American and China
With the government now having spent over $800 billion in less than a year shoring up tottering financial companies that had become little more than casinos (and rigged ones at that), America is looking increasingly like China, a country where the state has been gradually getting out of the business of directly owning companies.
At this point, with the US government owning 80 percent of the world’s largest insurance company, AIG, and essentially owning mortgage firms Freddie Mac and Fannie Mae as well as bankrupt Lehman Brothers, and with the nation’s two largest automakers in line asking for $25 billion in government loans, one would be hard-pressed to spot the difference between the two systems.
The essential point of commonality is that big enterprises—especially banking enterprises—are being allowed to operate as fail-proof yet operationally opaque adjuncts of the state. Their business decisions—whom to lend to, what risks to take, etc.—are made with the goal of enriching the key managers and shareholders, and probably also key government officials and bureaucrats—with no thought to the impact on the larger economy or the larger population of the respective countries.
I saw this system in operation in China once when, as a reporter for Business Week magazine based in Hong Kong, I visited the neo-capitalist boomtown of Shenzhen, just across the LoWu creek from Hong Kong. There I met a friend who introduced me to a former Nanjing Law School classmate who was now a top officer in the Armed Police, an 800,000-man paramilitary unit used for putting down strikes, demonstrations and “unrest” that essentially runs Shenzhen like a mob family. The guy took us to a downtown skyscraper that housed a private real estate company that, it turned out, was owned by the Armed Police (all the company vehicles in the parking lot had the characters “Wu Jing,” or “Armed Police” on their plates). In the lobby was a model of a huge housing development planned and under construction, that would become a bedroom community for Hong Kong office workers who would commute to Hong Kong from Shenzhen. At the time, Chinese Finance Czar Zhu Rongji had ordered a clampdown on lending to tamp down a Chinese economy that was in danger of overheating. I asked this soldier-entrepreneur how his company was planning on borrowing the money it needed for this mega project, and he just laughed, saying, “We can borrow all the money we need.” Later, my friend, wise in the ways of the Chinese system, whispered, “When he goes into the bank to ask for a loan, he’ll of course wear his army uniform, and what banker would turn him down?”
How different is this, in the end, from the system that is evolving here, where GM or Ford executives walk into the Federal Reserve, or the Treasury Department, and demand $25 billion in loan guarantees, saying, “Give us the money or we go under.” In China, an executive implicitly puts a gun to the head of his government banker. In the US the executive expressly puts an economic gun to the government banker’s head.
So much for the free market, which now only applies to small businesses. In America, as in China, individuals are left to sink or swim, and private property is only private as long as the government, or some well-connected developer, doesn’t want it. In China, if the state decides it wants some land for a mega commercial development, it just ejects the current residents, offers them a token sum for resettlement, and moves in with the bulldozers. In the US, the government does the same thing. Just ask the residents of New London, ousted from their riverfront property on orders of the US Supreme Court to make way for the “higher use” of a luxury hotel and commercial development. As for that so-called “American Dream,” the family home, as foreclosures rise to Depression Era levels, the government stands idly by, but leaps to the aid of giant corporations that, having made wildly risky gambles and lost, are about to go under. (In a particularly ugly slap at the battered homeowner, the McCain campaign in economically depressed Michigan has been gathering lists of foreclosed properties to run against voter lists, intending to challenge on Election Day the right to vote of anyone who offers an address that is in foreclosure. Lose your home, in other words, and the McCain will also try to make sure you lose your right to vote, too.)
The convergence of Chinese and US political-economic systems is going on in other ways too. Both governments are using massive computer systems (made in America) to monitor the Internet, with China making use of equipment and techniques developed for them by US companies like Google, Yahoo and Cisco Systems, and with the National Security Agency then drawing on those techniques for use back here in America.
As we saw at the two national party conventions last month, the US is also learning and applying the crowd-control techniques of the Chinese government to the US where the default tactic wherever public protest is planned is now to have police adopt a paramilitary approach that features aggressive use of tear gas, concussion bombs, assault rifles, house raids and preventive detention.
Another point of convergence is the concentration of power in a secretive executive body. China, of course, has a national congress. It meets once a year and passes carefully vetted resolutions. In recent years, its members have occasionally raised a controversial issue, like concerns about the environmental and human consequences of the Three Gorges Dam, or about the role of shoddy construction in the deaths of so many school children in the last earthquake. But it has no power and plays no role in controlling the decisions of the true leaders of the country.
Likewise in the US, there is a Congress, but over the last eight years, it has ceded virtually all oversight power to the executive branch, which treats any effort by its members to investigate or to constrain its action with utter contempt.
Both countries promote widespread, worshipful display of the national flag, and ritual oath-taking, as well as unquestioning patriotism and worship of militarism.
In media too there is convergence. China has since 1949 had a state-run media model, where all media organizations—newspapers, radio and TV stations—are owned by the state, and function as propaganda arms. In the US, while nearly all media organizations are privately owned, by controlling the licensing of all electronic media, and thus having the final say on any and all acquisition strategies, the government has over the last 20 years or so, degraded the media to the status of compliant servant. It is getting difficult to discern the difference between the two models. In fact, Chinese citizens may actually be better informed, having lived for decades under a propaganda model, since they know that they are being lied to by their newsmedia, whereas few Americans realize the extent to which their own media are controlled and acting as government mouthpieces.
Fascism has perhaps been best defined as a system in which the government and corporations merge, and in which militarism becomes a dominant value. I have long argued that this is an apt description of modern China. It is increasingly also an apt description of modern America.
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