Archive for the ‘Asia’ Category

Do something useful

July 19, 2011

(Do something useful No.1)

 

Just back from China and from pretty much getting latest book finished. Except for a small hitch, about which I will blog later.

Meantime, I am adding a new Category button called Do Something Useful. I will use it to file interesting miscarriage of justice and political persecution cases about which readers of this blog might want to do something. Like onpass the cases to friends, sign petitions, even write letters. Imagine how good you will feel if someone you decide merits your support gets let out of prison…

Please only support cases that you have read. Do not assume that me posting stuff automatically means people are innocent of what they have been accused of.

Most of the cases will come from China and Italy since they are — in institutional terms — the Third World countries in which I spend most time. But let’s not pretend nothing ever goes wrong in the UK; there is just a lot less of it. At some point I will go through previous posts and link ones like Knox and Sollecito into this new category.

Our starter for ten today is a lady from China called Wang Lihong. Read on. The link to her case on the Global Voices campaign site is here.

China: Campaigning for the Release of Female Activist Wang Lihong

The Chinese government has been arresting human right activists and political dissidents since February 2011 under the pretext of the Jasmine crack down. Many of the detainees have been released, including the prominent artist activist Ai Weiwei. However, a female activist, Wang Lihong has been detained for 117 days, with the court finally deciding to prosecute her last week.

A number of prominent bloggers have decided to break the silence and campaign for the release of Wang Lihong even though the political climate is still tense. Independent documentary maker, Ai Xiaoming has written a biography [zh] for Wang Lihong in her blog:

Who is Wang Lihong?

Wang Lihong

????1955?10??????????????????????????1975?4?????????1978?10??1982?7????????????????????????????????1991???????????2008????????????????????????????

Wang Lihong was born in October 1955 in an army family in Qingtao and finished her elementary and secondary education in Beijing. She was sent to serve the rural society in Shaanxi in April 1975 and enrolled in the Chinese Department of Yanan University between October 1978 and July 1982. She returned back to Beijing upon graduation and worked there. She left her job in 1991 and became an entrepreneur. She retired in 2008 and started participating in social welfare activities online.

Wang was arrested on March 21, 2011, under the charge of “inciting social unrest”. Later in the official arrest document issued on April 22, 2011, the charge has been changed to “disturbing public transportation in a crowd”. Many believed that the police referred to the “surrounding gaze” flash mob action in Fujian, back in April 2010 (see below).

Below is an incomplete list of social activities that she has participated in since 2008.

  1. The police murder case of Yang Jia on July 1 2008. She visited Yang Jia’s mother and interviewed her and blogged about Yang Jia’s case.
  2. Together with another blogger, Temple Tiger, she helped the homeless people around Tienanmen square.
  3. The Deng Yujiao self defense murder case in May 2009. Wang Lihong travelled to Hubei to join the “surrounding gaze” flash mob in order to pressure the court for an open and fair ruling on Deng’s case.
  4. On May 2009, Wang campaigned for a visit to petitioner, Yao Jing, who was seriously injured by local government officials from Linyi who tried to intercept her petition in Beijing. Together with a group of bloggers, Wang raised donation for Yao Jing’s hospital and lawyer expenses.
  5. Campaigned for human rights lawyer Ni Yulan, who was prosecuted by Beijing authority soon after she was released from jail.
  6. Participated in the “surrounding gaze” flash mob action in support of the three Fujian netizens who was accused by local authorities for defamation in their citizen reports about a suspected rape case in March and April 2010.
  7. Celebrated the Nobel Prize award to Liu Xiaobo in October 2010. She was detained for two weeks and was under house arrest for several months.
  8. In March 2011, she visited two activists in a Henan detention center, Wang Yi who was sentenced to one year labour education for writing a tweet and Tian Xi, an AIDS activist.

Wang’s citizen practice

During her detention, the police have asked Wang to make three promises for a probation arrangement: 1. to never meet sensitive people again; 2. to never travel to sensitive regions again; 3. to never get involve in other people’s business again.

She refused to sign the document and made a statement instead (via @Wanyanhai [zh]):

????????????????????????????????????????????……????????????? ????????????????????????????????

I am a person with a conscience. I cannot guarantee that I can keep silence in front of others’ suffering. I can’t guarantee that when I stand in front of Qian Yunhui, Tang Fucheng, Li Shuling… I can pretend that I do not see their miseries. If I keep silence in front of all these suffering and evil deeds, the next person beaten down by evilness will be myself.

Prominent citizen reporter, Tufuwugan, has encountered with Wang in various public incident since 2009 and he has written a blog post on his impressions of Wang [zh]:

????????????????????????????????????????????????????????????????????????????????????????????????????????????????????…?????????????????????????????????????

We have completely different styles. She likes to argue for the truth and never compromises while I like to hang around with a [flash mob] group and joke around. That’s why I really like her righteousness and simple mindedness. She has everything written in her face and never lied about her feelings… She is a really engaging citizen and a thorn in the eyes of those mother f**kers.

What Tufu and Wang have been doing all these years has opened up a new political space in China. Ai Xiaoming wrote another blog post about the significance of Wang Lihong’s citizen action [zh]:

?????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????“??????”??????????2010?????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????

They get to know one and other through the Internet and collectively practice their citizen rights. We have so few experts and scholars who are willing to speak for the grassroots, but countless netizens participate [in grassroots movements] and create a new climate for the new politics. This is something beautiful that we have never had before: citizens are collected through the Internet and participate in public affair. Regardless of their background, they come together without knowing each others’ real identity. They are connected through common concern. They feel that they can do something to make change, little things such as yelling out for innocent netizens [who have been wrongly prosecuted]. “Surrounding gaze will change China” has become a belief spread across the Chinese Twittersphere. In 2010, outside the Fujian Mawei court, hundreds of netizens travelled across the country to present themselves on the spot and there have been more than 5,000 signatures collected for the campaign. He Yang’s documentary work has recorded the whole political scene. This is the first time since the 1989 incident [Tiananmen Square] that I have seen people marching in the street, calling out “Speech is not a crime, Long live freedom!”

Free Wang Lihong

A blog, Free Wang Lihong [zh], a Facebook event page [zh] and a Google Group [zh] have been set up to collect articles and news reports about Wang and campaign for her release.

Back in Twitter, @weiquanwang has created a signature petition page [zh] for the release of Wang Lihong. Children’s rights activist @zhaolianhai [zh] also helps collecting signatures via a Google Spread Sheet [zh].

Some netizens have claimed that they will surrender themselves to the police if the court sentences Wang to imprisonment. @tufuwugan [zh] is among one of them and there are more, he reports via Twitter:

???????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????

Just now I received a phone call from Chu Chengzhi saying if Wang is founded guilty, he would surrender himself. He asked me to get some legal advice first. He is right. I was also involved similar “crimes”. If she is guilty, we are all guilty, let us all be guilty. They just want to terrify people through prosecution. Let’s take the initiation to take your prosecution, to fulfill your animal thirst for prosecuting people.

Yin Longlong has written a poem, ‘Search for Wang Lihong‘ [zh] to pay his tribute to Wang. Below is the translation of the poem’s first verse:

???????????
??????????????????????????
?????
????????????????
????????????????????
??????????????
???
??????????

I look for my pride, a steel file
A string. The sea has submerged the skyscrapers, princesses and mermaids outside the Emperor’s hall
In the century before the last one
I look for Wang Lihong, only to tell her that the Dynasty is falling apart
Tell her that we have chosen silence because they are worthless to listen to
Tell her that there are still breathes under the earth of our dead sisters
Tell her
Animals and insects are inside the summer prison cell

(Almost) nowhere to run to

February 22, 2011


Tunisia, Egypt, Libya… the list of north African countries to which Italian politicians may no longer be able to flee in exile gets longer every day. Bettino Craxi, the politician who ‘made’ Sivio Berlusconi, fled of course to Tunisia (here he is, all remorseful, on the beach). Italian spooks assisted the coup which brought the lately chased out Mr. Ben Ali to power.

Silvio himself might have been expected to skip off to his friend Muammar Gaddafi in Libya if things had gotten really nasty at home. But the way it is looking in Tripoli just now (here is some text from the first US tv crew in), there may be no north African option left. One feels for Silvio after all the effort expended smoothing the path of Gaddafi’s third son Saadi into Italian Serie A football, where he ‘played’ for four seasons and managed a cumulative half an hour on a first-team pitch. It is a wonder that Perugia, Udine and Sampdoria dared to leave him on the bench after his bodyguards in Libya had in 1996 killed eight opposing fans and wounded 39 for mocking this (please note) much underrated footballing prodigy.

Berlusconi has made multiple trips to Libya, including to Benghazi (search ‘Cooperation with Italy’) where the current rebellion started, but he likely won’t be going back soon. Gaddafi came to see Silvio in Italy several times, including just last August when he paid a modelling agency to supply him 200 nubile young women he could give a lecture to on the merits of (his version of) Islam. Muammar and Silvio were such a great team, but the former’s (liberal, London-educated) second son Saif going on telly and promising to keep shooting until the last bullet has put the relationship in a rather poor light.

I guess that in a worst case scenario Silvio can always go to Russia and see his best mate Vlad. But how would he keep his suntan up in Moscow? He could call in some of those unpaid holiday letting favours from Tony and Cherie (‘Flowers for me, Silvio?’) Blair, but he won’t get any more bronzed in north London. Surely there must be somewhere hot and dodgy left in the world where a man on the run can put his feet up? I know. Singapore!

Meanwhile: Stanley Ho, if you are watching, check this out. Perhaps you and Muammar should swap family management tips. Well, you both like ballroom dancing…

Police and thieves

February 21, 2011

Why don’t I feel happier? In the past week, Arsenal beat the best soccer team in the world (Barcelona), I went skiing and a metre of snow conveniently fell from the sky, Berlusconi was scheduled for trial in April, and Berlusconi’s soccer team Milan lost to Spurs. Surely that is a pretty good week?

Milan are clearly rubbish, the snow-boarding was definitely excellent, and Arsenal have a slither of a chance of holding on to their advantage in the return leg at the Nou Camp. So the problem must be with Berlusconi’s trial. It is. The press coverage grates on me because of the drearily repeated notion that one desperate old fool is the sum of Italy’s problems (here is the FT with some typically superficial coverage, though you likely need a subscription).

In reality, the investigation into Berlusconi’s latest lies and idiocies is a tale of a system failing to change. Details of the investigation, including testimony and wire tap evidence, have been leaked by police/magistrates in the standard contravention of the law and due process. (Here is one of many leaks, translated into English in The Guardian)

You would have thought that just once those who represent the legal system could have said to themselves: ‘Why don’t we try doing things the correct way this time? After all, we are dealing with an elected prime minister, so it might be smart to be impeccably professional.’ But oh no. Not for this lot the quiet, calm comportment of the thoughtful professional. For this lot, it is showtime, freshly-ironed magistrates’ togas, newly-pressed carabinieri trousers, and the rest — all of which allows Berlusconi’s followers to nurture their persecution complex.

I am reminded of remarks made by one of China’s bravest and most sensible lawyers, Mo Shaoping, at a conference last year. Mo, who defended as best he could the Nobel laureate Liu Xiaobo, offered his analysis of why the rule of law has been regressing in China in recent years. Strikingly, he said that one of the biggest problems is judges overstepping their role: ‘Originally [at the beginning of efforts to stregthen the rule of law in the 2000s], there was emphasis on judicial neutrality and passivity: the judiciary should be passive and neutral,‘ he remarked. ‘Now, the emphasis is on the active initiative of the judiciary. I myself consider this a step back.’ You are not alone, Mr Mo.

In vaguely related news:

The parents of Amanda Knox have been committed to trial for criminal libel for saying that their daughter was mistreated by police investigators. The trial, scheduled for July, will be the perfect opportunity for Perugia police and magistrates to produce THEIR TAPE-RECORDING of Knox’s illegal all-night interview. Then everyone can listen to what happened and make an informed judgement. Presumably the tape also includes the police explaining to Knox her right to have a lawyer present. (Note that The Guardian article behind the link is wrong that libel is only a criminal charge in Italy; it can be either criminal or civil — the police have opted for criminal. It is fair to say that criminal libel laws are typical of institutionally backward societies; such laws are opposed by all major writers’ and civil liberties groups that I am aware of.)

 

Fragrant harbour

February 1, 2011

I make it five times that Stanley Ho has changed his mind over his inheritance… in the last week. It was ‘You can have it’, ‘No you can’t’, ‘Yes you can’, ‘No you can’t’, and yesterday, 31 January 2011, ‘Oh go on, take it and just leave me alone with my dogs.’ Today, glancing at the headlines, it seems he may have changed his mind again but, frankly, I can’t be bothered.

Instead, here is a bit of commentary on the three videos that have been released on YouTube by Stan’s lawyer (I have used the link posted by David Webb). Let’s meet Stanley at home:

Video 1. Stan opens with: ‘We must get back Lanceford [the holding company he held all his big stuff through]’, speaking like and doing a great facial imitation of the bad guy at the start of an episode of Flash Gordon. Then the lawyer, more on him anon, asks Stan about some further comment for the press to which Stan replies he’s game as ‘I want to make it [the story] very big.’ Stan is already laying into Pansy, the daughter who is seen as both the most capable in business and about whom the most malicious and serious gossip circulates (perhaps these two things go naturally together). Then comes the now-famous: ‘It is something like robbery’ quote. Stanley says he wants to go ahead with legal action. Note the furnishing of Stan’s time-warp mansion on the south-side of HK island. To the left you can just catch a glimpse of a hideous mock-baroque table. The staff, family and nurses sneaking by the camera are also good value. In the foreground is the mandatory Chinese tea flask (must admit I have been caught on film with one of those myself) and a glass of hot water. ‘I want a fair division among my family,’ says Stan, before appearing to be pained by some inconvenient fact inside his head (like he never organised a fair division?).   At around three-and-a-half minutes you get a look at the always-on television, the electronic tombstone of the fading godfather. Stan’s ex partner Henry Fok was a big soccer fan, so at least with him you would get to take in the football. Another of Hong Kong’s octogenarian big boys is a closet Arsenal fan, and even has comfy sofas. Many are the mysteries of Confucianism… At the end Stan thanks the lawyer for having ‘blown up’ the whole affair in the space of a few days. The lawyer jokes about a huge fee to come. Or let’s say he laughs while talking about the huge fee to come; it may just be coincidence.

Video 2. Here Stan is trying to explain why he just withdrew legal proceedings and announced he had fired the lawyer. ‘The problem is Pansy,’ he starts. At this point I begin to become more interested in the lawyer than in Stanley. For one thing, you might argue that the lawyer is leading his client at the point at which he responds to Stanley: ‘To which I say: “So what?”’ The lawyer, Gordon Oldham, has a faded (south) Irish accent, though his profoundly undetailed official biography says only that he arrived ‘from the UK’ in Hong Kong 30 years ago. After Stan says Pansy is the problem, a woman, who for me has a stronger Irish accent, says off-camera: ‘But he [Stanley] is not afraid of her.’ What is going on here? My wildly speculative first thought is that there has long been a wee Irish mafia connected with the dogs and the horse-racing in Macau, but this is indeed wildly speculative. I must check further. The only thing I learn quickly from someone who knows Oldham quite well is that he is ‘a clever fellow’. Meanwhile in the video it is subsequently, I think, the Irish-accented woman off camera who butts in again to say to Stan: ‘Gordon will still represent you, ok?’ I think this is right, but then an ethnic Chinese woman I do not know moves across camera right to left saying ‘They made him, they made him [Stanley sign documents against his will]’. Stanley says he was forced during his television appearance to read ‘the plaque’ [cue card] organised by Pansy and Daisy. The video ends with the lawyer saying: ‘Are you telling me that I can now go ahead with filing and getting back your interests in Lanceford?’ To which Stan responds: ‘I suppose so…That’s what I want.’ The lawyer gesticulates everything to Stan as if he is an idiot. But Stan isn’t an idiot, even at the age of 89. After all, he is the one looking at the silly gweilo. Upshot of video 2. I think the lawyer has definitely got some questions to answer. I find it creepy the way he refers to Stan as Dr. Ho, using the title he never earned. Stan’s slaves, like Henry Fok’s (‘Dr. Ho’s office’, ‘Dr. Fok’s office’!) have long done this, but a self-respecting lawyer does not need to. I would also like to see the written consent from Stan to post this stuff to YouTube; it should have been put up with the postings.

Video 3. Roll on to January 30. Stan says Pansy says he can have his shares back, but it is ‘only words’. Third ‘wife’ Ina, who’s got a bunch of stock, doesn’t want to meet. (Ina was the ailing first wife’s nurse when Stanley got the hots for her. If you have ever seen the UK sit-com Are You Being Served you’ll have a picture in your head at this point.) Note that Stan here is saying he wants to get all the share scrip back and ‘then decide what to do’; do you remember the fair division promised in video 1, Stanley? Not much of interest here. It ends with Stan pointing out what a stand-up guy he has been.

Video 4. (Not yet released). Stan sits in his favourite cardigan looking into a full-length mirror intoning the mantra: ‘Mirror, mirror on the wall, who has shagged the most among us all?’ From a pair of old speakers the voice of Michael Jackson responds: ‘You have Stanley, you have’, followed by a trademark yelp. At length Stanely picks up a hand-held mirror and quizzes it: ‘Mirror mirror in my hand, who’s the foxiest in the land?’. From another pair of speakers, the double-deep voice of Errol Brown (per his legendary BabyCham add)  replies: ‘You da one, you da one Stan…’ This continues indefinitely.

A note on the lawyer, February 2:

The verdict from various people who know Gordon Oldham, personally and professionally, is that he is by no means the most amoral lawyer in Hong Kong (a warm breeze wafts across the Big Lychee as Ron Arculli, Stephen Cheong, Charles Lee and pals breathe a collective sigh of relief). Perhaps the mid-point of the opinions is one that calls him ‘aggressive and innovative and he doesn’t give a fuck about anything’. The others range from ‘decent guy’ to ‘slipperier than a donkey’s dick’ (the last, I would stress, is from a journalist who has only seen Oldham’s press performances). Anyhow, there does seem to be some consensus that posting Stan to YouTube without publishing his written consent and a full explanation of what is being done begs various question; as — and several people have said this pointedly — does the posting of edited interviews. You will notice there are plenty of cuts in the tapes. Can we have the full tapes please?

Mr Oldham has not responded to an email to the contact address given on his firm’s site yesterday. I will send another one.

Other points of interest: it seems that Oldham has not acted for Stan on other cases (at least ones I know about). Of course Stan, being a godfather, has almost as many lawyers as girlfriends, and so this is hardly surprising. But it does maintain one’s interest in knowing how Oldham got on the roster for this job. Finally, one who knows Oldham claims the accent is northern Irish, tho it sounded poshed up southern to me.

As to Stan’s choice of lawyer, I think it is good. There is an illustrious history of godfathers using gweilos to front for them when they need to do something very public. Remember all KS Li’s public relations problems at Hutchison in the 80s when he paid himelf a huge special dividend he had said he would not take? That was when he hired Simon Murray. Isn’t it great that everyone trusts white people? I think it’s fan-bloody-tastic.

Tidings

January 12, 2011

The last working week before Christmas is spent in Jakarta. Outside the five-star hotels where the elite congregate, the doormen and cab-boys are under a collective instruction to don Santa Claus hats. They do look quaint. But in a country where Islamic terrorists’ preferred bombing site is the five-star hotel, I wonder if this is not a tad provocative and lacking in concern for employee welfare.

At the end of the trip, in my role as billionaire agony aunt, I spend half a Sunday listening to one of the richest men in Indonesia lament the condition of his country. The China-driven commodity boom, he says, masks a qualitative economic slide back into the ranks of Third Worldism. Or, as he puts it: ‘The real value-added here is practically nil… You cannot just keep digging from the ground.’ We stare morosely at his 50-metre swimming pool as liveried retainers refill our coffee cups. Coming from a guy who, personally, cleaned up roughly two thousand million dollars on mineral investments in the past few years, his testimony is striking. And the point is simple: the asset trading game which passes for economic activity may yield a billion bucks for each of 15 or 20 people, but it is facile, puerile and beneath the dignity of a nation of more than 200 million people. Indonesia no longer has any industrial policy, any manufacturing ambition beyond luring multi-nationals’ processing ops, any sense of developmental destiny.

I heard exactly the same story from another billionaire in Malaysia in the summer. But since he has been down a few quid in recent years, I suspected the tale might be sour grapes. Not so. Even those who have made out like bandits of late say that south-east Asia is going down the tubes. Philippines, Thailand, Malaysia, Indonesia is the presently apparent order of keeling over. In sum, the region has decided, for want of a better expression (I have watched more than one series of The Wire of late), that the best it can hope for is to be China’s bitch. The interesting geo-political takeaway is that these countries in recent decades set themselves up as rather slavish US allies and they are failing. Meanwhile the state which is challenging the US in an increasingly aggressive and frightening manner — China — looks relatively rather successful. They told us in school that economic development was a win-win game, but I think this may have been a simplification. ‘Please Miss.’

Pity for the rich

October 20, 2010

It has been a very long break while I write the first part of a new book. When you are spending all day working on writing, the idea of writing a blog as well becomes rather less attractive. Nonetheless, with all the fun things going on in the world, I am going to see if I can get back into it after the summer break.

Joe Stiglitz (you will need a subscription) has come out swinging with an attack on what has been dubbed ‘QE2’ or a second round of quantitative easing of the US money supply. What is best about his analysis is that it points out the fallacy that monetary interventions are costless (whereas fiscal interventions raise public debt, as we all know). Stiglitz points out that QE1, which involved the purchase of around US$1 trillion of US government bonds and mortgage securities will have a cost down the line as US bond prices fall (or, put another way, as interest rates rise to more normal historic levels). With QE2 set to be of the order of as much as US$2 trillion, the quantitative easing expected to be confirmed in November will involve long term public costs of an even greater magnitude.

Stiglitz points out that fiscal interventions (can) have clear benefits. Of course there is the money you throw down in welfare benefits to those who lose their jobs. But over and above this, you build schools, railways, new energy infrastructure, etc, etc, which has a long term benefit to society. Things may not be the same with the long-run public cost of unconventional monetary policy.

What Stiglitz doesn’t do is to say where the gain from quantitative easing investment is likely to end up. The answer, surely, is that much of it will end up in the hands of the rich. The expectation of QE2 is already driving a big rally in the US stock market. Where QE1 probably prevented rigor mortis in the banking system during the initial shock, QE2 is mainly telling the financial system that stock prices are likely to rise, if only for ‘liquidity’ reasons. From a bullish stock market, the rich benefit disproportionately. The poor see little or no benefit, consistent with a 40-year trend in the US to make the rich richer relative to the poor.

The real gainers from QE2, I think, are going to be the decidedly rich and the super-rich. This is because, unlike the loose monetary policy after 2001 which fed housing bubbles, this time the liquidity is going to drive asset bubbles and stock market bubbles in developing country markets in which ordinary people do not much play. A flood of cheap dollars, passing through the hands of hedge funds which serve the rich, is headed for the stock markets of Thailand and Indonesia, condo purchases in Hong Kong and Singapore, Latin American local currency government bonds, and so on. The financial managers of the already-rich know how to trade these markets, ordinary Europeans and Americans do not.

There was an Asian stock market bubble in 1991-4 during the last great Euro-US recession. But that was largely based on ‘discovery of Asia‘ overexcitement. The emerging markets bubble we should expect next year will be based much more on domestic US monetary policy (remember that interest rates were high in the early 90s). It may serve, indirectly, to force some warranted currency realignments by pushing up the value of currencies that have been artificially held down by government interventions in east Asia. But above all, within the US, the experience is likely to see a large transfer of wealth from the taxpayer to the already opulent.

It’s all wrong

April 13, 2010

I have written nothing on this blog for over a month while I try to think through the logic of financial sector reform in the wake of the global financial crisis. Frankly, I haven’t got very far. I am not sufficiently knowledgeable about the detailed systemic workings of contemporary banks and ‘shadow banks’ (the bits, like brokers and pension funds, that cause bank-like problems without being banks) to be able to offer a clear blueprint.

Today, however, I was reading some of the now declassified material surrounding a policy choice by the United States government that was clear, decisive and hugely beneficial to tens of millions of people. This was the decision at the end of the Second World War to confiscate all rented farmland in defeated Japan, and to redistribute it to actual cultivators. Reading the original memorandum that led to the policy, one is struck by the extraordinary simplicity and clarity of the thinking: here are the lesser interventions we could attempt – most obviously tenancy reform – and here is why, though such interventions seem superficially tempting and easier, they will either change nothing or make the situation worse. Here is the case for a radical intervention (expropriation). Here is how it can be achieved and the valuation mechanism that will make the process affordable to the Japanese government (offering some small compensation to landlords). And that, of course, is what the US and the new post-war Japanese government did. They changed the institutional terms under which Japanese agriculture, and half the country’s population, operated, setting the stage for the most remarkable developmental story the world has seen (more remarkable than anything we have yet observed in China).

I mention this because reading a memorandum about an effective policy intervention reminds me that I can state a case about financial reform without spelling out every detail. The logic is the same as with the Japanese example for no other reason than that the case for radical change in finance is now just as compelling, and the likelihood that lesser interventions will achieve nothing or worse is just as great. In essence, financial reform requires its own act of expropriation: we have to take away from bankers, shadow bankers, and other speculators all money which they can play with in the current financial system but do not stand to lose because of explicit and implicit government guarantees.

Martin Wolf in The Financial Times (here and here and here, though possibly not if you do not have a subscription) thinks this is impossible because the financial system is too complex. His colleague at The FT, John Kay, thinks that it is possible if you hive off the most core ‘core’ of finance – the so-called ‘payments system’ – and restrict that bit of banking to buying only government securities with the retail deposits it takes in. This of course leaves huge chunks of finance – including things like mortgages – outside of what Kay and others call ‘narrow banking’, the little bit that under Kay’s proposals government would explicitly guarantee.

Japanese land reform makes me think that one should be able to do something more practical and far-reaching than what Kay proposes, given the political will. The counter to Wolf’s arguments is simply that finance is whatever politicians make it; they can rewrite the rules as they like. This, though we have forgotten it, is why we have politicians. And this means that the objective of separating speculative from non-speculative money is feasible.

In the UK, where the government already owns most of the retail banking sector, I would force all core banks to become mutuals (building societies), owned by their members. This is the appropriate form of ownership for the core, boring, low-cost bank activities, which should serve the needs of customers rather than third-party investors. These mutuals would take in government-guaranteed deposits which they would use as the float we employ to make regular payments, to finance mortgages on first homes, to provide working capital to business, and to purchase government securities — all within bands set by the Bank of England. The central bank would hence have a somewhat expanded mandate, giving core banks modestly changing limits for the amount of treasuries they could hold, the minimum business lending they had to do, and their mortgage lending range. This would not be finance by bureaucratic dictat because the Bank of England would be acting within its own limits and because the core mutuals would not provide all mortgages, all business finance, or buy all government debt. But people would use the mutuals because their deposits were guaranteed and credit would tend to be cheaper because the assets and guarantees behind it would tend to be better than outside the mutuals.

In effect, individual citizens would have a certain amount of core mutual ‘entitlement’ and would be encouraged, through voting, to set the agenda and objectives of their mutual. One role of the mutual part of the financial system would be to address the welfare needs which private bankers claim have been supported by private sector bank deregulation – they mean by this access to more mortgage lending for poorer people. Government would probably mandate the Bank of England to force the mutuals to lend a certain amount of their money to poorer people who maintain long-term exclusive accounts and (in a financial sense) behave themselves, such that they could borrow in excess of normal loan multiples to buy first properties. Separately, the mutuals would probably also offer some forms of ‘plain vanilla’, low(er) yield pension products that might be given capital guarantees – contraversial – or some other advantage, say preference in the allocation of government debt or legally-mandated first dibs on private sector initial public offerings (IPOs).

None of this would reduce risk outside the core banking field, indeed it might well increase it. Not to worry: more frequent, more limited collapses among non-guaranteed financial institutions would almost certainly be a good thing. When a crisis occurred, it would – unlike today – be possible to bankrupt the institution in question and send a clear message to people about the risk associated with investing in ‘the real world’. This would be possible, of course, because there finally would be a real world, instead of the unified Never-Never Land that global finance has become since the demise of clear regulation, beginning in the early 1970s. We would all have our building society account, and our other uninsured investments, and no one could be in any doubt about which was which. The system, I suspect, would also be fantastic for competition because it would allow lighter-touch regulation of uninsured financial institutions. My feeling is that politicians are far too keen at present to put the boot into hedge fund managers, who are a real font of new ideas (compared with bankers), because it is so much easier than changing an economy’s overarching ‘financial architecture’.

None of the above will happen, because it would need another World War with 50 million dead to make it happen (which brings us back to Japanese land reform). But it would still, I think, be the right thing to do and hence is worth discussing. Of course there are lots of problems with what I have outlined, not least finding a new, workable balance between the mutual and uninsured financial sectors.  Any thoughts on how to address such issues would be gratefully received.

Related items of note:

Paul Krugman suggests that the financial reform package in the US is likely to be so lame that it is best to boycott it.

http://www.nytimes.com/2010/03/01/opinion/01krugman.html

Roger Alcaly, in the NYRB, reminds us that a lot of hedge fund managers (like him) are much nicer and more intelligent than a lot of bankers, with the best review of the mechanics of the crisis I have seen.

http://www.nybooks.com/articles/archives/2010/mar/25/how-they-killed-the-economy/

The manifesto of the British Conservative party for the 6 May 2010 election is full of bluster about mutual-style organisations, as are other party proposals. But no one I am aware of is proposing that a core banking system be restricted to mutuals, which would be a significant policy.

http://www.guardian.co.uk/politics/2010/apr/12/conservative-manifesto-cameron-power-people

We should not forget the fiscal travesty in our financial system – the fact that interest on debt is tax deductible for business where dividends on equity are not. In essence, this provides a fiscal/legal guarantee of acute over-indebtedness at some point in every economic cycle. Various people have mentioned the fiscal issue in the past year (Martin Wolf, Clive Crook, someone at The Economist, me on this blog, me in a Mr. Angry letter to The FT). Unfortunately the tendency among the journalists is to drop the point down to the eighth paragraph (hard to avoid when no politician will even speak about the question). Still, the fiscal thing ought to be written about in its own right.

Fade away and radiate

February 21, 2010

To San Martino di Castrozza for what northern Italians call una settimana bianca or ‘a white week’. In fact, this is the white week, the week of carnevale when northern Italian schools shut for a ski break and everyone grabs the three official days of public holiday and adds to them the inevitable ponte of two more days which takes them to the weekend, allowing for nine consecutive workless days. At the lift where ski school meets, we overhear a woman asking her friend if her husband is working this week. The response is as if the dumbest question in the history of the world has been asked: ‘But of course not, this is white week.’ Even if Italy sinks back into the Third World, its holiday arrangements will remain forever sacrosanct.

I have to leave white week early to give a talk in Florida. But this isn’t so bad because I already had three Sundays skiing at our local Umbrian mini-mountain, Monte Nerone. Despite living 45 minutes away for eight years, this is the first year we have been. There is just a single button lift, but it is quite long and gives access to two good pistes of about 800 metres. Better still, the place is run by very nice people. My son was initially undone by a pair of skis from the sales that are almost twice as long as the ones he used the year before. I could do little to help him because, as part of my ongoing mid-life crisis, I started using a snowboard when I hit 40. So one of the young lift operators put on his skis and spent two hours teaching Luca. Not the kind of thing that happens in your average ski resort. And, after all that, there is a decent enough rifugio at the bottom of the pistes which serves pasta at Euro7 a plate. Given that there is a web camera overlooking the bottom of the pistes which allows you to see exactly how much snow there is in real time, and given that you can wake up and arrive after a fresh snowfall to find there are only 10 other skiers at 10am, it is a pretty good deal. Adults pay Euro18 per day, children Euro10; the lift is only open on weekends when there is sufficient, natural snow. Amazingly enough, the place has been operating since 1969.

Florida is not quite like Umbria. I arrive via New York, which is very deep in snow and very white and beautiful from the air. Florida is unseasonably cold too. Landing in America there is the usual double-take at the number of very fat people. And then arriving in Orlando, there is the supplemental double-take at the number of old people and the number of trousers with elasticated waistbands. Ten minutes in Orlando and you begin to think that Italians have found the Holy Grail itself with their determination to maintain an attractive outward appearance. I take a cab to the 750-rooom hotel with its obligatory man-made lakes, two golf courses, jogging trails and written warnings not to ‘jog alone’. Reckless as ever, I complete a run on my own and live to tell the tale.

The talk I have to give is to a group of people who definitely do not originate in Florida – steel producers and traders, the kind of Americans who still smoke and drink large quantities of beer. They want to hear about China and are friendly. Given that I have to address them at 8am and they were out drinking the night before, I write up a short note about the four points I told them to bear in mind when thinking about China in the next few years.

That done, I am looking for something to occupy me on a Saturday night in Orlando when I notice a poster of an aging blond woman who looks strangely familiar. The haggard, too-much-Prozac look makes me think of a kindly Delta Airlines stewardess who served me coffee on the flight in. But no. On close inspection I realise that what I am looking at is the current incarnation of Debbie Harry, lead singer of the eponymous band Blondie. A quick web search reveals that she was born in Florida, before being adopted by shopkeepers in New Jersey. As if this isn’t compulsion enough, while I am on my rebellious lone jog, my i-pod randomly shuffles Union City Blues to the top of the playlist – a song I have not heard for a long time. It is obvious that I am destined to attend a Blondie concert at the Universal Studios theme park in Orlando. Will it be better than the theme park gig in This is Spinal Tap, where the rockers open for a puppet show?

We must support the aged. I take back what I said about Ms Harry’s appearance on realising that she – singer of one of the first singles I ever bought, aged about 10 – is now 65 years old. We must respect the aged because it will not be long before we dwell among their number.

On which subject, it is worth mentioning that a major golden oldie, one who has been to crack hell and back, has just brought out an album that may be rather good. After many disappointing later-life recordings, Gil Scott Heron has released an album with a slick, modern sound that may be what the poet-singer has been looking for for so long. I saw him in London, years ago, in the midst of quest for something new and good and he was rubbish. But in this album there reside flashes of the tortured genius of his youth. You can have a listen here.

And so what of Debbie Harry and crew in concert in a theme park? Well, let’s just say I may have seen the future and it ain’t entirely pretty. Debbie darling, if you are reading: you cannot wear a bondage girdle and have a tea mug on stage. There has to be a choice.

 

More:

Oh, when we were young.

Upload: final three FEER articles

January 20, 2010

There have been various requests for me to upload some journalism and book-related work, so here is a (small) start. The following links connect to the last three articles I wrote for the Far Eastern Economic Review. We know they are the last articles, because in December the Wall Street Journal (now controlled by Rupert Murdoch), the owner of the FEER, closed that venerable magazine down. I was fortunate to be asked to contribute to the final issue, and wrote a piece contextualising China’s development in terms of what we have seen, historically, elsewhere in east Asia.  From the autumn of 2009 there is a piece about how China developed its iron and steel industry, again with lots of developing country perspective, which also explains why iron ore producers in Australia, Brazil, India and elswhere are making so much money out of China. Finally, in true Chinese spirit, there is a self-criticism of my 2002 book The China Dream, written in late 2008.

Your money or your freedom

January 15, 2010

 

Another rumbling of perhaps not-so-distant thunder. Google’s threat to pull out of China is a significant development in increasingly confrontational relations between China and ‘the West’ (which in my definition is not really west because it includes Japan, as well as Europe and the US). Google’s move ratchets up another notch the political pressure that has been rising over market access for foreign firms, the question of the Renminbi exchange rate, negotiations over China’s vast iron ore imports and the arrest (initially on espionage charges) of Rio Tinto employees, and the handling of Chinese political dissidents, not least ones involved in the new-ish Charter ’08 movement.

 

Note that most of these are commercial and economic disputes. A simple metric has been at work in relations between China and the West since the Tiananmen massacre of 1989. It can be summed up as a Western bottom line of: ‘Your money or your freedom’. In the early 90s, in the first months of Bill Clinton’s first term, there was a momentary clamour for China to mollify the West by becoming freer. This did not last very long, mainly because China offered the West a different prize: money (or at least the strong smell of profit via Chinese market opening). Everyone has their price, and in the golden years between the 2002 start of the last Chinese credit cycle and the 2008 global financial crisis, the West was paid in money.

 

The situation — or at least perception of it — began to change in the past two to three years as China recycled vast amounts of foreign exchange earnings into (mostly) foreign government bonds. The main result was to maintain an artificially depressed exchange rate which helps China-based exports. Everybody else in Asia has done this over the years but, as China’s currency management continued against a backdrop of global economic recession, and as more and more multinational companies started to complain that China is finding new ways to block their market access, Western governments have gotten increasingly miffed. Throw in the arrests of Rio Tinto employees, initially on charges of espionage, and you have the beginnings of a Western consensus that China is no longer paying enough for us to overlook its unpleasant human rights record. At least, I think, this is a useful way of viewing the situation.

 

Google’s threat to quit, interestingly, is more a human rights/morality position than a commercial one. It has, it says, been the subject of orchestrated attacks (using Microsoft’s Internet Explorer as the point of access) seeking to obtain information about human rights activists and campaigners dealing with China. Lots of other human rights lobbyists, lawyers, journalists and so on have had their Gmail accounts hacked, not via assaults on Google itself but through direct attacks on email users themselves. Google has not pointed the finger directly, but it is hard to imagine who would attempt to do these things on a regular basis beyond agents – at whatever degree removed – of the state. There have been various attempts in media coverage to spin the story such that Google, which has about a 30% share of the China search market compared with more like 60% for Baidu, is really willing to walk away because it is not the market leader. This is crude and unfair. The reality, surely, is that Google is putting up (morally) with way too much in return for what it is getting out (financially) from China. Everyone has their price, and Google’s is too high for China. That does not mean Google is bad, it means it is far better than most. The firm was willing to run censorship (albeit a bit less than Baidu) on its Chinese search engine in order to get a .cn presence, but having its systems attacked in a quest for information on political dissidents is too much. Compare that with Yahoo! which in 2004 voluntarily provided information to Chinese authorities which led to the jailing of a journalist for 10 years.

 

It will be interesting to see how the commercial fortunes of Baidu and Google are affected, long-term, if Google does quit China. Baidu’s share price has shot up around 15% since Google publicly stated its position, presumably on the assumption that it can now get a virtual monopoly position in search. Google’s share price is unaffected. I am making a note to check where they are at in five and ten years.

 

Meanwhile, for your delectation, here are some of my favourite word search terms that Baidu uses to censor and block web pages in China. These are my own (doubtless flawed) translations from documents leaked by a Baidu employee in 2009.

 

communist party

brainwashing

dictatorship

don’t love the party 

network blocked

the current government

China human rights

princeling [refers to children of political leaders]

the party now

one-party rule 

freedom of speech

common bandit

today’s police

defend legal rights

severance

requisition land

meditate

the masses

government official drives the people to revolt

bandit officials

suppress students

Zhao Ziyang

political crisis

evedropping device

sell blood

wife swap

oral sex

vagina

bestiality

mother and son incest

a night of passion

cheating in examinations
the sale of the answer
fake diploma

More links

Rebecca Mackinnon, who knows far more about this stuff than me, writes a spirited op-ed in the WSJ and seems to have a similar opinion.