Left economists praise China, but others liken it to Nazi Germany

- Peter Myers, Augist 15, 2019

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(1) Left economists praise China, but others liken it to Nazi Germany
(2) Hudson: rising housing prices and education are making us poorer
(3) Michael Hudson: Chinese Investment Bank (AIIB) is out-doing IMF & World Bank
(4) Neoliberalism has Met Its Match in China - Ellen Brown
(5) Nazism and the German economic miracle, by Henry C K Liu
(6) Xi Jinping is a modern-day Stalin; China is also like Nazi Germany. Australia vulnerable
(7) National Socialism with Chinese Characteristics - John Garnaut
(8) How China Interferes in Australia - John Garnaut, in Foreign Affairs

(1) Left economists praise China, but others liken it to Nazi Germany

- by Peter Myers, August 14, 2019

Michael Hudson is one of the leading 'Left' economists in the world. The son of Trotskyist leader Carlos Hudson, Michael identifies as a Trotskyist, and recently attended a conference commemorating Rosa Luxemburg.

Yet, while "street" Trots condemn China over Tibet and Xinjiang, Michael has attended several conferences in Beijing, and roundly applauds China's economic policies; in particular, its independence of the IMF, the World Bank, and the austerity policies pursued elsewhere.

Item 3 presents Hudson's thinking about China, while in item 2, an interview with Max Keiser, he shows what's wrong with the prevalent economics in the West, using housing as an example.

Although Trots call themselves 'internationalists', Michael has written two books favouring the Protectionist economic system developed in the USA in the 19th century.

One might think, then, then he would side with Trump in the trade war with China. But no.

Ellen Brown takes a similar line on China - see item 4.

I agree with her and Michael that the Chinese economic model has defeated the western 'Liberal' one.

But I remind both that Nazi Germany did the same in the 1930s. Henry C K Liu pointed this out in his article Nazism and the German Economic Miracle - item 5.

In fairness to them, I note that David Lloyd George, the British Prime Minister who brokered the Balfour Declaration, praised the economic achievements of Nazi Germany - that is, before the war broke out. He welcomed such economic expansion, instead of the Austerity practised elsewhere.

Both Liu and Hudson were in the economic forum called Gang8; they know each other well.

Liu may have gone on to advise the Chinese Government on how to use Nazi economic policy to achieve financial independence from the USA.

Liu says that China made a mistake by engaging in extensive Trade with the West. But by this means, China exchanged Technology Transfer for access to the Chinese market. In this way, the West and Japan were persuaded to hand over the Golden Goose of technology know-how, which is now firmly in China's possession.

The Technology Transfer shortened China's development by several decades. Within 30 years, it turned from basket case after the Cultural Revolution, to Economic Superpower taking over the world.

Nazi Germany faced an economic blocade, inaugurated when the Jewish lobby declared war, akin to "US Sanctions' today. It got around this trade embargo by bartering with neighbouring countries.

Is there a non-militaristic variant of Nazi economic policy?

Richard A. Werner shows that there is - the postwar Japan Miracle. His book Princes of the Yen is about the role of Japan's central bank in the "miracle" years and the recent "crisis" years.

Werner was Professor and Chair of International Banking at the University of Southampton.

Werner wrote, 'Noguchi and Sakakibara were the first and only public figures to clearly identify and acknowledge the true nature of Japan's economic system. They called it the "wartime system for total economic mobilization."' (p. 80). werner-princes-yen.html.

China adopted this system. Ezra Vogel wrote that when Deng Xiaoping visited Japan in October 1978, he was so astounded at its technology that he decided to copy the Japanese economic system in China; Japan, in turn, set up factories in China, and stood by China after 1989: http://www.japansociety.org/japan_from_china_war_to_china_peace.

Unlike Nazi Germany, much of China's economy is publicly-owned. Unlike the Soviet Union, it has a vibrant private sector subject to state guidance (just as Japan's private sector is subject to state guidance).

After its first experiments with high-speed trains, China built a high-speed network covering most of China in just ten years, whereas the US attempt to connect San Francisco and Los Angeles by high-speed rail failed.

China's superior economic system has put the rest of the world on notice: get rid of Economic Liberalism, or be taken over.

Britain, the US, Canada, New Zealand and Australia are going the way Hitler envisaged for the Ukraine: becoming mere quarries and markets for industrial exporting countries, as well as destinations for immigration. And worse, our populations are being dumbed down.

But Australians are waking up. John Garnaut, son of Ross Garnaut (Australia's Ambassador to China 1985-8), has written an article National Socialism with Chinese Characteristics; see item 7.

Australians are perceiving China to be a threat, as Nazi Germany was a threat.

(2) Hudson: rising housing prices and education are making us poorer

https://michael-hudson.com/2019/07/how-rising-housing-prices-and-education-are-making-us-poorer/

How rising housing prices and education are making us poorer

By Michael

Tuesday, July 16, 2019 Interview with Max Kaiser

Banks lend more & more $ for every house.

How much is a house worth? A house is worth whstever a bank is prepared to lend.

From 1945 to 1960, the bank would only loan you a mortgage with repayments up to 25% of your income, & you had to pay 20-30% downpayment.

More recently they'll loan to 42% of your income, with no downpayment, & you don't have to pay interest - this creates a gigantic asset bubble.

Banks will loan that money to other customers, forcing you to meet them. So you have to pay much more to buy a house.

In Germany, home owners & renters pay about 10% of their income for housing; in USA, it can be up to 42%, federally guaranteed.

Education costs also rose 1000-fold. But wages are not going up.

(3) Michael Hudson: Chinese Investment Bank (AIIB) is out-doing IMF & World Bank

https://michael-hudson.com/2015/12/the-imf-changes-its-rules-to-isolate-china-and-russia/

The IMF Changes its Rules to Isolate China and Russia

Michael Hudson

Sunday, December 20, 2015

A nightmare scenario of U.S. geopolitical strategists is coming true: foreign independence from U.S.-centered financial and diplomatic control. China and Russia are investing in neighboring economies on terms that cement Eurasian integration on the basis of financing in their own currencies and favoring their own exports. They also have created the Shanghai Cooperation Organization (SCO) as an alternative military alliance to NATO.[1] And the Asian Infrastructure Investment Bank (AIIB) threatens to replace the IMF and World Bank tandem in which the United States holds unique veto power.

More than just a disparity of voting rights in the IMF and World Bank is at stake. At issue is a philosophy of development. U.S. and other foreign investment in infrastructure (or buyouts and takeovers on credit) adds interest rates and other financial charges to the cost structure, while charging prices as high as the market can bear (think of Carlos Slim's telephone monopoly in Mexico, or the high costs of America's health care system), and making their profits and monopoly rents tax-exempt by paying them out as interest.

By contrast, government-owned infrastructure provides basic services at low cost, on a subsidized basis, or freely. That is what has made the United States, Germany and other industrial lead nations so competitive over the past few centuries. But this positive role of government is no longer possible under World Bank/IMF policy. The U.S. promotion of neoliberalism and austerity is a major reason propelling China, Russia and other nations out of the U.S. diplomatic and banking orbit. [...]

To U.S. neocons the specter of AIIB government-to-government investment creates fear of nations minting their own money and holding each other's debt in their international reserves instead of borrowing dollars, paying interest in dollars and subordinating their financial planning to the U.S. Treasury and IMF. Foreign governments would have less need to finance their budget deficits by selling off key infrastructure. And instead of dismantling public spending, a broad Eurasian economic union would do what the United States itself practices, and seek self-sufficiency in banking and monetary policy. [...]

(4) Neoliberalism has Met Its Match in China - Ellen Brown

https://www.truthdig.com/articles/neoliberalism-has-met-its-match-in-china/

AUG 07, 2019

When the Federal Reserve cut interest rates last week, commentators were asking why. According to official data, the economy was rebounding, unemployment was below 4% and gross domestic product growth was above 3%. If anything, by the Fed's own reasoning, it should have been raising rates.

Market pundits explained that we're in a trade war and a currency war. Other central banks were cutting their rates, and the Fed had to follow suit in order to prevent the dollar from becoming overvalued relative to other currencies. The theory is that a cheaper dollar will make American products more attractive in foreign markets, helping our manufacturing and labor bases.

Over the weekend, President Trump followed the rate cuts by threatening to impose, on Sept. 1, a new 10% tariff on $300 billion worth of Chinese products. China responded by suspending imports of U.S. agricultural products by state-owned companies and letting the value of the yuan drop. On Monday, the Dow Jones Industrial Average dropped nearly 770 points, its worst day in 2019. The war was on.

The problem with a currency war is that it is a war without winners. This was demonstrated in the beggar-thy-neighbor policies of the 1930s, which only deepened the Great Depression. As economist Michael Hudson observed in a June interview with journalist Bonnie Faulkner, making American products cheaper abroad will do little for the American economy, because we no longer have a competitive manufacturing base or products to sell. Today's workers are largely in the service industries - cab drivers, hospital workers, insurance agents and the like. A cheaper dollar abroad just makes consumer goods at Walmart and imported raw materials for U.S. businesses more expensive.

What is mainly devalued when a currency is devalued, Hudson says, is the price of the country's labor and the working conditions of its laborers. The reason American workers cannot compete with foreign workers is not that the dollar is overvalued. It is due to their higher costs of housing, education, medical services and transportation. In competitor countries, these costs are typically subsidized by the government.

America's chief competitor in the trade war is obviously China, which subsidizes not just worker costs but the costs of its businesses. The government owns 80% of the banks, which make loans on favorable terms to domestic businesses, especially state-owned businesses. If the businesses cannot repay the loans, neither the banks nor the businesses are typically put into bankruptcy, since that would mean losing jobs and factories. The nonperforming loans are just carried on the books or written off. No private creditors are hurt, since the creditor is the government and the loans were created on the banks' books in the first place (following standard banking practice globally). As observed by Jeff Spross in a May 2018 Reuters article titled "Chinese Banks Are Big. Too Big?":

[B]ecause the Chinese government owns most of the banks, and it prints the currency, it can technically keep those banks alive and lending forever. É

It may sound weird to say that China's banks will never collapse, no matter how absurd their lending positions get. But banking systems are just about the flow of money.

Spross quoted former bank CEO Richard Vague, chair of The Governor's Woods Foundation, who explained, "China has committed itself to a high level of growth. And growth, very simply, is contingent on financing." Beijing will "come in and fix the profitability, fix the capital, fix the bad debt, of the state-owned banks É by any number of means that you and I would not see happen in the United States."

Political and labor unrest is a major problem in China. Spross wrote that the government keeps everyone happy by keeping economic growth high and spreading the proceeds to the citizenry. About two-thirds of Chinese debt is owed just by the corporations, which are also largely state-owned. Corporate lending is thus a roundabout form of government-financed industrial policy - a policy financed not through taxes but through the unique privilege of banks to create money on their books.

China thinks this is a better banking model than the private Western system focused on short-term profits for private shareholders. But U.S. policymakers consider China's subsidies to its businesses and workers to be "unfair trade practices." They want China to forgo state subsidization and its other protectionist policies in order to level the playing field. But Beijing contends that the demanded reforms amount to "economic regime change." As Hudson puts it: "This is the fight that Trump has against China. He wants to tell it to let the banks run China and have a free market. He says that China has grown rich over the last fifty years by unfair means, with government help and public enterprise. In effect, he wants the Chinese to be as threatened and insecure as American workers. They should get rid of their public transportation. They should get rid of their subsidies. They should let a lot of their companies go bankrupt so that Americans can buy them. They should have the same kind of free market that has wrecked the US economy. [Emphasis added.]"

Kurt Campbell and Jake Sullivan, writing on Aug. 1 in Foreign Affairs (the journal of the Council on Foreign Relations), call it "an emerging contest of models."

An Economic Cold War

To understand what is happening here, it is useful to review some history. The free market model hollowed out America's manufacturing base beginning in the Thatcher/Reagan era of the 1970s and '80s, when neoliberal economic policies took hold. Meanwhile, emerging Asian economies, led by Japan, were exploding on the scene with a new economic model called "state-guided market capitalism." The state determined the priorities and commissioned the work, then hired private enterprise to carry it out. The model overcame the defects of the communist system, which put ownership and control in the hands of the state.

The Japanese state-guided market system was effective and efficient - so effective that it was regarded as an existential threat to the neoliberal model of debt-based money and "free markets" promoted by the International Monetary Fund (IMF). According to author William Engdahl in "A Century of War," by the end of the 1980s, Japan was considered the leading economic and banking power in the world. Its state-guided model was also proving to be highly successful in South Korea and the other "Asian Tiger" economies. When the Soviet Union collapsed at the end of the Cold War, Japan proposed its model to the former communist countries, and many began looking to it and to South Korea's example as viable alternatives to the U.S. free-market system. State-guided capitalism provided for the general welfare without destroying capitalist incentive. Engdahl wrote:

The Tiger economies were a major embarrassment to the IMF free-market model. Their very success in blending private enterprise with a strong state economic role was a threat to the IMF free-market agenda. So long as the Tigers appeared to succeed with a model based on a strong state role, the former communist states and others could argue against taking the extreme IMF course. In east Asia during the 1980s, economic growth rates of 7-8 per cent per year, rising social security, universal education and a high worker productivity were all backed by state guidance and planning, albeit in a market economy - an Asian form of benevolent paternalism.

Just as the U.S. had engaged in a Cold War to destroy the Soviet communist model, so Western financial interests set out to destroy this emerging Asian threat. It was defused when Western neoliberal economists persuaded Japan and the Asian Tigers to adopt a free-market system and open their economies and companies to foreign investors. Western speculators then took down the vulnerable countries one by one in the "Asian crisis" of 1997-8. China alone was left as an economic threat to the Western neoliberal model, and it is this existential threat that is the target of the trade and currency wars today.

If You Can't Beat Them É

In their Aug. 1 Foreign Affairs article titled "Competition without Catastrophe," Campbell and Sullivan write that the temptation is to compare these economic trade wars with the Cold War with Russia; but the analogy is inapt:

China today is a peer competitor that is more formidable economically, more sophisticated diplomatically, and more flexible ideologically than the Soviet Union ever was. And unlike the Soviet Union, China is deeply integrated into the world and intertwined with the U.S. economy.

Unlike the Soviet communist system, the Chinese system cannot be expected to "crumble under its own weight." The U.S. cannot expect, and should not even want, to destroy China, Campbell and Sullivan say. Rather, we should aim for a state of "coexistence on terms favorable to U.S. interests and values."

The implication is that China, being too strong to be knocked out of the game as the Soviet Union was, needs to be coerced or cajoled into adopting the neoliberal model and abandoning state support of its industries and ownership of its banks. But the Chinese system, while obviously not perfect, has an impressive track record for sustaining long-term growth and development. While the U.S. manufacturing base was being hollowed out under the free-market model, China was systematically building up its own manufacturing base and investing heavily in infrastructure and emerging technologies, and it was doing this with credit generated by its state-owned banks. Rather than trying to destroy China's economic system, it might be more "favorable to U.S. interests and values" for us to adopt its more effective industrial and banking practices.

We cannot win a currency war through the use of competitive currency devaluations that trigger a "race to the bottom," and we cannot win a trade war by installing competitive trade barriers that simply cut us off from the benefits of cooperative trade. More favorable to our interests and values than warring with our trading partners would be to cooperate in sharing solutions, including banking and credit solutions. The Chinese have proven the effectiveness of their public banking system in supporting their industries and their workers. Rather than seeing it as an existential threat, we could thank them for test-driving the model and take a spin in it ourselves.

(5) Nazism and the German economic miracle, by Henry C K Liu (2005)

From my mailing list in 2005

Date: Tue, 24 May 2005 06:21:12 -0400 From: "David Chiang" <chiang.d@worldnet.att.net>

http://www.henryckliu.com/page105.html

no longer at http://www.atimes.com/atimes/Global_Economy/GE24Dj01.html

Nazism and the German economic miracle

By Henry C K Liu

Asia Times, May 24, 2005

[...] The Nazis came to power in Germany in 1933, at a time when its economy was in total collapse, with ruinous war-reparation obligations and zero prospects for foreign investment or credit. Yet through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the strongest economy in Europe within four years, even before armament spending began. In fact, German economic recovery preceded and later enabled German rearmament, in contrast to the US economy, where constitutional roadblocks placed by the US Supreme Court on the New Deal delayed economic recovery until US entry to World War II put the US market economy on a war footing. While this observation is not an endorsement for Nazi philosophy, the effectiveness of German economic policy in this period, some of which had been started during the last phase of the Weimar Republic, is undeniable. [...]

After two and a half decades of economic reform toward neo-liberal market economy, China is still unable to accomplish in economic reconstruction what Nazi Germany managed in four years after coming to power, ie, full employment with a vibrant economy financed with sovereign credit without the need to export, which would challenge that of Britain, the then superpower. This is because China made the mistake of relying on foreign investment instead of using its own sovereign credit. The penalty for China is that it has to export the resultant wealth to pay for the foreign capital it did not need in the first place. The result after more than two decades is that while China has become a creditor to the US to the tune of nearing China's own gross domestic product (GDP), it continues to have to beg the US for investment capital. [...]

From the very outset of his rule, Hitler, whose main short-term goal was the economic revival of Germany with the help of German nationalist bankers and industrialists, won popular support of the nation. Hitler adopted an aggressive full-employment campaign. Between January 1933 and July 1935 the number of employed Germans rose by a half, from 11.7 million to 16.9 million. More than 5 million new jobs paying living wages were created. Unemployment was banished from the German economy and the entire nation was productively engaged in reconstruction. Inflation was brought under control by wage freeze and price control. Besides this, taking into account the lessons learned during 1914-18, Hitler aimed at creating an economy that would be independent from foreign capital and supply, and be well protected from another blockade and economic war. For Germans, all of the above was proof that Hitler was the one who had not only brought Germany out of economic depression but would take it directly to prosperity with new pride. German popular trust in the Fuehrer rose dramatically. [...]

The financing of Nazi economic-recovery programs drew upon sovereign credit creation techniques already experimented prior to Hitler's appointment as chancellor. [...] Hitler resorted to "pre-financing" (Vorfinanzierung) by means of "work-creation bills" (Arbeitsbeschaffungswechseln), a classic response of using monetary measures to deal with a fiscal dilemma.

Under the scheme of "pre-financing" with work-creation bills, the Reich Finance Ministry distributed these WCBs (three months, renewable up to five years) to participating credit institutions and public agencies. Contractors and suppliers who required cash to participate in work-creation projects drew bills against the agency ordering the work or the appropriate credit institutions. These credit institutions then accepted (assumed liability for payment of) the bills, which, now treated as commercial paper, could rediscount the bills at the Reichsbank (central bank). The entire process of drawing, accepting and discounting WCBs provided the cash necessary to pay the contractors and suppliers. The experience of successful rollover every three months quickly established credit worthiness. The Reich Treasury undertook to redeem these bills, one-fifth of the total every year, between 1934 and 1938, as the economy and tax receipts recovered. As security for the bills, the Reich Treasury deposited with the credit institutions a corresponding amount of tax vouchers (Steuergutscheine) or other securities. As the Treasury redeemed WCBs, the tax vouchers were to be returned to the Treasury. Hitler increased the money supply in the German economy by creating special money for employment.

In the US Banking Panic of 1907, J P Morgan (1837-1913) did in essence the same thing. He strong-armed US banks to agree to settle accounts among themselves with clearinghouse certificates he issued rather than cash and thus illegally increased the money supply without involving the government, and ended up owning a much larger share of the financial sector paid for with his own paper, ironically with the gratitude of the government. The difference was that the economic benefit went to Morgan personally rather than to the nation as in Nazi Germany and the private money was used to save the banks rather than to save the unemployed. [...]

NOTE (Peter M.): Nazi Germany did all this without Gold; its economy was fiat-based. Until then, it was thought that you could not operate an economy without Gold. See my article The Finance Policy of Nazi Germany: Feder, Schacht and Hitler, at Feder-Schacht-Hitler.doc.

(6) Xi Jinping is a modern-day Stalin; China is also like Nazi Germany. Australia vulnerable

https://www.smh.com.au/politics/federal/hastie-s-awakening-to-xi-s-bid-for-total-control-of-china-and-beyond-20190809-p52for.html

Hastie's awakening to Xi's bid for total control of China - and beyond

Peter Hartcher

Political and international editor for The Sydney Morning Herald

August 10, 2019 - 12.00am

Like most people in Australia, Andrew Hastie wasn't worried too much about China. When he was first elected to federal Parliament in 2015 at a relatively young age of 32, he'd already fought the Taliban on three deployments. So the new Liberal MP for the West Australian seat of Canning was preoccupied, naturally enough, with the urgent terrorist threat of Daesh, or Islamic State.

Then, in 2017, the government was convulsed with internal arguments over same-sex marriage. "It was our own little Brexit because we didn't have energy to talk about anything else," Hastie has since remarked to his colleagues.

So how did he get to the point this week of writing a threshold critique of China's President Xi Jinping as a modern-day Stalin? And warning that Australia today was like a complacent France even as German tanks rolled towards its borders in 1940?

The piece provoked a firestorm. China's embassy immediately said "we strongly deplore" Hastie's article, published in The Age and The Sydney Morning Herald.

In earlier years Hastie had noted China's vast, global infrastructure project, the Belt and Road Initiative spanning at least 68 countries to date, and still in its early phase. But it didn't occur to him that this might be just a minor part of a much bigger Chinese strategy until he opened an email from John Garnaut early last year.

Garnaut is an Australian former Beijing correspondent for The Age and the Herald. He'd been retained by Malcolm Turnbull to write a classified report on China's operations in Australia.

Garnaut's findings so alarmed the government that it led directly to Turnbull's bill outlawing foreign interference in Australia, a bill Labor helped pass into law. The Garnaut report remains classified. But Garnaut did send Hastie something else he'd written. As Hastie read, it struck him like a thunderclap.

We all know that China is vital to the living standards we enjoy every day in Australia. And we all know that our dominant trading partner is driven by an ideology that's alien to our own.

But how many of us have taken the trouble to study that ideology? And especially to study it in the way that Xi Jinping is implementing it in the world's rising superpower?

The former soldier started reading a speech the former journalist had delivered to an internal federal government seminar hosted by the Department of Prime Minister and Cabinet in August 2017. It was titled Engineers of the Soul: what Australia needs to know about ideology in Xi Jinping's China.

Garnaut explained to his audience that today's Communist Party rulers of China are guided by the ancient imperial books that are "all about the rise and decay of dynasties". Garnaut related a telling fact about the founder of Communist China, Mao Zedong: "Mao in particular was obsessed, as Mao's one-time secretary Li Rui explained to me. He told me: 'He only slept on one-third of the bed and the other two-thirds of his bed was covered by books, all of which were thread-bound Chinese books, Chinese ancient books. His research was the strategies of emperors. That was how to govern this country. That was what he was most interested in.'"

The Garnaut paper sketched the connections between Mao then and Xi now. Xi's father worked with Mao in advancing the Communist revolution of 1949, and that makes Xi a "revolutionary successor", a so-called princeling in the Chinese Communist Party's aristocracy.

In the view of China's princelings," Garnaut wrote, "China is still trapped in the cycle which had created and destroyed every dynasty that had gone before.

"In this tradition, when you lose political power you don't just lose your job (while keeping your super) as you might in our rather gentrified arrangement. You lose your wealth, you lose your freedom, you probably lose your life and possibly your entire extended family. You are literally erased from history. Winners take all and losers lose everything ... Xi and his comrades in the red dynasty believe they will go the same way as the Manchus and the Mings the moment they forget."

How to keep the red dynasty alive? Mao drew on a 1938 work by Russia's iron-fisted Communist ruler, Joseph Stalin, Short Course on the History of the Bolsheviks.

According to Garnaut, it was Mao's manual for ruthlessly purging his peers, who were in cahoots with imagined Western agents working to restore liberalism and capitalism. Xi's deep purge of his party ­ in the form of an anti-corruption drive ­ is an earnest compliment to Mao and to Stalin.

"The key point about Communist Party ideology ­ the unbroken thread that runs from Lenin through Stalin, Mao and Xi ­ is that the party is and always has defined itself as being in perpetual struggle with the 'hostile' forces of Western liberalism," Garnaut continued.

"Xi is talking seriously and acting decisively to progress a project of total ideological control wherever it is possible for him to do so. His vision 'requires all the Chinese people to be unified with a single will like a strong city wall'," Garnaut wrote, quoting Xi.

Of course, communism is no longer a functional economic ideology in China. "All that remains is an ideology of power, dressed up as patriotism, but that doesn't mean it cannot work," Garnaut wrote. "Already, Xi has shown that the subversive promise of the internet can be inverted. In the space of five years, with the assistance of Big Data science and Artificial Intelligence, he has been bending the internet from an instrument of democratisation into a tool of omniscient control ...

"The audacity of this project is breathtaking. And so too are the implications. The challenge for us is that Xi's project of total ideological control does not stop at China's borders. It is packaged to travel with Chinese students, tourists, migrants and especially money. It flows through the channels of the Chinese language internet, pushes into all the world's major media and cultural spaces and generally keeps pace with and even anticipates China's increasingly global interests."

When Hastie finished reading, he saw the Chinese regime through an entirely new prism. And he paid much closer attention, testing Beijing's emerging behaviour against Garnaut's explanation. Hastie now saw the news of Xi's sweeping censorship, for instance, through the lens of a program of total ideological control. The news of Xi's mass incarceration of a million or more of China's ethnic Uighur minority people in re-education camps, too, was now much more comprehensible as a part of his program of totalisation.

And so, too, Beijing's manipulation of its Confucius Institutes, embedded in dozens of universities around the democratic world, was starkly obvious as another tool for extending Chinese Communist Party ideology. Only now, as illustrated by the recent student demonstrations at the University of Queensland, have Australian universities started to wake up to their unwitting part in Xi's totalising project.

And then, in recent weeks, Hastie has heard for himself about Xi's intensified religious persecution of Christians. Hastie's father established the Mandarin Presbyterian Church in Sydney's inner west suburb of Ashfield. Through this connection, Hastie has learned of how Australian Christian missionaries in China are being questioned and detained, their networks dismantled.

The people of Hong Kong understand the threat to their slender, remaining rights. They are now struggling desperately. We know that Beijing has no moral compunction about using mass murder to control political protest, even peaceful protest. How? Because just this year Xi's Defence Minister, Wei Fenghe, said the 1989 decision to massacre thousands of unarmed students in Tiananmen Square was "correct policy" to end "political turbulence".

John Howard, long an optimist in Australia's dealings with China, this week recognised that the old formula for Australia's relationship with Beijing can no longer operate.

"It is getting harder, because the regime in China now is a lot more authoritarian than the one that was in power 10 years ago," Howard said. "And what we are seeing in Hong Kong perhaps represents a glimpse of the future for Chinese society."

Andrew Hastie thought that Australia needed to wake to the danger of Beijing's relentless intrusions. If he erred, it was to use a comparison to Hitler's Germany. Xi is ruthlessly repressive but not guilty of genocide.

Nonetheless, it was telling that Prime Minister Scott Morrison, while not embracing Hastie's warning, certainly did not contradict him. He merely pointed out that, as a backbencher, Hastie was "entirely entitled" to put his views.

Indeed, while some Liberal and Labor politicians criticised Hastie's language and his comparisons, not one of them argued against his central proposition. Hastie, taking Xi's own ideology seriously, is now deeply worried that China is a present threat to Australian sovereignty and liberty and his realisation is widely shared across both of Australia's major parties.

The final words of his piece this week: "The next decade will test our democratic values, our economy, our alliances and our security like no other time in Australian history."

The Hastie experience shows that Australia is still working out how to talk about the threat from China. But the big change is that, however awkward the topic when it involves your biggest trading partner, Australia is now talking about it.

(7) National Socialism with Chinese Characteristics - John Garnaut

https://foreignpolicy.com/2012/11/15/national-socialism-with-chinese-characteristics/

National Socialism with Chinese Characteristics

Meet He Di, the insider trying to save the Chinese Communist Party from itself.

BY JOHN GARNAUT | NOVEMBER 15, 2012, 4:50 PM

BEIJING - Two years ago, one of China's most successful investment bankers broke away from his meetings in Berlin to explore a special exhibit that had caught his eye: "Hitler and the Germans: Nation and Crime." In the basement of the German History Museum, He Di watched crowds uneasily coming to terms with how their ancestors had embraced the Nazi promise of "advancement, prosperity and the reinstatement of former national grandeur," as the curators wrote in their introduction to the exhibit. He, vice-chairman of investment banking at the Swiss firm UBS, found the exhibition so enthralling, and so disturbing for the parallels he saw with back home, that he spent three days absorbing everything on Nazi history that he could find.

"I saw exactly how Hitler combined populism and nationalism to support Nazism," He told me in an interview in Beijing. "That's why the neighboring countries worry about China's situation. All these things we also worry about." On returning to China he sharpened the mission statement at the think tank he founded in 2007 and redoubled its ideological crusade.

He's Boyuan Foundation exists almost entirely under the radar, but is probably the most ambitious, radical, and consequential think tank in China. After helping bring the Chinese economy into the arena of global capital through his work at UBS, He now aspires to enable Chinese people to live in a world of what he and his ideological allies call "universal values": liberty, democracy, and free markets. While the foundation advises government institutions, including leaders at the banking and financial regulators, its core mission is to "achieve a societal consensus" around the universal values that it believes underpin a modern economic, political and social system.

"This is the transition from a traditional to a modern society," He says.

The challenge for Boyuan is that "universal values" clash with the ideology of the Communist Party, which holds itself above those values. "Boyuan is like the salons that initiated and incubated the governing ideas of the French revolution," says David Kelly, research director at a Beijing advisory group who has been mapping China's intellectual landscape. "They explicitly want to bring the liberal enlightenment to China."

The 65-year-old He is at the forefront of an ideological war that is playing out in the background of this week's epic leadership transition, where current Chinese President Hu Jintao officially yielded power to Xi Jinping. At one pole of this contest of ideas are He's universal values; at the other, the revolutionary ideology of the party's patriarch, Mao Zedong. This battle for China's future plays into the decade-long factional struggle between Hu and his recently resurgent predecessor, Jiang Zemin. Jiang's ideological disposition has evolved in chameleon fashion but in recent years he has hinted that if the party remains inflexibly beholden to Mao Zedong-era thought and Soviet-era institutions then it faces a risk of Soviet-style collapse.

When He Di stepped down as chairman of UBS China in 2008 - after leading the investment banking capital raising charts for four straight years - UBS gave him an office, a secretary, and a salary with no minimum work requirements. He continued to find UBS lucrative deals, capable princelings to hire (such as the son of former Vice Premier Li Ruihuan) and introductions to wealthy private banking clients. The Swiss bank also gave him $5 million to inject into Boyuan, just weeks before the 2008 global financial crisis, without any strings attached except the appointment of a UBS representative on his board, according to Boyuan representatives. He tipped in $1 million of his own as he redeployed his resources to build a platform for ideas. "One day I picked up the phone and called potential board members." he said. "I called 6 or 7 ministers or vice ministers, without any hesitation."

Boyuan's Beijing headquarters is an elegantly renovated courtyard home on the north side of the city. Behind He's desk is a wall of books on history, philosophy, and reform. Over a simple lunch of braised vegetables and endless cups of tea, he told me how his commitment to liberal values is rooted in a strand of Communist Party tradition that flourished in the 1980s and has since been subordinated but not entirely vanquished. "My grandfather and father were all fighting to establish not dictatorship, not feudalism, but so that people at the grassroots could enjoy a good life." He's grandfather was a vice-minister in the Kuomingtang government that ruled China until the Communists defeated it in 1949; he was beaten to death during the Cultural Revolution.

He's father was an influential agricultural minister in the reformist 1980s, a talented agricultural scientist respected for his integrity who helped guide China's peasants to shed the communal owning of land. This was China's moment of enlightenment, He says, where the revolutionary veterans respected the judgment of peasants and entrepreneurs alike to choose what to plant, what to make, and how to take it to market. The trick was simply to get out of the way. "At that time, the top leaders really understand the concept of so-called Ôuniversal values,' which means human rights and allowing the people freedom to choose what they want," says He. "They respected the abilities of the people, reflecting a universal value not necessarily coming from the West but based on human beings basic needs."

He had originally intended the Boyuan Foundation to be a retirement pursuit, a project of collective self-enlightenment with close childhood friends. His worries grew as he watched a fellow princeling, Bo Xilai, breathe new life into the spirit of Mao and whip up a popular frenzy in Chongqing, the inland mega-city Bo governed. As he watched Chinese citizens embrace modernity and the party-state slide back toward the revolutionary ideology of his childhood, his ambitions turned from supporting China's modern evolution to saving it.

When He returned to Beijing after his visit to Berlin in late 2010, he discovered that renowned scholars had been investigating those same parallels, even if they could not publicize their work. Shanghai historian Xu Jilin had traced China's leftward turn (leftists in China are the more conservative faction, who favor a more powerful state) to the 1999 U.S. bombing of the Chinese Embassy in Yugoslavia which grew into a "nationalist cyclone," a moment when China's rising pride, power, and the political phenomenon of Bo Xilai started to gain momentum. "Statist thinking is gaining ground in the mainstream ideology of officialdom, and may even be practiced on a large-scale in some regions of "singing Red songs and striking hard at crime," Xu said in a recent talk delivered to the Boyuan Foundation. "The history of Germany and Japan in the 1930s shows that if statism fulfils its potential, it will lead the entire nation into catastrophe."

Xu's antidote is right out of the Boyuan mission statement: "What a strong state needs most is democratic institutions, a sound constitution and the rule of law to prevent power from doing evil," says Xu.

He Di believes the overwhelming majority of Chinese people are on his side. "If you test how many Chinese people really want to return to Mao's period, to become North Korea, I don't believe it's 1 percent of them" he said.

He's adversaries - many of whom call for a return to the ideals of a Maoist era - are skeptical of private capital, appalled by rampant corruption, and antagonistic towards what they see as dangerous Western values. These adversaries, whose heroes include the fallen political star Bo Xilai and the politically wounded corruption-fighting general Liu Yuan, have a term for everything that He Di's Boyuan represents: "The Western Hostile Forces." Luckily, He has the chips to play in such a high-stakes game.

Besides his own princeling roots, which protect him from the state, He has the backing of his foundation's chairman Qin Xiao, who held a ministerial-level position as chairman of one of China's top state-owned financial conglomerates. Boyuan's directors include Brent Scowcroft, the former U.S. national security advisor. The Boyuan steering committee includes the publisher of the path-breaking investigative magazine Caijing, a son of one of the most important generals of the revolution (Chen Yi), and a group of officials who, between them, manage the largest accumulation of financial assets in the history of global capital.

He's childhood friends who have worked closely with Boyuan include the governor of the People's Bank of China, Zhou Xiaochuan, and Wang Qishan, the financial-system czar who is set to enter the Politburo Standing Committee, China's top decision making body, this week. They, along with several other princelings who have risen to the top of Chinese finance, became close friends, ironically, when they were red guards, fighting "capitalist roaders" in Mao's Cultural Revolution in the late 1960s.

Many of the protagonists at Boyuan have levers of the state at their disposal, and are organizing and challenging the party line in ways that would lead ordinary citizens to be branded as dissidents. Further in the organization's background, offering moral and practical support, are members of some of China's most powerful families - including former security chief Qiao Shi, former premier Zhu Rongji, and former president Jiang Zemin.

He traces China's spiritual and policy drift to 2003, the year in which the team of then President Jiang and Premier Zhu entrusted the party and government apparatus to their successors Hu and Wen Jiabao. He says the administration moved away from "opening and reform" - former leader Deng Xiaoping's policy of bringing China in line with the rest of the world - and the resulting vacuum was filled with counterproductive criticism of privatization and reform. Leaders are isolated from their mid-level officials, each bureaucracy is siloed from the next, and there is no framework to mediate their interests or debate the wider merits of any particular proposal, he says. And once they started back down the old road of central planning, high-ranking officials grew addicted to the power it brought them. "The current leaders have really disappointed because I don't know what they believe," says He. "They were educated by the party, the old doctrines of Marxism, yet they lack growth experiences at the grassroots. They are really engineers who still want to enjoy the dividends from the previous generation leadership."

He believes in China's ability transform itself but knows it might not happen easily. He thinks Mao was an aberration who hurt his family's 100-year quest to bring China into modernity. Mao saw peasants and workers as an undifferentiated mass to be organized and mobilized, but not respected - a man who represents China's past and used communism instead of Confucianism as his doctrine of control. "Mao called himself Qin Shihuang plus Stalin," He said, referring to China's first emperor. "He used revolution to repackage China's despotic tradition and crown himself emperor."

When Deng and his successors committed to the market they also committed to the values that underpinned it, He says, including the ideal of law. Hu, by contrast, eviscerated the integrity of the individual, and his administration's combination of extreme nationalism, extreme populism, and state capitalism means that history can repeat itself, He warns.

And that's why the Nazi exhibit scared him so.

(8) How China Interferes in Australia - John Garnaut, in Foreign Affairs

https://www.foreignaffairs.com/articles/china/2018-03-09/how-china-interferes-australia

How China Interferes in Australia And How Democracies Can Push Back

By John Garnaut

March 9, 2018

Australia is the canary in the coal mine of Chinese Communist Party interference. Over the past 18 months, the country has been shaken by allegations of the Chinese party-state working to covertly manipulate the Australian political system and curate the wider political landscape. There are claims of Beijing-linked political donors buying access and influence, universities being co-opted as "propaganda vehicles," and Australian-funded scientific research being diverted to aid the modernization of the People's Liberation Army (PLA). Most notoriously, an ambitious young senator, Sam Dastyari, was exposed for parroting Communist Party talking points and giving countersurveillance advice to a Chinese political donor before being hounded into premature retirement.

The scandals might seem odd. Few countries on the planet have benefited as clearly from China as Australia has. Its society has been enriched by waves of Chinese migrants and sojourners for 160 years. Its national income grew as much as 13 percent in a single decade as a result of China's resource-intensive construction boom, according to the Australian Reserve Bank. And an easing of the resources boom has been offset by the spending power of 180,000 Chinese students and a million tourists each year, along with hundreds of thousands of migrants who have mostly thrived in their new country.

Yet these are the very ingredients that make Australia's debate over Chinese influence so interesting. Nobody knows what happens when a mid-sized, open, multicultural nation stands its ground against a rising authoritarian superpower that accounts for one in every three of its export dollars. Even the firebrand editorial writers of China's tabloid press seem unsure. "Australia calls itself a civilized country, but its behavior is confusing," The Global Times wrote. "While it is economically dependent on China, it shows little gratitude."

The Australian conversation has evolved from amorphous anxieties about Chinese influence and soft power into more precise concerns about covert interference by the Chinese Communist Party. Media reports are shedding light upon a hidden world of inducements, threats, and plausible deniability. They reveal a dimension of risk that sits between the poles of economic attraction and military force, which Western Sinologists, diplomats, and national security officials had not previously focused on. The more we learn, the more it seems that there is little that is soft about the way the party wields power beyond its borders. [...]

Ethnic Chinese writers, entrepreneurs, and activists have led in drawing the nation's attention to the party's efforts to suppress the diversity of their opinions through surveillance, coercion, and co-option. In 2005, Chinese defector Chen Yonglin exposed an enormous informant network that kept tabs on Chinese Australians, including Falun Gong practitioners, who defied the party line. He explained how he would use the information to take targeted coercive actions like confiscating passports, denying visas, and shutting down meetings.

In 2008, Chinese Australian writer Yang Hengjun illuminated the party's efforts to mobilize thousands of red-flag-waving students to march on Canberra's Parliament to "defend the sacred Olympic torch" against pro-Tibet and other protestors, as the torch wound its way to the Olympic ceremony in Beijing. After the 2009 arrest of Australian iron ore executive Stern Hu, several Chinese Australian entrepreneurs revealed that they were targeted by the Chinese security system in ways that other Australians were not. They were all jailed on trumped-up charges, stripped of their assets, and mistreated during interrogations.

The Kafkaesque tragedy of Matthew Ng, Charlotte Chou, and Du Zuying became front page news in Australia because they and their families chose to tell their stories. More recently, Chinese Australian journalists have laid a foundation of investigative reporting on the party's concealed links to Australian politics.

Philip Wen, Beijing correspondent for The Sydney Morning Herald, showed how the party was "astroturfing" grassroots political movements to give the impression of ethnic Chinese support for Beijing's policies and leaders and to drown out its opponents. He also discovered that Australian politicians did not know basic details about Chinese citizen political donors who were bankrolling their campaigns, including their real names.

Student journalist Alex Joske, who owes his Chinese language fluency to his Beijing-raised mother, has mapped the party's "united front" networks and shown that they are now so ubiquitous - and well-resourced - that they are crowding out independent opportunities for ethnic Chinese community and political representation.

He's also shown how those networks can be activated to silence Chinese Australians, including his own experience of being intimidated by leaders of the local Chinese Students and Scholars Association. And for every story of state-sponsored coercion and co-option that Chinese Australians publicize, there are dozens that never surface. One journalist told me how he'd been summoned to a karaoke bar and physically assaulted in retaliation for his report on the dealings of a Chinese state-owned company in Australia. Another gave a parliamentary committee a confidential dossier detailing how Beijing sought to choke one of Australia's last independent Chinese-language media platforms by intimidating its advertisers. In this case, one China-based advertiser was forced to stop after a Ministry of State Security official camped in its office for two weeks. Another, in Australia, agreed to stop after being invited to a three-hour "tea" session at a Chinese consulate in Australia. At the same time, pro-Beijing media proprietors are rewarded with free content, equipment, and business opportunities. [...]

The distinctive part of the Australian experience is not what China is doing there but how Canberra is pushing back in the face of threats from Beijing and pressure from local business leaders worried about economic retaliation. Clarity of diagnosis has set the stage for a surgical response - one that manages the risks and targets the harm while attempting to maintain the overall project of engagement. This is not an easy balance to strike, but Australia's efforts to do so should be closely watched by leaders from Berlin, Ottawa, Washington, and Wellington - who may soon find themselves in a similar position.

Australia's experience also featured in an overview by The New York Times' Liz Alderman of mounting Western wariness of Chinese investments on Thursday:

In Australia, where Chinese foreign investment reached more than $30 billion in 2014 alone, the government has sought to toughen screening.

Wariness of Beijing's growing economic influence has increased as Chinese investors buy up vast swaths of the Australian economy and over concerns about Chinese businessmen giving millions of dollars to Australian politicians. Chinese takeovers of Australian businesses have jumped in recent years, along with an acceleration in purchases of agricultural land.

In 2015, the government strengthened foreign acquisitions and takeover rules to require the approval of a national oversight board if, for instance, a foreign purchaser's portfolio of farmland was worth $15 million or more. It has also blocked bids by a Chinese firms for Australian electricity companies, citing such deals as contrary to the national interest.

More changes could be afoot. The government recently said it would consider updating its foreign investment guidelines so Australians could be sure that proposed investments were "good for the country."

END

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