Waffle not institutional reform is what (I predict) the “G-20 summit” will produce

“Summits”  of global political leaders require competent “sherpas”  to do the preparations.  From what I gather about the London “G-20 summit” this has not happened adequately enough, so I expect only a lot of waffle to emerge.  (If they suddenly start talking about Global Warming or AIDS in Africa or whatever, we will know the actual talks have failed badly.)

Reforming the IMF?   Hmmm, let’s see, what happened to all that talk four years ago about reforming the Big Daddy of them all, the UN?   Oh yes,  I forget, India is now a permanent veto-wielding Security Council Member, NOT!

It has been said that academic syllabus reform at a university is like ‘”moving a graveyard”.  Reforming the world monetary system and its major institutions would be like moving thousands of graveyards.   And there is no one with the brains of a White or a Keynes to help things along.  But we should not be surprised if there were pronouncements  of this or that high-powered commission of pompous worthies  who will make recommendations for reform some time in the future.    In general, little more than waffle will emerge now — I cannot even see the UK Government following informal British  advice to stand down from its founding role at the IMF.

There is no clear path to solving the great (alleged) economic and financial crisis because no one wants to admit its roots were the overvaluation (over decades) of American real-estate, and hence American assets in general.

India’s PM shall be seen at least up and about after several months out of action, indeed he will be up and about for the  first time in months doing what he (like India’s nomenclatura in general) likes doing best, which is to travel outside India.

Subroto Roy, Kolkata

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China’s India Example: Tibet, Xinjiang May Not Be Assimilated Like Inner Mongolia, Manchuria

Author’s Note: My articles on related subjects recently published in The Statesman include “Understanding China”, “China’s India Aggression”, “China’s Commonwealth”,  “Nixon & Mao vs India”, “Lessons from the 1962 War”, “China’s force & diplomacy” etc https://independentindian.com/2009/09/19/my-ten-articles-on-china-tibet-xinjiang-taiwan-in-relation-to-india/

 

 

 

China’s India Example: Tibet, Xinjiang May Not Be Assimilated Like Inner Mongolia And Manchuria

by

Subroto Roy

First published in The Statesman, Editorial Page Special Article March 25, 2008

Zhang Qingli, Tibet’s current Communist Party boss, reportedly said last year, “The Communist Party is like the parent (father and mother) of the Tibetans. The Party is the real boddhisatva of the Tibetans.” Before communism, China’s people followed three non-theistic religious cultures, Buddhism, Confucianism and Taoism, choosing whichever aspects of each they wished to see in their daily lives. Animosity towards the theism of Muslims and Christians predates the 1911 revolution. Count Witte, Russia’s top diplomatist in Czarist times, reported the wild contempt towards Islam and wholly unprovoked insult of the Emir of Bokhara by Li Hung Chang, Imperial China’s eminent Ambassador to Moscow, normally the epitome of civility and wisdom. In 1900 the slogan of the Boxer Revolts was “Protect the country, destroy the foreigner” and catholic churches and European settlers and priests were specifically targeted. The Communists have not discriminated in repression of religious belief and practice ~ monasteries, mosques, churches have all experienced desecration; monks, ulema, clergymen all expected to subserve the Party and the State.

 

 

Chinese nationalism

For Chinese officials to speak of “life and death” struggle against the Dalai Lama sitting in Dharamsala is astounding; if they are serious, it signals a deep long-term insecurity felt in Beijing. How can enormous, wealthy, strong China feel any existential threat at all from unarmed poor Tibetans riding on ponies? Is an Israeli tank-commander intimidated by stone-throwing Palestinian boys? How is it China (even a China where the Party assumes it always knows best), is psychologically defensive and unsure of itself at every turn?

 

The Chinese in their long history have not been a violent martial people ~ disorganized and apolitical traders and agriculturists and highly civilised artisans and scholars more than fierce warriors fighting from horseback. Like Hindus, they were far more numerous than their more aggressive warlike invading rulers. Before the 20th Century, China was dominated by Manchu Tartars and Mongol Tartars from the Northeast and Northwest ~ the Manchus forcing humiliation upon Chinese men by compelling shaved heads with pigtails. Similar Tartar hordes ruled Russia for centuries and Stalin himself, according to his biographer, might have felt Russia buffered Europe from the Tartars.

 

 

Chinese nationalism arose only in the 20th Century, first under the Christian influence of Sun Yatsen and his brother-in-law Chiang Kaishek, later under the atheism of Mao Zedong and his admiring friends, most recently Deng Xiaoping and successors. “Socialism with Chinese characteristics” is the slogan of the present Communist Party but a more realistic slogan of what Mao and friends came to represent in their last decades may be “Chinese nationalism with socialist characteristics”. Taiwan and to lesser extent Singapore and Hong Kong represent “Chinese nationalism with capitalist characteristics”. Western observers, keen always to know the safety of their Chinese investments, have focused on China’s economics, whether the regime is capitalist or socialist and to what extent ~ Indians and other Asians may be keener to identify, and indeed help the Chinese themselves to identify better, the evolving nature of Chinese nationalism and the healthy or unhealthy courses this may now take.

 

 

Just as Czarist and Soviet Russia attempted Russification in Finland, the Baltics, Poland, Ukraine etc., Imperial and Maoist China attempted “Sinification” in Manchuria and Inner Mongolia as well as Tibet and Xinjiang (Sinkiang, East Turkestan). Russification succeeded partially but backfired in general. Similarly, Sinification succeeded naturally in Manchuria and without much difficulty in Inner Mongolia. But it has backfired and backfired very badly in Tibet and Xinjiang, and may be expected to do so always.

 

 

In India, our soft state and indolent corrupt apparatus of political parties constitute nothing like the organized aggressive war-machine that China has tried to make of its state apparatus, and we have much more freedom of all sorts. India does not prohibit or control peasant farmers or agricultural labourers from migrating to or visiting large metropolitan cities; villagers are as free as anyone else to clog up all city life in India with the occasional political rally ~ in fact India probably may not even know how to ban, suppress or repress most of the things Communist China does.

Hindu traditions were such that as long as you did not preach sedition against the king, you could believe anything ~ including saying, like the Carvaka, that hedonism and materialism were good, spiritualism was bunkum and the priestly class were a bunch of crooks and idiots. Muslim and British rulers in India were not too different ~ yes the Muslims did convert millions by offering the old choice of death or conversion to vanquished people, and there were evil rulers among them but also great and tolerant ones like Zainulabidin of Kashmir and Akbar who followed his example.

India’s basic political ethos has remained that unless you preach sedition, you can basically say or believe anything (no matter how irrational) and also pretty much do whatever you please without being bothered too much by government officials. Pakistan’s attempts to impose Urdu on Bengali-speakers led to civil war and secession; North India’s attempts to impose Hindi on the South led to some language riots and then the three-language formula ~ Hindi spreading across India through Bollywood movies instead.

China proudly says it is not as if there are no declared non-Communists living freely in Beijing, Shanghai etc, pointing out distinguished individual academics and other professionals including government ministers who are liberals, social democrats or even Kuomintang Nationalists. There are tiny state-approved non-Communist political parties in China, some of whose members even may be in positions of influence. It is just that such (token) parties must accept the monopoly and dictatorship of the Communists and are not entitled to take state power. The only religion you are freely allowed to indulge in is the ideology of the State, as that comes to be defined or mis-defined at any time by the Communist Party’s rather sclerotic leadership processes.

Chinese passports

During China’s Civil War, the Communists apparently had promised Tibet and Xinjiang a federation of republics ~ Mao later reneged on this and introduced his notion of “autonomous” regions, provinces and districts. The current crisis in Tibet reveals that the notion of autonomy has been a complete farce. Instead of condemning the Dalai Lama and repressing his followers, a modern self-confident China can so easily resolve matters by allowing a Dalai Lama political party to function freely and responsibly, first perhaps just for Lhasa’s municipal elections and gradually in all of Tibet. Such a party and the Tibet Communist Party would be adequate for a two-party system to arise. The Dalai Lama and other Tibetan exiles also have a natural right to be issued Chinese passports enabling them to return to Tibet~ and their right to return is surely as strong as that of any Han or Hui who have been induced to migrate to Tibet from Mainland China. Such could be the very simple model of genuine autonomy for Tibet and Xinjiang whose native people clearly do not wish to be assimilated in the same way as Inner Mongolia and Manchuria. India’s federal examples, including the three-language formula, may be helpful. Once Mainland China successfully allows genuine autonomy and free societies to arise in Tibet and Xinjiang, the road to reconciliation with Taiwan would also have been opened.

Growth & Government Delusion

Growth & Government Delusion:

Progress Comes From Learning, Enterprise, Exchange, Not The Parasitic State

By Subroto Roy

First published in The Statesman, Editorial Page Special Article,
February 22 2008

 

P Chidambaram, Montek Ahluwalia and Manmohan Singh, like their BJP predecessors, delude themselves and the country as a whole when they claim responsibility for phenomenal economic growth taking place. “My goal is to continue to maintain growth but at the same time the government reserves the right to make rapid adjustments depending upon the evolving international situation” is a typical piece of nonsensical waffle.

Honest Finance Ministers in any country cannot take personal responsibility for rates of economic growth nor is any government in the world nimble, well-informed and intelligent enough to respond to exogenous shocks in a timely manner. The UPA and NDA blaming one another for low growth or taking credit for high growth merely reveal the crude mis-education of their pretentious TV economists. There are far too many measurement and data problems as well as lead-and-lag problems for any credibility to attach to what is said.

Per capita real GDP

Indian businessmen and their politician/ bureaucratic friends seem to think “growth” refers to nominal earnings before tax for the corporate sector, or some such number that can be sold to visiting foreigners to induce them to park their money in India: “You will get a 10 per cent return if you invest in India” to which the visitor says “Oh that must mean India has 10 per cent growth going on”. Of such nonsense are expensive Davos and Delhi conferences made.

What is supposed to be measured when we speak of economic growth? It is annual growth of per capita inflation-adjusted Gross Domestic Product (National Income or Net National Product would be better if available). West Germany and Japan had the highest annual per capita real GDP growth-rates in the world starting from devastated post-War initial conditions. What were their rates? West Germany: 6.6 per cent in 1950-1960, falling to 3.5 per cent by 1960-1970, and 2.4 per cent by 1970-1978. Japan: 6.8 per cent in 1952-1960; 9.4 per cent in 1960-1970, 3.8 per cent in 1970-1978. Thus, only Japan in the 1960s measured more than 9 per cent annual growth of real per capita GDP.

Now India and China are said to be achieving 9 per cent plus routinely. Perhaps we are observing an incredible phenomenon of world economic history. Or perhaps we are just being fed something incredible, some humbug. India’s population is growing at 2 per cent so even if the Government’s number of 9 per cent is taken at face-value, we have to subtract 2 per cent population growth to get per capita figures. Typical official fallacies include thinking clever bureaucratic use of astronomically high savings rates causes growth. For example, Meghnad Desai of Britain’s Labour Party says: “China now has 10.4 per cent growth on a 44 per cent savings rate… ” Indian savings have been alleged near 32 per cent. What has been mismeasured as high savings is actually paper expansion of bank-deposits in a fractional reserve banking system induced by runaway government deficit-spending in both countries.

Real economic growth arises from spontaneous technological progress, improved productivity and learning-by-doing of the general population. World economic history suggests growth occurs in spite of, rather than due to, behaviour of an often parasitic State. Technological progress in a myriad of ways and discovery of new resources are important factors contributing to India’s growth today. But while the “real” economy does well, the “nominal” paper-money economy controlled by Government does not.

Continuous deficit financing for half a century has led to exponential growth of public debt and broad money. The vast growth of bank-deposits has been misinterpreted as indicating unusual savings behaviour when it in fact signals vast government debt being held by nationalised banks. What Messrs Chidambaram, Ahluwalia,Manmohan Singh, the BJP et al have been presiding over is annual paper-money supply growth of 22 per cent! That is what they should be taking honest responsibility for because it certainly implies double-digit inflation (i.e. decline in the value of paper-money) perhaps as high as 14 or 15 per cent. If you believe Government numbers that inflationis near 5 per cent you may believe anything.

The mainsprings of real growth in the wealth of the individual, and so of the nation, are greater practical learning, increases in capital resources and improvements in technology. Deeper skills and improved dexterity cause output produced with fewer inputs than before, i.e. greater productivity. Adam Smith said there is “invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many”.

Consider a real life example. A fresh engineering graduate knows dynamometers are needed in testing and performance-certification of diesel engines. He strips open a meter, finds out how it works, asks engine manufacturers what design improvements they want to see, whether they will buy from him if he can make the improvement. He finds out prices and properties of machine tools needed and wages paid currently to skilled labour, calculates expected revenues and costs, and finally tries to persuade a bank of his production plans, promising to repay loans from his returns.

Overcoming restrictions of religion or caste, the secular agent is spurred by expectation of future gains to approach various others with offers of contract, and so organize their efforts into one. If all his offers ~ to creditors, labour, suppliers ~ are accepted he is, for the moment, in business. He may not be for long ~ but if he succeeds his actions will have caused an improvement in design of dynamometers and a reduction in the cost of diesel engines, as well as an increase in the economy’s produced means of production (its capital stock) and in the value of contracts made. His creditors are more confident of his ability to repay, his buyers of his product quality, he himself knows more of his workers’ skills, etc. If these people enter a second and then a third and fourth set of contracts, the increase in mutual trust in coming to agreement will quickly decline in relation to the increased output of capital goods. The first source of increasing returns to scale in production, and hence the mainspring of real economic growth, arises from the successful completion of exchange.

Risk and enterprise

Transforming inputs into outputs necessarily takes time, and it is for that time the innovator or entrepreneur or “capitalist” or “adventurer” must persuade his creditors to trust him, whether bankers who have lent him capital or workers who have lent him labour. The essence of the enterprise (or “firm”) he tries to get underway consists of no more than the set of contracts he has entered into with the various others, his position being unique because he is the only one to know who all the others happen to be at the same time. In terms introduced by Professor Frank Hahn, the entrepreneur transforms himself from being “anonymous” to being “named” in the eyes of others, while also finding out qualities attaching to the names of those encountered in commerce.

Profits earned are partly a measure of the entrepreneur’s success in this simultaneous process of discovery and advertisement. Another potential entrepreneur, fresh from engineering college, may soon pursue the pioneer’s success and start displacing his product in the market ~ eventually chasers become pioneers and then get chased themselves, and a process of dynamic competition would be underway. As it unfolds, anonymous and obscure graduates from engineering colleges become by dint of their efforts and a little luck, named and reputable firms and perhaps founders of industrial families. Multiply this simple story many times, with a few million different entrepreneurs and hundreds of thousands of different goods and services, and we shall be witnessing India’s actual Industrial Revolution, not the fake promise of it from self-seeking politicians and bureaucrats.

see also 12 June 2009 https://independentindian.com/2009/06/12/mistaken-macroeconomics-an-open-letter-to-prime-minister-dr-manmohan-singh/

China’s Commonwealth: Freedom is the Road to Resolving Taiwan, Tibet, Sinkiang

China’s Commonwealth

Freedom is the Road to Resolving Taiwan, Tibet, Sinkiang

by

Subroto Roy

First published in The Statesman, December 17 2007, Editorial Page special article

War between China and Taiwan would lead to nothing but disaster all around. Everyone recognises this yet China’s military and political establishment threaten it sporadically when provoked by Taiwan’s leaders, and both sides continue to arm heavily and plan for such a contingency. China’s military is mostly congregated in its North West, North, East and South East with between one third and one half of its total forces facing Taiwan alone in an aggressive posture for an amphibious invasion. Taiwan faces 900 Chinese missiles targeted at it. China’s South West has been left relatively unguarded as no threat has been perceived from India or the Tibetans in fifty years.

Cross-strait relations

The 23 million people of Taiwan have made themselves relatively secure across the 100 miles of sea that separate them from the Mainland. A sea-borne Communist invasion following a heavy missile barrage and blockade would undoubtedly leave the Taiwanese badly bruised and bleeding. But there is enough experience from World War II to suggest that trying to invade and occupy islands turns out as badly for the invader as it does for the defender. The Taiwanese military are confident they may be able to defeat an attempted invasion after two or three weeks of fierce fighting even if their promised American ally fails to materialize by their side.

In any case, for China to succeed in forcibly establishing its rule someday over Taiwan would be a pyrrhic victory, since it would lead to tremendous political and economic costs upon all Chinese people. Gaining control after a terrible war would rule out the Hong Kong “One Country Two Systems” model, with nominal Chinese sovereignty being established over an otherwise unchanged Taiwan. Instead the Chinese would have to institute a highly repressive political system, which will incorrigibly damage Taiwan’s flourishing technologically advanced economy, as well as lead to drastic irreparable political and economic retrogression on the Mainland.

Political repression will lead backwards again to the long-gone era of Mao-Zhou communism, displacing the glacial positive trends seen since Deng Xiaoping. Foreign confidence and investment would vanish, boycotts may cause China to lose lucrative and hard-earned new markets in the USA, Europe and Asia, as the world recoiled from the bloodshed to wait to see what the new repression led up to. The Chinese Communist Party (CPC), tiny as it is in size compared to China’s vast population, would become much weakened and lose whatever little confidence it has among an increasingly modern- minded and aware Chinese public. Occupying Taiwan in the 21st Century will not be a tea-party.

The alternative to war is “peaceful reunification” which is the official policy of the CPC, and which also has been a major plank of United States foreign policy since the time of George C Marshall. Unlike Britain, Japan, Russia, France, Germany, even Sweden and Belgium, the Americans were not among the 19th Century powers that exploited China, and that is something that has left some residual goodwill, implicit as it may be, since all Chinese despise the fact their country was humiliated by greedy foreign powers in the past. The USA has subscribed to “One China” and peaceful unification even after its cynical near-betrayal of Taiwan since 1972, having normal diplomatic and trade relations with Communist China while agreeing to help Taiwan if the Communists attempted a military invasion.

Communist China’s strategy towards peaceful reunification with Taiwan has been unlimited allurement: offer Taiwanese businessmen a free hand in investing in China, offer Taiwan students places in Mainland universities, offer Taiwanese airlines flying rights etc. The Taiwanese see their giant ominous neighbour offering such allurements on one hand and threatening a missile attack and invasion and occupation on the other, as if they are animals who will respond to the carrots and sticks of behaviourism.

Taiwan in recent decades has seen its own history and future much more clearly than it sees the Communists being able to see theirs. A marriage can hardly occur or be stable when the self-knowledge of one party greatly exceeds the self-knowledge of the other. It is thus no wonder that the Taiwan-China talks get stalled or retrogress, as the root problem has failed to be addressed which has to do with the political legitimacy of a combined regime.

Political China consisted historically of the agricultural plains and river-valleys of “China Proper” and the arid sparsely populated mountainous periphery of Inner Mongolia, Tibet and Sinkiang. The native people of Formosa (Taiwan) had their own unique character distinct from the Mainland until 1949 when Chiang Kaishek’s Kuomintang moved there after being defeated by Mao Zedong’s Communists.

Today the Hong Kong Model of “One Country Two Systems” can be generalized to “One Commonwealth/ Confederation of China, Six Systems”, whose constituents would be Mainland China, Chinese Taipei (Taiwan), Chinese Hong Kong, Tibet, Sinkiang and Inner Mongolia. A difference between a commonwealth and a confederation is that a commonwealth permits different heads of state whereas a confederation would have one head of state, who, in view of Mainland China’s predominance, could be agreed upon to be from there permanently.

Taiwan is the key to the peaceful creation of such a Chinese commonwealth or confederation, and Taiwan may certainly agree to “reunification” on such a pattern on one key condition ~ the abolition of totalitarian Communist one-party rule on the Mainland.

The CPC’s parent party was the Russian Social Democratic Labour Party which became the Bolshevik Party which became the All-Union Communist Party in 1925. This still exists today but to its great credit it agreed sixteen years ago, more or less voluntarily, to abandon totalitarian power and bring in constitutional democracy in the former USSR. East European Communist Parties did the same, mostly transforming themselves back to becoming Social Democrat or Labour Parties ~ so much so that Germany’s present elected head of government is a former East German.

Hearts and minds

Mainland China must follow a similar path if it wishes to win the hearts and minds and political loyalties of all Chinese people and form a genuine confederation ~ which means the CPC must lead the way towards its own peaceful dissolution and transformation.

Historically, China’s people followed an admixture of three non-theistic religious cultures, namely, Buddhism, Confucianism and Taoism, individually choosing whichever aspects of each that they wished to see in their daily lives. Lamaist Buddhism governed Tibet and Mongolia and deeply affected parts of Mainland China too. China’s theists include the Uighurs of Sinkiang who were and remain devout Muslims, as well as the many Catholics and other Christians since the first Jesuits arrived five hundred years ago. Sun Yatsen himself was a Christian. Marx, Engels, Stalin, Mao and even Deng have never really been able to substitute as a satisfactory new Chinese pantheon.

A free multi-party democracy in Mainland China, flying the Republican or some combined flag and tracing its origin to the 1911 Revolution, even one in which Communists won legitimate political power through free elections (as has been seen in India’s States), would earn the genuine respect of the world, and be able to confidently lead a new Chinese Confederation. The Chinese people who have been often forced against their will to resettle in Tibet and Sinkiang under the present totalitarian regime would be free to move or stay just as there are many Russians in Ukraine or Kazakhstan today. And of course the Dalai Lama would be able to return home in peace after half a century in exile. Freedom is the road to the peaceful resolution of China’s problems. Let freedom ring.

Hutton and Desai: United in Error

Hutton and Desai: United in Error
Subroto Roy

In an engaging debate in Prospect Magazine about a year ago, republished at China Digital Times, Will Hutton and Meghnad Desai have made the same cardinal error: they have assumed (like almost everyone else who has considered China’s or India’s recent macroeconomics) that savings rates are some astronomical figure.

Typical official fallacies in both countries include thinking that clever bureaucratic use of such high savings rates can and does cause high growth. In fact, real growth arises not because of what politicians and bureaucrats do but because of spontaneous technological progress, improved productivity and learning-by-doing of the general population ~ mostly despite not because of an exploitative parasitic State.

Here is Hutton on this issue: “China’s economic growth is based on the state channelling vast under-priced savings into huge investment … How much longer can China’s state-owned banks carry on directing billions of dollars of savings into investments that produce tiny or even negative returns…” (italics added)

Here is Desai: “China has achieved rapid growth with a policy of under-consumption and over-saving… China… now has 10.4 per cent growth on a 44 per cent savings rate….” (italics added)

What has been mismeasured as high savings in China and India is actually the expansion of bank-deposits in a fractional reserve banking system induced by runaway government deficit-spending.

On the basis of Indian evidence, I said this in public for the first time at Patrick Minford’s seminar on monetary economics at Cardiff and a week later at the IEA London in the spring of 2005 in a lecture titled “Can India become a superpower or will there be a monetary meltdown?” My recent general articles in The Statesman “The Dream Team: A Critique”, “Fallacious Finance”, “Against Quackery” etc speak a little more of this in the Indian case. What little I have seen of Chinese evidence indicates a similar phenomenon at work.

I said in 2005:”New technological progress in a myriad of ways, as well as the discovery of new resources… are all important factors contributing to real economic growth in India today. While the real side of the economy does well, the “nominal” economy, within the Government’s control, displays disconcerting trends. Continual deficit financing for half a century has led to exponential growth of public debt and broad money. The vast growth of time-deposits in banks may have been misinterpreted as indicating a real phenomenon such as unusual savings behaviour when it is more likely to be a nominal phenomenon resulting from increasing amounts of government debt being held by the largely nationalised banking sector. (The same may be true of China).”

As for growth-rates, before anyone at all waffles on about China’s and India’s allegedly high growth-rates, it is best to bring to mind a little hard evidence from other countries eg Germany and Japan where growth was starting from devastated post-War initial conditions:

West Germany: 6.6% in 1950-1960, falling to 3.5% by 1960-1970, and 2.4% by 1970-1978. Japan: 6.8% in 1952-1960; 9.4% in 1960-1970, 3.8% in 1970-1978.

China and India sustaining 8%, 9%, 10% annual growth of per capita real GDP for years on end? Naaaaah. Or rather, if you believe that, you will believe anything.

 

see also https://independentindian.com/2009/06/12/mistaken-macroeconomics-an-open-letter-to-prime-minister-dr-manmohan-singh/

Mistaken Macroeconomics: An Open Letter to Prime Minister Dr Manmohan Singh 12 June 2009

Understanding China

Understanding China

The World Needs to Ask China to Find Her True Higher Self

by Subroto Roy

First published in The Statesman, October 22 2007, Editorial Page Special Article, http://www.thestatesman.net

The most important factors explaining China’s progress since the deaths of Mao Zedong and Zhou Enlai have been the spread and quick absorption of modern Western technology under conditions of relative peace and tranquillity. The “capitalist road” came to be taken after all and the once-denounced Liu Shaoqui was posthumously rehabilitated by his shrewd old friend Deng Xiaoping.

To be sure, the new technology itself has combined with democratic hatred felt by young Chinese against the corrupt elitist police-state gerontocracy, and this produced first a Wei Jingsheng and Democracy Wall and later the Tiananmen Square protests. There have been also in recent years many thousands of incidents of peasants resisting State-sponsored brutality, fighting to prevent their lands being stolen in the name of purported capitalist industrialisation, in an economy where, as in India, land is an appreciating asset and the paper-currency remains weak because inflation by money-printing is the basis of public finance. China’s multitudinous domestic tensions continue to boil over as if in a cauldron, and it seems inevitable Chinese Gorbachevs and Yeltsins will one day emerge from within the Communist Party to try to begin the long political march towards multiparty democracy and a free society ~ though of course they may fail too, and China will remain condemned to being a dictatorship of one sort or other for centuries more.

Absence of war

What has been seen in recent decades is the relative absence of war. The last military war the Chinese fought was a month-long battle against fellow-Communist Vietnamese in 1979, after Vietnam had run over and destroyed the Chinese (and Western) backed Khmer Rouge in Cambodia. Before that, fellow-Communists of the USSR were fought in a border war in 1969. Before that was the border-war with India in 1959-1963 and occupation of Tibet 1950-1959.

The really savage, fierce large-scale fighting in 20th Century Chinese history was seen in the Second Sino-Japanese War of 1937-1945, the Civil War of 1945-1949 and the Korean War of 1950-1953. The occupation of Tibet and fighting against India resulting from Tibet’s occupation were really, from a Chinese Communist point of view, merely light follow-ups to those major wars of the Mao-Zhou era, especially fighting the USA and UN in Korea. Peaceful Tibet and naïve non-violent India stood no chance against the aggressive highly experienced Mao-Zhou war-machine at the time.

It may even be that Mao could live only with incessant external tumult ~ after fighting military wars, he orchestrated domestic conflicts in the Little and Great Leap Forward of 1949-1963 and Great Proletarian Cultural Revolution of 1964-1969, all among the failures of a cruel ill-educated man who led his people into social, political and economic disaster from which trauma they have been slowly recovering over the last thirty years.

Today, Communist China’s military is geared to fight the non-Communist Chinese of Taiwan in a continuation of the Civil War. It seems unlikely there will be an actual invasion for the simple reason that Taiwan, though much smaller, may not suffer eventual defeat but instead inflict a mortal wound upon invading forces. Mao succeeded in driving Chiang Kaishek across the Taiwan Straits but it is post-Chiang Taiwan that displays the model of how strong, prosperous, democratic and self-confident Chinese people really can strive to be in the modern world. Everyone agrees Taiwan and China must one day unite ~ the interesting question is whether Taiwan will get absorbed into China or whether China shall take Taiwan as its new model! Just as Liu Shaoqi had the last word over Mao on the question of taking the capitalist road, Chiang Kaishek may yet have the last word over Mao on the best constitutional method for modern China’s governance.

Peculiarly enough, China’s Kuomintang and Communists were both allies of Russian Bolshevism (not unlike India’s Congress Party and Communists). Sun Yatsen’s collaboration with Comintern’s founders began as early as 1921. By 1923 there was a formal agreement and Stalin sent Gruzenberg (alias Borodin) to China as an adviser, while Sun sent many including Chiang to Russia on learning expeditions. “In reorganising the party, we have Soviet Russia as our model, hoping to achieve a real revolutionary success”, said Sun hopefully. But by March 1926, Sun’s successor Chiang, had begun purging Communists from the Kuomintang-Communist alliance; in July 1927 Borodin returned to Russia after failing at reconciliation; and by July 1928 Chiang had unified China under his own leadership, and Moscow had repudiated the Kuomintang and ordered Chinese Communists to revolt, starting the Civil War and instability that invited the vicious Japanese aggression and occupation.

China’s problems today with Taiwan and with Tibet (and hence with India) will not come to be resolved until China looks hard in the mirror and begins to resolve her problems with herself. No major country today possesses a more factually distorted image of its own history, politics and economics than does China since the Communist takeover of 1949. “Protect the country, destroy the foreigner” was the motto of the Boxer revolts in 1900, a natural defensive reaction to the depredations and humiliations that Manchu-dynasty China suffered at the hands of the British, French, Germans, Russians, Japanese etc for more than a century. The Boxer motto seemed to implicitly drive Mao, Deng and his modern successors too ~ hence the “One China” slogan, the condemnation of “splittism” etc. But the ideology that Mao, Liu, Deng et al developed out of Stalin, Lenin and Marx seems base and stupid when it is unsentimentally compared to the great political philosophy and ethics of ancient China, which emerged out of wise men like Mo Tzu, Meng Ko (Mencius) and the greatest genius of them all, K’ung Fu Tzu, Confucius himself, undoubtedly among the few greatest men of world history.

Tibet

India has not been wrong to acknowledge Outer Tibet as being under China’s legal suzerainty nor in encouraging endogenous political reform among our Tibetan cousins. The Anglo-Russian treaty of 1907 undertook that Tibet would not be dealt with except through China, and the Indian Republic has been the legal successor of British India. Lhasa may be legitimately under Beijing as far as international relations goes ~ the more profound question is whether Beijing’s Communists since 1949 have not been themselves less than legitimate, and if so whether they can now transform themselves in the post Mao-Zhou era through good deeds towards greater legitimacy.

The root problem between China and India has not been the Tibet-India border which was almost always a friendly one and never a problem even when it remained imprecise and undefined over centuries. The root problem has been the sheer greed and aggressiveness of Chinese Communists ~ who now demand not merely Aksai Chin but also a minimum of some 2000 sq km of Tawang and Takpa Shiri in Arunachal. The CIA’s 1959 map of the region, which would be acceptable to the USA, UK, Taiwan and the international community in general as depicting the lawful position, shows the Communist Chinese territorial claim to be baseless and Indian position to be justified.

Nehru’s India was naïve to approach the Mao-Zhou Communists with the attitude of ahimsa and a common Buddhism. But Mao-Zhou Communism is dead, and the Deng capitalist road itself has lost its ethical way. What India and the world need to do now is ask China or help guide China to find her true higher self. China’s Tibet problem and hence border-dispute with India would have been solved peacefully by application of the ways of great men like Confucius, Mencius and Mo Tzu, who are and will remain remembered by mankind long after petty cruel modern dictators like Mao, Zhou and Deng have been long forgotten. Why China’s Communist bosses despise Taiwan may be because Taiwan has sought to preserve that memory of China’s true higher self.

see also https://independentindian.com/2009/09/19/my-ten-articles-on-china-tibet-xinjiang-taiwan-in-relation-to-india/
https://www.youtube.com/watch?v=VHUhy9pJyys

Fallacious Finance: Congress, BJP, CPI-M et al may be leading India to hyperinflation (2007)

Fallacious Finance: Congress, BJP, CPI-M et al may be leading India to hyperinflation

by

Subroto Roy

first published in The Statesman, March 5 2007

Editorial Page Special Article

It seems the Dream Team of the PM, Finance Minister, Mr. Montek Ahluwalia and their acolytes may take India on a magical mystery tour of economic hallucinations, fantasies and perhaps nightmares. I hasten to add the BJP and CPI-M have nothing better to say, and criticism of the Government or of Mr Chidambaram’s Budget does not at all imply any sympathy for their political adversaries. It may be best to outline a few of the main fallacies permeating the entire Governing Class in Delhi, and their media and businessman friends:

1. “India’s Savings Rate is near 32%”. This is factual nonsense. Savings is indeed normally measured by adding financial and non-financial savings. Financial savings include bank-deposits. But India is not a normal country in this. Nor is China. Both have seen massive exponential growth of bank-deposits in the last few decades. Does this mean Indians and Chinese are saving phenomenally high fractions of their incomes by assiduously putting money away into their shaky nationalized banks? Sadly, it does not. What has happened is government deficit-financing has grown explosively in both countries over decades. In a “fractional reserve” banking system (i.e. a system where your bank does not keep the money you deposited there but lends out almost all of it immediately), government expenditure causes bank-lending, and bank-lending causes bank-deposits to expand. Yes there has been massive expansion of bank-deposits in India but it is a nominal paper phenomenon and does not signify superhuman savings behaviour. Indians keep their assets mostly in metals, land, property, cattle, etc., and as cash, not as bank deposits.

2. “High economic growth in India is being caused by high savings and intelligently planned government investment”. This too is nonsense. Economic growth in India as elsewhere arises not because of what politicians and bureaucrats do in capital cities, but because of spontaneous technological progress, improved productivity and learning-by-doing on part of the general population. Technological progress is a very general notion, and applies to any and every production activity or commercial transaction that now can be accomplished more easily or using fewer inputs than before. New Delhi still believes in antiquated Soviet-era savings-investment models without technological progress, and some non-sycophant must tell our top Soviet-era bureaucrat that such growth models have been long superceded and need to be scrapped from India’s policy-making too. Can politicians and bureaucrats assist India’s progress? Indeed they can: the telecom revolution in recent years was something in which they participated. But the general presumption is against them. Progress, productivity gains and hence economic growth arise from enterprise and effort of ordinary people — mostly despite not because of an exploitative, parasitic State.

3. “Agriculture is a backward sector that has been retarding India’s recent economic growth”. This is not merely nonsense it is dangerous nonsense, because it has led to land-grabbing by India’s rulers at behest of their businessman friends in so-called “SEZ” schemes. The great farm economist Theodore W. Schultz once quoted Andre and Jean Mayer: “Few scientists think of agriculture as the chief, or the model science. Many, indeed, do not consider it a science at all. Yet it was the first science – Mother of all science; it remains the science which makes human life possible”. Centuries before Europe’s Industrial Revolution, there was an Agricultural Revolution led by monks and abbots who were the scientists of the day. Thanks partly to American help, India has witnessed a Green Revolution since the 1960s, and our agriculture has been generally a calm, mature, stable and productive industry. Our farmers are peaceful hardworking people who should be paying taxes and user-fees normally but should not be otherwise disturbed or needlessly provoked by outsiders. It is the businessmen wishing to attack our farm populations who need to look hard in the mirror – to improve their accounting, audit, corporate governance, to enforce anti-embezzlement and shareholder protection laws etc.

4. “India’s foreign exchange reserves may be used for ‘infrastructure’ financing”. Mr Ahluwalia promoted this idea and now the Budget Speech mentioned how Mr Deepak Parekh and American banks may be planning to get Indian businesses to “borrow” India’s forex reserves from the RBI so they can purchase foreign assets. It is a fallacy arising among those either innocent of all economics or who have quite forgotten the little they might have been mistaught in their youth. Forex reserves are a residual in a country’s balance of payments and are not akin to tax revenues, and thus are not available to be borrowed or spent by politicians, bureaucrats or their businessman friends — no matter how tricky and shady a way comes to be devised for doing so. If anything, the Government and RBI’s priority should have been to free the Rupee so any Indian could hold gold or forex at his/her local bank. India’s vast sterling balances after the Second World War vanished quickly within a few years, and the country plunged into decades of balance of payments crisis – that may now get repeated. The idea of “infrastructure” is in any case vague and inferior to the “public goods” Adam Smith knew to be vital. Serious economists recommend transparent cost-benefit analyses before spending any public resources on any project. E.g., analysis of airport/airline industry expansion would have found the vast bulk of domestic airline costs to be forex-denominated but revenues rupee-denominated – implying an obvious massive currency-risk to the industry and all its “infrastructure”. All the PM’s men tell us nothing of any of this.

5. “HIV-AIDS is a major Indian health problem”. Government doctors privately know the scare of an AIDS epidemic is based on false assumptions and analysis. Few if any of us have met, seen or heard of an actual incontrovertible AIDS victim in India (as opposed to someone infected by hepatitis-contaminated blood supplies). Syringe-exchange by intravenous drug users is not something widely prevalent in Indian society, while the practise that caused HIV to spread in California’s Bay Area in the 1980s is not something depicted even at Khajuraho. Numerous real diseases do afflict Indians – e.g. 11 children died from encephalitis in one UP hospital on a single day in July 2006, while thousands of children suffer from “cleft lip” deformity that can be solved surgically for 20,000 rupees, allowing the child a normal life. Without any objective survey being done of India’s real health needs, Mr Chidamabaram has promised more than Rs 9.6 Billion (Rs 960 crore) to the AIDS cottage industry.

6. “Fiscal consolidation & stabilization has been underway since 1991”. There is extremely little reason to believe this. If you or I borrow Rs. 100,000 for a year, and one year later repay the sum only to borrow the same again along with another Rs 40,000, we would be said to have today a debt of Rs. 140,000 at least. Our Government has been routinely “rolling over” its domestic debt in this manner (in the asset-portfolios of the nationalised banking system) but displaying and highlighting only its new additional borrowing in a year as the “ Fiscal Deficit” (see graph, also “Fiscal Instability”, The Sunday Statesman, 4 February 2007). More than two dozen State Governments have been doing the same though, unlike the Government of India, they have no money-creating powers and their liabilities ultimately accrue to the Union as well. The stock of public debt in India may be Rs 30 trillion (Rs 30 lakh crore) at least, and portends a hyperinflation in the future. Mr Chidambaram’s announcement of a “Debt Management Office” yet to be created is hardly going to suffice to avert macroeconomic turmoil and a possible monetary collapse. The Congress, BJP, CPI-M and all their friends shall be responsible.

Of related interest: Mistaken Macroeconomics,
“The Indian Revolution”, “Against Quackery”, “The Dream Team: A Critique”, “India’s Macroeconomics”, “Indian Inflation”

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