Saturday, May 5, 2018

  As the Chinese plan to make life better for
  their grandchildren, Trumpworlder's ardently
  struggle to make America second-rate again

The Goal of a Moderately Prosperous Society (Xiaokang society)

The Chinese text in the picture above is from the Shijing (Classic of Poetry), the oldest existing collection of Chinese poetry comprising 305 works dating from the 11th to 7th centuries BC.  Within it is the Confucian ode “Min lao” written in the 9th century B.C. Here is a translation of the "Min lao" with an interpretation in the 2017 review Yearning for the Lost Paradise: The “Great Unity” (datong) and its Philosophical Interpretations:

The people indeed are heavily burdened,
But perhaps a little ease (xiaokang) may be got for them.
Let us cherish this centre of the kingdom,
To secure the repose of the four quarters of it.
Let us give no indulgence to the wily and obsequious,
In order to make the unconscientious careful,
And to repress robbers and oppressors,
Who have no fear of the clear will (of Heaven).
Then let us show kindness to those who are distant,
And help those who are near;
Thus establishing (the throne of) our king.

    This ode shows a clear political message:

  1. the masses resort to a moral leadership (“cherish this centre of the kingdom”) that will 
  2. guide them to a peaceful era of social redistribution (“a little ease may be got for them”);
  3. this is the conduct to be followed both for the homeland and internationally (“show kindness to those who are distant, and help those who are near”); and
  4. this conduct will be a model for the world at large (“establishing the throne of our king”).

In January Jung-kyu Kim, director of ACA Investments, a Pan-Asian private equity firm headquartered in Singapore, wrote an article Why Does China Pursue a “Moderately” Prosperous Society? in which he noted:

    In his New Year address, Chinese President Xi Jinping reiterated his commitment to “building a Moderately Prosperous Society in all aspects.” As far as I can tell, no Western media made a note of this comment. Come to think of it, Xi’s address at the 19th National Congress, delivered on October 18, 2017, was also called “Secure a Decisive Victory in Building a Moderately Prosperous Society in All Respects.” In the speech Xi mentioned a Moderately Prosperous Society no less than 15 times. It was all over Chinese headlines, even though hardly any outside observer commented on it. What is going on?
    The little-mentioned term is in fact the key to understanding the contradiction lying at the heart of the Chinese Communist Party.

Indeed! What is going on when hardly any outside observers bother with what the President of the most populous nation with the worlds largest economy says in a speech? Unfortunately, the problem is that those in the North Atlantic/Mediterranean oriented Western press are basically ignorant of Asia, they have no sense of Chinese history (effectively the oldest continuing culture in the world), and they don't have any idea what has happened within Chinese government since the end of the third quarter of the 20th Century.

Chinese leader Deng Xiaoping used the terms Xiaokang society in 1979 as the eventual goal of Chinese modernization. Tell that to an American, even a reporter working for the mainstream media, and 99-in-100 would respond "who?" And that's a problem because those odds of recognizing that name wouldn't be much better in the Trump White House and I'm not sure they would have been much better in the Obama Administration.

Jung-kyu Kim was right, of course, when he said of "moderately prosperous society" that "the little-mentioned term is in fact the key to understanding the contradiction lying at the heart of the Chinese Communist Party." But it goes much further than that. For any nation, it is the key to effectively competing with 21st Century China.

So let's go back to that last quarter of the 20th Century when the plan for the current economic success of China was established. If you need to identify a person who brought about the late-20th Century change it was Deng Xiaoping. After Chairman Mao's death, Deng led his country through far-reaching market-economy reforms. But here is where it helps to understand the structure of Chinese government as explained in the previous post.

Beginning soon after Mao's death Deng served five years as Chairman of the National Committee of the Chinese People's Political Consultative Conference and Vice Chairman of the Communist Party of China. He then served eight years Chairman of the Central Military Commission of the state and Chairman of the Central Military Commission of the Party.

And yet, at no time was Deng President or Premier or Party Chairman.

Two years after his official retirement during his January and February of 1992 “Southern tour” to Guangzhou, Shenzhen, Zhuhai and Shanghai - the pioneering provinces and cities which led China's economic reforms,  Deng explained he did not believe that the market economy was synonymous with capitalism or that planning was synonymous with socialism.

He said, "planning and market forces are not the essential difference between socialism and capitalism. A planned economy is not the definition of socialism, because there is planning under capitalism; the market economy happens under socialism, too. Planning and market forces are both ways of controlling economic activity".

While embracing the move to open the economy to market forces might have been a good idea, the biggest problems with Capitalism - significant economic inequality, corruption, greed - rapidly appeared. China's current strategy is to continue with a mixed economy while tightening up on the the Finance, Insurance and Real Estate (FIRE) sector's corruption and greed through financial regulation and criminal prosecution plus finding ways to mitigate economic inequality.

Still, current Chinese President Xi Jinping has continued to embrace the goal of a moderately prosperous society or the three millennia old ideal of xiaokang for the people. According to President Xi Jinping, China's development model will be driven by “innovation, co-ordination, green, openness and sharingĖ® known as the Five Major Development Concepts.

Explaining the Five Major Development Concepts in detail would require at least five very long boring posts. Instead, here are links to five half hour TV news pieces on YouTube created for state-owned China Central Television by Robert Lawrence Kuhn who you probably don't know but can read about on Wikipedia. These videos can give you a sense of China's economic situation and plans.
[To learn more about China, its history and culture, watch the six episode The Story of China at]

If the lack of coverage of Xi's New Year's Speech is puzzling, the failure of the Western press to cover the 2018 Boao Forum for Asia Annual Conference is troubling.

The Boao Forum for Asia Annual Conference and the American press

As everyone knows this year's very significant The Boao Forum for Asia Annual Conference was being held in the second week of April. You didn't?'s not entirely your fault if you don't know about The Boao Forum for Asia.

There was almost no news coverage in the American press. To make matters worse Bloomberg dismissively said "Boao Forum for Asia, China’s answer to Davos." Actually, no, that misrepresents the truth.

Proposed in 1998 by Fidel V. Ramos, former President of The Philippines, Bob Hawke, former Prime Minister of Australia, and Morihiro Hosokawa, former Prime Minister of Japan, The Boao Forum for Asia (BFA), a nongovernmental and nonprofit international organization with a fixed conference date similar to "Davos", was formally inaugurated on February 27 2001.1

China is not Asia. Yes, Boao, Hainan Province, China serves as the permanent site of BFA Headquarters. Since 2002, BFA has been holding its annual conference at Boao. But it isn't China's version of anything. With that said, China is the largest economy in the world. So when China shifts its economic policy the Boao Forum Annual Conference will focus on the implications.

Ironically, among all the foreign news outlets and financial news outlets stories was a New York Times story with the headline Xi Jinping Promotes Openness at a China Forum Rife With Restrictions. In that story the prejudiced correspondent wrote:

    Yet even as Ms. Lagarde and Mr. Xi talked about that openness, forum attendees were unable to use Google, log on to Facebook or post to Twitter about the event unless they found a way to bypass China’s army of internet censors. In fact, aspects of the forum stand in stark contrast with the many ways China remains closed and intransigent.

In fact at that very time the story on the front page of every newspaper in America was about Facebook CEO Mark Zuckerberg's appearance before the House Energy and Commerce Committee on the matter of Facebook allowing both foreign nations and both commercial and political marketing sites access to the personal information of most users, presumably including the writer of the NYT story. There is more than a small amount of weirdness that she would choose to complain about not being able to "log on to Facebook" because the Chinese government regulates it while the U.S. government, which created the basic internet technology, permitted Russians to influence our elections through Facebook and other internet sites.

The Agenda of the 2018 Forum indicates the depth of discussion and opportunities for learning about the future of the world's economy from an Asian view:

Consider the three agenda items at the left below from among the many. Each offers a distinction between how the Chinese are viewing the future versus how the Trumpworld views the future.

The first - "From Big to Great" - with some irony uses Trump's buzzword "great" to point out that "big" may not be great when it comes to determining what makes good business sense. 

The second - "Financial Risks: Black Swan, Grey Rhino, & the Minsky Moment" - was discussed in a previous post (a Minsky Moment refers to a sudden major collapse of asset values which occur because long periods of prosperity and increasing value of investments lead to increasing speculation using borrowed money, a term coined by Paul McCulley who also coined the term "shadow bank").

While the Trumpworld politicians are trying to eliminate Dodd-Frank, China has made a priority in reducing the risks from speculative lending. In fact, unlike the United States in 2008, China is prosecuting bankers who have basically put the economy at risk to make themselves rich.

Finally, while Trumpworld is putting officers of major corporations in official government positions to make sure government decisions benefit the corporations, China is working to eliminate self-serving connections between government officials and the business community.

Based on observing both inside their government and what happens in the United States, the Chinese know that it is important to keep government regulators independent from the business community they regulate.

Americans, on the other hand, know from their own history that...oh, wait...Americans generally don't know their own history.

For instance, Republican Warren G. Harding, the 29th president of the United States, died in 1923 during his first term. At the time of his death, Harding was one of the most popular presidents, but the subsequent exposure of scandals that took place under his administration such as Teapot Dome eroded his popular regard, as did revelations of an affair by Nan Britton, one of his mistresses. In historical rankings of the U.S. Presidents, Harding is often rated among the worst.

The Teapot Dome Scandal involved an oil reserve in Wyoming which was one of three set aside for the use of the Navy in a national emergency. Naturally, the oil industry thought it should be developed. Edward L. Doheny, owner of the Pan American Petroleum & Transport Company, one of the largest oil companies in the world in the 1920s, received the rights following a series of shady maneuvers which ultimately resulted in Secretary of the Interior Albert Fall being convicted of accepting a bribe.

Then there was the Justice Department scandal involving payoffs from alcohol bootleggers to secure either immunity from prosecution or the release of liquor from government warehouses. And there was the Veterans' Bureau scandal. The Bureau was run by Charles Forbes who had sought to get full control of veterans' hospitals and their construction in his bureau. Harding agreed to the transfer as the politically-powerful American Legion backed Forbes and personally denigrated those who opposed him. Forbes then defrauded the government in the post WWI hospital construction allowing inflated billings, with the two construction companies getting the contracts dividing the profits with Forbes and the bureau's chief counsel.

And, of course, Harding has a 15-year affair with one woman while another woman was his mistress with whom he had a child. One biographer wondered why Harding's infidelity was held so much against him, given that Grover Cleveland was elected president in 1884 although it was known he had a mistress and may have fathered a son out of wedlock! (Cleveland was the only president in American history to serve two non-consecutive terms in office and during the Gilded Age as his second administration began, disaster hit the nation when the Panic of 1893 produced a severe national depression, which Cleveland was unable to reverse.)

Warren Harding appointed Herbert Hoover as Secretary of Commerce. Hoover held this position of responsibility for the regulation of American business and international trade during the entire Roaring Twenties period when the United States gained dominance in world finance, until he ran for and became President on March 4, 1929. Six months later, on September 4, 1929, the American economy began its collapsed into The Great Depression and did not recover for more than a decade until WWII.

It is very uncomfortable to consider the course of events and men leading America in the 1920's because of the current situation in the White House and Congress. It is even more uncomfortable when one realizes how Atlantic-centric the American press international coverage is, much as it was in the 1920's.

Jung-kyu Kim quoted above regarding the lack of Western press coverage of Xi's New Year's Speech co-wrote a book The Great Equal Society: Confucianism, China and the 21st Century which offers the core message that inner morality, first expounded by Confucius millennia ago, will resonate on both sides of the Pacific. The book provides a sweeping survey of the hot topics of dysfunctional government, crony capitalism, and the erosion of ethics in both Wall Street and Main Street.  In the book we see the new challenge to America akin to the 1960's space race:

    We hope that China seizes the Confucian vision and realises a society which can serve as an inspiration for the rest of the world, If China becomes just another America … with its materialist values, military expansionism and environmental degradation, then the world will have no reason to welcome its emergence. If China becomes a model civilisation … achieving a healthy and prosperous society [while] projecting a magnanimous and intelligent leadership globally - in a way that America is currently failing to do - then the world will surely laud and embrace its rise.
    What matters is not popular mandate per se but having able and selfless leaders. If the party can continue to produce such leaders, then the Chinese people will be only too happy to acknowledge its mandate of heaven.

The challenge for a nation is to have able, selfless leaders capable of offering magnanimous and intelligent leadership. Can the now celebrity-oriented American political system dependent upon popular vote compete against China's single party oligarchy in such a challenge?

If not, the United States will return to its pre-20th Century status of being a second-rate economic power by the end of the 21st Century, but without the availability of the 19th Century economic safety valve of the "go west young man" policy (which was, of course, dependent upon the state-sponsored genocide of the Native Americans).

1On February 27, 2001 representatives from...

  • the Republic of the Philippines, 
  • the Commonwealth of Australia, and 
  • Japan
...the proposing countries - met with representatives of 23 other countries...

  • Bangladesh, 
  • Brunei Darussalam, 
  • Cambodia, 
  • China, 
  • India, 
  • Indonesia,  
  • Iran, 
  • Kazakhstan, 
  • Kyrgyz Republic, 
  • Laos, 
  • Malaysia, 
  • Mongolia, 
  • Myanmar, 
  • Nepal, 
  • Pakistan,  
  • Korea, 
  • Singapore, 
  • Sri Lanka, 
  • Tajikistan, 
  • Thailand, 
  • Turkmenistan, 
  • Uzbekistan, and
  • Viet Nam declare the establishment of Boao Forum for Asia. In 2006 Israel and New Zealand were added and in 2016 the Maldives was added to the formal sponsoring nations.

Or to put it another way, its membership list includes representatives of business and government from Australia, Bangladesh, Cambodia, China, France, Germany, Hong Kong, India, Indonesia, Iran, Israel, Japan. Kazakhstan, Korea, Laos, Macao, Malaysia, Maldives, Mongolia, Nepal, New Zealand, Pakistan, Philippines, Russia, Saudi Arabia, Singapore, Sri Lanka, Sweden, Switzerland, Taiwan, Tajikistan, Thailand, United States, Uzbekistan, and Vietnam.

American business members include The Boston Consulting Group, Nielsen, Western Digital Corporation, Rockefeller & Co., PayPal Inc., Seagate, UPS, Mars, Incorporated, JPMorgan Chase & Co., Xcoal Energy & Resources, Wal-Mart Stores, Inc., Pfizer Investment Co., Ltd., Visa, Worldwide Pte. Limited,  Medtronic, Wyeth Nutrition Co., Ltd., and Lennar International.

The current 12 member Board of Directors includes from the United States Henry M. Paulson, Jr. who has served as Chairman of the Board of Directors for The Nature Conservancy and was Co-Chairman of its Asia/Pacific Council, and Chairman of The Peregrine Fund, Inc.. Oh, and he also was the 74th Secretary of the Treasury from July 2006 until January 2009.

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