Saturday, 17 March 2018

Friedrich List and the Myth of 'Free Trade'

The Chinese Dictatorship, now in its death throes, just like Putin's Russia, has been facilitated in its malevolent and pernicious ascent by false humanistic ideas prevalent in the West that are the fruit of Christian-bourgeois society and ultimately of capitalist ideology. It is this ideology of power-lessness, harmful in the extreme to our own democratic institutions, that we must counter if we wish to defeat once and for all the Chinese and Russian Dictatorships. The work of Friedrich List - on which these dictatorships rely absolutely to game the indolent and gullible West - offers essential clues as to how to begin this task in earnest.

…[L]ife itself is essentially appropriation, injury, conquest of the strange and weak, suppression, severity, obtrusion of peculiar forms, incorporation, and at the least, putting it mildest, exploitation [Ausbeutung]; -- but why should one for ever use precisely these words on which for ages a disparaging purpose has been stamped? Even the organisation within which, as was previously supposed, the individuals treat each other as equal--it takes place in every healthy aristocracy -- must itself, if it be a living and not a dying organisation, do all that towards other bodies, which the individuals within it refrain from doing to each other: it will have to be the incarnated Will to Power, it will endeavour to grow, to gain ground, attract to itself and acquire ascendancy - not owing to any morality or immorality, but because it lives, and because life is precisely Will to Power. (Nietzsche, Beyond Good and Evil, Aphorism 259.)

In The National System of Political Economy, Friedrich List lays bare in the starkest terms the ultima ratio that forms the backbone of his diatribe against the “cosmopolitan” school of political economy propounded by the Anglo-Saxons from Smith to Ricardo and then Mill, against the “national” doctrine that List expounds and propounds as the future economic strategy of a powerful Germany against the dominance of Britain and France.

Without explicitly addressing the question of the meaning of “wealth” in economics at the level of human individuals or of humanity as a whole, List is already confronting the stark reality that the “wealth of a nation” cannot and must not be understood purely in terms of “utilitarian exchange” but rather in terms of “national power”, of Macht - in terms, that is, of the ability of a nation to impose itself over other nations….in the event of war! 

EXTRACTS FROM AUTHOR’8 PREFACE xliii I would indicate, as the distinguishing characteristic of' my system, nationality. On the nature of nationality, as the intermediate interest between those of individualism and of entire humanity, my whole structure is based.

The “cosmopolitan” view of the British economists contains three non sequiturs: it assumes that all exchange of goods, all trade between nations, is an equal exchange not only because equal values or wealth are exchanged, but also because such exchange necessarily increases the wealth of each trading nation by virtue of its being “free and equal”, free and fair - and therefore it must benefit each trading party. This is a non sequitur, of course; but List only sees the second part of it - that free trade does not necessarily enrich all parties. He totally misses the first part, the “equal exchange” in terms of “value” and “wealth” as quantifiable or objective entities. And he totally ignores the fallacy of “free” trade - the fact that a decision to trade cannot be free because “freedom” is irrelevant in trade for the simple reason that trade ineluctably establishes a “bond” between trading parties!

Let us examine the second part of the non sequitur.

4 The prosperity of a nation is not, as Say believes, greater in the proportion in which it has amassed more wealth (i.e. values of exchange), but in the proportion in which it has more developed its powers of production' (p. 117).

It is not the present wealth of a country, then, that determines its prosperity; rather, it is a country’s present ability to produce wealth that determines its pre-eminence among nations, again, not in terms of its present stock of wealth, but in terms of its future flow of wealth or prosperity (Latin pro and spes, hope for the future). For List, then, the prosperity of a nation is measured by its present ability to produce wealth on such a scale as “secures to the nation an infinitely greater amount of material goods [than is the case for other nations], but also industrial independence in case of war”!

‘ It is true that protective duties at first increase the price of manufactured goods; but it is just as true, and moreover acknowledged by the prevailing economical school, that in the course of time, by the nation being enabled to build up a completely developed manufacturing power of its own, those goods are produced more cheaply at home than the price at which they can be imported from foreign parts. If, therefore, a sacrifice of value is caused by protective duties, it is made good by the gain of a power of production, which not only secures to the nation an infinitely greater amount of material goods, but also industrial independence in case of war9 (Friedrich List, The National System of Political Economy, p. 117).

Therefore, “cosmopolitical” economy can be valid only if the trading nations have similar industrial structures. Where these industrial structures differ, inter-national trade and exchange cannot be “equal” because even where the value of the exchange is equal, the ability of the trading nations to produce those values will differ! List has in mind, as we saw earlier, the ability of a nation to prepare for war and to dominate other nations.

[T]he idea struck me that the theory was quite true but only so in case all nations would reciprocally follow the prin-
ciples of free trade.... This led me to consider the nature of nationality. I perceived that the popular theory took no account of nations, but simply of the entire human race on the one hand, or of single individuals on the other. 

I saw clearly that free competition between two nations which are highly civilised can only be mutually beneficial in case both of them are in a nearly equal position of industrial development, and that any nation which owing to misfortunes is behind others in industry, commerce, and navigation, while she nevertheless possesses the mental and material means for developing those acquisitions, must first of all strengthen her own individual powers, in order to lift herself to enter into free competition with more advanced nations. In a word, I perceived the distinction between ] cosmopolitical and political economy. I felt that Germany must abolish her internal tariffs, and by the adoption of a common uniform commercial policy towards foreigners, strive to attain to the same degree of commercial and industrial development to which other nations have attained by means of their commercial policy.

If indeed, List reasons, nations could trade as individual human beings whose power to accumulate “wealth” is limited by their physical abilities, then trade between individuals could be said hypothetically to be free and fair or equal. The same applies to humanity as a whole because in that case “wealth” would be an abstract notion in the aggregate. But where individual nations or nation-States are concerned, the notion of “wealth” or “value” must extend to the ability of each trading nation to subjugate the others!

Here List incurs a blinding contradiction between a notion of “wealth” or “value” which he entirely shares with the “cosmopolitan” economists (Smith and Ricardo) - and a wholly different notion of “value” or “wealth” that his stance of trade-as-conflict between nations clearly entails! It is simply impossible to speak of “value” as if it were an economic category entirely independent of the “nationality” implied by his countervailing notion of “national economy”! List himself concedes that “free trade” can be “fair and equal” provided that trading nations are at a similar stage of industrial development. Yet, such a concession is tantamount to falling into the fallacy of “cosmopolitan economics” divulged by the British under the false pretence of “neutral science”! For if indeed “the ability to produce value” is even more important than value itself, then the notion of “value” must be re-evaluated or reinterpreted to allow for the novel category of “ability to produce”!

(We have here a dramatic precognition on List’s part of what would later become Nietzsche’s “transvaluation of all values” - cf. my “Nietzsche and Economics”.) The “value” of the British political economy simply cannot be the same as the value of List’s “national economics” or “National-oekonomie”! The first notion of value (Smith, Ricardo, Marx) refers to an apolitical quality or substance - be it subjective utility or objective wealth (labour-time) - whereas the second, List’s, refers to a broader category of political control and domination through the production and exchange of goods. The difference is not simply one of “stocks” and “flows” of one and the same entity. Rather, the two kinds of “value” refer to completely distinct entities - one utilitarian or absolute, and the other clearly political and even military in nature!

Equally, if we follow this reasoning with cold and calculated logic, we will see that the notion of “free trade” is meaningless for the simple reason that the category of “freedom” is quite meaningless when applied to that of “trade”! No “trade” can ever be “free” for the simple reason that “trade” itself, the exchange of produce, already implies a “bond” between the trading parties that negates or at the very least obliterates the notion of “freedom”. By changing the real status of the trading parties from before the trade takes place to after it does, trade also transforms the status of the parties vis-a-vis each other in such a way as to render the notion of “freedom” entirely irrelevant to the reality of exchange by trade! Parties to trade may well be “free” to engage in the trade - but this “free choice to trade” becomes irrelevant and meaningless once the trade is executed - for the crushing reason that, in the absence of an objectively quantifiable “value”, the exchange has transformed the material standing of the trading parties! It is quite simply a wanton and gratuitous exercise to speculate on whether a trade is “free” or otherwise because (a) it is impossible to determine the real motives of traders, (b) traders may not be aware of their and other traders’ motives, and ©, whatever the motives and interests, the very effecting of a trade creates a new set of circumstances that make the “freedom” or less of the trade completely irrelevant to its material consequences. The mythology of “free trade” (either a pleonasm or an oxymoron) stems from the legal interpretation of contractual arrangements whereby a contract represents an “agreement” or “a meeting of the minds”. But, as we have succinctly explained, the reaching and closing of a contractual arrangement tells us nothing about the “freedom” of the contracting parties! (This point is outlined with characteristic insight and perspicacity, as well as vitriolic acuity, by Nietzsche in The Genealogy of Morals - discussed in my own “Nietzsche and Economics”.)

Contemporaneously to List, Nietzsche demolished the naive “cosmopolitanism” of British Political Economy with a single stroke of his pen in Human All-Too Human:

25 Private- and World-Morality - The older morality, namely Kant's ,25 demands from the individual those actions that one desires from all men--a nice, naive idea, as if everyone without further ado would know which manner of action would benefit the whole of mankind, that is, which actions were desirable at all. It is a theory like that of free trade, which assumes that a general harmony would have to result of itself, according to innate laws of melioration. (HATH)

To argue that trade, in and of itself, ameliorates the lot of the exchanging parties is pure Kantian universalist idealism - sheer wishful-thinking! It is to presume that human beings, let alone nations, enter trade with the intention to improve the lot of all participants (hence Kant’s Categorical Imperative: do unto others as you would have them do unto you). - Even worse, it is to assume that trade in reality does improve the lot of participants! And worst of all, it assumes that individuals, let alone nations, know their own best interests - and that these are constructive rather than destructive

This is the false, fictitious (“cosmopolitan”!) logic - this is the Ohn-macht, the power-lessness, of Western thought and logic propmulgated by cohorts of “enlightened” literati, humanists and, of course, economists that Nietzsche denounces and to which he opposes his Will to Power (Wille zur Macht). It is, in political reality, just that - mere, pure logic, a useless and meaningless tautology with no substantive content! (Cf. On this point, the brilliant demolition of free-trade liberalism as a purely “logical” construction in M. DeCecco, Moneta e Impero. Like List, whom he invokes, however, DeCecco falls short of debunking the mythology of “value” and “free trade”.)

List himself falls into this “cosmopolitan” trap simply because he is unable to relinquish the notions of “wealth” and “value” as (mythical, as it turns out) universal homogeneous substances or substrata that are objectively measurable and identifiable - and to which all human beings aspire. It is on this mythology that the “freedom” of “free trade” is founded as the summum bonum, the highest aim of human aspiration. Nevertheless, his alertness to the problem is evident in the orientation of his historico-economic research and in his policy recommendations.

In the course of the daily controversy which I had to conduct, I was led to perceive the distinction between the theory of values and the theory of the powers of production, and beneath the false line of argument which the popular school
has raised out of the term capital. I learned to know the difference between manufacturing power and agricultural power. I hence discovered the basis of the fallacy of the arguments of the school, that it urges reasons which are only justly applicable to free trade in agricultural products, as grounds on which to justify free trade in manufactured goods. I began to learn to appreciate more thoroughly the principle of the division of labour, and to perceive how far it is applicable to the circumstances of entire nations.

We will turn to these policies next.

Wednesday, 7 March 2018

Foreign Trade and the Nation-State - Reply to Martin Wolf

Martin Wolf, in an FT Column, contends that trade barriers reduce the "wealth" of all countries without advantaging the countries that impose them, with or without "retaliation".

Mr. Wolf bases his argument on a neat distinction between “trade” - which presumably does not affect “macroeconomics” - and “macroeconomics” proper, which is presumably governed by a different set of principles. In the world of Classical (Smith, Ricardo, Mill) and Neo-classical economics (from Jevons to Hayek), trade is merely an “exchange”, a “free exchange”, between nation-State countries that does not and cannot affect the “national” economic policies, but can rather only “reflect” them. In this perspective, it is “logical” that trade barriers can only affect national economies “globally” - all of them “negatively” - simply because, to repeat, “trade” is merely a “free exchange” that merely “reflects” the productive conditions (“macroeconomics”) “within national economies”.

 Yet, this “logical” reasoning breaks down once we abandon the world of British “political economy” and we examine instead the “National-oekonomie” that formed the basis of German economic thought from Friedrich List through to Klein and ultimately even Schumpeter (especially in the ‘Theory of Economic Development’). It is clear from this latter viewpoint, that economic reality (“national” or “political” economy) differs violently from the “logical” framework of Classical and neo-Classical equilibrium developed by the English, and later the American, economists. In this “national-economic” perspective, trade is not simply an “equal exchange”; rather, it is a form of political interaction that is vital to determining the relative “dominance” of one nation-State over another. The aim of all capitalist exchange is “profit” - the “wealth of nations” to which Smith (not Ricardo, and least of all the neo-classics, with the great exception of Keynes!) referred. But what is this “wealth of nations”? what is “profit”? Ina nutshell, profit is the ability to dominate other nations by “commanding” their living labour. (Marx came closest to this realisation.) It is clear therefore that trade is an attempt by nation-states to project their Political Might, their Power (Macht) over other nations. (See, on this theoretical point, M. DeCecco, Money and Empire.)

To the extent that “free trade” served the national-political needs of the Anglo-Saxons, the “science of economics could easily defend and propagate the theory of equilibrium and market-based international trade, reliant on the Gold Exchange Standard. Now that these “equilibria” are breaking down, it is time to revise the entire philosophical and political foundations of Western economics. - Something I have attempted in this Blog.

Perhaps I ought to add that, from this perspective (amply explored in this Blog), Western “economic science” represents the ultimate form of “power-lessness” (Ohn-Macht) that Nietzsche, and then Weber (who was close to the German Historical School of Economics), and ultimately Schumpeter openly denounced. In “Imperialism and Social Classes”, Schumpeter exposed the “will to power” (Nietzsche’s expression) that the German ruling class espoused to extend its economic domination over Central Europe, resulting ultimately in Hitler’s Lebensraum. Again in this German perspective - a “mercantilist” one -, the brutal racist-imperialist will to power of the Chinese Dictatorship is keenly displayed. It behoves us as inheritors of Western democracy to expose the “power-lessness” of Western “economic science” and to fight back those dictatorships that wish to adopt these bland logical tautologies into tools of politico-economic domination!  

Saturday, 3 March 2018

The Chinese Catastrophe

In this post, we wish to advert to a number of misconceptions surrounding the coming co-optation by the Chinese Dictatorship of Big Brother Xi Jin Ping to a lifelong term as President Of His (not the People’s!) Republic of China.  First, contrary to what all media seem foolishly to believe, the centralisation of all decision-making power in Big Brother is the final confirmation of the weakness and fear of the Chinese Dictatorship: it most certainly is not a statement of strength. Had the Dictatorship been confident about (a) the chances of social development and economic growth of Chinese society, and (b) its ability to impose its socio-economic system outside China, it would never have agreed to this act of suicide.

It is almost self-evident, and historia docet (history teaches), that a confident and exuberant regime or indeed polity would never consciously decide to let one Dictator arrogate all social and political power in his hands. It had long been known that the Dictatorship’s choices were either to save Party and lose the country or else to save the country and dissolve the Party. This latest desperate act of hara kiri shows conclusively that it has chosen the former course.  Cornered and besieged on all sides, with the economy close to contraction and a collapsing financial system, the Dictatorship knew that any further opening of Chinese economy and society would result in its repentine irrelevance. Given that the Chinese Politburo is made up of a kleptomaniac plutocracy, these inveterate murderers must know that their fate and that of their families would soon be sealed. The only solution, of course, is a return to the totalitarian genocide of Mao Tze Dung's infamous "Cultural Revolution".

Similarly, in this perspective, the One Belt One Road strategy is one last desperate stratagem on the Dictatorship‘s part to achieve two fundamental aims: one, to preempt encirclement in the form of a cordon sanitaire on the part of parliamentary democracies from India to Japan, and two, to unload its internal contradictions by exporting them over a formal and informal empire in terms of (a) the migration and overseas posting of potentially dangerous elements and (b) the requisition of economic resources needed to pacify the Chinese population - which, be it noted, remains among the very poorest in the world.. This project  - this "final solution", Hitler's Lebensraum - is common to all dictatorships: imperialism is vital to their survival - in the guise not merely of nationalism but rather of fascist and racist expansion - because they need to unload their internal conflict outside their borders through territorial expansion, absolute exploitation of occupied territories, loot and rapine. (For an elementary exposition of this point, please refer to J. Schumpeter, Imperialism and Social Classes; also to H. Arendt, Imperialism; and finally to M. De Cecco, Money and Empire.)

Wednesday, 31 January 2018

China’s GDP of Bridges to Nowhere

This is a lengthened version of a previous post in which we argue that "market" capitalism has a huge advantage over "command" capitalist economies such as the one run by the Chinese Dictatorship in China - and that advantage is the necessity of capitalism to have what the Classical Economists called "formally free labour". The essentiality of this notion to the very existence of capitalism was stressed vehemently especially by Karl Marx and Max Weber.

In this blog, we have repeatedly explored the reasons behind the difference between “productive” and “unproductive” investment - which formed the basis for the essential distinction in Classical Political Economy between productive and unproductive labour. The aim of the Classical Political Economists was to determine what determined whether an investment in a capitalist economy was truly “profitable” in that it expanded the “wealth” of a national economy or else “unprofitable” and therefore “unproductive” in the sense that it was rather a wasteful use of resources. Of course, ultimately, what is deemed to be “productive” or “unproductive” in terms of “wealth” is a subjective judgement depending on the ultimate aims of a society. Yet in capitalist terms, in terms of the maximisation of profit over the long run, the answer to this question may and must be narrowed down and be given a more objective politico-economic answer.

This question is all the more important at the present moment in large part because of the challenge that the Chinese Dictatorship poses to Western capitalism in terms of whether its “command capitalism” is indeed superior to the “liberal market system” of the capitalist West. Does the Chinese Dictatorship offer indeed a superior and more productive version of capitalist enterprise or is it rather involved in what Prof. Michael Pettis calls “the GDP of bridges to nowhere”? In other words, is Chinese capitalism a true and valid challenge to Western liberal capitalism or is it all bound to come crashing down to earth as many are predicting? This is a question of fundamental importance because what the Chinese Dictatorship seeks to obtain by spruiking its “China Dream” is to impose a totalitarian hegemony over the world to supplant the relatively democratic Pax Americana that has dominated geopolitics since the end of World War Two.

The upshot of our politico-economic studies is that the difference between productive and unproductive economic growth is based on the ability or less of an economic system to gauge the level of social conflict in a given society. Given that capitalism is the generation of political control over living labour on the part of employers through the apparent “exchange” of dead or objectified labour for living labour - that is to say, through the payment of living labour in terms of its own past production (what are called wages), - given this “exchange”, a capitalist system of production of social needs must rely on the existence of a “formally free” labour force able to bargain on the minimum level of wages as well as on the goods produced for consumption. It is evident that only a system that allows this formal freedom can operate over time as a capitalist system, and only such a system can therefore be said to be “productive” in a capitalist sense. The implication of this conclusion is that a functioning capitalist system must be politico-economically superior to a command economy such as the Chinese Dictatorship’s for the simple reason that the former is much more democratically aligned with the material needs of its labour force than the latter could ever be.

This follows from the fact that under capitalism the labour force is formally free in the twin sense that (a) it decides how and how intensely to work and (b) it chooses relatively freely the kind of goods that are produced by its own living labour. In a capitalist economy, the capitalist has sufficient political power to force workers to sell their living activity in exchange for money wages. But the capitalist does this in competition with other capitalists, which means that workers have a significant choice over what is produced and how it is produced through the exercise of purchasing power choice given to them through the wage system. Wages constitute the degree of freedom that capitalists must grant workers to ensure the politico-economic reproduction of the capitalist system of production. Without a formally free labour force, that is, without the payment of wages in exchange for living labour, no genuine capitalist system of production is possible. This formal freedom of the labour force is what gives capitalism its superior degree of socio-political cohesion and legitimacy over other systems of production by ensuring that social resources are devoted to the most efficient production of social needs.

Our studies establish that this is the fundamental conclusion behind the analyses of capitalism that go from Ricardo through to Marx and Weber, all the way to Keynes, Schumpeter, and of course....Hyman Minsky himself! The insight behind the Minsky Moment is all here! It is possible for a capitalist regime to mask the social antagonism implicit in the wage relation either through inflation in wages or asset prices, or else through more direct intervention and interference with industrial and financial markets. A Minsky Moment occurs when it becomes apparent to economic operators that the monetary values (prices) on assets no longer represent real purchasing power (value) in the economic system because credit expansion is no longer based on the real ability of the holders of financial credits to realise these into valid claims over productive ability.

Both forms of repression - inflation and dirigible - are aimed at restricting the formal political and legal freedom of the labour force. Because of this repressive element, both inflation and direct intervention (dirigisme or command economy) will result in profound distortions of the “productivity” or “growth” of a capitalist economy. What happens in a command economy such as China’s is that the element of free social conflict that market capitalism contains is absolutely missing - and that therefore the Chinese economy must collapse sooner than a market capitalist economy under the strain and burden of “unproductive” investment. (Of course, this is also a key tenet of the Austrian School with its notion of “malinvestment” or misallocation of capital.)

But let us proceed with order to understand the full implications of what s being argued here.

The Value of Value

The first question that Classical Political Economists posed themselves was what determined prices. They all agreed that market prices could not be determined by supply and demand because begged the question - “supply and demand” of what? Smith, Ricardo and Marx agreed that prices are determined by “the amount of labour” contained in commodities. But Marx went further than his British counterparts by analysing the notion of profit. The most ostensible characteristic of capitalism is that it is “production for profit”. But what is profit? If indeed market prices are determined by “the amount of labour” contained in commodities, it is clear that, given that capitalists “purchase” the commodity labour at market prices, then it is impossible for them ever to realise a profit from production! Thus, Marx determined that there must be a “double character” (Doppelcharakter) to the commodity “labour”. On one hand, labour is purchased by the capitalist through payment by means of existing objectified labour, which is reflected in the purchasing power of the money wages that workers receive. But then, at the same time, what the capitalist buys with wages is not a fixed quantity of existing objectified labour - a mere quid pro quo, a simple exchange of one object product with another. Rather, what the capitalist buys in return for wages or dead labour is the living activity of the worker! Therefore, the exchange of wages paid by the capitalist for the “living labour” of the worker is no longer “equal” for the simple reason that the capitalist buys the present living activity of the worker in exchange for the past objectified labour of the worker! It is immediately obvious that this is no “equal exchange” at all! Hence, the real source of profit for the capitalist must be in the fact that what the capitalist pays workers is their “labour power” - their ability to reproduce themselves -, but what the capitalist receives from the worker is the ability to pro-duce (bring forth, create) new products (commodities) that the capitalist can sell in order to control more living labour in future! This difference between dead objectified labour or labour power on one hand and living labour on the other gives us the true meaning of “value”; and this is what makes possible capitalist “profit” and the accumulation of capital!

Formally Free Labour

The capitalist purchases the living activity of workers in exchange for their dead objectified labour, that is, in apparent exchange - because no such “exchange” is possible as “equal exchange” given that the two realities are incommensurables - for the workers’ past labour. This impossible exchange leads to three fundamental politico-economic conclusions about what constitutes the essence of capitalism: the first is that the “exchange” between living labour (from workers) and dead labour (products owned by capitalists) is an impossible exchange that can never be “equal” or “free and fair”, so that quite evidently capitalist industry and enterprise are based on violence and conflict - the antagonism of the wage and the exploitation of workers implicit in the profitable accumulation of capital (value). The second conclusion is that the notion of profit or surplus value refers to the ability of capitalists to be able to command living labour in the future through the “exchange” of wages or dead objectified labour for living labour. This conclusion implies the necessity of “relative overpopulation” for capitalism to survive.

The third paramount conclusion, however, is that, despite the social violence unequivocally involved in the capitalist purchase of living labour by means of past or dead objectified labour - in spite of this, the capitalist must still “purchase” the living activity of workers, and he must do so in competition with other capitalists!

Thursday, 21 December 2017

The Chinese Dictatorship Foments Global Conflict

As we have argued repeatedly here, the Chinese Dictatorship has embarked on an irreversible path of internal repression and external menace and oppression. As if to confirm word for word what we have prosecuted on these pages, here is a magnificent piece by Angus Grigg of The Australian Financial Review, which seems to have been written with the express intent to bolster everything we have advanced here.

The end of clear-eyed optimism

In his book, Age of AmbitionThe New Yorker journalist Evan Osnos wrote of a time when anything seemed possible in China.
It was a period when fortunes were made, cities built seemingly overnight and when people expected tomorrow would be better than yesterday.
A protester displays a Chinese flag as during a rally outside the Legislative Council chamber in Hong Kong,
A protester displays a Chinese flag as during a rally outside the Legislative Council chamber in Hong Kong, JEROME FAVRE
Everywhere you looked there was change and it was happening in the blink of an eye. There were, of course, plenty of dark elements, but equal amounts of hope.
By the time I arrived in the spring of 2012, however, the dominant narrative had moved on. Change and ambition were still prevalent, but these were increasingly over-shadowed by anxiety.
In searching for a tipping point, one reference would be the second quarter of 2012.
That's when growth in China's economy dipped below 8 per cent. The two-decade long "economic miracle" was over.

From famine to feast

According to official figures, China's economy still grew by more than the entire economic output of Saudi Arabia that year, but the "animal spirits" that dictate sentiment had changed. Where shortage once existed there was now excess.
China's leaders called this "over-capacity" and everywhere you looked there was too much of something. By mid-2015, the mining industry had expanded so quickly that a tonne of coal was worth less than the equivalent amount of water. Steel had become cheaper than cabbage and, rather than blackouts, China wasted 18 per cent of all the wind power it generated in 2016, as thousands of turbines had been built before grid connection was available.
In just a few short years, China's much-heralded model of state-planned capitalism, the so-called "Beijing Consensus", had delivered the country from shortage to saturation.
Peak China had been reached and it had come more than a decade before most economists and, it seemed, state planners had predicted.
The result was more mobile phones than people and an estimated 10 million vacant apartments on the outskirts of regional cities and provincial towns across the country.
These were not so much "ghost towns", as monuments to the folly of easy credit and over-exuberant developers.

Massive credit stimulus

Such excess capacity had been partially alleviated by mid-2017 through the forced shutdown of mines and outdated factories, but in seeking to reflate the economy Beijing was forced to embark on a credit stimulus larger than that undertaken during the 2008 global financial crisis.
That delayed worries around a hard economic landing, but seemingly only heightened Beijing's anxiety. For, while official figures show China remains the world's fastest-growing major economy, this is not enough.
Growth of 6.9 per cent in the first three quarters of 2017 may have seemed miraculous for an economy worth $US11.2 trillion ($14.65 trillion), but it didn't provide enough well-paid, white-collar jobs for China's eight million university graduates, who could expect to earn less than $900 a month.
Nor did it help those graduates buy an apartment in Beijing or Shanghai, which by 2017 were considered the world's two most unaffordable cities, when incomes were compared to property prices.
And, despite Premier Li Keqiang declaring a "war on pollution" in March 2013, air-quality readings across the country were often still 20 times above what the World Health Organisation considered safe.
It made for an anxious ruling party and an agitated population.

And back to authoritarian mode

In response the party fell back on the old habits of authoritarianism. Rather than finding an accommodation with dissenting groups, or looking for ways to bring them into the discussion, from late 2012 the party, under the leadership of General Secretary Xi Jinping, took the opposite route.
It got tough.
Anyone who diverted from the official narrative was a target. Bloggers, human rights lawyers, woman's rights activists, journalists and those who spoke in favour of better treatment for ethnic minorities were either jailed, detained or silenced.
The gradual relaxation of free speech which had played out under former leader Hu Jintao was abruptly reversed.
Social media platform Weibo (China's version of Twitter) went from a lively and often-brutal forum for outing corrupt government officials and parodying the party to a place where people posted food reviews and photos of their pets.
At our lane house in Shanghai, such anxiety meant the installation of an additional CCTV camera. Under threat from a slowing economy, the party was leaving nothing to chance. No problem was seemingly too small to ignore, even the movements of two journalists from a relatively small Australian newspaper.
For us this extra set of eyes became apparent in late 2014, soon after an environmental activist visited us at home. Soon after we noticed a CCTV camera had been installed on the adjacent house and trained on our front steps.

On camera, without pretence

While there had long been cameras at the entrance and rear of our lane, it was difficult not to view this additional installation as a less-than-subtle reminder that the operating environment had changed.
And, just in case the presence of these cameras went unnoticed, a sign in Chinese at the lane's entrance read: "This area is being monitored and the tape is linked with the police station."
Like in western capitals, safety was always the stated objective for installing ever more cameras, but in China there was never any pretence that one's privacy was an issue.
The power of these cameras and how effectively they could be deployed was revealed to me in March 2014, when I was in Beijing to attend the National People's Congress, the annual sitting of China's parliament.
Known as the "two sessions", the event is a series of choreographed meetings, where ethnic minorities in colourful costumes are paraded before the TV cameras while entering the Great Hall of the People, which sits adjacent to Tiananmen Square.
But more than anything the "two sessions" is a platform to demonstrate a unified party and therefore even the slightest dissent is not tolerated.
In Tiananmen Square fire fighters in orange overalls stood guard against self-immolations, armoured personnel carriers provided the security presence and plain-clothed police were stationed at intervals of 100 metres along major roads.

A breathtakingly efficient surveillance machine

But the real work, as I discovered, was done by the CCTV cameras.
After leaving the Great Hall that March, following Premier Li Keqiang's "work report", I was waiting for a public bus back to the hotel.
Preoccupied with my rapidly-approaching deadline to file my report, I was contemplating what angle to take on the Premier's speech when a protester ran into the centre of Chang'an Avenue and unfurled a banner.
His one-man demonstration was over almost before it had begun.
Previously unsighted security officers materialised in seconds, as did an unmarked van, into which the protester was bundled.
No one spoke to me or even acknowledged my presence at the scene.
But 90 minutes later, back at my hotel, the phone rang.
It was the Public Security Bureau.
They had "noted" my presence at the bus stop and wanted to know if I planned to report on the protester and his treatment.
I was deliberately vague, even though there was little to report as the only facts were that a single protester, with an unknown grievance, had been detained by authorities near Tiananmen Square.
That was not going to threaten the front page, or any page for that matter, on a day when the Premier had set the year's economic growth target, declared his "war on pollution" and vowed to transform China into a "maritime power".

Most watched city

But as is often the case in China, the real story was not what we'd seen, rather how the authorities had reacted. In this case, the much-discussed point after deadline was how quickly I'd been identified for having witnessed this act of dissent.
Playing back the scene in my head, the only way I could have been identified was by one of Beijing's CCTV cameras, which numbered about 470,000 by 2015, according to the party's official newspaper, The People's Daily. That made Beijing the most watched city in the world, closely followed by London with its estimated 420,000 cameras.
The People's Daily boasted that "every corner" of Beijing was covered by the CCTV camera network and on that March morning it had performed.
I initially thought my official accreditation was the way I'd been identified, but it was then pointed out that this was under my jacket and scarf on that frigid spring morning.
That meant facial recognition software had most likely "made" me and from there it was just a matter of getting my number, which is registered with the Public Security Bureau, and making a call.
And it all happened in just 90 minutes. More impressive was the resources they were able to throw at such a seemingly minor incident, which only served to reinforce my theory on the arrival of China's Age of Anxiety and how the foreign press corps was the focus for some of this.

Foreign devils

Reading between the lines of the regular criticism made against the foreign media in China's official press, it was clear we were either viewed as state actors, under the influence of our respective foreign governments or, worse, anti-communist ideologues determined to foment democracy and unrest in China.
The idea that we were merely journalists, chasing stories and looking to generate clicks seemed implausible to our Chinese minders and it made for an inordinate amount of unwanted scrutiny. That's because in China all the media is either state-owned or controlled by the state, which is to say the Communist Party.
To this end all Chinese journalists must receive a press card from the Propaganda Department and from 2014 were required to pass an additional exam that tested their understanding of Communist Party ideology. The exam was based on a 700-page manual, which defined the relationship between the party and the news media as one of the "leader and the led".
Leaked commands from propaganda authorities to the state media, which are frequently catalogued on the blog site, Directives from the Ministry of Truth, tell how strictly China's news media is policed and how Xi's demand that news "must speak for the party" was actually implemented.
"Delete all content related to the Panama Papers," editors at state-run news outfits were told in April 2016 after leaked documents showed secret offshore companies were held by some of China's most prominent families, including relatives of Xi.
"Delete reports on calls to ease internet control," read another directive in March 2017 after a delegate at that year's People's Congress in Beijing argued internet censorship was hurting China's economic and scientific development.

Anxiety and action

Such directives made easy reporting fodder for the foreign press.
But at the same time they reinforced a view in Beijing and among pro-China think tanks abroad and some in the foreign business community that "the media" never wrote any of the good stories about China.
We were relentlessly negative, so the argument went, focused on the minutiae, while never bothering to look over our shoulders and acknowledge how far China had come.
At times this was a fair criticism.
China's journey from a ruined country with GDP per capita of $US165 when Mao Zedong died in 1976, to income per head 50 times that level today is without doubt the biggest development story in history.
It is often described as an "economic miracle", responsible for lifting 500 million people out of poverty and spawning a middle class of 300 million people which has been the dominant driver of the world economy for the last decade.
This is the China of big numbers, which has delivered some of the most impressive figures statisticians have ever compiled.
In Shanghai, like most parts of China, the numbers were on a scale that could not be replicated. The city's statisticians note Shanghai has gone from not having a single kilometre of subway line in 1993 to more than any other city in the world today. It boasts two of the world's 10 tallest buildings, an elevated road network criss-crossing the city and the world's biggest container port.
This, however, is only half the story.

Big numbers, but...

The scale of China, with its population of 1.4 billion people, means it should be the world's biggest in most areas. But when viewed through a lens which discounts for sheer size China appears far less impressive.
On a per capita income-basis, China remains the 82nd poorest country, according to the International Monetary Fund, and its economy is ranked 78 out of 190 countries by the World Bank for the ease of doing business.
It has produced just one nobel laureate in the three science disciplines and has one of the highest levels of income inequality in the world. The richest 1 per cent of households own a third of the country's wealth.
These are the type of statistics that are rarely aired but paint a more realistic picture of China and help explain why, despite the two decade-long "economic miracle", the party remains anxious.
This anxiety is often verbalised by leaders expressing their desire to avoid the "middle-income trap" and become what the party defines as a "moderately prosperous society" by 2020.
To achieve this China will need to double the size of its economy in the 10 years to 2020, but it can't do this using the easy drivers of growth it employed over the first three decades of its opening up.

New approach required

Put another way, the party can't continue to use borrowed money to build things as the game of catch-up economics becomes ever less effective with every additional dollar spent.
As the author Yu Hua put it in his book, China in Ten Words, the country's development model was to spend $US1000 in order to generate $US100 in additional GDP.
Most of that quest for additional GDP was poured into housing and infrastructure projects and was responsible for the most extraordinary statistic of all.
In his book, Making the Modern World, Vaclav Smil said China had used more concrete in the three years to 2013 than the US did during the entire 20th century. And not by a small amount. According to Smil, the US used 4.5 gigatons of cement during the last century while between 2011 and 2013 China used 6.6 gigatons.
That's nearly 50 per cent more and helps explain how, by the middle of 2017, China's debt levels had risen above 300 per cent of GDP, according to the Institute for International Finance.
It also explains why cities like Shanghai have some of the world's best infrastructure and why Chinese tourists find the London Tube dirty, the Eurostar slow and many of the roads third world.
But this impression can be misleading.
While a city like Shanghai has a Maglev train which travels at 430km/h and takes a little over seven minutes to reach the main international airport 30 kilometres away, this and other projects like it have been built at the expense of social services, particularly health care.

Vanity over social welfare

China may be the world's second-largest economy, but its per capita health spending is one-tenth of the OECD average and, according to World Bank data, it spends less in this area than the likes of South Africa and Croatia.
This has been the trade-off. Gold-plated infrastructure at the expense of a better publicly-funded health care system.
Such a funding mismatch never stops western business leaders lauding the quality of China's infrastructure and the benefits of a one-party state that can defy populism and take long-term planning decisions.
Yet these same business leaders presumably never seek treatment at one of China's public hospitals, which have half the number of doctors per capita than the OECD average and one quarter the nurses.
Not burdened by elections, China's leaders have in one sense chosen vanity over social welfare.
As well as building subway networks in 32 cities with a further 53 under construction, and having more kilometres of high-speed rail line than anywhere else in the world, China's rulers have ploughed public funds into the construction of vast government buildings and extravagant beautification campaigns.
Before his eventual downfall in 2012, the former party secretary of Chongqing, Bo Xilai, is believed to have spent $US1 billion planting Ginko trees across the city, even though the climate was too hot. In Jinan, the provincial capital of Shandong Province, the local government built what was then the world's second-largest building, behind the Pentagon.

Growth, no matter the quality

These may be isolated examples and practices which President Xi has sought to eradicate since taking office, but they are indicative of a wider phenomenon in China which has mandated growth no matter the quality.
That means 41 per cent of all China's economic activity in 2017 was generated by building things, known as fixed-asset investment.
The economic planners in Beijing know this number must come down below 30 per cent, but they can't be sure what will replace all that building.
This is the root of the party's economic anxiety – keep building and the economy continues to grow above 6 per cent or pull back and begin a long period of slower growth as the economy restructures.
The party flirted with the latter in 2014 and 2015, but ultimately did not want to see what an economy growing below 5 per cent might look like and so pushed the button on yet more stimulus.

The final straw

For economists like Jonathan Anderson, previously with the World Bank in Beijing and now an independent adviser, the 2016 credit stimulus, which soaked up much of the industrial over-capacity, was the final straw.
He went from China optimist to fully-fledged bear as Beijing pumped credit into the system faster than during the 2008 global financial crisis.
"At the current pace we would highlight 2019-2020 as crunch years when China crosses the potential crisis threshold," Anderson said in forecasting a fall in growth to between 2 per cent and 3 per cent.
"This doesn't sound like much – but for an economy that has never posted a growth number below the mid-single digits, it's almost revolutionary."
That is what the party and Xi fears most. He's even said as much. In 2012, soon after taking over the leadership, Xi told cadres the mistake made by the former Soviet Union was weakening the party's role in major institutions, like the army.
"We must stand firm," XI said.
This gives the impression of a party continually looking over its shoulder and one that will be only become more anxious in the future.

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