The Humiliation Of Hu Jintao

 The recently completed onec-every-five-years Party Congress in China, which confirmed Xi Jinping for a third term as General Secretary of the party, punctuated his apparent assumption of essentially total power by humiliating his predecessor, Hu Jintao, in its final session. At the beginning, he was forced to leave the session, with two men clearly pulling on his clothing in a widely seen video to make him get up and go. It is unclear how much of this was reported to the Chinese public, but the English language Chinese media insisted that he left the meeting for health reasons.  Apparently his health is not all that great, but he was not obviously immediately ill when made to leave, and he was most clearly made to leave.

So, why this humiliation? The general view is that indeed it was Xi asserting his total control very clearly to everybody in the room and more widely.  Later that session pretty much all remaining allies of Hu in either the 24 member Politburo or its 7 member Standing Committee were removed and replaced by loyalists of Xi's, with this reportedly going further and deeper than expected, although it was expected.

Reports have tried to argue that rule by Xi is a great improvement over that by Hu, with this supposedly justifying this humiliation heaped upon him. Of course, China now has a higher GDP and larger military, with deep poverty eliminated in the last decade, and many scientific achievements occurring, along with a space program happening. But pretty much all of this probably would have happened if Hu had been in power over the past decade. Growth was rapid under his rule in 2002-2012, indeed more rapid than under Xi given the slowdown in growh in the last few years. Most of these activities and trends were already well in place and ongoing under Hu.  It is not clear Xi has added anything at all to any of it himself, aside from perhaps a greater acceleration of military buildup.

The latter has been accompanied by something not at all admirable, a more aggressive and hostile approach to neighboring countries.  This is supposed to justify Xi's assumption of total power and imposition of massive surveillance on citizens in a way unseen anywhere in the world ever. Fights are being picked with India, although there have been wars with India decades ago, all of which China won. The policy of expanding into the South China Sea, which international courts have ruled China does not own, was happening under Hu, but has been accelerated under Xi. Xi has also taken more direct control of Hong Kong, with the prospect that this economic golden egg is going to be severely damaged and stop producing what it did in the past, with the suppression of human rights now going on there, leafing to many fleeing.  And, of course, we have seen heightened threats against Taiwan, a place that is superior in every single regard in per capita terms to the Peoples' Republic, which seeks to control it and to it what it is now doing to Hong Kong.

All this is being emphasized further by Xi's first action after the Congress, to go to the Yan'an cave, a founding place of significance to the Communist Party. Xi there emphasized "arduous strruggle" as he did in his long speech at the Congress. But why should a nation not at war with neighbors and enjoying a still rapid growth into solidly middle income status, and moving into its higher levels, have to engage in "arducous struggle"? Why cannot people achieving a higher standard of living enjoy it? This is what goes on in democratic nations with high incomes. They do not threaten their neighbors and go around shutting down cities while super surveilling people.  China is increasingly going on a dark path as its leader becomes a totalitarian dictator whose bad decisions will not be countered by any checks or balances by anybody.  This is the phenomenon of degnerate autocracy, whose path and model is that set by Xi's pal, V.V. Putin in Russia, with his now clearly disastrous invasion of Ukraine.

I shall note two items that have been put forward in the media with little comment or questioning as supporting the claim that Xi is somehow some improved leader over Hu. One has to do with corruption and the other has to do with income inequality.  Supposedly Hu was very bad on both of these, Xi is a great improvement and a hard charging reformer on both. There is some basis for this, but it is seriously exaggerated.

The stronger case is on the matter of corruption. The pro-market and essentially capitalist reforms set in motion by Deng Xioaping did lead to the emergence of a wealthy elite, with this emergence accompanying an apparent increase in corruption. The trend to this was in place when Hu took power, and he did little to combat it. Xi very publicly engaged in an anti-corruption campaign when he took office. It has indeed led to some improvement in China's international ranking on this matter, with China moving from being the 80th to the 66th most corrupt nation in the world according to Transparency International, over the past decade. A major problem with this campaign is that it appears to have been heavily directed at critics of Xi, thus with this campaign also being part of his consolidation of personal power. These days one must be one of his cronies to get away with being corrupt, with there still being plenty of that around.

The matter of income inequality is less clear, with a not so good story involved.  When Hu took power in 2002, income inequality was rapidly increasing. He came in with a call to turn that around, and in fact he succeeded. He especially focused on the regional inequality and also the gap between the urban and rural populations.  He made moves to reduce taxes on farmers, and he also introduced in 2005 and old age pension program. Richard Easterlin has documented that citizens had been becoming less happy in China up to about 2005, with this turning around then and going the other way, coinciding with these reforms implemented by Hu. As it was it still took until 2008 for aggregate inequlality to peak with a Gini coefficient around .49. It then began to decline and did so quite noticeably to about a .47 level by 2012. This decline continued for three more years after Xi replace Hu to 2015, when it bottomed out at around .45. But since then it has returned to creeping upward, getting back up to about .46 most recently. So, Xi can claim to have a lower Gini than when he started, but this masks an unfortunate turnaround with a return to a gradually increasing income inequality under his rule.

It should be noted that while Hong Kong has much greater income inequality than mainland PRC, Taiwan has much greater equality, with a Gini in the low 30s.

A final matter that cuts in several directions, has been Xi's crackdown on high flying CEOs of major corporations. Arguably this is a move to increase income and wealth equality, although as noted already, income inequality is actually increasing again. It may also be directed at possible corruption, although it is not clear that all of those Xi is attacking are all that corrupt. It seems more that he wants to squash them as possible alternative power centers, and indeed a curious fact about the most recent Party Congress was the much greater absence of any executives from major private companies in China. The Party is clearly emphasizing a return to more of a command and state-centered mode of operation in the economy. This may not pay off so well, as many of these CEOs are leaders of the highest tech companies in the nation. Going after them may aggravate the clear slowdown in economic growth that is happening, with this also being driven by ongoing lockdowns that increase social control, as well as the collapse of the real estate sector in China. Xi Jinping's assumption of total power for an unclear time in the future may in fact lead to economic and social stagnation in China, with all this to be distracted from by calls for "arduous struggle" and aggressive actions towards neighboring powers. This is a sad and disturbing outcome.

Frankly, Hu Jintao looks to have been a more humanitarian and in many ways more effective leader than his successor. He did not deserve the humiliation he received.

Barkley Rosser

Are North Korean Workers Going To Annexed Portions Of Ukraine?

 Maybe. An October 21 report in NK Daily says so, with further speculation on this matter on blogs that cover North Korea. Supposedly Kim Jong Un agreed to this with V.V. Putin in their most recent meeting, with the number supposedly to be around 800-1,000, with the NK Daily report saying that they have actually been selected, and with Russia, China, and North Korea somehow agreeing that having these workers work in Russian-occupied annexed portions of Ukraine would not violate sanctions.  

I do not know what these workers will supposedly be doing. However, supposedly they will be going in November specifically to the Donbas area. I guess we shall see more about this, a curious development.

Barkley Rosser

If GOP Wins Either House Of Congress, Dems Must Kill Debt Ceiling

 If that come to pass, especially if GOP takes both houses, presumably they will be able to do it in the lame duck session, assuming that Manchin and Synema stick with them on it, which one of them might not. But as a budget matter, it can pass by reconciliation, which avoids a filibuster. Can be passed with only 50 votes plus VP Harris in the Senate. There are several specific ways they can do it, with it not really mattering which they do, just that they are able to do it if this comes to pass, which looks highly likely at least with respect to the House of Representatives, if not definite.

We have seen the GOP play games with the debt ceiling in the past, most damagingly in 2011, although sometimes when they have done so, they have suffered negative political feedback.  Indeed, fear of that has in the past allowed "more reasonable" Republicans in the House, where these efforts seem to have always emanated from, to eventually cut some sort of not too bad deal with the administration before the plug got pulled and an actual market-damaging default happened. 

The problem now, as we pretty much all know, although this matter is not getting much attention, is that that on top of the general polarization, the House GOP members are becoming increasingly radical right, with a whole bunch of seriously crazy types likely to enter the House with this election, even if they do not take control.  The moderate GOPs are retiring or getting primaried out for insufficient Trumpiness, and a bunch of election deniers and QAnon followers and so forth will certainly be coming in. And if GOP takes the House, if Kevin McCarthy is even able to get himself elected Speaker rather than someone much further right, he will be under severe pressure from the extreme wing of the party to make seriously wild demands that would be very damaging to put in place, with the Biden admin going to be resisting hard, and with these bomb throwers more likely to be willing to go all the way to pushing an outright default, even possibly with the conscious plan of bringing about an economic crash they can blame on Biden in 2024.

The danger of this is really seriously high, and it needs to be nipped in the bud.  I understand that many think that somehow the debt ceiling is some sort of sacrosanct thing, having been around in some form or other for over a century.  But it is not. It has never made any sense and no other nation has anything like it, although some have rules limiting the sizes of budget deficits, a different thing. Several of us here, most certainly including me, have posted on this general matter numerous times in the past.  And we have long argued that the debt ceiling should simply be abolished. It serves no useful purpose, and only opens our governing process to serious mischief.  Heck, even though a default was avoided in 2011, it came close enough that it led to a debt downgrade for the US.

So, Dems, if you lose a house of Congress, eliminate the debt ceiling, please!

Barkley Rosser

Iranian Demonsttations Spread to Oil Workers

 The death of a Kuidish-Iranian woman doe not wearing a hijab to cover her hair has led to weeks of demonstrations led by and mostly by young women especially in the Kurdish parts of Iran.  However, they have gained the support of young men as well, despite a severe crackdown by the authorities that has now killed over 100 of the protestors. 

The latest development that marks this becoming a more serious threat to the regime is that apparently the demonstrations have spread to at least some oil workers.  The oil industry is concentrated in the Khuzestan part of Iran on the Gulf, with a substantial number of the workers ethnically Arabs and Sunni Muslims in contrast to the majority Shia population, which both Persians and Azeris largely are, the two most populous ethnic groups in the nation, who together constitute over 90%. The Kurds are apparently mixed, some Sunni and some Shia.

Traditionally prior to the Islamic revolution, most oil workers belonged to the Communist Tudeh Party. They participated in the anti-Shah movement that led to the Islamic revolution. But in its aftermath, they were suppressed as was their party.  This has left them somewhat alienated.  Obviously given the importance of the oil industry to the Iranian economy, this appearance of them supporting the women demonstrators raises the ante.

In any case, the US should still negotiate a revival of the JCPOA nuclear deal with Iran, which would allow an increase in oil production and exports from Iran.  A deal has seemed very close for some time, but somehow as it looks to be almost ready to be agreed to, one side of the other comes up with some demand that looks unacceptable to the other. But maybe this can be overcome.

Barkley Rosser

Patagonia: Life Imitates Theory

 When Yvon Chouinard, the founder of Patagonia, completed the transfer of that company’s ownership to an environmental trust fund, it was front-page news across the country.  It came as something less than a shock to me, however, because I had described a very similar structure in a paper I wrote a few years ago about “pluralist social ownership”.

First, it’s interesting what Chouinard decided not to do.  He didn’t donate the company to a government agency, although that option is not quite as weird as it sounds.  Environmentally conscious landowners often donate parcels to park administrations or other government units, expressing their faith in the ability of the public sector to safeguard this type of resource and make it available for study and recreation.  If you don’t see the same sort of donations of companies like Patagonia, it’s because the track record of government in most other functions is much less impressive.

Chouinard also chose not to give Patagonia to its workforce.  This deserves a bit more attention, since many entrepreneurs have taken this course; some of the largest worker-owned firms were begun as normal, for-profit enterprises until the decision was made to put the workers in charge.  It’s a reasonable choice if the main motive of the private owner looking to divest is to benefit the workforce, but there is no reason why this has to be the dominant one, even for very socially conscious owners.  Chouinard is an example: he has earned a reputation for treating his employees very well, but his primary interest is environmental.

So instead he gave away the company to two environmental entities, one that holds all the voting shares (about 2% of equity) and another that will profit from the remainder.  This is perfectly reasonable, so long as these groups can be entrusted to adhere to this commitment.

Of course, if he had some other motive he could still have used the same general approach, but partnering with different organizations that shared his priorities.  If he were interested above all in gender equity he could have donated to gender equity trusts.  If the most important thing for him was to safeguard an indigenous culture, that type of trust could be endowed.  Or protecting the interest of a particular region, or promoting international cooperation, or, well, you name it.  Transferring ownership to a trust with a steadfast mission is an extremely adaptable approach, one that can accommodate a wide range of political and social values.

This is why I described what I called a “social equity fund” model in my paper.  The problem I was addressing was the form social ownership could take in a truly pluralist society, one with a mosaic of values and interests and not just one, however democratic the process for selecting it.  (I had reasons to doubt that a framework based on a monolithic conception of social interest would be compatible with democracy, but that’s a topic for another day.)  Investing ownership in a range of funds representing distinct groups and their values seemed to be the right approach.  Unlike state or even worker ownership, social funds could embrace a range of commitments as diverse as those found in society—truly a pluralist vision of social ownership.

The biggest problem with the Patagonia example, however, is that it was the work of a single individual, the firm’s founder and leader.  Chouinard is an exceptionally enlightened capitalist, but we can hardly count on the tender mercies of his peers.  This is why the indispensable step forward is to democratize the ownership shares of funds reflecting significant social interests.  This is the “socialist” part of the vision, in which most equity is progressively transferred from a minority of wealthy individuals to the funding system as a whole, and a mechanism for periodically allocating ownership to funds on a one-person, one-vote basis is established.

The paper discusses all this in some detail, including the regulatory framework such a system would require.

I hope Chouinard’s inventive solution to the problem of dedicating Patagonia to environmental values is recognized beyond environmentalist circles.  This points the way to a basic rethinking of how an economy can be owned and organized to advance social interests in a world in which such interests will inevitably be diverse and even sometimes in friction with one another.

Degenerate Autocrats

 Yesterday I had Konstantin Sonin present a seminar at JMU on "The Degenerate Autocrat: Origins and Consequences of the Russia-Ukraine War." Sonin is a former Vice -Rector of the Higher Economic School in Moscow who had to leave suddenly in March due to his critical remarks about the regime and has since been fired from the faculty there. He is Dewey Distinguished Service Professor at the Harris School of Public Policy at U. of Chicago and has coauthored with Daron Acemoglu, who might get the Nobel on Monday.

Anyway, his argument is that longtime full autocrats become incompetent as their regimes degenerate because they increasingly appoint incompetent sycophants who give them bad information and do not warn them of problems with bad policy decisions they make. They accumulate these bad asvisers, often from old longtime cronies who become increasingly corrupt as well, because they are afraid anybody competent might move to overthrow them.  Putin in Russia with his stupid decision to invade Ukraine is the current leading example, but he had others from the past including Nicholas II's decision to join WW I, Hitler's decision to invade USSR, Mao's decision to carry out the Great Leap Forward, and Saddam Hussein's decision to invade Kuwait. 

So far post-Mao China has avoided this slide into incompetent degenerate autocracy. The system set up where leaders would step aside after serving for ten years avoided this problem. But now it looks that Xi Jinping is making the move to go to this system, taking a third five year term as leader, with no clear successor in sight.  This is a dangerous situation, with a number of recent decisions looking somewhat questionable and the economy slowing down, although there still continue to be some forward looking decisions and actions being made.  But the longer term prospects from this move do not look good.

Barkley Rosser

An Improvement In China's Human Rights Record In XinJiang?

 On Octobet 5, 2022, the Washington Post published a front section srtory, "Uyghyr crackdown eases, bu Xinjiang;s scars endure," by Eva Dou and Kate Cadell. While documenting ongoing human rights problems and a lack of transparency in Xinjiang province in China, including ongoing use of forced labor in prisons in industrial parks, in the wake of criticism of its record in that province by the UN, the article reports that it appears that China is no longer sending Uyghur and Kazakh Muslim minority members to infamous "reeducation" camps.  Indeed, many of these are now being closed entirely, with the story providing a photo of a former one, now closed, in Kashgar, second largest city in the province and a famous stop on the historic Silk Road.

I applaud this development and hope it continues.  Besides the UN criticism, I suspect that Xi Jinping is looking for some favorable news in anticipation of his bid to get a third five year term as Party Chair in the forthcoming CCP congress. I hope this new and improved policy continues beyond that event.

There continue to be other human rights problems in China. Repression of speech and political activity continues to increase in Hong Kong, with a resulting exodus of people happening. There continue to be auxiliary health and other issues associated with the strong lockdowns associated with the pandemic, although those have resulted in low rates of the disease itself happening. 

But I must note and applaud when there is an improvement in the human rights situation anywhere in this world where there is such a strong trend to more authoritarianism in so many places, including in the US.

Barkley Rosser

Putin Supporters In US Becoming Desperate

 Latest reports have after Putin annexed four oblasts in Ukraine the Ukrainian military making numerous gains in several of those and simply on a major roll that seems very unlikely to be stopped or even slowed down all that much, short of Putin using nuclear weapons. First Lyman was taken, now the last town the Russians held in Kharkiv oblast was taken. Ukrainian troops appear to be closing fast on both Kreminna and Svatavoe in Luhansk (or Lugansk) oblast, with most of northern Luhansk likely to be conquered if those two are conquered, which now looks likely very soon.

Supporters of Putin have argued that losing territory in the northeast was one thing, and they have also claimed that the Ukrainians have suffered major losses in this run, although they fail to provide any evidence of that. But they have said that Putin is willing to fall back there as long as he holds clearly important Kherson in the south, where there has long been a standoff after Ukraine made some gains and long announced a major counteroffensive. Putin moved many troops from the northeast to Kherson to hold off that loudly advertised counteroffensive, and it seemed to be working. But apparently there has been a breakthrough there as well now, with a tank attack on the northern end of the Kherson front breaking through and the frontline pushed down about 25 miles and still moving, with movement also happening on the southern end of that front also.  

It seems that the only place on the whole front where the Russians can make any favorable claims involves the weird case of Bakhmut in Donetsk oblast. There the Wagner Group has been trying to conquer it for the last three months, although it seems not to have much strategic importance in and of itself. But while they have failed to conquer it, they have managed to move forward a few meters from day to day, and apparently are continuing to do so, the only place this is happening on the entire front. This allows local TV in Russia to report on "gains," even though these gains seem not to ever lead to much of anything. Some speculate this odd campaign continues partly due to the boss of the Wagner Group, Prigozhin, is trying to increase his power in Moscow.

So we have the Russian position largely collapsing with Putin being humiliated by all this in the wake of his annexation of these territories where he is now massively losing territory.  How are his supporters reacting to all this? Pretty badly, hysterically even.

I had not watched him for a long time, but I decided earlier this evening to watch one of his more prominent US supporters, Fox News's Tucker Carlson, whose show is the most watched on cable news I believe, even now.  He is full in on supporting Putin and was coming across as indeed nearly hysterical this evening. There was no mention of any of these military gains by the Ukrainians, not a whisper.

Instead, he was all in on the Nordstream pipeline incident, charging that it "is obvious" that it was carried by the US, citing statements by SecState Blinken that and end to the Nordstream pipeline would be a "strategic blow" to Russia, not to mention emphasizing that Russia owns the pipeline. As it is, the US and the nations that use the pipeline have avoided making any specific accusations as indeed it is very difficult to prove or establish who might have done such a thing. 

It is reported that the nearby nations suspect it was done by Russia. As it is, Nordstream I has been repaired. With that the Swedes were apparently about to investigate the sites of the explosions to look for evidence about what happened, but the Russians began pumping gas through it, which blocks that. Big surprise that Tucker Carlson had nothing to say about that.

His argument then segued into predicting that this supposed behavior by the US is going to lead to a nuclear war between the US and Russia, somehow never noting that it is Russia and Russia alone that is threatening to use nuclear weapons. He seems to accept that Putin's annexations are justified and that indeed Putin using nuclear weapons in Ukraine would be some justified self-defense. He reported with outrage on reports that the US might sink the Black Sea fleet if Russia uses nuclear weapons, with the US doing this without using nuclear weapons, although Carlson never noted this last point. This possibility of nuclear war is all due to the US, even as the US is not threatening the use of nuclear weapons at all, only Putin and various commentators in Russia.

I have to say that I was taken aback at the intensity of his outrage over all this, the US supposedly definitely responsible for the now all done pipeline incident, and this supposed danger of the use of nuclear weapons.  I now understand why I see local people commenting in my local newspaper, the Harrisonburg Daily News Record, to the effect that not only is Russia winning the war, they deserve to win the war.  This is a pretty astounding spectacle, but then most of these people also continue to believe the Big Lie of Trump that he actually won the 2020 presidential election, a lie Carlson also plays a major role in continuing to push.

Barkley Rosser