Nice to see Gordon Chang agrees with me

I was once fortunate enough to share a television studio with Gordon Chang, author of The Coming Collapse of China. Sadly, we were there to disagree about Beijing's North Korean colony; still, it was a good natured discussion, and for me it was an honor just to appear to be at his level for fifteen minutes.

Anyhow, Gordon has decided to examine the CCP's situation regarding its massive holdings of American debt (Weekly Standard), something into which I delved last year. I am happy to say that this time, Chang not only agrees with me, but echoes the very same arguments I did, including the most critical one - the reaction of the rest of the world:

What would happen in the worst case scenario if the Chinese central government decided to dump U.S. Treasuries? Beijing would have to buy something with the proceeds of its sales. As a practical matter, it would have to buy debt denominated in pounds, euros, and yen. The values of those currencies would then skyrocket. London, Brussels, and Tokyo would then have to try to depress the values of their currencies, which means they would have to buy .  .  . dollars. In short, there would be a great circular flow of cash in the world's currency and debt markets.

There would be turmoil in those markets, but it would not last long beyond the time the Chinese ended their dollar dump. And we would end up in just the same place that we are now, except that our friends, instead of a potential adversary, would be holding our debt. Global markets are still deep and flexible and can handle just about anything. The fact that Beijing has not employed its so-called nuclear weapon is an indication that the Chinese know it is not, as a practical matter, usable.

I would add one more ironic twist for those who are simply worried about American debts and deficits in general (not an unfounded concern): the odds are far better that our allies and friends could convince us to slow down our rampant spending at home - in part because more Americans would be willing to listen and in part because none would be so dependent upon Americans importing their goods as the CCP. This is probably why, as Chang notes, the cadres have suddenly stopped hectoring us about our excessive borrowing - because they desperately need to keep lending to us.

Iran: What the unfinished revolution means

Today was probably the closest the Iranian uprising has come to reminding the world of the Tiananmen massacre. In fact, the regime-ordered violence in Baharestan Square brought back memories of twenty years ago to many.

For a large number of Iran-watchers, the last few weeks have been somewhat bewildering. No tyranny on earth has been so careful to project a democratic image than the Islamic theocracy of Iran. By allowing discussion and argument within an infinitesimal political space, the Iranian mullahs managed to look far more favorable to the rest of the world than their Arab neighbor tyrants. This was especially the case during the presidency of "reformer" Mohammed Khatami, who managed to put the free world at ease about his fellow mullahs even as the regime continued to develop nuclear weapons, funnel aid, money, and weapons to foreign terrorist groups, and cement an alliance with the largest dictatorship on earth (measured by people imprisoned): the Chinese Communist Party.

Four years ago, the Iranian regime began its departure from the charm offensive with the "election" of Mahmoud Ahmadinejad. I pondered what the rise of Mahmoud the Mouthpiece meant, and I came to the conclusion that the regime was close enough to the CCP that it didn't feel the need to pretend at being democratic. It was full speed ahead to nuclear weapons, terrorism abroad, and tyranny at home. Iran had just become a large Taishi.

Now, we are once again seeing the effects of Tehran's ties to the CCP, but this time, the Iranian people refuse to play along. If anything, the events in Iran have unfolded as they have because the mullahcracy has become too close to the CCP.

The Communists had their own experiments with "elections" at a local level for roughly a decade before basically closing it down in 2006. Like the mullahs, the cadres hoped to score points with the outside world and perhaps soothe some very ruffled feathers at home. However, like Tehran, Beijing insisted on its rules, including approval of candidates and real power staying outside the elected bodies and in the hands of the local Party leaders.

However, events in small towns like Taishi made it clear to the cadres that even controlled elections can wreak havoc on their plans. Thus, they had to go. That Beijing went back to the straight dictatorial path just as Iran was relying more heavily on its CCP allies may be coincidental to the embarrassment of last month's "vote," but I'm not so sure.

After all, the Iranian mullahs couldn't help but notice the division caused by the local elections, and the factionalism within the CCP (the mullahcracy has similar factional issues). Moreover, the stubborn refusal of Hong Kong's democrats to go away had to be a shock to the mullahs in Tehran, and perhaps made them think twice about letting anyone even remotely linked to "reform" achieve the powerless but highly public role of president.

After all, something had to occur that made the regime - a group so willing to hand Khatami the reins - balk at giving Mir Hossein Mousavi the post. After all, Mousavi - the 1980s prime minister who railed against the west and cheered Hezbollah - was no less nationalist than the Mouthpiece. He never stated an intention to change the regime - even minimally. He called for greater freedoms for the Iranian people, but only within the framework of the "Islamic Republic."

To most of the rest of the world, Mousavi is hardly different from the Mouthpiece (and many believed just that), but anyone who observed Hong Kong politics would (or, in my case, should, as I did not) know better. Hong Kong's democrats are as nationalistic as the Communists; they have never expressed any interest in challenging the CCP's control across China; all they have asked for is greater freedom in their city. Yet even with these limited aims (and in no small part because of them), they still give the CCP fits, and dissidents hope.

Could it be that the Iranian regime looked out at Mousavi and saw a home-grown Kam Nai-wai? Did they see his wife as a Persian Emily Lau? Did they fear the "reform" movement - previously known for its fealty to the regime on the big issues - would someday become the Hong Kong democratic movement writ large?

Whatever their motivation, the Iranian regime lost its subtle advantages just as it drew closer to Beijing's embrace. Much like Czechoslovakia's Communist movement lost popularity, independence, and legitimacy as it moved closer to Moscow after World War II, the Iranian mullahcracy lost its deft ability to appear at least somewhat democratic just as it moved closer to a regime that came to see any democratic appearance as an unnecessary headache.

Thus, all the regime has left now are the same weapons the CCP has had since 1989: brutal military force and radical nationalism. The CCP has managed to hold itself together for two decades. Only time will tell if the Iranian mullahcracy can likewise thwart the will of the people it oppresses.

Is the CCP headed for a lost decade?

It didn't take long after the Tiananmen anniversary to slid into the rear-view mirror for the "engagement" crowd to spin up the CCP once more - this time as the saviors of the world economy. The lead cheerleader was World Bank President Robert Zoellick, who had this to say about recent "growth" in the CCP's realm this year (Breitbart): "By and large (China's growth) has not only been a stabilizing force, but a force that will pull the system (out of the downturn)."

While such nonsense is not entirely unexpected from Zoellick, who prior to his current sinecure was doing far more damage as U.S. Deputy Secretary of State, it certainly was treated as heady stuff in Zhongnanhai. There's only one problem: the CCP's economic "recovery" is largely a regime-driven fantasy that could very well repeat Japan's "lost decade."

To see what I mean, let's take a look at the recent "growth" Zoellick trumpets (Bloomberg). For starters, growth in the first quarter (January to March) was only 6.1% a figure that does not keep up with population growth - meaning the average resident under the CCP's thumb grew poorer this year.

Secondly, the forces behind the "growth" should be troubling to anyone knowledgeable of recent economic history (Bloomberg again):

China’s spending on factories, property and roads surged by the most in five years as the government’s 4 trillion yuan ($585 billion) stimulus package countered a record slump in exports.

. . .

Since the stimulus was announced in November, the nation has built 20,000 kilometers (12,430 miles) of rural roads, 445 kilometers of highway and 100,000
square meters (1.08 million square feet) of airport buildings, the National Development and Reform Commission said on May 21. China is also building 5.2
million low-rent homes over three years.

In other words, regime-driven "stimulus" was the main driver; without it, there might not have been any "growth" at all. To anyone even remotely familiar with 1990s Japan, this is not a comforting development.

A slew of Japanese governments tried public works spending in a desperate attempt to pull the Japanese economy out of the ditch. It failed so spectacularly that the period is now known as Japan's "lost decade." Even today, the Japanese economy is still feeling the after-effects of wasted resources, mounting debt, and lost private investment.

If this is where the CCP is headed, it will be a much rougher ride.

Japan's "lost decade" also came with unprecedented political competition. The long-governing Liberal Democratic Party actually lost power for brief intervals, and its dominance over Japanese politics was forever destroyed. Meanwhile, even within the LDP, reformers fought pitched battles for control - and sometimes actually won them. The economic doldrums brought with them a pathway to political maturity for the Land of the Rising Sun, a pathway it is still walking to this day.

The CCP, by contrast, will be in no mood for any political competition should the economy continue to stumble. Instead, we will see more arrests, more phantom concessions to protesters, and - as always when the Chinese Communist Party is involved - more bloodshed.

Even so, one would think that the CCP would find a way to muddle through, as it always has. I'm not so sure this time, and ironically, it could be the "engagement" crew itself that has unwittingly put in motion the regime's unexpected endgame.

What with Zoellick's comments (which are far from isolated) there will be many in the elites of the democratic world who are expecting and hoping for CCP-fueled economic growth to pull the rest of the world out of recession. When it doesn't happen, Beijing will be peppered with friendly advice on what to do different. In Japan, such advice was outwardly taken with a mixture of false gratitude and real annoyance, but opposition movements within the country seized upon the admonitions of Wall Street, Washington, and others to force domestic debates.

The CCP will allow no such thing. As it slowly dawns on the "engagement" crowd that the CCP cares less for their various nations' economies and more about preserving its own power, it could very well lose some of its strongest and most vital foreign supporters. It will certainly make the electorates in those nations far more anti-Communist in thoughts and votes.

Thus could the largest piece missing from the anti-Communist puzzle - a united free world determined to help the Chinese people take their country back - be put in place by the very people who are trying to prevent it from happening, all because no one seems to have remembered the lessons from Japan's "lost decade."

Those who do not remember history . . .

Twenty Years Later

So here we are, at another June 4 that much of the rest of the world won’t notice. It is all the more painful here in the West in that this anniversary – the 20th is one of our more important ones. It will hurt to see those who so bravely gave their lives be so cruelly forgotten.

The irony here – and one we must remember – is that this year, more than any other except perhaps for 1989 itself, we can truly say that those who were murdered did not die in vain. For whatever the rest of the world thinks of the Tiananmen Square bloodbath, the Chinese Communist Party is more afraid of it than it has ever been.

It would seem odd that this would be so. After all, the cadres have spent the last two decades erasing the Tiananmen Spring from local history books, and have rather brilliantly co-opted the previously non-Communist elite into the regime. Likewise, they seem to have convinced much of the rest of the world to move on and embrace the “new” China of the 21st Century. However, below the surface, it’s abundantly clear that the pressures that led the people to take to the streets in 1989 have never really gone away. They just went underground, and thus have become the cadres’ obsession.

We remember the students of 1989, but the CCP also remembers the laborers, farmers, pensioners, and other ordinary Chinese who joined the demonstrations (yes, that’s plural – it’s believed that 1 in 10 Chinese citizens joined some demonstration in hundreds of cities and towns that year). The cadres knew how to handle the intellectuals: a dose of radical nationalism and a slew of licenses-to-steal (otherwise known as Party Cards) did much of the trick. Thus, Beijing appears the model of peace and tranquility – to locals and outsiders.

Go beyond Beijing, Shanghai, Hong Kong, or Shenzhen, however, and it’s a different story. The anger, fear, and frustrations are still there, met not with kind words and incentives but party-sanctioned violence and corruption. In fact, the CCP pyramid scheme used to win over the intellectuals in the cities actually made the situation in the countryside worse – since it was peasants and laborers who were forced to pay for the CCP’s plans.

This is the real reason Tiananmen – even today – must remain buried in the past: too many people outside the cities remember what really happened, and have no interest in forgetting. We who live and work outside China rarely see this, in no small part because the cadres cannot afford to let us. Much like the hard-line Communists in Europe saw their regimes collapse when the outside world noticed the people’s anger, so, too, would the CCP if the foreign approval upon which it depends turned into wishing – and helping – the Chinese take their country back.

So, to prevent this, the cadres have to make sure June 4 passes by quietly – or, to be more accurate, that something else distracts our attention. For years, it hasn’t taken very much (a late Presidential primary, the proximity of the D-Day anniversary, etc.). This year, however, the anniversary so spooked the cadres that they apparently allowed (and perhaps even encouraged) their Korean colony to become a nuclear power – a rather large role of the dice that, if they’re not careful, could lead to more Americans and others catching on to the ruse.

That the CCP felt compelled to let Kim Jong-il frighten the entire free world, spin South Korea permanently away from the pro-Beijing “sunshine” of the last decade, and nearly inject an unexpected hawkishness into the Obama Administration is a sign of just how desperate the regime wanted the Tiananmen anniversary off the front pages. If they remain that scared of the 20-year-old crackdown, lovers of freedom cannot be completely discouraged.

Moreover, despite what the CCP would have us believe, the future is actually bright for anti-Communists. After two decades of prosperity-fueled corruption, the regime is facing a recession that could leave tens of millions of Party Members without the ill-gotten perks to which they think they are entitled. India and the United States have moved closer than at any time in 40 years, while CCP ally Pakistan is losing credibility in Washington faster than it’s losing territory to the Taliban. Japan and South Korea are now firmly in the anti-Communist camp, and even Taiwan, despite the Communist-friendly Nationalist government, seems to be returning to its anti-Communist roots.

All the while, the historical symbol of bloody repression hangs everywhere. Invisible but undeniable, it reminds tens of millions of Chinese that there was, once, a different path, and makes laughable every effort by the CCP to make it go away. With what the regime felt it had to do to keep the past away, we can truly see that it (the past) is still strong enough to guide the present and the future.Communism in China will fall; the only question remains: how much time, blood, and treasure must be lost before it does? That question can only be answered by those who helped accelerate the end of European Communism but, for now, have yet to do the same to Chinese Communism – namely, us.

Cross-posted to the right-wing liberal and Virginia Virtucon