Revisiting 'One World, One Dream'

James Fallows comes back. In a more thorough way, the latest piece in the Atlantic about the post-Olympics China points out some paradoxes that are typical in contemporary China. 

The general public opinion in China seems to be very different from the one outside of China that 'according to a report last year by Joshua Cooper Ramo of Kissinger Associates, most people in China considered their country very “trustworthy.” Most people outside China thought the country was not trustworthy at all'. 

Knowing this fact would make the slogan 'one world, one dream' sound naive.  The problem is whether Chinese leaders know this situation. Fallows thinks that 'the closer Chinese officials are to centers of political power, the less they know what they don’t know about the world.' 

Is that so? Look at Premier Wen's interview with the Newsweek, issues such as Tibet and the Dalai Lama, human rights and democracy can be talked frankly. The matter is how such an openness to the West can be represented in a broader way and synchronized in China, say, by officialdom in China to the ordinary people.   

Here is another paradox, or the mismatch between the image that Chinese top leaders want to project to the outside world as a progressive and harmonious society, and the reality of what China really is in the eyes of some outside observers. The gap between what China wants to be and what China really is has become particularly prominent. While the government desperately tried to do all sorts of PRs and take preemptive measures to achieve an ideal and positive image of China, it has encountered the most dramatic antithetical event - the milk scandal.  

Truth about what China really is lies somewhere beyond such a paradoxy. Sometimes we need another big event that involves both sides to provide a proper lens to see it clearly. It would be amazing in historical eyes that within just two months the world has witnessed three big events, namely the Beijing Olympics, the Russian-Georgian conflicts and the global financial crisis, that probably would mark the dawn of the new era of global governance. 

If the dichotomy thinking of the West and the Other was fashionable for what's happened in Beijing and Moscow, the latest financial crisis looks like an antithesis to such a mindset, for it's been generally agreed that the world needs to work together to tackle down the problem. 

Are the national interventions across the board of the West not historical necessity? Isn't such a kind of socialization in the post-industrialized countries of the West realized naturally in the discourse of history? Such a development certainly is at the vanguard of the historical movement that no historical lessons so far can one refer to, which means, the socialized policies that the West have adopted are not the historical regression but completely new. 

It is in vain to use any adjective to define capitalism being caught in this financial turmoil and remedial measures thus taken to save it from collapsing as 'true capitalism' or 'honest capitalism' like what Judy Shelton tries to define in a reactionary 'A Capitalist Manifesto'  , or Simon Jenkins' unsolicited defense against 'the End of Capitalism'. Those ideological tainted words all fail to capture the essence of this new trend as it's still too early to make a judgement. 

Probably, this financial crisis will be like a catharsis to enable either the left and the right, or the West and the Non-west to become more inwardly reflective and to concentrate more firmly on its internal self problems. Finally, China adopts a new rural policy to unleash its potential, and to some extent, empower peasants to achieve equal social status as those city dwellers. What kind of changes it will bring is still too early to say, but it will certainly be one of the keys to win the trust from the outside world. 

Run, Money Making Machine, Run!

What does that really mean when governments across the the Eurozone countries, following the suite of UK, consecutively guarantee to backup those ailing banks to provide huge amount of money, even unlimited, to maintain necessary liquidity?

It is a coordinated remedial action indeed, and the market responds positively. Relieved? Hold on for a while, where this huge amount money comes from? Money can create itself, or governments suddenly know how to play gimmick? Never mind those blank cheques, as long as the confidence is restored, the pressure can at least be reduced a bit, otherwise it will be reaching at an unbearable level.

Actually, this kind of coordinated measures is gambling on the presupposition that no banks in reality would encounter the worst scenario, that is, they would really require governments to fulfill their promises to provide tons of money in one shot. If that happened, money printing machines would be very busy, and high inflation would be unavoidable. The issue is to set the confidence in motion, pulling the financial institutions out of this fearsome dead end and entering into a benevolent circle.

Formally, it's a risky decision again, in a much larger scope at the national and international level far beyond financial sector. It is also a forced free choice par excellence as well for Eurozone countries, and those who have guts to take a lead will have more power to set the tune for the future. In this latest round of competition, UK's Brown government does stand out and has played the leading role in presenting what seems to be a more feasible solution to the crisis.

Now, the market initial reaction seems positive that the worst scenario looming at the horizon has been temporarily contained. Human nature triumphs. Put your finger crossed though, as the price of filling in this credit black hole promised by those governments will be born by everyone in this world in a more subtle and invisible way.

Admittedly to most of us, such a prospect is less painful in reality than a sudden collapse of the ailing system. However, if it works, restructuring the ailing financial system may well be dragged into a lengthy debate internationally, and any radical changes may not come so soon.

Better die slowly than a sudden fatal heart attack, you bet!

Obey, but think hard!

(Illustration: the existing US National Debt Clock installed near Times Square in New York has exceeded its limit to accommodate the figure more than 10 trillion dollar on the 7th of October, 2008. As a temporary treatment, the dollar sign has to be squeezed to put additional figure '1' and the new one which can display quadrillion figure will be installed next year. The Debt Clock was installed in 1989 when the national debt of the US was about 2.7 trillion. At present, with the population of about 305 million, the average debt that each American bears has reached $34,000.00.)

A bit surprise to see Slavoj Zizek's latest writing on the financial turmoil and its implication appeared in a French mainstream newspaper. It's a translated version, and I guess the original English one has encountered some difficulties to be published in US, as it has somehow touched the hard kernel of the problem that most commentators that have appealed for fair play are either quite ambiguous on the fundamental issue of progressive values or avoiding being too political or radical in their argument.

The problem that Zizek has identified lies in the overlap of the left view and some conservative republicans', as both of them are against the rescue plan and they share disdainful feeling for those big CEOs and speculators in Wall Street who are protected by ludicrous golden parachutes while leaving disasters of their risky decisions to ordinary people that have been dragged into mortgage nightmare.

What the left like Michael Moore denounced-the rescue plan as the looting of the century is to fix up the problems of ailing financial institutions that virtually serve the interests of the rich and the powerful, so what seems to be a socialist's measure of 700 billion bailout plan indeed helps little the poor people. However, since the prosperity of Main Street can not be sustained if Wall Street goes wrong, state intervention is indeed necessary.

In an English version that has appeared on LRB, Zizek presents another notion - 'trickle-down'.

'The standard ‘trickle-down’ argument against redistribution (through progressive taxation etc) is that instead of making the poor richer, it makes the rich poorer. However, this apparently anti-interventionist attitude actually contains an argument for the current state intervention: although we all want the poor to get better, it is counter-productive to help them directly, since they are not the dynamic and productive element; the only intervention needed is to help the rich get richer, and then the profits will automatically spread down to the poor. Throw enough money at Wall Street, and it will eventually trickle down to Main Street. If you want people to have money to build, don’t give it to them directly, help those who are lending it to them. This is the only way to create genuine prosperity – otherwise, the state is merely distributing money to the needy at the expense of those who create wealth.'

The English one is ended with US campaign in mind, and the French one is more general, philosophically speaking. Zizek warns that the left leaning Democrats will be inconsistent in political stand if they are in line with the premise of Republican populists that capitalism and the free market economy are a popular, working-class affair, while state interventions are an upper-class strategy to exploit hard-working ordinary people.

Against the illusion that market is neutral, Zizek rightly argues that because of the asymmetric character of risky decision making process and national interests first in dealing with international trade conflicts, any decisions thus made to preserve free market and its operation are political in their nature, therefore we must think which side we should be in. The question is not whether or not the state should intervene, but what kind of intervention it is. In a really political sense, both presidential candidates were struggling to define the conditions for their campaign activities while facing new circumstances.

Here is a much sharper analysis in the English version:

'Politics is precisely the struggle to define the ‘neutral’ terrain, which is why McCain’s proposal to reach across party lines was pure political posturing, a partisan politics in the guise of non-partisanship, a desperate attempt to impose his position as universal-apolitical. What is even worse than ‘partisan politics’ is a partisan politics that tries to mask itself as non-partisan: by imposing itself as the voice of the Whole, such a politics reduces its opponents by making them agents of particular interests.'

Perhaps we all need to think resolutely on how come this society has created such an ailing institution which in turn has blackmailed and played fool with ordinary people.

After the meltdown, what's next?

While some observers are still waiting to see the effect of American government bailout plan, Fukuyama has gone further and voiced out the potential damage of this unprecedented financial turmoil to America's brand, or, soft power. 

In this lengthy essay, Fukuyama outlines the historical contour that has shaped the current financial situation and its impact on America's image. He argues that two central ideas that America have exported to the rest of the world, namely, deregulation with small government, the so-called Reaganism, and shaping prosperous international order by promoting liberal democracy, will be discredited further after this financial turmoil. 

Is Washington concensus dying altogether? In a dialectic way, yes and no. The American model might be improved from now on if its problems can be clearly identified and solved. After all, the Reaganism/Thatcherism that adopted small government, low tax and light regulations as the governance rules has witnessed three decades economic growth, and the emergence of the information and biotech industry as a new driving force behind the development. 

The problem, however, as Fukuyama argues, lies in elevating such a pragmatic approach to the problems of large welfare states into 'an unimpeachable ideology', that is, tax cuts would be self-financing and financial markets could be self-regulating. The faith in these two principles in the context of the globalization has resulted in America's ever expanding deficit and wild innovations of all sorts of derivatives that no one outside of Wall Street can really understand. The life of the rich and powerful is simply beyond the grasp of general people, as the article laments that no writer has ever chronicled the excess of the 21 century in the financial world.

Lack of transparency and too few regulations in the financial sector will only damage trust, 'which can only flourish if governments ensure they are transparent and constrained in the risks they can take with other people's money'. Perhaps, it's time to review his book Trust - the Social Virtues and the Creation of Prosperity once more. 

Anyway, the effect is accumulative, and actually warning signs appeared as early as the Asian financial crisis in 1997 and 1998. However, the policy to a large extent hasn't been changed, and the reason in Fukuyama's argument is the apolitical nature of less-educated working class in US, which is different from their European counterparts, that there is no relatively firm political stand among American workers means they can easily swing either left or right. Since the economic problems were still not so obvious at the moment that George W. Bush won the election, cultural issues and later on war-on-terror rhetoric plays upper hand.  Thanks to the financial crisis, this time it seems that the tide would finally be turned into the direction favourable to the Democrats.   

Internationally, American image has been tarnished a lot because of Iraq war, Guantanamo and Abu Ghraib scandal, Fukuyama has endorsed Obama as a better choice to undertake the task to rebrand America because he seems to be pragmatic and less burdened with the past. In his opinion, America will eventually restore its influence, but whether or not American model will be attractive again depends on how flexible and adaptive it will become to solve the problems in reality. 

Still, it's a view being confined in the national interest mindset. It certainly has the merit of being historically clear. Another side of the story would be complimentary, as Will Hutton appeals for a more idealistic solution in this article, that 'it's time to build a new one based on fairness instead of naked greed.' 

Sounds familiar? On such a difficult and fundamental issue, French pundits are quite straight forward. The battle for a new model of society has begun, as this essay from Le Monde argues. In a structuralist's way, European countries in general, US and China represent three typical models of society. European social democratic model has been characterized by the social market economy and the state welfare system. Because of extremely heavy tax burden to redistribute social wealth (averagely 42% of GDP comparing 28% in Japan, 23% in US and 20% in developing countries), it's running out of steam to maintain national competitive edge in the 21st century. 

This is the backdrop that the right wing in European countries is coming back, which is in contrast with the situation in US. However, the left wing social foundation in Europe is still quite solid that the progressive values such as equality, solidarity and the fight against injustice are still held dearly by a lot of citizens, thus shaping a formidable political force that which is quite different from American ideologically swing working class identified by Fukuyama. 

The change of liberal laissez faire model would be in US after this financial crisis, as more government regulations and nationalizations are on agenda. Meanwhile, China is also trying its best to adapt to the new situation because it's been coupled for a quite long time with US. The financial crisis will either accelerate its decoupling process or enhance its coupling process with US, while it is facing challenges of wealth redistribution to construct a fairer welfare system within its own territory. 

Other than reshaping development models, a new model of global governance is also needed. We have entered a highly dynamic and uncertain time, multi-polar and more interdependent of course, but if it will be a kind of three-legged stool system, as Parag Khanna envisions in this essay remains to be seen.