Tag Archives: China

The Chinese Worker Protection Act

comradeJeremiah, as you know, takes a nuanced view of protectionism.  We favor free trade, but we recognize the role of negotiation.  Since our new president has promised to get tough on China, here is a suggestion: use trade barriers to promote environmental and worker protection standards around the world.

For example, if a Chinese (or any) exporter enjoys a labor cost advantage because it exposes its workers to hazardous conditions, slap punitive tariffs on them until they reform.  Good luck challenging that at the WTO.  If they are polluting Shenzhen, we don’t need to buy their products.

American manufacturers complain that our trading partners can offer cheap goods because they abuse their workers, and it’s true.  Just look factory fires in Bangladesh.  These people labor like slaves in conditions we outlawed a hundred years ago.  Labor advocates worry about a race to the bottom.  We can halt this race using … protectionism!

Now, here is a trade policy that should draw bipartisan support.  We can protect our manufacturers by holding foreign companies to American standards.  This will create jobs in America, and at the same time make life better for exploited workers around the world.


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Toward Better Democracy

The Greek people voted, fair and square, to receive more bailout money from Germany. If Chancellor Merkel does not accede, that means she lacks respect for “democratic values.” Obviously, the Germans don’t see it that way.

Buttonwood wrote a nice article on the limitations of democracy. You cannot vote to have manna fall from the sky (or Germany). Many economic factors lie outside a nation’s control. The best we can do is elect leaders who are competent to play the hand we are dealt, and honest enough to tell us where we stand (see President Superhero).

Jeremiah happened to be passing through Hong Kong at the time of the protests, and heard many cynical things said about democracy. One that stands out is the idea that people would begin voting for government handouts, and mighty Hong Kong would become a welfare state. No kidding – it was exactly like the famous (and apocryphal) quote from Professor Tytler.

The majority always votes for the candidates promising the most benefits from the public treasury, with the result that democracy always collapses over loose fiscal policy.

Additional cynicism about democracy can be found in the Chinese press, or Chinese comments on Western news sites. We found this gem, below, among the comments on FT. Danny Quah quips that not all American elections are swayed by money – only 94% are.

Democracy is about giving the dictatorship mandate to the winner of a money backed popularity contest.

Those of us who would defend democracy, and especially those who would advocate democracy in other countries, need to be a little more discriminating in our arguments. We are used to thinking of democracy, freedom, and prosperity as a package deal. Jeremiah believes that there is synergy among the three, but the causal relationships are not clear cut.


Plenty of people would be willing to accept a dictatorship, as long as it delivered consistent improvements in their quality of life. This is basically the deal the Chinese Communist Party has. Many Americans are oblivious to the problems in our republic, for the same reason. They will sit up and take notice only as each one, individually, starts to feel the pinch.

The fatal problem with democracy is the fiscal one – people voting themselves largesse from the public purse – but we may dispossess our fellows in other ways, too. The majority may vote to rob from “the rich,” and rob from future generations. We may also vote to abridge the civil rights of any group that is a minority, from gays to atheists. This makes democracy the tyranny of the majority.

Democracy is also open to tampering. There is the obvious influence of money, and the fiendishly clever marketing it can buy. Domestic money is bad enough, plus we have illicit foreign money. We have incumbency bias, and gerrymandering. We have voter fraud. The mere ceremony of voting does not even deserve to be called “democracy,” witness the sham elections held by dictators around the world.

Accountability is all we ask of political leadership. Everything else is just narrative.

What we really want is freedom, and the rule of law. We accept democracy as a reasonably effective way to change leadership without the trouble of a revolution, which is what Danny Quah means when he says that “every government, every ruler, must be daily insecure.” He makes an intriguing argument that Western democracies are less accountable than the CCP.

So, in the spirit of removing the mote from our own eye, here are some ideas to make democracy safe for the world:

  • Representative democracy – As everyone knows, direct democracy is unworkable. That’s why we vote to elect legislators, who in turn vote to make laws.
  • Picked candidates – Hong Kong will have free elections, among four or five candidates picked by the CCP. Of course, no one elected the CCP. On the other hand, come 2016, we will have only two choices for president, and – who picked them?
  • Weaker executive – We should not be electing a dictator. America has only two parties because of the Manichean struggle to control the White House. Our executive branch has far more power than befits a “democracy.”
  • Restrict voting on fiscal matters – This would address the Tytler problem directly, and you can read it implicitly in Art. I, Sec. 2 of our Constitution. States that pay less tax, have fewer votes. For individuals, this could mean that if you are not paying taxes, you don’t get to vote on how taxes are spent.
  • Restrict advertising – Jeremiah would like to see political advertising banned from television. That would eliminate a big cost factor behind money politics. Even if people see the same stuff on YouTube, they would at least be more actively engaged.
  • Smaller scales – Chinese democrats, take note. Democracy doesn’t scale! People seem to have forgotten this since 1787. Nothing in our Constitution contemplates a national government. The States were intended to be sovereign. Most of our fiscal (and social) problems come from federal overreach.
  • Fewer elections – Limiting elected officials to a single term in office would prevent them trying to make a career of it, and avoid having to raise funds for reelection. Congressional terms might need to be increased, say, to six years.

The charm of democracy is the idea that each individual, making his mark in the voting booth, has some say in how we are governed. Rather than cling to the trappings and the rhetoric, we should start working on the reality.

See also: The People’s Ice Cream

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Asian Values

Jeremiah confesses to becoming somewhat of an Asiaphile. Check out this ad from Bank of Singapore. We looked into this “Asian values” thing, and found Kishore Mahbubani.

Like you, we believe success is built on the Asian values of integrity and hard work

In addition to integrity and hard work, Professor Mahbubani has identified seven “pillars of wisdom.”

  1. Free market economics
  2. Science and technology
  3. Meritocracy
  4. Pragmatism
  5. Culture of peace
  6. Rule of law
  7. Thirst for knowledge

Sound familiar? Those sneaky Asians have lifted our values! Jeremiah distinctly remembers free market economics in America, as recently as the 1980s. In fairness, this is a Singaporean list. For China, meritocracy and rule of law may be more aspirational.

[Western intellectuals] had sharp minds, always producing new insights as they spoke. It has come as a huge personal shock for me to see this same group of Western intellectuals now totally blind to emerging new realities.

Mahbubani writes that he is personally surprised to see intellectual leadership – or wisdom, as he calls it – waning in the West. He draws lessons from our policy failures, as in this article, motivated by the minimum wage debate.

If the powerful American Constitution and its system of checks and balances have failed to prevent dysfunctional governance in the US, we in Singapore should take heed

America is not a place, they say, but an idea. If we have forsaken the idea, we should be glad it has found a new home. Good values are good for everyone. We hope to see them discovered – and rediscovered – around the world.

See also: The Road from Serfdom

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Chinese Price Hike

Analysts are reading a lot into the PBOC’s recent reduction of its prime lending rate. Gordon Chang, for instance, sees desperation. Chang says lower rates are a reaction to slower growth, and also – in aiding state owned enterprises – a setback for reform.   Jeremiah takes a longer view, looking at growth trends and currency values among China’s trading partners.

Long term, China needs to rebalance its economy more toward domestic consumption. This will stabilize Chinese society by sharing the proceeds of economic success more broadly. It will also give Chinese producers a new market, free of export costs and currency risk.

The obvious way to do this is to allow the Yuan to appreciate, at a measured pace, exactly as China’s trading partners have requested. This will allow America to rebalance more toward production – although we will first have to end our obsession with consumerism. Here is a chart of the Yuan’s ongoing rise versus the dollar.


In the shorter term, however, the Yuan is in the crossfire of a currency war. Try running that chart for the Euro, or the Yen. You may be sure the Yuan will continue to appreciate, but it may be in the relative sense of “less aggressively debauched.”

So, the PBOC cuts rates to keep up (down) with the neighbors. They are also liberalizing rates, allowing them to rise for ordinary savers. This stands in contrast to Europe’s lunatic policy of charging people to keep money in the bank. Lost in the news over China’s lending rate, is this rise in the deposit rate.

As Shaun Rein writes in The End of Cheap China, the impact of China’s rebalancing will be sharply inflationary for America. Not only will we not have cheap goods coming over here, but we will have to bid against a growing Chinese consumer class.

Jeremiah sees a nice symmetry here. In the 1970s, when America was struggling with inflation, we began importing cheap goods from Asia. Now, we will import inflation, which is just what the Keynesian doctors have ordered. Be careful what you wish for.

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Thank You, Mr. Lee

Saturday was Singapore’s national holiday, and we reread Michael Barr’s wonderful paper on Lee Kuan Yew. This is a thoughtful, well researched inquiry into the question of Mr. Lee’s professed socialism. Looking at Lee’s policies, and modern Singapore, you would never guess that the old man was a socialist.


The author makes a strong effort to solve this riddle but, at bottom, it is just semantics. We have warned you before about reasoning from labels. Barr starts with the western definition of socialism, and Jeremiah’s essay on socialism uses some of the same examples.

Rather than seeing Lee’s socialism as a gutted version of British socialism, it should perhaps be viewed as a less ruthless version of Chinese communism.

Academic socialists are unhappy with Lee, because they are working from a textbook and he was working with a real economy.   Lee has said, for example, that a welfare state is only possible where the economy is already affluent, as in the West. For tiny Singapore, capital formation was a priority.

The party had called for a social insurance scheme, like our Social Security, but Lee needed the funds for investment. Today, Social Security is bankrupt, while Singapore’s investment fund is one of the world’s strongest. Investment in housing meant homes for workers, plus the economic benefits of home building.

People are not interested in “isms”: Capitalism, Socialism, Fascism, or Communism. They are only interested in seeing that their ordinary lives improve.

Lee believes in state control, but not a welfare state. His model looks a lot like China’s, but he was ahead of Deng and Xi in reform and opening up. Great leaders know they will be judged by results, not dogma – and Lee’s results speak for themselves.

The welfare states of the West are now in obvious decline, just as Lee foretold. Carping about who is a proper socialist is just another example of western arrogance. Socialists in England, France, and America should use this occasion to reconsider their own ideas.

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Drubbed by China, Again

The OECD is back with another of these humiliating studies. This one is on “financial literacy” among high school students. The U.S. summary is here, the full report is here, and this nifty chart is from the Financial Times. The OECD bar chart, like the one we presented before, is on page 62 of the report.


The report states, quite reasonably, that high school students are about to face important financial decisions. For example – if you spend six figures on a degree in journalism, how long will it take you to pay off the loan? If high school teaches nothing else, it should teach how to make that decision. Jeremiah described the college education scam here, and here.

More than one in six students in the United States does not reach the baseline level of proficiency in financial literacy.

The funny part is – China is notionally a communist country. Nothing in Marxist Leninist theory teaches how (or why) to compute Net Present Value. We are reminded of that Economist piece in which the interviewer asks, pace John Cleese, “not much of communism is it?” to which the party spokesman replies – communism is what we say it is.

See also: The Road from Serfdom

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Safe for Democracy

As you may know, demonstrations are planned to demand free elections in Hong Kong. This seems to have popular support, and may be permissible under the Basic Law. Coverage in FT is mainly about tactics – should protesters blockade the Central financial district, or no?

Pro-democracy activists fear that even with open voting, the list of candidates will be dictated by Beijing.

Comments on the topic have tended toward a referendum on democracy itself, and the assorted evils of the West. Here are some highlights:

  • Democracy is a scam whereby the West can remove inconvenient leaders and replace them with stooges.
  • Elected leaders in the West are idiots.
  • The latest survey shows Chinese respondents have a high level of trust in their government, versus a sharp decline for America.
  • The West got rich through exploitation, not democracy.

Jeremiah is not the best spokesman for American foreign policy, but he would like to assure his Chinese readers that we are sincerely pretty cultish about democracy. Our leaders are idiots, as the comment says, and we elect them regularly. President Obama has said, “go win an election,” on several occasions, as if that were the wellspring of legitimacy. If democracy is a poison, we imbibe it ourselves.

Brain surgeons are not elected but they rise through their merits. So why should the stupid but popular … have the legitimacy to lead a nation?

Our enthusiasm for democracy goes all the way back to the Roman Republic – and Greece, the cradle of our civilization. We believe that democracies are less likely to wage war, at least among themselves, and history reinforces this. Of course, Rome degraded into a dictatorship, and Egypt elected Mohamed Morsi – but our faith in democracy is undimmed.

Jeremiah insists that the people must have a right to choose their leaders, although he sometimes wishes this right came with an IQ test. Also, the more a government is constrained by laws, rights, courts, activism, and the media – the better it can withstand the occasional idiot. This brings us to the central paradox of democracy or, as we say, “you get the government you deserve.”

The Hong Kong activists are energized, and likely to vote responsibly. When people must fight to vote, they take it seriously. We Americans, who vote in low numbers and for stupid reasons, are badly suited to a democracy.

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