Friday, January 19

Frankenstein at the United Nations: Confucius say you kowtow. And a few words about democracy's soft underbelly

Pundita, dear, your crystal ball seems to be working well these days. You launched your China Frankenstein series less than two weeks before China shot down their satellite. I am surprised you did not put up a "Frankenstein in Space" post. May I suggest that you place the Frankenstein series on your sidebar for handy reference?

I also note that the day before Bernanke warned Congress that the graying of America's population would have serious affects on the economy, you quoted Thurow's 1997 warning about the strains that the aging baby boomer population would place on democracy.

Not bad for a crystal ball you purchased at a yard sale.
Boris in Jackson Heights

Dear Boris:
The early warning came in August 2006, with a report that China had laser-illuminated a US satellite -- targeted it, in other words. China's action to shoot down their satellite is a sharp reminder on how a powerful military dictatorship does things on the foreign relations front. Hang the debris cloud from the satellite hit; China has been trying to set up a UN conference on heading off space weapons programs. The US has been blocking the effort on the grounds that there is no ams space race.

So to push the issue forward at the UN, China's generals okayed the hit on their satellite, despite the large debris cloud this would create, and with full knowledge that the action would set off an international uproar. And with full knowledge that the US and Russia abandoned anti-satellite testing in part because destruction of satellites causes so much space debris.

It's important for democratic governments to understand that China's "peaceful rising" does not mean they want to take their place alongside the Western powers. China wants to rise above today's powers.

China's dictators have a simple philosophy when it comes to dealing with the nations that were most responsible for pulling China out of ruin: We kowtowed to you for decades, now you kowtow.

Beijing does not want to be 'part' of the world community; they want to rule it. Part of this is because China's leaders have talked themselves into believing they have no choice but to continue to defend their oppressive government. They feel driven to demonstrate to the world that China's form of government is superior to democracy.

Another factor is China's old civilization, which the Chinese never tire of invoking. The civilization is one of emperors. Imperial thinking permeates Chinese philosophies. The Cultural Revolution did not purge the mindset because it is so deeply embedded in Chinese culture.

Until all this understanding translates into policy in Brussels, Tokyo, the US and Moscow, China's generals will continue to set benchmarks for their peaceful rise, of the kind we saw with the destruction of their satellite. China wanted to make a point at the United Nations, and now they've made it.

As for Ben Bernanke's remarks, he gave the same warnings in October 2006. The warnings have been building for decades from many quarters in the US.

The importance of Thurow's observations on the same theme is that they point to a larger issue: whether democracy and capitalism can continue to peacefully coexist in the US, once major entitlement programs dry up or are greatly curtailed.

The issue transcends US borders; it affects every democracy that is trying to make capitalism work. Thurow observes that globalized business chips away at the cement holding democracy and capitalism together, which is programs that benefit citizens who cannot survive under a capitalistic system without assistance from the state.

Once a business can move operations offshore to avoid, say, low-cost medical insurance for US employees, the cost for insurance transfers to the individual taxpayer, if the state picks up the tab. This situation can only play out in so many ways before the taxpayer revolts. The state is then forced to nationalize or re-nationalize key business sectors in order to come up with the revenue to fund assistance programs.

From there, it's a hop and a skip to the scenario in von Hayek's Road to Serfdom. At some point along the road, the state revokes liberties to impose more socialism than most citizens want. Poof! Democracy disappears or becomes a stage show.

Keeping democracy functioning smoothly is a balancing act between capitalism and socialism. Globalization is upsetting the balance. Thurow's comments point to the soft underbelly of democracy, which resists innovation when politician's votes are at stake. Fixing Medicare and Social Security prior to an outright collapse of the systems will mean pain; the solutions require leadership rather than politics, which runs on compromise and sticking with the status quo until a system finally collapses.

Thank you for the suggestion, Boris; as soon as I can find time I'll implement it.

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