Friday, January 19, 2018

Dutiful dirges of Davos

You will find me eager to help you,
but slow to take any step.
Euripides, Hecuba

Thousands of people will gather next week in Davos. Their combined wealth will reach several hundred billion dollars, perhaps even close to a trillion. Never in world history will be the amount of wealth per square foot so high. And this year, for the sixth or seventh consecutive time, what would be one of the principal topics addressed by these captains of industry, billionaires, employers of thousands of people across the four corners of the globe: inequality…
Only in passing, and probably on the margins of the official program, will they get into the tremendous monopoly and monopsony power of their companies, ability to play one jurisdiction against another in order to avoid taxes, how to ban organized labor in their companies, how to use government ambulance services to carry workers who have fainted from extra heat (to save expense of air conditioning), how to make their workforce complement its wage through private charity donations, or perhaps how to pay the average tax rate between 0 and  12% (Trump to Romney). If they are from the emerging market economies they can also exchange experiences on how to delay payments of wages for several months while investing these funds at high interests rates, how to save on labor protection standards, or how to buy privatized companies for a song and then set up shell companies in the Caribbean or Channel Islands.
Still poverty and inequality which are, as we know, the defining issues of our time will be permanently on their minds.
It is just that somehow they never succeeded to find enough money, or time, or perhaps willing lobbyists to help with the policies they will all agree, during the official sessions, should be done: to increase taxes on the top 1% and on large inheritances, to provide decent wages or not to impound salaries, to reduce gaps between CEO and average pay, to spend more money on public education, to make access to financial assets more attractive to the middle and working class, to equalize taxes on capital and labor, to reduce corruption in government contracts and privatizations.  
Since they have been singularly unsuccessful in convincing governments to do anything  about rising inequality--will they lament-- it is not surprising that nothing has been done. Or rather that the very opposite policies have been conducted: Trump has, as he promised or threatened, passed a historic tax cut for the wealthy while Macron has discovered the attraction of latter-day Thatcherism. Nothing positive of note seems to have been done in the emerging market economies either (with perhaps the crackdown on corruption in China the only important exception).
This return to the industrial relations and tax policies of the early 19th century is bizarrely spearheaded by people who speak the language of equality, respect, participation, and transparency. None of them is in favor of “Master and Servant Act” or forced labor. It just so happened that the language of equality has been harnessed in the pursuit of structurally most inegalitarian policies over the past fifty years, or more.  And indeed, it is much more profitable to call  journalists and tell them about the nebulous schemes whereby 90% of wealth will be, over an unknown number of years and under unknowable accounting practices, given away as charity than to pay suppliers and workers reasonable rates or stop selling information about the users of platforms. It is cheaper to place a sticker about the fair trade than to give up the use of zero-hour contracts.
They are loath to pay a living wage, but they will fund a philharmonic orchestra. They will ban unions, but they will organize a workshop on transparency in government.
So in a year, they will be back in Davos and perhaps a new record in dollar wealth per square foot will be achieved, but the topics, in the conference halls and on the margins, will be again the same. And it will go on like this…until it does not.

Tuesday, January 16, 2018

The aloofness of Pax Sinica

When China Rules the World” (no question mark or conditional tense) by Martin Jacques is a large, somewhat repetitive, volume of 700 pages that tries to answer a number of questions that many people in the world are asking themselves: Will China’s growth continue? Will China become a multi-party democracy? And what might Pax Sinica look like?

On the first question, Jacques entertains no doubt: China will successfully move (actually, it is already moving; the edition of the book that I read was published In 2012) to high value-added and high tech production and growth will, for the foreseeable future, remain high.

On the second question, Jacques is more circumspect:  China might become a multi-party democracy but it is likely, if Communist Party manages to control the process, to look like a cross between Singapore, a de facto single-party state, and Japan where factional struggles within Liberal Party often matter more than inter-party politics.

He is scathing of the view, often heard in the West, that higher education levels and higher incomes will, quasi-automatically, lead to demands for democracy. (Although he allows that in twenty years “and likely more” Chinese Communist Party will no longer be ruling.) Jacques believes that China, because of Confucian tradition of “virtuous” government that puts the emphasis on quality of governance and not on the way the rulers are selected, is different. Perhaps he is right…or perhaps not : nobody can tell. Here Jacques’ book also illustrates the hazards of prediction. It was written when Bo Xilai was still a contender for supreme power and before Xi Jinping took office and began implementing his “turn of the screw”. I have little doubt that today Jacques would be more sanguine about durability of CCP rule.

I would like to focus on the third question where I believe Jacques brings most interesting reflections. How would China’s rise affect the international political order? Two long-term factors (discussed in chapters 7 and 8) play the most important role there, First, Jacques’ argument that China is not a nation-state but a civilization-state that sees itself as a fulcrum of Asia (and by extension of the world). It is at ease with “tributary relations” that leave to the dominated party  full freedom in domestic affairs and considerable freedom in foreign policy. The second important element is a deeply ingrained racism or inability to comprehend “the other” which (as I will argue below) may be linked or might underlie the rather benevolent approach to international relations.

The “tributary” approach is contrasted with the current Western-based theory of international relations that is built on the concept of the nation-state. This difference between the West and China is, in Jacques’ opinion, a lens through which we should look at the type of the international system that China might build. But the difference may be less than it seems. The two recent global hegemons, UK and the United States, also had a somewhat similar approach to international relations. UK ruled half of the world using a very flexible system spanning everything, from almost fully independent nations like Australia and Canada, to protectorates and colonies. Many US allies were (and are) similar to protectorates. Italy or South Korea could more or less do whatever they wanted in domestic policy (short of bringing Communists to power) but very little in foreign policy. So under the recent hegemons, countries were neither fully equal as the theory would have it, nor were the allies of the hegemon obliged to blindly align all their policies. It then becomes less clear where Chinese concept of flexible or “tributary rule” differs from the one used by the Western powers in the past 150 years.

However, perhaps because of China’s lack of interest in “others” and its complex of superiority, Pax Sinica may be more peaceful. This is indeed a possibility (one of the four Jacques considers in Chapter 11). If we look at it empirically, in the past half-century China has been involved in only one foreign military adventure (a war against Vietnam) and several very limited border skirmishes. Other hegemons, USSR and USA were much more belligerent: USSR has invaded Czechoslovakia and Afghanistan while US has invaded or attacked Vietnam, Dominican Republic, Panama, Lebanon, Afghanistan, Serbia, Iraq and Libya, in addition to overthrowing a number of unfriendly governments. So China has, up to now, been, on the international stage, a peaceful country. Chinese pacifism might have deeper roots: as Jacques writes, Chinese are fond of drawing a contrast between exploratory and friendly mission of Zheng He and rapacious slave-grabbing  European conquests.

But was China peaceful because it was weak and in Deng Xiaoping words  needed international peace and domestic stability for at least one hundred years and thus had “to hide its strength, and bide its time”?  Would a dominant China do “regime-changes”? Although Jacques does not pose the question directly, his view is that it would not because it does not care to export its model.

This is where the ingrained sense of superiority comes in. If you believe that others are fundamentally different (and inferior) you also may not care under what governments they live, so long as these regimes accept your suzerainty and do not pose a threat to you. Thus China’s sense of superiority translates into aloofness, and perhaps paradoxically, may imply a relatively peaceful rule.

Whether this will happen or not—and even whether China will become a global hegemon—is everybody’s guess. (I am certainly less convinced of that than Jacques.) But one thing, Jacques writes, is certain: “The emergence of China as a global power relativizes everything. The West is habituated to the idea that the world is its world; that the international community is its community, that international institutions are its institutions….that universal values are its values…This will no longer be the case”.