World Bank memos

Henry C.K. Liu hliu at
Thu Dec 3 07:06:17 PST 1998

Enzo Michelangeli wrote:

> Surely they must feel the need for good
> answers to give to their children, should they ask why Chinese people living
> under the colonial yoke have managed to achieve a per capita income thirty
> times higher than in their own country.

Hong Kong's propsperity has been achieved despite of, rather than because of colonialism. Before the opening up of the China market in 1978, Hong Kong propsered as a war merchant during the Korea and Vietnam wars and during the Cold War in general as an embargo buster. It has little to do with capitalism or free market. In fact it was based on closed markets. The myth of Hongkong being a shining example of Asian free enterprise was created by Thatcher 15 years ago as a ploy to preserve British residual interest in Hong Kong after its return to China in 1997. It was also a strategy to lure American interests to Hong Kong. Hong Kong's free market capitalism is only 2 decades old. Among the folklure of Hong Kong is a saying that it is hard to be a capitalist unless one first acquires capital either illegally or unethically. Horatio Alger type attitude will only get a person a decent job. There is another Hong Kong truism: an university education is only useful for wealth preservation; it is rather useless, and in fact a negative, when it comes to wealth creation. And it is supported by empirical evidence. The fact is: most of Hongkong's wealth had been created by non-capitalist means. And its largely still true. Very feel HK natives truly believes in capitalism in the American sense of that term.

> Henry, let's be frank here: China's development policy was to introduce
> elements of capitalism in the coastal areas, keeping the northwest more
> strictly socialist. As a result, the coastal areas boomed, just as Taiwan
> and Hong Kong and Singapore did decades before that, and the rest of China
> remained as poor as before. As Chinese workers are neither blind nor stupid,
> they moved south: Shenzhen's population jumped in a few years from 50,000 to
> more than two million people. Go to Guangzhou when there are no trade shows,
> and you will see the square close to the train station morphing, at dusk,
> into a sleeping camp for thousands of migrant workers looking for a job.
> (During the trade shows they are shooed away by the police, worried for the
> good image). They may not know it, but they are pursuing capitalism.

There is no disput that capitalism is more effective in creating wealth. Yet capitalism requires socialism and environmentalism to keep it just and safe. Besides, as I said above, and as you just said, the key is "elements" of capitalism, not wholesale capitalism.

> Certainly, but nobody will ever invest in places with terrible
> infrastructure and plagued by officers asking for kickbacks, unless labour
> is cheap enough to guarantee high returns. And I'm not only talking of
> foreign investors: Chinese capital is as smart as any. Which is why it's
> been traditionally held offshore.

So labor and environmentl abuses are caused by corruption and backward infrastructure? That was what the drug smuggling British tried to argue, that opium smoking was the fault of Chinese culture rather than British smuggling. It seems to me that such abuses occur because they are permitted to occur, sometimes legally, most of the time illegally. By the way, there are no kickbacks to officials in China. There are Confucian type special relationships that I described in my previous posts that are cultural specific, but impersonal kick backs are extremely rare, not because the Chinese are innately more ethical, but becasue the social structure makes that type of corruption ineffective. Even since China shifted from its extreme leftism, overseas Chinese capital has chosen China as the location of choice, rather than staying offshore, oftern even at lower returns. It shows that maximization of return on capital is not an all overriding factor.

> HK is in a much better position than China, and the pollution is not that
> bad, even though more could be done. And it will, because highly paid
> professionals care about health more than workers who have more immediate
> worries (which explains why people in poor countries smoke much more than in
> rich countries). But it's *wealth* that is bringing in a cleaner
> environment, not social policy. Otherwise, Calcutta would be a garden and
> Carmel a dump.

You are totally off on this point. Wealth appears to have produced more pollution than its ability to clean it up.

> >My point is that abusive business practices will end only if they are
> forbidden
> >by law. Business will always find a way to do business if everybody is
> subject
> >to the same rules. The World Bank, instead of providing sophisticated
> apologies
> >for pollution and inhumane labor conditions, ought to take economic and
> >environmental human rights seriously and impose a global regime through
> whhich
> >such practices will be illegal as well as unprofitable. It is not an
> economic
> >issue, rather, it is a poltical issue. To argue such a basic issue on
> economic
> >effieceincy and transtional neccesity grounds is simply misleading, if not
> >suspect. It reminds one of arguing for slavery on economic efficiency
> terms.
> You may find that disheartening, but slavery ended precisely when it wasn't
> economically efficient anymore (when, as Aristotle famously said, "machines
> will move themselves"). Morals, and laws that officialize them, don't live
> in a Platonic Hyperouranic world, but are strongly influenced by the
> economic structure. That's one Marxian lesson that I totally agree upon.

The issue of what ends slavery, war or economic determinism was extensively debated on the list under the thread of Cockburn and slavery. I will repost one of my inputs on the subject.

Progress is always the illegitimate child of politics. The same ironic rationalization would apply to Richard Nixon, lifelong anti-Communist, who would be able to achieve as President a historic opening to Communist China in 1973 as a grand strategy in geopolitics, after a quarter of a century of ideological estrangement between the two powers, while a similar attempt by a liberal Democrat, such as John F. Kennedy (1917-1963), would have to face domestic accusation of being soft on Communism. Similarly, it would take an anti-abolitionist Abraham Lincoln (1806-1865), who would gain attention early in his political career as a pragmatic segregationist cloaked under the high-minded rhetoric of democratic ideals, to finally overcome his previous political rationalization and to make peace with his personal morals to issue the Emancipation Proclamation in 1862. Lincoln would come into national prominence in the Lincoln-Douglas debates during the 1858 Senate campaign by shrewdly trapping his opponent, Stephen A. Douglas (1813-1861), into introducing the anti-slavery Freeport doctrine, permitting the new territories to exclude slavery in the name of popular sovereignty. The compromise proposed by Douglas, in spite of the Dred Scott decision by the Supreme Court a year earlier, in 1857, ruling that slavery could not constitutionally be excluded from any territory, would cost Douglas much popular support, particularly among pro-slavery Southern Democrats, even after his insistence on his personal indifference to the immorality of slavery. Lincoln, the man who would oppose the exclusion of slavery in the new territories with his perversely righteous and dubiously motivated declaration: "A house divided against itself cannot stand", and who would declare himself to be personally opposed to racial equality, would end up abolishing slavery for the whole nation four years later as a political expediency brought about by a poorly conducted, ongoing civil war, notwithstanding his earlier belief that while "Negroes" should enjoy the right to life, liberty and pursuit of happiness promised to all men by the Declaration of Independence, the extinction of slavery could only be a gradual and lengthy process, with no near-term target date.

American attitude toward the issue of slavery in her history is clouded by a fundamental conflict of its self-image and historical facts. The majority of Americans continue to be abolitionists in public and pro-slavery in private. It shows up in every debate on social issues.

If left to economic consideration alone, slavery would still be thriving in America today.



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