Month / October 2017

by Andrew

The 1917 October Revolution lives on in China

Here in late October 2017, I am reading a lot about the centennial of the 1917 revolution in Russia, and a lot about the 19th Communist Party Congress in China. It seems strange to me that the connection between these two events is not being discussed more.

Surely it is obvious? The most consequential and long-lasting geopolitical legacy of the 1917 revolution in Russia has to be that in 2017 China is still governed by the Communist Party. And yet this fact is glossed over in a lot of the current discussion about the meaning and legacy of the October Revolution. I was struck by the fact that, in Sunday’s special issue of the New York Times Book Review on the revolution, not one book about China was reviewed.

In Russia today, the 1917 revolution hardly seems like a live issue. Shaun Walker has a nice piece in The Guardian pointing out how ambivalent the current government is about embracing the October Revolution, and how it is not being officially celebrated:

Putin has been equivocal in his statements on the revolution but has made it clear that his main issue is the violent seizure of power undertaken by the Bolsheviks. Putin has fetishised the sanctity of statehood, however distasteful the ruling regime may be: whether it be in modern-day Kiev or Damascus, or in tsarist Russia.

“When we look at the lessons from a century ago, we see how ambiguous the results were, and how there were both negative and positive consequences of those events,” said Putin this week, coming back to a thought he has expounded on many times before. “We have to ask the question: was it really not possible to develop not through revolution but through evolution, without destroying statehood and mercilessly ruining the fate of millions, but through gradual, step-by-step progress?”

This, ultimately, is the key message from the Kremlin as the anniversary approaches. Monarchists and the ultra-Orthodox are free to idolise Nicholas II; communists and nostalgics are free to look back on the Bolsheviks as the harbingers of a new civilisation, but state collapse and violent protests are always to be condemned.

Cut to China, where the government is sponsoring the publication of a nice new edition of Lenin’s Collected Works to commemorate the centennial of the revolution, and the government is proudly wrapping itself in the flag of socialism.

LeninWorks-Chinese

Top propaganda official Liu Qibao in September gave a fascinating speech to a meeting commemorating the anniversary of the 1917 revolution, which has recently been officially translated into English. I actually think the whole thing is worth reading, but here are a few excerpts to give a taste:

The October Revolution brought Marxism-Leninism to China. After the First Opium War (1840-1842), China was gradually reduced to a semi-colonial and semi-feudal society and the Chinese nation was plunged into deep suffering. … The October Revolution ignited a new hope for realizing national independence and people’s liberation.

… A century ago, China was poor and weak, and it was bullied by big powers. Since then, our country has gone through many setbacks and hardships before rising up and achieving glory. The Chinese nation has undergone unprecedented changes — from standing up to prospering and strengthening to establishing its position amongst nations of the world.

Never in history have we been closer to the goal of the great renewal of the Chinese nation, and never in history have we had greater confidence and capability to realize this goal. This tremendous change is attributed to the fact that we have chosen the path of socialism which was opened up by the October Revolution…

The epoch-making historical feat of the October Revolution and the major achievements of the Soviet socialism system cannot be negated by dissolution of the Soviet Union. The reasons behind the Soviet breakup are many, including rigidity and conservatism; yet, the root cause was its turning away from Marxism-Leninism and from the socialist path created by the October Revolution.

China’s Communist Party is therefore saying, in so many words, that because of the failure of the Soviet Union, the true legacy of the 1917 revolution today is to be found in China. This of course is propaganda, but it is also in some sense actually true.

It may be even more true than the Party would like to admit. Although the Soviet Union officially recognized the Nationalist government during China’s civil war, it also quietly put its thumb on the scales to support the Communists during their campaign to capture Manchuria. And it was fear of provoking the Soviet Union that kept the US from intervening more decisively to support the Nationalists. Arguably, the Communist victory in the civil war would have been impossible without this implicit backing of the Soviet Union (see my previous post on this history for more detail).

Because of China, it seems like the question of the legacy of the 1917 revolution is still very much a contemporary one, rather than something that can be relegated to the history books.

by Andrew

SDR inclusion as commitment device

Chinese central bank governor Zhou Xiaochuan recently gave an interview to Caijing magazine, on the occasion of the first anniversary of the renminbi’s inclusion in the currency basket for the IMF’s Special Drawing Right, or SDR, alongside the dollar, euro, pound and yen. This obscure piece of financial infrastructure improbably dominated the headlines for a while, as China waged a public campaign for inclusion. But most people could not figure out why SDR inclusion meant so much to China, and in the end the world seemed to decide that it was mostly a symbolic victory in China’s quest for global status. We haven’t heard much about the SDR since.

Zhou, though, still seems to think that SDR inclusion was a big deal. And since he has for decades been one of the main figures driving the modernization of China’s financial system, his track record is not that of someone who just pursues empty pieces of symbolism. Zhou is already past the normal retirement age and probably will not be in office this time next year, so SDR inclusion is part of his legacy. In the long interview (Chinese text here), he gives what I think is quite a revealing justification:

The entry of the renminbi into the SDR basket will produce a “ratcheting effect” for China’s opening up. This is like the ratchet on the rope in a volleyball net; when the net is tightened the ratchet latches on to the rope, so once it is set in position it cannot go back, cannot reverse. In English there is an expression, “past the point of no return.” Of course, in economics and society there is no absolute “ratchet,” I don’t mean that it’s absolutely impossible for there to be a reverse, just that it is very difficult.

In China’s reform and opening up process, whether in attracting foreign investment, liberalizing foreign trade, reforming the exchange rate, entering the WTO, etc, there were often some small reversals in the middle, or kind of a stop-and-go. But once we took that step, it was very difficult to go back.

After the renminbi entered the SDR, both international institutions and financial markets are using the renminbi more and more; international investors are using the renminbi to invest in the domestic financial market; laws and regulations have been revised; traders and exporters are all using new procedures. If you want to go backward, it is difficult, and the costs are high.

Perhaps another way of putting this is that SDR inclusion is a commitment device. In addition to the practical concerns raised by Zhou, there would also be reputational costs to reversing exchange-rate and capital-account reforms. Since SDR inclusion is contingent on the IMF’s determination that the renminbi is “freely usable,” it could conceivably be reversed if the currency were to stop being freely usable. What future Chinese central bank governor will want to see headlines screaming “IMF expels renminbi from SDR”?

Of course, China over the past year has in fact been de-facto tightening capital controls by stepping up scrutiny of overseas M&A and slowing down approval of foreign-exchange transactions. But it has done so largely by using its regulatory discretion rather than changing formal rules. So perhaps the commitment device is working some.

It is telling though that this justification for SDR inclusion is about consolidating and defending past reforms, rather than advancing new ones, though Zhou clearly wants to see those as well.

Lagarde-Zhou

Christine Lagarde and Zhou Xiaochuan in 2016

 

by Andrew

What I’ve been listening to lately
    • Sun Ra Arkestra – Live in San Francisco. I caught the closing night of the Arkestra’s summer residency in SF, and it was, of course, great. Although I know the Sun Ra repertoire very well, the show was constantly surprising: for instance, “Tapestry from an Asteroid” was enlarged from its original incarnation as a two-minute instrumental miniature to a long, dreamy jam with (newly added?) lyrics. The 93-year-old Marshall Allen continues, amazingly, to lead the band from the stage. His saxophone playing is somewhat diminished, and is now mostly an avant-garde special effect–squawking and screaming while pawing at the keys. But he deploys it in very effective contrast to the more swinging horn section and the ferocious groove from the expanded rhythm section.
    • Augustus Pablo – Africa Must Be Free By 1983 Dub. The dub version of the 1978 Hugh Mundell album is arguably better than the original. In any case it’s another minimalist instrumental reggae masterwork by Pablo.
    • Sweet As Broken Dates: Lost Somali Tapes From The Horn Of Africa. This amazing new reissue landed at the right time for me, just as I was going back to another African treasure, the moody Ethiopian jazz of Mulatu Astatque. There’s been plenty of good writing on the historical context of these recordings; the music itself is fresh and fascinating.
    • Minutemen – What Makes A Man Start Fires. This album (half of the Post-Mersh Vol. 1 compilation), which I had somehow missed hearing before, is a predecessor and a worthy runner-up to their great epic Double Nickels on the Dime. Decades later, the Minutemen’s punky, jazzy miniatures still sound like nothing else in popular music, and the Watt-Hurley partnership remains one of the great rock rhythm sections.

 

by Andrew

Hong Kong’s war of attrition against street hawkers

I enjoyed Christopher DeWolf’s Borrowed Spaces: Life Between the Cracks of Modern Hong Kong, the latest installment I read in the Penguin Hong Kong series. It’s a nice piece of reportage that helps fill in the little-known (to me anyway) history of street life and informal urban structures in Hong Kong.

The book is particularly good at providing an alternative perspective on how Hong Kong’s government actually works. To anyone who has spent time in Hong Kong, the idea that it has the world’s freest economy (as the Heritage Foundation perennially tells us) is just patently, obviously untrue. But even so I was fairly shocked to discover that the government has for decades been actively trying to get rid of the small-scale retail entrepreneurs known as street hawkers:

For years, activity in the streets of Hong Kong was only loosely regulated, but by the 1970s, the government decided it was time to assert more control. The theory at the time was that, as cities transitioned from “third world” to “first world,” such informal uses of urban space would dwindle as the economy developed and people became wealthier. One day, the reasoning went, there would no longer be any need for hawkers, dai pai dong, squatter villages or anything of the sort.

In light of this argument, the Hong Kong government opted for a policy of elimination through attrition. Squatter villages were frozen in place, their residents prohibited from expanding their homes until they could be replaced with public housing estates. Street hawkers were licensed and regulated.  …

The catch was that, while hawkers were still allowed to ply their trade, their licenses were made exceptionally hard to transfer. Even today, when a licensed hawker dies, his or her license can only be transferred to a surviving spouse. The intent was to eventually eliminate all street hawker stalls, and this 1970s-era policy is now well on its way to achieving that goal. In 2015, there were just 6,133 licensed hawkers in Hong Kong; another 1,440 work illegally.

The biggest markets are thriving, including the always busy meat, seafood, fruit and vegetable stalls around Nelson Street and Canton Road, but many of the secondary markets are withering away – not for lack of business, but because the government is actively relocating stalls and buying back hawker licenses in order to clear the streets. Between 2013 and 2015, a total of 481 hawkers surrendered their licenses. …

It is hard not to notice that shrinking opportunities in this part of the economy have coincided, at least, with the general decline in entrepreneurship and social mobility:

The crackdown on informal life isn’t necessarily responsible for the persistent inequality and decline of social mobility in Hong Kong, but there’s a case to be made that it has exacerbated the situation by denying people access to affordable products and the ability to become entrepreneurs.

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