I wrote last week on Bank of America's CEO Brian Moynihan and his statement lambasting whining investors who bought a Chevy Vega and then complained that it wasn't a Mercedes.
Having already discussed how that statement fit in to the MBO fiasco I wanted to use it to address a different but disturbing angle.
Chevrolet is a division of the General Motors Corporation, producing a range of vehicles from the mighty Corvette to the lowly Vega. Mercedes also produces a wide range of vehicles.
In comparing a Chevrolet Vega to a Mercedes Mr Moynihan was mixing apples and oranges, on many levels.
The low end of the Mercedes range is the A-Class. It is still a Mercedes, and commands the relevant pricing, to the extent that it would have been sufficient to compare a Vega with an A-Class. But no. Mr Moynihan, with one fell swoop, highlighted the demise of American manufacturing, the stature of German manufacturing, and perhaps the decline of America.
I recently watched "A Requiem for Detroit". It was incomprehensible to me that a city such as Detroit could have fallen into such ruin and despair.
This summer I traveled to the former East Germany and to that part of Poland which had been German before the War. This was a region which had been through the terrors of total war. Stettin, or Szezcin, Poland, as it is known now was a major rail and harbour city and was bombed accordingly. You can still see shrapnel scars on some buildings, but even there buildings have been rebuilt, or demolished.
In former East Germany the renovation and restoration since 1989 of cities which had been flattened during the war requires museums to illustrate the degree of the desolation wrought. This rebuilding was financed by what was West Germany and the "Solidarity Tax" which was a 1% surcharge on income tax initiated in 1989, and extended just recently.
We have not had a traditional war on American soil since the Civil War. But if you look at cities like Detroit,Michigan, or like Gary,Indiana, you would think we have. And you would be right. America has been wracked by the divisions of rich and poor. Our segregationist history has helped shape this as a Race War, but it is really a Poverty War.
There was the hope that perhaps the election of President Obama was the beginning of the end of this war. The Tea Party, misled by people like Sarah Palin are determined to ensure that this war intensifies.
It is an axiom of statesmanship, which the successful founders of tyranny have understood and acted upon, that great changes can best be brought about under old forms. The call for a return to an imaginary past by the Tea Party, predicated on the lies and distortions of organisations such as Fox News to push a scared public into the arms of America's fascists is the both sinister and dangerous as it follows on this adage-gaining power through the democratic process.
The only way to combat this is to get out and vote to defeat them!
Friday, 29 October 2010
Buyer Beware?
Always on the lookout for the next accident the mortgage documentation fiasco looks to be the newest baby for the ambulance chasing law firms smelling blood, or at least some rotten flesh. But don't think the lawyers or their prey, the holders of Mortgage Backed Securities (MBO's)are concerned about the homeowners who might or might not be dispossessed.
These investors in the securities the mortgages backed- the holders of MBO's- are only worried about the plummeting value of the securities they purchased, and are looking for ways to recoup their losses. The law firms are suggesting that faulty documentation might be a way to force the banks to buy them back.
Now I am not a defendant of the big banks. It is clear that they have no one's interest in mind but their own and will go to great lengths to achieve their golden calf. Unfortunately for the lawyers and the holders of MBO's, the letter of the law, not the spirit, is what counts.
This distinction is where I believe the the problem began. The pursuit of profit, selling misleading products protected by finely worded contracts which assign legal responsibility to anyone but the bank. The products they describe were designed to appeal to the investor's greed to such an extent that they would overpower fear, and rationality. How else can you explain the success of structured products which claimed to take low rated assets and turn them in to AAA rated assets?
The MBO market was on the less sophisticated end of the this game. And on the basis of Bank of America CEO Brian Moynihan's recent statement intended to criticise investors, some of the sellers were of the same ilk. In an attempt to dismiss legal challenges Mr Moynihan virtually self-indicted himself as he claimed that investor complaints essentially amounted to "I bought a Chevy Vega, but I want it to be a Mercedes".
Precisely. The bankers took a Chevy Vega, buffed it up and presented it as being as good as a Mercedes. Check their documentation. They never sold it as a Mercedes. They might have mumbled when they admitted it was a buffed up Chevy Vega, but if an investor were stupid enough to pay Mercedes prices for a Chevy Vega, who was really at fault?
It is perhaps telling that in the Q&A sessions at the various presentations by lawyers to MBO investors the focus is not on the merits of a legal challenge-but on the likelihood and costs of winning. Of course investors rarely let pride get in the way of money-driving up to the courthouse in their Chevy Vegas, with a crooked Mercedes Stern on the hood.
These investors in the securities the mortgages backed- the holders of MBO's- are only worried about the plummeting value of the securities they purchased, and are looking for ways to recoup their losses. The law firms are suggesting that faulty documentation might be a way to force the banks to buy them back.
Now I am not a defendant of the big banks. It is clear that they have no one's interest in mind but their own and will go to great lengths to achieve their golden calf. Unfortunately for the lawyers and the holders of MBO's, the letter of the law, not the spirit, is what counts.
This distinction is where I believe the the problem began. The pursuit of profit, selling misleading products protected by finely worded contracts which assign legal responsibility to anyone but the bank. The products they describe were designed to appeal to the investor's greed to such an extent that they would overpower fear, and rationality. How else can you explain the success of structured products which claimed to take low rated assets and turn them in to AAA rated assets?
The MBO market was on the less sophisticated end of the this game. And on the basis of Bank of America CEO Brian Moynihan's recent statement intended to criticise investors, some of the sellers were of the same ilk. In an attempt to dismiss legal challenges Mr Moynihan virtually self-indicted himself as he claimed that investor complaints essentially amounted to "I bought a Chevy Vega, but I want it to be a Mercedes".
Precisely. The bankers took a Chevy Vega, buffed it up and presented it as being as good as a Mercedes. Check their documentation. They never sold it as a Mercedes. They might have mumbled when they admitted it was a buffed up Chevy Vega, but if an investor were stupid enough to pay Mercedes prices for a Chevy Vega, who was really at fault?
It is perhaps telling that in the Q&A sessions at the various presentations by lawyers to MBO investors the focus is not on the merits of a legal challenge-but on the likelihood and costs of winning. Of course investors rarely let pride get in the way of money-driving up to the courthouse in their Chevy Vegas, with a crooked Mercedes Stern on the hood.
Thursday, 28 October 2010
The Blather of Lord Heseltine
In keeping with good government practice the Coalition government will abolish the Regional Development Agencies (RDA) and replace it with the new and improved Regional Growth Fund (RGF). The government has decided to drag out old the old warhorse Lord Heseltine to chair the panel responsible for distributing the RGF funds.
In an interview on his new role he started off by saying he didn't understand all the fuss surrounding the loss of 500,000 jobs in the Public Sector. These are, according to Lord Hes, the same jobs that would be lost through attrition and/or retirement. This might be true. If so however, either announcing cutting them is a farce, or he just happened to forget that the difference is that those 500,000 won't be replaced.
Skirting that issue he jumped into "The private sector will provide" refrain, coupled with the retort that relying on taxpayer's money in order to support the regions is "yesterday's language". Oh really. The RGF will provide a fund-out of either thin air, or more likely taxpayer's money-and then "make the best judgements available" in order to distribute it to the private sector?!
When asked how this supposed reliance on the private sector to drive the economy forward squared with his previous title of "Mr Intervention"-a title he gained for famously saying when in government in the 80's that he would intervene before breakfast, before lunch and after dinner if it meant supporting British industry-he gave the most political of answers-"All my political career, and actually before it, we have seen the transfer of wealth, decision making and power from the provinces to London".
Not quite the answer I was looking for, but then again, it is very difficult to combine intelligent thought with ideological blather. Just ask Mr Osborne-a man who has never worked a day in his life-smirk his way through the nonsense that these cuts were ever anything more than an unsubstantiated gamble predicated on a shallow understanding of Milton Friedman's and dislike of John Maynard Keynes.
In an interview on his new role he started off by saying he didn't understand all the fuss surrounding the loss of 500,000 jobs in the Public Sector. These are, according to Lord Hes, the same jobs that would be lost through attrition and/or retirement. This might be true. If so however, either announcing cutting them is a farce, or he just happened to forget that the difference is that those 500,000 won't be replaced.
Skirting that issue he jumped into "The private sector will provide" refrain, coupled with the retort that relying on taxpayer's money in order to support the regions is "yesterday's language". Oh really. The RGF will provide a fund-out of either thin air, or more likely taxpayer's money-and then "make the best judgements available" in order to distribute it to the private sector?!
When asked how this supposed reliance on the private sector to drive the economy forward squared with his previous title of "Mr Intervention"-a title he gained for famously saying when in government in the 80's that he would intervene before breakfast, before lunch and after dinner if it meant supporting British industry-he gave the most political of answers-"All my political career, and actually before it, we have seen the transfer of wealth, decision making and power from the provinces to London".
Not quite the answer I was looking for, but then again, it is very difficult to combine intelligent thought with ideological blather. Just ask Mr Osborne-a man who has never worked a day in his life-smirk his way through the nonsense that these cuts were ever anything more than an unsubstantiated gamble predicated on a shallow understanding of Milton Friedman's and dislike of John Maynard Keynes.
Tuesday, 26 October 2010
If I Were Chancellor of the Exchequer...
I was avoiding answering this question as I thought it would involve an inordinate amount of research to put together a comprehensive, and hopefully irrefutable answer. I have a tendency to be a bit too literal and so in this instance I was standing much in my own way.
For upon reflection I concluded that it was actually a very basic question amounting to either cutting the budget and thereby introducing a new austerity to Britain, or or to employ deficit spending by the government as a means of stimulating the economy until such time that economic growth achieved the critical mass to continue to grow without government intervention.
To answer the question I will split the world of economics into Monetarists and Keynesian's. Of course there are other variations, but if we concern ourselves with questions of monetary versus fiscal policy solutions to economic questions it will facilitate my answer.
To narrow the discussion down to this level requires answering some fundamental questions pertaining to the role of government, and theories of economics.
At a minimum I would maintain that governments are there primarily for four basic reasons: 1.)To protect the state from outside aggression; 2.)to ensure civil peace/obedience i.e. police and a legal framework; and 3.) to provide public services such as transportation, infrastructure, etc.
This is where the notion of political economics comes into play. The basic purposes of government as I have defined them have to be paid for. This means taxation, the fourth purpose. Any money taken in the form of taxes means that the private sector has less. Hence the question of fiscal policy and how taxation, the most basic form of government intervention effects the economy.
But there is still one more question or perhaps purpose to be queried. Is the government also responsible to introduce fiscal policies to promote employment, and if so, what is the fiscal policy/employment/inflation relationship?
The Keynesian's in the room would maintain that a mixed economy, predominantly private sector, but with a large role for government and the public sector is the correct route and that the introduction of massive spending cuts is the wrong choice.
The Monetarists would counter this maintaining that government interference in economics, especially in the creation of a massive budget deficit is anti-business and that the "crowding-out" effect of government debt supply would counteract any positive effects of government spending.
They-the Monetarists would have to explain how they wanted to get us out of the current "liquidity-trap" in which the Central Banks provide cheap funds to the banks who don't lend it on thus counteracting any positive effects of monetarist policy.
They would find this extremely difficult.
The private sector doesn't invest because there is either no current demand, or they don't foresee (rising) demand in the future. Of course they don't invest. There is no confidence, and cutting government spending by 25% to balance the budget, primarily at the expense of the public sector is a huge gamble. There has to be a distinction between benefits and the Public Sector.
As Chancellor I would introduce a massive overhaul of the benefits sector. Only those who truly can't work would continue to receive benefits. Everyone else would be made to fulfil some sort of work, even if it were just community service. I would also make cuts to the wealthy. Free Bus Passes, child benefit and other benefits such as winter fuel payments would have cut offs at income levels above £90,000. Strange but true I believe that marriage is a benefit to society, regardless of sexual preferences, and so households would be viewed, not individual working adults, despite the difficulties of means testing.
The Public Sector can be trimmed-it can always be trimmed, but only in conjunction with a viable growth program which will stimulate the private sector. I would establish a National Endowment to fund research and development in energy-all energy, including nuclear-with the stated goal to develop and manufacture in the UK. I would focus on infrastructure projects and would not sell off public assets such as the rights to run the Channel Tunnel.
Simply stated, all of the purposes of government as I have defined them require a functioning economy, and by that I mean a full-employment economy. It might mean that some parts of it are less profitable, that some parts could be more efficient. But it does not mean that the cheapest route is the best. It is not. I would go so far as to say that the pursuit of the cheapest is the problem, not the solution
For upon reflection I concluded that it was actually a very basic question amounting to either cutting the budget and thereby introducing a new austerity to Britain, or or to employ deficit spending by the government as a means of stimulating the economy until such time that economic growth achieved the critical mass to continue to grow without government intervention.
To answer the question I will split the world of economics into Monetarists and Keynesian's. Of course there are other variations, but if we concern ourselves with questions of monetary versus fiscal policy solutions to economic questions it will facilitate my answer.
To narrow the discussion down to this level requires answering some fundamental questions pertaining to the role of government, and theories of economics.
At a minimum I would maintain that governments are there primarily for four basic reasons: 1.)To protect the state from outside aggression; 2.)to ensure civil peace/obedience i.e. police and a legal framework; and 3.) to provide public services such as transportation, infrastructure, etc.
This is where the notion of political economics comes into play. The basic purposes of government as I have defined them have to be paid for. This means taxation, the fourth purpose. Any money taken in the form of taxes means that the private sector has less. Hence the question of fiscal policy and how taxation, the most basic form of government intervention effects the economy.
But there is still one more question or perhaps purpose to be queried. Is the government also responsible to introduce fiscal policies to promote employment, and if so, what is the fiscal policy/employment/inflation relationship?
The Keynesian's in the room would maintain that a mixed economy, predominantly private sector, but with a large role for government and the public sector is the correct route and that the introduction of massive spending cuts is the wrong choice.
The Monetarists would counter this maintaining that government interference in economics, especially in the creation of a massive budget deficit is anti-business and that the "crowding-out" effect of government debt supply would counteract any positive effects of government spending.
They-the Monetarists would have to explain how they wanted to get us out of the current "liquidity-trap" in which the Central Banks provide cheap funds to the banks who don't lend it on thus counteracting any positive effects of monetarist policy.
They would find this extremely difficult.
The private sector doesn't invest because there is either no current demand, or they don't foresee (rising) demand in the future. Of course they don't invest. There is no confidence, and cutting government spending by 25% to balance the budget, primarily at the expense of the public sector is a huge gamble. There has to be a distinction between benefits and the Public Sector.
As Chancellor I would introduce a massive overhaul of the benefits sector. Only those who truly can't work would continue to receive benefits. Everyone else would be made to fulfil some sort of work, even if it were just community service. I would also make cuts to the wealthy. Free Bus Passes, child benefit and other benefits such as winter fuel payments would have cut offs at income levels above £90,000. Strange but true I believe that marriage is a benefit to society, regardless of sexual preferences, and so households would be viewed, not individual working adults, despite the difficulties of means testing.
The Public Sector can be trimmed-it can always be trimmed, but only in conjunction with a viable growth program which will stimulate the private sector. I would establish a National Endowment to fund research and development in energy-all energy, including nuclear-with the stated goal to develop and manufacture in the UK. I would focus on infrastructure projects and would not sell off public assets such as the rights to run the Channel Tunnel.
Simply stated, all of the purposes of government as I have defined them require a functioning economy, and by that I mean a full-employment economy. It might mean that some parts of it are less profitable, that some parts could be more efficient. But it does not mean that the cheapest route is the best. It is not. I would go so far as to say that the pursuit of the cheapest is the problem, not the solution
Friday, 22 October 2010
So Much for the Vaunted Private Sector
There is an interesting battle going on regarding the foreclosure mess in the U.S. and the role of the Reston, Virginia based company Mortgage Electronic Registration Systems (MERS).
It is a wonderful example of efficiency in the private sector.
Traditionally the mortgage business in the U.S. was predicated on a clear understanding of who held title to a specific property. If a lender on a mortgage wanted to sell the lien they were required to fill in new forms and pay filing fees each time a loan changed hands.
This was a cumbersome process which had a benefit that the documentation to title would be scrutinized by the purchaser in their normal due-diligence procedures. It took time, and time is money in the world of high-finance. So the giants of the Mortgage industry including Fannie Mae, Freddie Mac, GMAC and the Mortgage Bankers Association got together and created MERS in 1995 to facilitate the trading of mortgages at speed, bypassing local property laws.
Efficiency. The use of electronic systems to track mortgages as they were traded between firms in the creation of Mortgage Backed Securities (MBS) at lightning speed. As long as everything was going up there were no problems.
Now prices are declining, and the cracks begin to appear. MERS was created to smooth the securitisation process, and to allow lenders to avoid paying registration fees. Cost savings. What is not clear in this cost-saving efficency machine is if MERS is an agent or a principal.
This is a very important distinction. Apparently you can't be both, and yet being only one could be a real problem. An agent can't list itself as a principal. MERS states cleary that it is an agent-it was created as such. And yet it lists itself as a mortgagee. An agent doesn't hold title so in it's role as an agent it doesn't actually own the loan. Acting as an agent and as a principal could be contravening a precedent which states that you cannot separate the loan from the mortgage, and to do so makes the mortgage null and void. Null and void.
And in this case, although the borrower still owes the money, the mortgage can no longer be enforced-the house cannot be foreclosed on, and, my favorite, the house could be sold without paying off the mortgage as the borrow retains title!
Of course the lender can sue the borrower, and will. But most of the homeowners in question are financially distressed, and as the old saying goes, you can't reach into a naked man's pocket...
And the efficiency goes further. As MERS began submitting affidavits in foreclosures signed by "vice presidents" of the firm it turned out that the vice presidents had never seen the files as the affidavits stated they had. Even better, MERS allowed financial institutions that are its members to name anyone a vice president so none of these people actually worked for MERS.
And you wonder why our financial system needed to be bailed out by TARP.
It is a wonderful example of efficiency in the private sector.
Traditionally the mortgage business in the U.S. was predicated on a clear understanding of who held title to a specific property. If a lender on a mortgage wanted to sell the lien they were required to fill in new forms and pay filing fees each time a loan changed hands.
This was a cumbersome process which had a benefit that the documentation to title would be scrutinized by the purchaser in their normal due-diligence procedures. It took time, and time is money in the world of high-finance. So the giants of the Mortgage industry including Fannie Mae, Freddie Mac, GMAC and the Mortgage Bankers Association got together and created MERS in 1995 to facilitate the trading of mortgages at speed, bypassing local property laws.
Efficiency. The use of electronic systems to track mortgages as they were traded between firms in the creation of Mortgage Backed Securities (MBS) at lightning speed. As long as everything was going up there were no problems.
Now prices are declining, and the cracks begin to appear. MERS was created to smooth the securitisation process, and to allow lenders to avoid paying registration fees. Cost savings. What is not clear in this cost-saving efficency machine is if MERS is an agent or a principal.
This is a very important distinction. Apparently you can't be both, and yet being only one could be a real problem. An agent can't list itself as a principal. MERS states cleary that it is an agent-it was created as such. And yet it lists itself as a mortgagee. An agent doesn't hold title so in it's role as an agent it doesn't actually own the loan. Acting as an agent and as a principal could be contravening a precedent which states that you cannot separate the loan from the mortgage, and to do so makes the mortgage null and void. Null and void.
And in this case, although the borrower still owes the money, the mortgage can no longer be enforced-the house cannot be foreclosed on, and, my favorite, the house could be sold without paying off the mortgage as the borrow retains title!
Of course the lender can sue the borrower, and will. But most of the homeowners in question are financially distressed, and as the old saying goes, you can't reach into a naked man's pocket...
And the efficiency goes further. As MERS began submitting affidavits in foreclosures signed by "vice presidents" of the firm it turned out that the vice presidents had never seen the files as the affidavits stated they had. Even better, MERS allowed financial institutions that are its members to name anyone a vice president so none of these people actually worked for MERS.
And you wonder why our financial system needed to be bailed out by TARP.
Thursday, 21 October 2010
Is the Public Sector the Golden Goose?
I saw today that the Province of Alberta is considering tinkering with the National Health Care System by introducing "for profits" providers into the mix.
The biggest complaint by Albertans is the length of the waiting lists for major operations for conditions which aren't life threatening such as knee replacements.
Quite how introducing profit-based providers into the public health system is going to improve this problem is beyond me. The usual laissez-faire chant is "efficiency, efficiency, efficiency". It is true that wastage exists in the public sector. It is also true that wastage takes place in the private sector.
What generally happens is when things are going well the amount of careless spending increases. Contracts or subscriptions aren't cancelled although the services provided are no longer needed. Suppliers are not reviewed to insure they are still delivering value for money. It all adds up and what seemed like a pittance in times of plenty suddenly becomes outrageous when times are tough.
So we get the $400 hammer or the £10 pencil in the public sector, as if they didn't occur in the private sector. The belief in the invisible hand of the market to ensure that such "inefficiencies" don't happen in the private sector is garbage. Of course they do. They just don't come under the same scrutiny as the public sector, and it is strange how the invisible hand of the market is easily transformed into the visible hand of the manager. .
In the U.K. the billionaire Sir Philip Green is contracted by the Conservative/LibDem government to write a report on the amount of wastage in the public sector. And then we are supposed to be surprised by his findings highlighting waste at every corner.
My favourite is the attack on the cost of telecommunications. IT is one of the most expensive items in any budget. The providers are essentially an oligopoly. They employ one of the most simple tricks in the book. They offer their hardware below cost, but only in conjunction with long term service contracts. Changing contracts is incredibly expensive. Mr Green can easily show where he could get a cheaper provider. But does he factor in the cost of breaking contracts? Of replacing old hardware?
It is really a question of management, or more specifically of that incredibly rare commodity, good management. This is a problem in both the public and the private sector. Stringent attention to cost control is a prerequisite regardless of the state of the economy and whether the institution in question is in the for-profit or non-profit sector.
It would be a step in the right direction to force private sector companies to declare that part of their business which comes from the public sector, and the profit margins they generate. The private sector company selling a $5 hammer for $400 is not an innocent bystander in this.
The biggest complaint by Albertans is the length of the waiting lists for major operations for conditions which aren't life threatening such as knee replacements.
Quite how introducing profit-based providers into the public health system is going to improve this problem is beyond me. The usual laissez-faire chant is "efficiency, efficiency, efficiency". It is true that wastage exists in the public sector. It is also true that wastage takes place in the private sector.
What generally happens is when things are going well the amount of careless spending increases. Contracts or subscriptions aren't cancelled although the services provided are no longer needed. Suppliers are not reviewed to insure they are still delivering value for money. It all adds up and what seemed like a pittance in times of plenty suddenly becomes outrageous when times are tough.
So we get the $400 hammer or the £10 pencil in the public sector, as if they didn't occur in the private sector. The belief in the invisible hand of the market to ensure that such "inefficiencies" don't happen in the private sector is garbage. Of course they do. They just don't come under the same scrutiny as the public sector, and it is strange how the invisible hand of the market is easily transformed into the visible hand of the manager. .
In the U.K. the billionaire Sir Philip Green is contracted by the Conservative/LibDem government to write a report on the amount of wastage in the public sector. And then we are supposed to be surprised by his findings highlighting waste at every corner.
My favourite is the attack on the cost of telecommunications. IT is one of the most expensive items in any budget. The providers are essentially an oligopoly. They employ one of the most simple tricks in the book. They offer their hardware below cost, but only in conjunction with long term service contracts. Changing contracts is incredibly expensive. Mr Green can easily show where he could get a cheaper provider. But does he factor in the cost of breaking contracts? Of replacing old hardware?
It is really a question of management, or more specifically of that incredibly rare commodity, good management. This is a problem in both the public and the private sector. Stringent attention to cost control is a prerequisite regardless of the state of the economy and whether the institution in question is in the for-profit or non-profit sector.
It would be a step in the right direction to force private sector companies to declare that part of their business which comes from the public sector, and the profit margins they generate. The private sector company selling a $5 hammer for $400 is not an innocent bystander in this.
Wednesday, 20 October 2010
Who's Driving this Bus?
We recently had a long discussion about capitalism and socialism. The youthful representative presented the idea that they both wanted the same thing-to provide for the people- with two major differences. Socialism ends up not providing, and capitalism ends up only providing for the few.
It made me think of a conversation I had with a Chinese investment banker who had originally worked for the Central Bank of the People's Republic and then came to work for a French bank.
As we strolled down Tiananmen Square, shadowed by state security agents who followed us everywhere despite the fact that it was 2007, I asked him what he thought Mao would think of modern China in its new capitalist version. He paused for a moment and then said, "Mao would have been surprised by the methodology, but in the end modern China was achieving what Mao had striven for."
I looked around me as I stood in line to file past Mao's preserved corpse; to the west the parliamentary building, to the east the Chinese National Museum, and to the north the Forbidden City. Old China and Modern China. Walk in any direction and you will come to the first ring road, then the second, the third...they are up to the 9th. Each one appears to replicate what was inside the previous ring, until you reach the countryside.
It is bleak. Essentially a desert, although man-made. The air is terribly polluted. The water supplies are rapidly being depleted. And there is a massive gap between the rich and poor.
So capitalism as an economic approach is bringing China into the 21st century, where socialism/communism didn't. The constant is totalitarianism as a political system.
To be fair the political elite in China is very concerned about the plight of the masses-they have to be. Social stability is a prerequisite for them to remain in power.
Theoretically the political elite in a democracy is put in place by the masses who presume their politicians will then institute programs for the benefit of those who voted for them.
Except once they get elected and start to implement policies the electorate recently has decided to voice their displeasure.
Its interesting how the totalitarians are worried about social unrest, while the western democracies response to the financial crisis seems to be inviting it.
It made me think of a conversation I had with a Chinese investment banker who had originally worked for the Central Bank of the People's Republic and then came to work for a French bank.
As we strolled down Tiananmen Square, shadowed by state security agents who followed us everywhere despite the fact that it was 2007, I asked him what he thought Mao would think of modern China in its new capitalist version. He paused for a moment and then said, "Mao would have been surprised by the methodology, but in the end modern China was achieving what Mao had striven for."
I looked around me as I stood in line to file past Mao's preserved corpse; to the west the parliamentary building, to the east the Chinese National Museum, and to the north the Forbidden City. Old China and Modern China. Walk in any direction and you will come to the first ring road, then the second, the third...they are up to the 9th. Each one appears to replicate what was inside the previous ring, until you reach the countryside.
It is bleak. Essentially a desert, although man-made. The air is terribly polluted. The water supplies are rapidly being depleted. And there is a massive gap between the rich and poor.
So capitalism as an economic approach is bringing China into the 21st century, where socialism/communism didn't. The constant is totalitarianism as a political system.
To be fair the political elite in China is very concerned about the plight of the masses-they have to be. Social stability is a prerequisite for them to remain in power.
Theoretically the political elite in a democracy is put in place by the masses who presume their politicians will then institute programs for the benefit of those who voted for them.
Except once they get elected and start to implement policies the electorate recently has decided to voice their displeasure.
Its interesting how the totalitarians are worried about social unrest, while the western democracies response to the financial crisis seems to be inviting it.
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