COFFEE & BISCUITS

I want to share a few things in the paper today that evoke strong reactions from me:

1. “The Apple in His Eye“
This article talks about the significance of Steve Jobs’ role in the innovation of Apple products, including the Ipad. The greatness of Apple’s products lies in that they are “edited products that cut through complexity, by consciously leaving things out — not cramming every feature that came into an engineer’s head, an affliction known as ‘featuritis’ that burdens so many technology products.” This observation recalls to my mind all these mp3 players that I saw being sold in HK. Even as they tried to mimic the outward appearance of Ipods, the programs in the ipod-look-alike players are saddled with many programs, which not only burdened the capacity of the gadget, but in the end, has a high probability of being dysfunctional. Also, this observation recalls to my mind Google’s layout — also simple and functional (by the way, I noticed that Baidu’s layout is conspicuously like Google’s).

Finally, I really identify with the following quote from Steve Jobs on style:

Great products, according to Mr. Jobs, are triumphs of “taste.” And taste, he explains, is a byproduct of study, observation and being steeped in the culture of the past and present, of “trying to expose yourself to the best things humans have done and then bring those things into what you are doing.”

I had written in previous entries about my love for looking at beautiful things (I use beauty and style interchangeably). So I have often wondered myself, why is it that as with age I increasingly appreciate looking at beautiful things. The above passage in NYTimes puts my fascination into words. The appreciation of beauty and style does require periods of STUDY. And looking at it does make my heart go soft with admiration with the human capability. (Note that this is different from say, trying to make MYSELF beautiful; all I am talking about is my fascination with LOOKING at beautiful things…eventually, things that I would have the resource to collect)

2. Thomas Friedman’s column “Never Heard That Before“
I have always found Friedman’s columns and books to be exaggerating, shallow, and alarmist. He is the quintessential sensational journalist, following wherever the wind blows (high noise). It’s unfortunate how much clout he holds in public opinion. While I would dismiss his usual writings, his column today sounds off alarm in my head as I ponder the possibility that it could be true (what makes it true is if many people think it’s true). He wrote that in Davos forum, delegates from Europe and Asia are asking if the United States is experiencing political stability. Furthermore, he received this question: “Is the ‘Beijing Consensus’ replacing the ‘Washington Consensus’?”

Ring – Ding – Ding- DINGGGGGG!!!!! Okay, that’s pause with that question right there. If that does not send chills down your spine, it does to mine. Here is Friedman’s explanation of the Beijing Consensus:

The Beijing Consensus, says Bennhold, is a “Confucian-Communist-Capitalist” hybrid under the umbrella of a one-party state, with a lot of government guidance, strictly controlled capital markets and an authoritarian decision-making process that is capable of making tough choices and long-term investments, without having to heed daily public polls.

Let me explain why I am so agitated from reading this question. Lately I have been having heated debates with some friends (and parents) regarding China’s economic policy. The debates usually get “heated” because the victimization and nationalistic tone of a typical Chinese (even Chinese Americans) would take on upon hearing criticisms of the Chinese government really ticks me off. As I try to be objective by pointing out how the Chinese leadership violates international commercial law and affects other developing countries, a typical Chinese / Chinese American would take on the argument in this way: If the Chinese Government is lifting 500 million above poverty, I don’t care if it is the Mexicans who are hurt. Then I would point out what I think is the core of the issue: it is that by cheating the international community, China would risk shutting down the international trade channel (as well as other, such as constructive dialogue), which would reduce the economic pie (as Econ 101 would teach you) and everybody lose, including China. Inevitably, the person I would have this debate on (who usually don’t have economic training but think that they know the issue) would not try to understand this explanation and continue with the victimization tone (“China had been bullied by the West 100 years ago…”) But let me not go into details on that one.

Anyway, back to the Beijing Consensus. What is really alarming to me is, if China’s economic growth based on its growth model at this time would lead short-sighted national leaders of developing country to consider resorting to one-party, authoritarian rule.

If national leaders started thinking that China’s political model and growth is the magic formula to growth in their country, we now have a justification for cracking down on human rights.

I don’t want to talk about politics nowadays because I realize that it alienates people and we never compromise. But somethings NEED to be talked about because it is very important. In this case, I felt that the increasing “successful” Chinese economic regime has become a justification for the existence of political oppression. I am happy that China’s economic growth has improved the lives of so many Chinese people, but I am also deeply troubled by how their growth experience would lead to the spread of their political doctrine to the rest of the developing world, who is still trying to figure out their growth formula.

Another reason why I am agitated is that I seriously question why newspapers nowadays constantly scream that “the power is shifting to the East,” as if it’s a foregone conclusion. I am stunned by the short-sightedness of pundits and politicians. This is mad hysteria. Of course, I don’t believe this is the truth. Here is why: China runs only a partly capitalistic system. In key area, it is still a command economy. For example, in the lending area. When the government wants to heat the economy up, it tells local government and banks: Here is your quota for production and lending, now go do it. And the local government and banks would do as they were bidden. Do you see the problem here? Recall what happened in the socialist production system? The result is a bunch of low-quality goods, many dysfunctional. In today’s Chinese economy, there might be more complicated economic products, such as financial loans. But the result is still the same: crappy loans. Bad quality loans. Another characteristic of the economy system due to the one-party system? Limited information and corruption (due to lack of check and balance). As outsiders, we do not know the bad stuff that is going on within that country because the media is not allowed to talk about it. But you can be sure that something bad is brewing. In Charles Kindleberger’s Financial Manics and Crashes, he reviews the financial crises in history dating back to several centuries ago. A common feature of Crashes is that the seed from them is laid during good times, and then as times went bad, there would be an eruption of news about corrupt company. Even in a country of mostly free information such as US, Enron took awhile to get out. In a country such as China, you can bet that something similar will come out some day. In the past year the government showered liquidity in its economy (the seed of trouble). You may see growth now, but I predict that something bad will inevitably leak out eventually and send shock waves to foreign investors.

Finally, I want to make a point about what constitutes “power shift” in economics term. Is it by the absolutely about of GDP figure? Or by the growth percentages? While people are amazed by the production power and figures, I ask, who is buying Chinese products? My answer: China and US are partners in crime. The Chinese government should be grateful to the low saving rate of the Americans for keeping them in power. It is the American consumerism that fuels the export growth in China (and export growth is what fuels its production figure). It takes 2 to tango. It is wrong to say that America alone caused the Financial crisis, because China also caused it. It caused it by keeping its exchange rate artificially low and fixed to the US dollar by avaricely buying up US Treasuries, allowing the US interest rate to be so low (in the mean time, the US government happily continues to spend), and consequently fueling world wide loose liquidity since 2002.

Conclusion: Okay, I see that growth is high in China while it is dismal in the rest of the developed world. Also, just because in this financial crisis, China is still having a high growth rate and the West is not — does not mean that the power has shifted. Economic growth is intimately related to the political system. Without checks and balance, without freedom of information, without a truly invisible hand, China will just remain a volatile, and unsustainable growth example that is a shining star for a brief moment.

If China is in a world of itself, it’s fine, because then the bad consequences will just be limited to itself. But its action affects the world (of course in both positive and negative way…but in this post, I am focusing on the negative), and it needs to be responsible for it. At least, recognize its responsibility and stop being arrogant.

One last point, and on a personal note: I may sound like a China hawk in this post, but let me say that I am not your typical china-bashing, imperialistic or brainwashed, Western observer who just want to see China wither. No — an emphatic NO. Several years ago (2001), when I was still in college, I was an enthusiastic student of Chinese history, political science, and economy. China has not even entered WTO then. There was so much possibilities for it to finally lay off its decades of humiliation by rising in the world. Then, I read a book written by Nicholas Lardy and it is titled “Integrating china into the World Economy.” The book placed China is a positive light, discussing how China is such a responsible player in the world economy, reducing tariffs earlier than it was supposed to. I was proud. China was playing according to rules of the world economy, being a cooperative player. Several years later, what I saw is: China has cheated its way to growth, and now being arrogant about its short run success. Readers of Chinese history probably knew that in previous dynasties of China, whenever foreigners conquerors conquered China, they would be willingly absorbed by the Chinese way of doing things (rather than the other way around). It seems that this is the expectation of how things should be conducted in China nowadays. I find myself much less hopeful for this country than 9 years ago.