Yellow Bric Road

When the leaders of Brazil, Russia, India and China ─ known by their acronym Bric ─ held their first standalone meeting in the Russian city of Yekaterinburg on June 16, 2009 it was a wakeup call ─ and a shake down for the dollar and global financial system. On the second day of the summit, the U.S. dollar fell sharply indicating the Bric nations had found the magic power of making the dollar ride a roller coaster with only a few words.

The Bric leaders proposed investing their reserves in each other’s currencies, settling bilateral trade in domestic currencies and striking currency swap agreements. It was even suggested to include the five central Asian states of Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan and Kyrgyzstan within the framework of using the yuan as a settlement currency, which some point to as an attempt to create a miniature European Union type of arrangement in Central Asia.

The idea of replacing the dollar as a global currency with the yuan or other currency does have some significant traction. “The Bric countries can lead the world towards global monetary stability by supporting the researching and planning for the next global currency to replace the U.S. dollar,” said Morrison Bonpasse, president of the Single Global Currency Association, a U.S. think tank. Mr Bonpasse believes that “when such a single global currency supports a number of countries with 40-50 percent of the world’s GDP, the ‘tipping point’ will have been reached, and other countries will join quickly.”

The handwriting of the new global currency menu is on the Bric wall and road. Bric nations already account for 50 percent of world growth, based on purchasing parity power. While collectively their gross domestic product amounts to only 14.6 percent of the $60.7 trillion
global economy, within 20 years, it is estimated that it will reach 50 percent. Their collective populations account for 42 percent of the world’s total and 26 percent of the world’s landmass. Goldman Sachs now predicts that in 20 years, the four could together, dwarf the Group
of Seven leading industrial nations, and that China’s economy will overtake that of the U.S. in size.

Overcooked Insects

The Lancet medical journal declared in a May 2009 commentary that “Climate change is the biggest global health threat of the 21st-century.” As someone who has eaten more than my fair share of insects in China where they are treated and considered delicacies, I was fascinated to read how they actually are the carriers that spread human diseases because of climate change. Tree-munching beetles, malaria-carrying mosquitoes and deer ticks that spread Lyme disease are three living signs that climate change is likely to exact a heavy toll on human health. As it becomes hotter, the air can hold more moisture, helping certain disease-carriers, such as ticks that spread Lyme disease spread.

Pine bark beetles, which devour trees in western North America will be able to produce more generations each year, instead of subsiding during winter months. They leave standing dead timber, ideal fuel for wildfires from Arizona to Alaska, said Paul Epstein of the Center for health and the Global Environment at Harvard University. Having personally fought a forest wildfire when I lived in the former Will Rogers guest house near Will Rogers Park in the 1980s ─and being the father of a former U.S. Forest Firefighter who fought forest fires across the Western United States in the 1990s ─ I shudder at the thought.

History offers many lessons that we ignore and unfortunately, as a result, repeat in updated modern variations. One of my favorite, as a photographer and agricultural high school graduate ─ and of course English born writer ─ is what happened in England during the industrial revolution. Compare modern day photographs of colleges in the English university city of Oxford, with those taken as recently as 50 years ago, and one can’t help but notice the remarkable difference. Today the picturesque sandstone buildings are a near pristine golden yellow in colour. However, before the passage of the Clean Air Act in the United Kingdom in 1956, they were more or less uniformly black.

Years of chocking fumes from open fireplaces and filthy emissions from cars in a country that was the cradle of the industrial revolution using coal as the primary source of energy, came consequent damage, not only to buildings, but the environment and human health.

One of those consequences for a particular life form can be found in the history of the peppery moth, as taught in biology classes to children learning about Darwin’s theory of natural selection. Before the industrial revolution began in earnest, in the 18th century, most of these moths in Britain were a light color. However, some possessed mutated genes that made them much darker. These latter were fewer in number, it has been suggested, because it was easy for birds to spot and eat them. Then the environment changed and soot blackened the trees so that the lighter moths were more easily spotted and eaten while the darker moths blended better with the soot. The latter soon outnumbered the former.

This story illustrates the dilemma humanity faces with climate change, but especially China. No country has managed to boost its economic growth substantially without a consequential effect on the environment. America, like Britain before it and China today, have paid the same price and caused the same damage to the environment. Fortunately, today the world is aware of the price the planet and human health has paid and is prepared to tackle the issue to make sure there are no more innocent victims.

As the global mean temperature rises, expect more heat waves. The U.N. Intergovernmental Panel on Climate Change projects 25 percent more heat waves in Chicago by the year 2100; Los Angeles will likely have a four-to-eightfold increase in the number of heat-wave days by century’s end. These “direct temperature effects” will hit the most vulnerable people hardest, according to the U.S. Environmental Protection Agency, especially those with heart problems and asthma, the elderly, the very young and the homeless.

People who live within 97 kilometers of a shoreline, or about one-third of the world’s population, could be affected if sea levels rise as expected over the coming decades, possibly more than 1 meter by 2100. Flooded homes and crops could make environmental refugees of a billion people.

More Sanctions? Fugetaboutit

Forget about the stalled six-party talks or the five working groups aimed at ending North Korea’s nuclear program. Forget about more useless sanctions. Forget about bipartisan recriminations. Forget about the blame game ─ especially picking on China and Russia. Forget about a nuclear East Asia.

The universal opposition and condemnation of North Korea’s nuclear tests ─ the first in October 2006 and the second on May 25 of this year ─ demands an urgent alternative solution to the rehashed and recycled proposals that have been tossed around since the 1953 Korean armistice took effect.

China and Russia, which like America opposed the North Korean tests, have been humiliated and desperately want a solution they can jointly embrace with America. Kim Jong Il’s nuclear bluff must be called. The Dear Leader crows that he is ready for war. Bring it on and let’s end the Korean War once and for all.

The Korean armistice signed on July 27, 1953, between North Korea and the U.N. Korean forces led by the U.S. remains in force. No formal peace treaty was ever concluded. People have forgotten that more than 84,000 soldiers from 16 countries serving under the U.N. flag died during the conflict. More than a million Korean civilians also died, as well as an estimated 900,000 Chinese troops fighting with the North Koreans. A peace treaty is long overdue.

Why should China and Russia go along? Because the U.S. will agree that Taiwan is a province of China and that America will not defend Taiwan should it declare independence. The U.S. settles two thorny issues simultaneously. China and America have a lot to offer Russia to come along.

America, China, Japan, Russia and South Korea must initiate five- party talks without pre-conditions or sanctions, which only hurt and subject the majority of North Koreans to more misery and suffering because of their self-centered sycophant authoritarian military leadership.

The five-party talks should explore how best to find an honorable face-saving exit for Kim and Co. This is a negotiating tactic America has perfected with several Haitian dictators over the years, allowing them to live comfortably in exile.

North Korea borders economic powers China, Russia and South Korea. Japan is nearby, across the Sea of Japan. These four economic superpowers could set up cooperative cross-border economic zones on their mutual borders, the kind Kim has visited and admired in China, and is hopelessly and helplessly trying to emulate.

These special economic zones would transform Pyongyang’s central planned Stalinist communist economy into neutral economic buffer zones in the potentially explosive area and stop the accelerating destabilization rippling through the region and beyond. It is the only feasible way to bring stability to East Asia.

It is in the world’s long-term strategic interest to neutralize North Korea’s nuclear capability, create a North-South confederation and eventually a unified Korea that enjoys prosperous cooperative economic zones with its neighbors.

Economic prosperity also would prevent a massive refugee exodus and ensuing crisis that China and Russia are concerned about, especially if American and European corporate citizens embrace the economic zones the same way they did in China. This would allow North Korea to finally sign a peace agreement that allows it to be gradually reunited with the South. The cost of reunification, unlike the case in postwar Germany, would be shared by the five parties looking out for what’s best for all humanity.

The five-party effort could transform the secretive and isolated Hermit Kingdom and its crippled economy into open, vital, sunlit renaissance model for basket cases like Zimbabwe and other failed states.

What is the alternative? More crippling sanctions, nuclear one-upmanship and political threats that can only lead to conflict, and potentially, Armageddon?

GM’s Future Is In China

With America’s automobile industry fighting for survival as it depends on government lifelines, China’s automobile industry is thriving. It wasn’t long ago that China produced only 5000 cars a year. Today it is the world’s largest car market. No one expected China to be in first place in the global auto market race until 2020. The pundits and experts were wrong again. China’s stimulus package with more than $733 million in tax breaks for rural buyers of small cars drove sales through the Middle Kingdom’s sky. Let’s not forget China also allocated $220 million to fund and upgrade new green automotive technologies, especially in alternative-energy vehicles that are the wave of the future. To help offset the high cost of buying clean-energy vehicles, subsidies of nearly $8,800 are being offered to local government agencies and taxi fleets in 13 cities for each hybrid vehicle purchased.

Beijing’s 2009 car sales target is 10 million units, an increase of 10 percent from 2008, and a figure that will cement its position as number one with an estimated 1 million more unit sales than America. China’s dominant role will allow it, rather than Detroit and Washington to dictate world fuel consumption and emission standards, including fuel efficient Hummers. The deal needs to be approved by both Washington and Beijing. The U.S. Department of the Treasury must give their nod to the deal, as must the Committee on Foreign Investment in the U.S. and Beijing’s policy for a “green and environment-friendly vehicle industry” poses a hurdle for the buyer Tengzhong Heavy Industrial Machinery.

The five top-selling brands in China are Volkswagen, Hyundai, Toyota, Honda and Nissan, in that order. No American car there.

The two Chinese joint ventures of bankrupt General Motors reported record monthly sales for May 2009, the month before GM filed for bankruptcy. Shanghai GM, said vehicle sales jumped more than 50 percent from a year earlier to 56,011 cars, buoyed by the top selling Buick brands. GM’s minivan joint venture sold 100, 258 cars, the first time that a Chinese automaker sold more than 100,000 cars in one month. GM’s total vehicle sales in China surged 75 percent from a year earlier to more than 156,000 in a month. This was in stark contrast to its performance at home where sales plunged 50 percent in the first quarter of 2009.

The carmaker, which sold its first car in China in 1920, sold 1.09 million vehicles in China in 2008, and said it expected to double annual sales in the country to more than 2 million cars over the next five years.

Hummer and Sickle

For someone who started their working career in America in machine shops in Detroit and Pontiac, Michigan in the 1960s, and legal career in the secured lending arena representing corporate America in the 1970s, who for several years worked his way through the bankruptcy court system representing secured lenders, creditors committees, trustees and receivers, including Detroit’s giants and America’s leading financial institutions, watching General Motors seek refuge in bankruptcy court is not only a sad epitaph of an era, but a double dose of nostalgic memory lanes. First as an auto parts worker in who made parts for what became America’s automobile dinosaurs, and then as a lawyer representing the corporate-financial institutions whose shenanigans lead America to be technically bankrupt.

Living in China and reading that GM’s gas guzzling Hummer brand is being sold to a Chinese company for an estimated cool $500 million, even though the purchaser has assured it plans to keep production in America, so that 3,000 workers and 100 dealers can retain their super-sized burger diets, was a symbolic reminder of how China’s Confucian capitalism is devouring America. After all, the Hummer is different from other American car brands because it invokes a sense of American pride. A Hummer is readily associated with American soldiers dashing around in Humvees in Iraq and Afghanistan. Hummer is symbolic of Americanism.

With America’s automobile industry fighting for survival as it depends on government lifelines, China’s automobile industry is thriving. It wasn’t long ago that China produced only 5000 cars a year. Today it is the world’s largest car market. No one expected China to be in first place in the global auto market race until 2020. The pundits and experts were wrong again. China’s stimulus package with more than $733 million in tax breaks for rural buyers of small cars drove sales through the Middle Kingdom’s sky. Let’s not forget China also allocated $220 million to fund and upgrade new green automotive technologies, especially in alternative-energy vehicles that are the wave of the future. To help offset the high cost of buying clean-energy vehicles, subsidies of nearly $8,800 are being offered to local government agencies and taxi fleets in 13 cities for each hybrid vehicle purchased.

Beijing’s 2009 car sales target is 10 million units, an increase of 10 percent from 2008, and a figure that will cement its position as number one with an estimated 1 million more unit sales than America. China’s dominant role will allow it, rather than Detroit and Washington to dictate world fuel consumption and emission standards, including fuel efficient Hummers.

Chinese Navy a Threat?

The PLA navy was founded in Taizhou, Jiangsu, on April 23, 1949, bringing together vessels acquired from the Kuomintang and left behind by the Japanese after World War II.

China’s state of the art nuclear submarine the Type 094, also known as Jin Class kicked off the PLA Navy’s three day 60th anniversary party celebration in the northeastern coastal city of Qingdao last month. Naval vessels from 14 countries, including the U.S., and naval representatives from 25 countries, joined in the celebration. Conspicuously absent was the Japanese navy. Japan was not invited for fear it might anger the Chinese public, still deeply scarred by the military invasion in the 1930s and its attendant atrocities.

The idea of inviting an international array of naval personnel was to build foundations for further exchanges and the PLA Navy’s integration with the international community.

Chinese nuclear submarines cruise the western Pacific and share the waters with the U.S. Pacific Fleet. China still has a long way to go as a naval power, but it is only a matter of time before Chinese warships routinely deploy to the Middle East and Africa, where over 75 percent of China’s vital oil imports come from.

China’s first aircraft carrier doesn’t even begin to match the 12 carriers the U.S. has. The U.S. carriers do not operate by themselves, but with powerful and capable escort ships in carrier battle groups.

China needs a reliable infrastructure for projecting and sustaining naval and air power. The U.S. is the pre-eminent exponent of this strategy. It has a long head-start over China. Its 5th Fleet is based in Bahrain, in the Persian Gulf, drawing ships on rotation from both the U.S. Pacific and Atlantic fleets.

U.S. defense spending equals the defense budgets of the next 15 countries combined and will soon exceed all other countries combined. In 2008 the General Accounting Office said cost overruns for the Pentagon’s 95 biggest weapons programs ─ just the overruns! ─ added up to $300 billion, more than double that of China’s $70 billion and Russia’s $50 billion combined military budgets.

With an overall military budget of more than $655 billion in 2009 – almost 10 times that of China’s, not counting the overruns – the U.S. is unmatchable.

Human Capital

The 624,000 international students attending U.S. colleges and universities in 2008 contributed $15 billion to the U.S. economy. The majority come from India and China. For every 100 foreign students who received an American Ph.D in engineering or the physical sciences, the U.S. got 62 patent applications. As for the students who returned home, many took with them warm feelings toward America, democracy and free enterprise. Do the math. Yet, since the Patriot Act was enacted, all foreign student applications have to be screened by the Office of Homeland Security, which gets bogged down, forcing students to defer their studies for a year.

University presidents are justifiably outraged. “We don’t want our students saying we might as well go to Britain rather than the U.S.,” Yale University President Richard Levin said during a student recruitment visit to China in 2007.

While the enrollment of foreign students is just now rebounding in the U.S. in the wake of 9/11, it is increasing dramatically at universities in Britain, Germany, Australia, New Zealand and Singapore. The European Union is even considering offering citizenship to foreign students who complete their doctorates at European universities.

Technological leadership is the key to prosperity and security, and America remains the world’s technology leader – for now. But, as highlighted by a 2005 report from the National Academies, the U.S. lead in science and technology is not guaranteed. America must now “prepare with great urgency to preserve its strategic and economic security,” the report said. Asian universities now produce 47 percent of engineering graduates worldwide and foreign-born inventors account for nearly half of all U.S. patents.

China has moved up to third place in the world after Japan and the U.S. in the number of patent applications filed. According to the World Intellectual Property Organization, Chinese inventors submitted 173,327 patent applications in 2005, a 33 percent increase over the previous year and the biggest leap in submissions of any country that year. Japan had the most filings followed by the U.S.

More than half of the high-technology startups launched in America between 1995 and 2005 had at least one founder of overseas origin, a 2007 study by Duke University in Northern Carolina found. It revealed that in the Silicon Valley, 52.4 percent of startups in the past decade had at least one founder of foreign origin, significantly higher than the California average of 38.8 percent and the national average of 25.3 percent. Sergey Brin, from Russia, co-founded Google. A German, Andy Bechtolsheim, and Vinod Khosla from India founded Sun Microsystems. Jerry Yang, a Chinese, co-founded Yahoo.

The result is that the U.S. is losing its dominance in critical areas of science and innovation, as evidenced by the rise of foreign patents. “The rest of the world is catching up,” said John E. Jankowski, a senior analyst at the National Science Foundation, the federal agency that tracks science trends. “Science excellence is no longer the domain of just the U.S.” This is best exemplified by the number of patents registered today. Asians, most notably Chinese and Indians, have become more active and in some fields have taken the innovation lead. The U.S. share of its own industrial patents has fallen steadily over the decades and now stands at 52 percent.

China has invested heavily in human capital that promises to sustain growth and create greater prosperity. Parents in China spend $90 billion a year on their children’s education. This is over and above what the government spends. Government and families constantly increase their investment in primary and secondary education. Elite English private schools are setting up campuses in China to capitalize on the educational opportunities. Given the excellent core curriculum available across China to its 230 million students, the country is well positioned to continue to upgrade its human capital over the next decade. Shouldn’t America be doing the same?

China at Crossroad

China is at a political and economic crossroad that few in America or the West fully appreciate. For the first time since China embarked on its economic reforms in 1978 and lifted hundreds of millions of people out of poverty, China’s political leadership is faced with its greatest test of political survival. President Hu Jintao has gone so far as to say that turning the challenges posed by the global credit and economic crisis into opportunities will be a test of the Communist Party’s capacity to continue to govern. China recognizes it needs to stand on its own two feet and not rely on exports.

The task is daunting. Household consumption in 2007 made up just 35.3 percent of China’s gross domestic product, a record low for a major country in peacetime. In the 1980s, it was over 50 percent. By comparison, household consumption in the U.S. in 2007 made up 72 percent of GDP.

China must make radical spending changes from infrastructure to social investments which requires giving people more disposable income. More household subsidies, especially in the areas of health care and education, is what is needed. The problem, believe it or not, is that China does not have the bureaucratic infrastructure in place to minimize waste and corruption.

The other reality is that returning money to the people through lower taxes or spending on social programs is not a high priority in China because its leaders do not have to run for re-election. In China, officials are held accountable to their superiors, not voters. Hence most officials are afraid to make a mistake and take the same bureaucratic road as their counterparts in America. They just want to make it to retirement without taking any risks that could cost them their job.

Thus, Chinese citizens who are unable to vote out their leaders or collect compensation from the courts express their rising anger in protests, riots, strikes and political demonstrations that are unnerving the Communist Party leadership. One must keep in mind that public demonstrations are not permitted in China. So when people do take to the streets at great personal risk, they do so because they want their leaders to notice and do something about it, or lose their “mandate from heaven.”

Millions of laid-off workers and Chinese investors in the local stock market who lost trillions of yuan ─ Shanghai was the worst performing market in 2008 ─ across China are protesting, smashing windows, offices, overturning police cars and scuffling with police. Even police have gotten into the act. Auxiliary officers in Hunan Province surrounded a Communist Party office in December 2008 to demand higher wages. Chinese investors in China’s collapsed market are also demanding an American-style bailout.

Pax Americana is Passé

The U.S.-led, post-World War II world is done and over, thanks to America’s failure to adhere to the principles of the Founding Fathers. Compromised national and global leadership, more than $10-trillion in debt and the ignition key that sparked the global financial crisis in its hands, have all contributed to America’s shining city upon the hill losing its luster.

The world’s sole superpower abused its global sheriff’s role with unnecessary wars, failed financial instruments and basic misreading of people’s needs ─ at home and abroad. America is no longer the Mecca of modernity, innovation and economic prowess. The era when America was the global locomotive that dictated the rules of international trade, finance and political affairs is over.

America is now perceived as a moral and political failure, as well as a financial and capitalist catastrophe by the developing world. China, on the other hand, because of its centrally controlled prudent fiscal, development and capitalist model that endowed it with more than $2 trillion in reserves, is fast becoming a viable and more acceptable alternative model. Cash-rich China is in a much stronger geopolitical position than cash-strapped America to move aggressively in the developing world and gain access to their commodities and natural resources.

The new world order that will succeed Pax Americana is one in which China will play a dominant and leading role, if for no other reason than it is the biggest holder of U.S. government bonds, accounting for more than 35 percent of the total held by foreign central banks. It is common knowledge in any bankruptcy proceeding that the lead creditor has a lot to say and the debtor has to listen, whether they like it or not. Taken with China’s model of centrally managed mercantilism which is a preferred model for developing countries, especially dictatorships, America must accept the fact that its failure to heed the admonitions of the Founding Fathers of the Republic has rendered it morally impotent.

Most people in Japan, South Korea and China favor a Northeast Asian free trade area including the three countries. Most Americans, on the other hand, are opposed to regional or bilateral agreements.

China must be viewed as a partner, not a competitor. If America insists on viewing China as a competitor, it will lose the competition. It already has. America has to accept China as a willing collaborative partner. America can no longer ignore the more than 230 years of U.S. business success in China and the political collaboration that goes hand in hand with that success. U.S. exports to China have grown much faster than to any other trading partner. In 2007 they grew by 18 percent and since 2000 they have grown by 300 percent. The U.S. is enjoying a resurgence in exports to China, which are driving productivity gains at a time when the U.S. economy critically needs it. The good Sino-U.S. relationship that exists today is a Bush 43 foreign policy success, built since January 1, 1979, when the two countries established diplomatic relations.

The Beijing 2008 Olympics showcased China’s ascendancy, not only as a sporting powerhouse with their record haul of gold medals, but in the global competition for economic supremacy. The Wall Street financial meltdown that cast its depressive shadow on the global economy has made capitalist America a “bailout nation” as communist China has become the center of U.S. capital and the new Confucian capitalism. China is fast becoming the world’s economic leader.
America is losing its perch of global supremacy. In 2000, U.S. stock exchanges accounted for about half the value of global stock markets; at the beginning of 2008, they accounted for just 33 percent ─and shrinking.

America can only help itself by helping China embrace the future with it as a partner. There is no more room for fear-mongering or bashing of China. The reality of modern China has to be accepted for what it is. America must broaden and deepen its ties with China into a concrete partnership with meaningful economic and military alliances. America must accept the fact that China is part of the solution and not the problem. America must start, sooner rather than later, taking the long-term view of its beneficial relationship with China.

The Great U.S. Recession

The 2008-2009 financial meltdown in the U.S. is shaping up as the Great Recession. With job losses rising, credit facilities diminishing and the billions of rescue dollars to save the pillars of capitalism failing, it is the longest U.S economic recession since World War II ─ and the worst may be yet to come.

This recession, which officially began in December 2007, is not only the longest and most severe, but the most devastating. More than half a million Americans, from financial analysts to factory workers, lost their jobs in November 2008 alone. Another 681,000 were added to the jobless rolls in December. Rarely has a labor downturn affected such a broad swath of income levels ─ and the worst is continuously coming in slow kill mode in 2009. Some economists predict that the U.S. economy could lose as many jobs in the first six months of 2009 as all of 2008. Nearly 2 million jobs have been lost since the start of the recession in 2007, two-thirds of them since September 2007.

The longest economic slumps since 1945 were the 16-month downturns that ended in March 1975 and November 1982. The Great Depression lasted 43 months from August 1929 to March 1933 and the world experienced a two-thirds shrinkage in trade in that period. The combination of housing market, credit market and financial market collapses is a rare and unprecedented combination. Unemployment topped 8 percent in February 2009.

How do the two countries with the most to lose cooperate to make sure they and the rest of the world minimize the financial pain and make sure everyone benefits globally? They cooperate more with each other in the lead of global and regional organizations ─ and in bi-lateral dialogue ─ to learn from each other and build together as partners.

The fact is that China is already helping the global financial situation by holding onto U.S Treasury debt. Not only holding on, but also continuing to quietly buy, even as late as September 2008, knowing full well that doing so could bring great losses. This is solidarity. China’s foreign reserves have already been invested ─ more than half in U.S. Treasury issues and other American bonds and much of the rest in euro-denominated assets ─ and it isn’t easy or practical to transfer hundreds of billions, or tens of billions of dollars without causing serious disruption to the currency market, which wouldn’t be in China’s self-interest either. If it sells the U.S. Treasuries it holds, global interest rates would go up and the dollar would collapse. On the other hand, the fewer Treasuries China buys as a result of the 2008 financial tsunami, the sooner America will see the end of its money-printing spree.

Confucian Capitalism

America and China have more in common than either side wants to acknowledge. Neither trust freewheeling capitalism and when it comes to the crunch, both governments take over industries for the political protection of the governing parties and the economic stability of their countries. Government intervention and ownership of private companies is very Confucian ─ a belief that public-private partnership of the wise ones will benefit the people. I don’t for a moment believe in this model as I believe government should be kept out of business and should be shrunk, not expanded by getting involved in the private sector. Getting government involved in business only benefits greedy self serving capitalists at the expense of the people.

Before I address Confucian capitalism, I want to give an example that best supports my argument to keep government out of business at all costs. I’m not referring to the fact that they can’t run a government profitably and without deficits, but a business that is easy to make a profit in America ─ a legal whorehouse and bar.

The Mustang Ranch in Nevada is a legal whore house and bar that is very profitable. It was busted for a variety of racketeering charges and the government took over its daily operations. After trying to run the whore house that sold sexual services and a lot of liquor to its clientele for a couple of years, the ranch was put into receivership because the government operators lost money. Now I don’t want to speculate as to what happened with the profits, but if the government can’t run a simple whore house and bar how the hell is it going to run the complicated financial services industry of America?

I personally witnessed and lived through a sneak preview of the U.S. government intervention and bailout of the pillars of U.S. capitalism during the Hong Kong stock market crash of August 1998. On a much smaller and broader scale, to counter the short sellers and speculators that had battered Hong Kong stock prices, the Hong Kong government, with China’s approval, decided to intervene in the battered stock market ─ and I want to emphasize stock market and not individual companies or the financial sector ─ with public money. It spent $15.1 billion to acquire 7.3 percent of the companies in the blue-chip Hang Seng Index. At the time, the Hong Kong government was severely criticized by free-market advocates for its intervention as a dangerous precedent. The fact is, it helped stabilize the market and then sold the stock at a substantial profit once the speculators left.

Seeing that the U.S. model of capitalism has bankrupted a few countries, Iceland and Hungary being the only two willing to admit to that fact by the end of 2008, there is no reason to believe developing countries will even attempt to embrace Western capitalism anymore.

The Hong Kong example of Confucian capitalism is a far cry from the U.S. quasi-nationalism with taxpayer dollars of the world’s bankrupt leading banks, insurance companies and automobile industry because of institutional incompetence. What is clear is that America’s corporate democratic capitalists who repeatedly lecture China on how to run its Confucian capitalist economy, have capitulated to Confucian capitalism on a humongous hypocritical U.S. scale.

G-20 Just Another Expensive Talkfest

The G-20 summit in London on April 2 is a $30 million taxpayer paid extravagant talkfest. The G-20 was created in the wake of the Asian and Russian financial crisis of 1998. It is a group of developed and developing nations that coalesced to prevent future global financial crisis from developing ─ something they have obviously failed to do.

Because China holds the biggest inventory of foreign exchange reserves in the world, and because it looks to be one of the few major economies to show significant growth in the near future, it is being urged to boost the resources of the International Monetary Fund. Pressure was brought to bear on China because Japan, which holds $1-trillion in foreign reserves ─ the second-largest cache of foreign reserves ─ pledged $100 billion in loans to the IMF.

China is reluctant to give huge loans to the IMF because some of the European countries that would benefit from China’s contribution have been outspoken critics of China.

China is ranked 100 out of 192 U.N. members in terms of per-capita GDP despite the fact that it is the third biggest economy in the world after the U.S. and Japan. Many of the troubled countries the IMF wants to rescue have a per-capita income that is much higher than the average Chinese. They have also enjoyed at least one decade of economic prosperity and their living standards are still far higher than China’s. Even if China decides to inject a large sum of money, it is pointless to merely increase its weight in the organization. That is because the U.S. still holds veto rights in the decision-making process of the IMF. That has to change.

The voting rights of Brazil, Russia, India and China in the IMF are 9.62 percent of the total, together accounting for about half of the voting rights that the U.S. holds in addition to its sole veto power.

The IMF, like the World Bank, is a relic of World War II, created at the Bretton Woods conference in 1944, as the foundation cornerstones of the postwar world financial system. I advocated the abolition of both bodies along with the United Nations, or at the very least, their restructuring in my last book Custom Maid Knowledge, to give China and other developing countries greater say than the founding European nations and America now dependent on China have. The bank’s management structure reflects the world of the 1950’s, with Belgium having more voting power than China.

A new global central bank relevant to the 21st-century is long overdue. The world can no longer depend solely on the U.S. Federal Reserve to single-handedly micro-manage the global financial system with the IMF and World Bank playing second and third fiddle as its sidekicks. That is the only way to make sure that financial institutions doing business globally never again accumulate debt that is more than 30 times their capital and to make sure all central banks impose rational leverage ratios on their national banks.

Education Stimulus Bar

China has called for the formulation of an education reform plan that will focus on improving rural education, vocational training and teachers’ welfare, citing the global crisis as a call to arms to bolster education. The 2009 to 2020 evolving educational plan, will take into account the nation’s evolving population structure, rural-urban wealth gap and rural-urban migration, and meet the talent requirements for industrialization, urbanization and modernization.

The central government will create 50,000 teaching jobs in the country’s backwater regions in a double-barrel effort to help fresh graduates get jobs and improve educational standards in rural areas. The 50,000 posts, for “special vacancy” teachers, are in addition to a three-year initiative from 2006 to send 60,000 young college graduates to teach at grass-roots schools to bolster the level of teaching. Shouldn’t America be doing the same?

Students in rural areas in China, like America, have been increasingly failing to get access to quality education as the widening gap between urban and rural salaries and better working conditions lure many qualified rural teachers to more promising jobs in the cities.

Premier Wen Jiabao said educational planners must be prepared to shatter old mindsets and structures and be daring in exploring reforms in school management, pedagogy and assessment. “Education will take a prominent position as we seek to mitigate the impact of the global financial crisis on our economy,” Mr. Wen said. “Education has become the cornerstone of national development” ─ music to my ears. I advocated America do the same in my 2007 book Custom Made Knowledge. Why isn’t America? Why isn’t America, like China, investing in an education stimulus program that educates Americans in the ways to acquire the knowledge and the tools necessary to compete in an Interlocal economy.

War or Economic and Financial Stability?

Beijing and Tokyo have reached an agreement concerning permitted naval activity in exclusive economic zones, which reach 220 nautical miles from shore. Shouldn’t Washington and Beijing be doing the same?

President Eisenhower apologized for the flight of captured American spy pilot Francis Gary Powers over Russia and ended the U-2 flights over that country. Why couldn’t President Bush do the same when the U.S. reconnaissance plane crash-landed on Hainan Island in March 2001? Why couldn’t he just pick up the phone and discuss matters amicably with Jiang Zemin? Why was the first American spokesman Admiral Dennis Blair, commander of U.S. forces in the Pacific? Why did the U.S Ambassador in Beijing, Adm. Joseph W. Prueher, handle the negotiations? Why was the U.S. defense attaché to Beijing, Brig. Gen. Neal Sealock, wearing his military uniform at his first press conference? Was this diplomacy or a constant subtle unnecessary military reminder and threat?

When a Russian pilot defected with his MiG-25 in 1976 to Japan, American experts spent nine weeks stripping the plane and examining every part. The Russians eventually got the plane back in boxes. Why was the U.S. surprised then that the Chinese examined the U.S. spy plane? Isn't that part of the risk in the espionage game? Besides, if all the hardware and software was destroyed per the "checklist" as claimed by the American crew before the Chinese got access to the plane, what is the big deal? It is face. Symbolic value ─ it is just as important to the U.S. as it is to China.

What is the point of America pairing and starting to operate radar-evading B-2 bombers and F-22 fighters in the Pacific for the first time in February 2009? More to the point, what is the point in sending USNS Impeccable, a surveillance-spy ship with 2-km-long underwater receiver and source cables, off Hainan Island to gather underwater acoustic data of China’s submarine movements from its main submarine base on Hainan earlier this month? Whether the ship was in China’s exclusive economic zone or in international waters is secondary and irrelevant. The end result is the same ─ an unnecessary confrontation with five Chinese vessels that was luckily contained without any casualties, but triggered the U.S. to send warships to protect its "surveillance" vessels. China responded by sending its largest "fishery patrol ship" China Yuzheng 311 "on a routine mission" in the South China Sea and decided to convert mothballed naval vessels to fishery patrol ships ─ all this at the dawn of a new U.S. presidential administration. It was a similar provocation to what happened with the spy plane that crash landed at the dawn of Bush’s first term in office. Why does the U.S. military insist on provoking China while the White House and State Department are trying to get the two countries to work closer to resolve the global financial crisis?