much saving in China for the domestic capital markets to deal with, and that calls for loosening up restrictions on capital outflow overseas.

One final thing. People have been predicting the downfall of the United States for decades, and people have consistently gotten this wrong. One very, very wise decision that the Chinese leadership has made was *not* to bet against the United States, or to make a rising China dependent on a falling United States.

http://piaohaoreport.sampasite.com/blog/China-and-the-savings-glut-2.htm

http://piaohaoreport.sampasite.com/blog/Did-US-corporations-cause-the-US.htm

The trouble with “blaming” anyone is that anything that happens in political and economic systems is usually the result of lots of people making lots of unconnected decisions which interact in unexpected ways.

One interesting point is that age structure has a huge impact on economics, and countries benefit from having lots of working age people to support old people (Ireland and China-today) and the get hurt by having an aging workforce and fewer working age people (Japan-today and China twenty years from now). It’s interesting to see why the United States has escaped this problem.

Immigration…….

The United States is not only the sink for the world’s capital, it’s also the sink for the world’s labor. Without continuous immigration the United States would be faced with a negative population growth and an aging population and would end up with the same sorts of problems as Japan.

Also the fact that China’s population is aging is why I think that the idea that China is “saving too much” is incorrect, and why I think that the trade deficit isn’t just a bad thing. What the big problem is right now is that there is too much saving in China for the domestic capital markets to deal with, and that calls for loosening up restrictions on capital outflow overseas.

One final thing. People have been predicting the downfall of the United States for decades, and people have consistently gotten this wrong. One very, very wise decision that the Chinese leadership has made was *not* to bet against the United States, or to make a rising China dependent on a falling United States.

——

One other point.  They aren’t really “American corporations” they are “multi-national corporations headquartered in the United States” (and in some cases they aren’t even headquartered in the United States).  The modern multi-national corporation has so many different activities occurring in so many different places, that it usually doesn’t make any sense to think of themselves as belonging to one country, and the another wise decision that the Chinese leadership has made is not to fight the multinationals but to buy into them.  The United States does well in this environment because it is itself a “multinational nation.”

I’m moderately worried about things like the Chinese savings glut, but what really has me worried is something else.  At this point, the people who really want to challenge the global economic system are really on the margins.  What worries me is something like the assassination of Archduke Ferdindad in Saerejvo in 1914.  Some seemingly minor incident that spins rapidly out of control and which destroys the system.

Interesting but IMHO wrong

http://yaleglobal.yale.edu/display.article?id=9311

US CESRC Review

A nice and very diverse range of views in China at the US China Economic and Security Review Commission

http://www.uscc.gov/hearings/2007hearings/hr07_02_1_2.php 

The problem with the testimony is that there were two words that I thought should have had more prominence but didn’t.  Those two words are

• globalization
• Iraq

Wars change things greatly, and one thing that the Iraq war has changed is the willingness of the United States to undertake vast and expensive projects to promote democracy, and the willingness of the world to trust the United States at those sorts of projects.  The other thing that is pretty obvious to me, but which I found curious that no one mentioned is the degree to which funding from China has become absolutely essential to the war in Iraq.

The other thing that I found interesting was the lack of any broad strategic vision.  Strategic vision is one thing that the United States is not very good at, since the US finds it very difficult to think ahead three or four years, much less the decades or even centuries, that is required for long term political planning.  One could place the blame at “national character” but I don’t think this may be accurate.  One thing that I realized in reading some of the papers involved in the decision to establish diplomatic relations with the PRC, one quote by Richard Nixon still haunts me.

 http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB66/ch-41.pdf

But the reason why it has to be done — aside from Southeast Asia on which I won’t speculate — is that they are one-fourth of the world’s population.  They’re not a military power now but 25 years from now they will be decisive.  For us not to do now what we can do to end this isolation would leave things very dangerous.  Even a total detente with the Soviets would mean nothing if the third power was isolated.

What does our moving do?  It doesn’t at all mean that we’re with them; it means a dialogue, that’s all.  Looking to the future the world will not be worth living in if we can’t get the great potential explosive forces under control.

So it’s not because we have illusions or are euphoric.  It’s ironic that I am the President who is the least euphoric about relations with Communist countries.  This isn’t from hardline prejudice but from experience;  I know that pleasant smiles and small talk about our grandchiildren won’t solve problems.  Where vital interests are involves, great powers consult their vital interests — or else they’re played for suckers by those powers that do.  But interests may coincide.

It’s traumatic for both sides.  We’re taking this step not for the next year or the next four years, but for the next twenty.  It may make the world a little safer.

I’m wondering who in Washington today is thinking past the next year, or the next four years, but for the next twenty or the next hundred.

Comments on belonging and diaspora

http://www.firstmonday.org/issues/issue8_4/wong/index.html

I like the term diaspora Chinese.  Part of the reason why is that diaspora invokes the Jews which have a lot of commonality with Chinese.

One thing that the article mentions is the tendency for diaspora Chinese to do what I call “put Chinese culture into a glass case.”  You take a perfect vision of pure Chinese culture and put it into a museum case.  The trouble with doing this is that you no longer have a living culture, and you end up with something that is unconnected with the living.

I’ve tried to avoid doing this, and I seem to have been one of the few American-born Chinese for which the concept of “China” is a living concept rather than a dead stuffed animal in a museum case.  When I think of “China” I think of current events that are happening on the web, the reform of the securities market for example.

One advantage of pulling a culture out of the museum case is that no only does it live and breath, but you can also change it.  One of the benefits of being “Chinese” or “American” or anything else is that you have the power to change what the term means, and even without consciously realizing or intending to, you will change the meaning of the term by your actions.  I’ve created new “Chinese” food by putting Mexican salsa on my steamed dumplings.  When a closed fixed definition of “Chinese” this isn’t possible, but a closed fixed definition of any culture is doomed to kill it.

One example of this is how I influence my kids.  It is very important for them for them to define “Chinese” in a way so that the have ownership of the concept, rather than relying on my definition or those of my parents.  They know more about Chinese cartoon characters than I do, and then have parts of “China” and “Chinese” that are not in my experience.  This is important for a culture to adapt and change and grow.

Moving this from the cultural to the political.  The idea of “one China, different interpretations” is something that I think will allow some stability in Mainland-Taiwan relations.  The sticking point of this formula has always been what does “one China” mean.  I don’t think that this is quite the right question, the question is not what does one China mean, the question is “what do you want it to mean?” and that might be different from person to person.

More rants on the *STUPID* education report

Apologies for being impolite and confrontational. If there was a chance that I’d get listened to without being impolite and confrontational, I’d be nice. But when you point out that the emperor has no clothes, you have to be a little rude.As far as the absurdities in the report:

1) Giving people more information about costs is silly. I already know that Harvard costs a lot more than Austin Community College, but if I were a parent, I’d be willing to spend pretty much anything to get my kid into Harvard because he or she then gets linked into the power elite social network that runs the world. That’s worth mucho bucks.

2) Focusing on costs is also silly. Graduate students and teachers are already being squeezed, if you focus on costs then the system will just squeeze them more and cut corners on quality metrics that aren’t being measured. There *are* ways of some massive cost savings, but these require some major restructuring of the system. There is no pedagological reason why an MIT undergraduate physics major shouldn’t be able to satisify their calculus requirement with a course taught at Austin Community College, especially since some of the teachers at ACC are better than the ones at MIT. (Research universities don’t care that much about teaching skills.)

3) The members of the panel were *incredibly* inbred which is why the report was non-sense. Someone mentioned that they found themselves very quickly in agreement with each other, and that is a general warning sign that that a committee is inbred. Everyone in the panel were senior upper-class executive members of the power elite. There were no graduate students, junior faculty, undergraduates, parents, high school teachers in the panel. Also it is not sufficient enough for these people to be “merely listened to”, in order to get a good report, you need them *in the panel*.

4) A lot of the facts in the panel are conventional wisdom which might also be wrong. There are a lot of philosophical and pedagological assumptions which went unquestioned. Just to name an obvious one, is the only purpose of education to get a job and enhance national competitiveness.

Also because the members of the panel are from the upper class power elite, I think they are missing what is really worrying people like me in the upper middle class. I’m seeing the United States quickly divide into winners and losers, and I really worried that I and my kids are going to end up in the “loser” column. In academia, I’m already in the “loser” category, which is a shame since I think I’d make a damn fine astrophysics professor if given a chance, and that’s not going to be from traditional academia. I gave that up because I couldn’t be that nasty to myself or my kids.

The anxiety spreads to education because education is *the* class determination mechanism of our time. It does no good for someone in the middle class to have their kids have a cheap affordable education if it means missing a chance at getting into the power elite. People in the power elite are just not going to understand the nature of this anxiety, which is why you have report after report filled with non-sense.

Most of the reports I’ve seen involve integrating the lower class into the middle class, but those seem misplaced since if the middle class self-destructs (which is in the process of happening) then there is nothing to integrate into, and saving the American middle class means creating a global middle class. National boundaries are becoming irrelevant and there is just no way of not having the United States turn into a nation of “have’s” and “have not’s” as long as the world is that way.