Program Information:
Title: Orville Schell: China Thinks Long-term
Location: The YBCA Forum (Yerba Buena Center for the Arts) - San Francisco, CA, The Long Now
Foundation
Date: Sep 22 2006
Good evening. I'm Stewart Brand from the Long Now Foundation. A global business
network where I work half time. We do scenarios, we work with corporations and
governments, and departments of governments, and all kinds of people. Mostly doing
scenarios about what's the sort of strategic environment that these large organizations are
facing. In the next ten to twenty five years. And what they usually pose to us is, In what
subjects do they really want to know about. And the answer is, China, China, China,
China, and India. And so we often have Orville Schell who's an old friend and buddy
from Balinas days and things like that. And Jerry Brown days. He did a book about Jerry
Brown. If Jerry Brown had gone higher in politics you'd be reading his book about him.
Orville has been in the thick of some of the best public talks given in the Bay Area in the
last ten years, because he's been organizing out of the graduate school of journalism at
UC Berkeley. And basically bringing in a series of major intellects to not only talk about
what's going on in the world, going on in America, but going on with journalism. And so
he's got a perspective not only on China, China, China, and China, but a perspective on
how media and policy makers and basically the global frame of reference is shifting in
relation to China, and China in relation to it. Please welcome Orville Schell.
Well, welcome. It's great to be here at this very interesting lecture series and to answer to
the call of Stewart, an old and dear friend, who in ways that have not always been
apparent to me at the moment, is usually way out in front of things, and then later on you
kind of come to realize how that was true. Well, tonight the topic is China, and in a
curious way too, I think China has long been something of a long now. There is indeed
no society that's had more millenia of history, and history that's curiously rooted in a kind
of a nowness in that it didn't aspire to change much. It did change, but it didn't aspire to
change, in fact when things went wrong, they'd always look back. They'd look back to
the golden age of the Zhou Dynasty, when things were supposed to have been somewhat
exemplary, as expressed through all the classics.
And that's why it's such a curious fact that when China entered the 20th century, and the
old imperial system which was basically a cyclical one, the dynasties would rise and fall
and new dynasties would be formed, and they would try to emulate the best of the past.
But it is so confusing that as China entered the 20th century, it sort of lost that gravity, that
constancy, the sort of repetitiousness of its culture and sort of slightly involved and
embroidered core and took off on this incredible tear of trying this, trying that, trying
something else, revolutions, counter revolutions...and it went through this period of serial
cancellations of what it thought it was. It's a very difficult thing for a culture or society to
do. Particularly one like China, which was so deeply rooted in its past, its traditions, and
had such a profound respect for the history and the notion that in history was embodied
the model of the future.
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So in short order, we had the fall of the Qing Dynasty in 1911, we had the Mayforth
movement in favor of democracy and science against the Confucian canon. Then you've
got Chiang Kai-shek, the nationalist party, the republican movement, a kind of a mixture
of Confucianism and Christianity, of Western political forms of governments and more
traditional forms, and then of course, Japan came along. That was the critical moment.
And so that nationalist experiment, republican experiment, ended and you got Mao. And
Mao was a totally different tack. It was an imported ideology from Russia, Europe, and
China set off ultimately before 1949 in the so called liberated areas and the Wall of
China, on this incredible sort of magnificently mad experiment of revolution.
And then you got Deng Xiaoping , who in effect came on board. And it was interesting,
because I first went to China while Mao was still alive. While the cultural revolution still
raged. And it was very interesting to have been able to do that and establish that as the
baseline against which everything thereafter happened. So then Deng Xiaoping, you
know he was sort of the epitome of rationalism, search truth from facts, black cat white
cat what does it matter as long as it catches mice. You know, let's get it done, let's not be
too political. And in effect it was a counter revolution. One that goes on today. The
anti-Christ was let into the cathedral: capitalism. And yet the Communist party continued
to rule. And then we have several other leaders since Deng too, who have been sort of
variations on the theme.
But if you look back over that stretch over that century of history, you find the society
sort of in search of itself, or in search of some other way to be. And that I want you to
remember, because it is a kind of uncertainty principle that lurks behind all of the
extraordinary dynamism, change, all of the city skylines you see when you go there and
the amazing facts of life, which you're all familiar with and which bring you here tonight.
And how are they doing it. If you were a little bit confused, though, about what this
whole proposition is all about, well, you've come to the right place. Now, I'm not going
to answer it for you. But I'm going to try to help you think through it in a way that may
help you make a little more sense of what are the dynamics at work in this society.
It's a greatly hopeful society in many ways, increasingly wealthy, increasingly innovative,
entrepreneurial, increasingly confident, indeed it's increasingly arrogant. And in a certain
sense, it is as extreme a society today as it was during the cultural revolution. Except,
rather than having politics in command, the market is in command. Profit is in command.
Chinese do seem to have a curious way of, when they try something, they go at it hammer
and tongs, there is a kind of a totalism to these experiments that they've undertaken over
the last century, and that is something that is worth bearing in mind.
Now let me just tell you what I want to do here. We can't tell where China's going,
exactly. But we can see where it's been. And we can define the various sort of dynamic
elements that are at work in the society. I mentioned the fact that probably some of you
are a little confused about how to factor in all the things you hear about China that make
it seem like such a miracle, a boom, of just amazing proportions, that's enabled it to flood
the world with produce and goods and has enabled the middle class to rise, etc etc, we'll
get into that, but on the other hand, there are an awful lot of things that are very
destabilizing, that are unresolved, that are causing a tremendous amount of anxiety and
nervousness within China. Indeed, the key word to remember here is Unresolved.
And that China is a place where if you were not accustomed to sort of a multiple
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personality, if you're not accustomed to maintaining several things in your mind at once
that are opposite, you probably won't have a very realistic appreciation of this place. So
the contradictions are all real. And each of them, implicitly within them, is a different
scenario. A different future. And that's important because everybody wants to kind of
come to some term in terms of well all right, which is it, which is most likely, tell us. I
mean, business wants to do diligence, governments want to do their form of appraisal, of
what's happening, what are the trends. I think it's very difficult to do that in the case of China.
In fact, it is by a long shot in my view, the most unresolved nation in society of
consequence in the world. And it is that because it is in between things. And it is
molting out of not just one system. Not just Communism, Marxism, Leninism, Mao's
Revolution, it is also molting out of Confucianism, molting out of traditional forms of
governance and ways of seeing things, and you know, leaders and wives, husbands,
children, families, you name it. So it's got a huge amount of contradictory baggage,
which it is trying to evolve out of, and it's very unclear where it's going. I have a friend
who at one point I remember asking what he was doing, and he said well he said, I'm in
between transitions. And I think that perfectly captures where China is today.
So I want to sort of excuse your whatever sense of uncertainty you may have about how
to analyze this country here at the outset. All right, let's consider just a few basic facts
here. It's got a population of about 1.25 billion people, roughly, could be 1.3, the margin
of error in the census of China is equal to the entire population of France. Now that just
kind of gives you an idea what we're dealing with here. It has an army of 2.5 million
people, it's the largest standing army, not the most technologically advanced, but the
largest army in the world. It has roughly 800 million peasants, but it has an increasing
number of those peasants coming into the cities. In the big cities like Beijing, and
Shanghai have about a third of their populations are peasants who've come from the
countryside, what they call the floating population. It is 160 cities over a million people.
I mean, I wager, I don't even know, three quarters, you've probably never heard of them.
Another statistic, that this is somewhat eye popping. It's the world's largest consumer,
and one could go on and on, of agricultural and industrial goods of all different kinds. It
has lots of cheap labor although it seems that it might be coming to something of the edge
of the envelope in a certain respect on that. And if you don't fully understand the power
of cheap labor, go to Wal Mart. My family and I, we always play a game when we go
shopping at Home Depot or Wal Mart or wherever we go. To see, you know, you look at
the thing and you say, all right, give me odds, was it made in China. And there are very
few things these days, as you well know, that aren't made in China. And even fewer that
are made here. This was once the sick man of Asia, it's now been substantially reborn.
Okay, how do we analyze this. I'm going to do something that I hope will help you make
a little sense out of the contradiction. I want to try to argue, first of all, on the bright side.
The good scenario. China the miracle. China the boom, the indestructible force of the
future. And then I want to turn around and put on another hat and show you some of the
weak points, and then we'll see what we can make of that. China now has peaceful
borders with almost every country that surrounds it, that used to have 4,000 mile border
with the Soviet Union, and there were myriad Soviet divisions, it was very hostile border,
and no longer. They had a war in 79 with Vietnam, relatively peaceful now. It's quite an
accomplishment. They've had a peaceful transition to two leaderships following Deng
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Xiaoping, it's not exactly a political system we would recognize.
No one quite knows how the leaders come to be chosen, it is sort of a consensus building
process, but that is quite impressive. Whether they can continue to do that or not is
another question, because it is an asystemic political system. They are, as you know, if
you open your paper, they are on the march in Asia, Latin America, and the Middle East.
You know, while we are hunkered down squandering our fortune and all of our
intellectual firepower in Iraq, they're showing up in Chile, Argentina, Africa. They're
setting up a whole new series of Confucius Institutes, they're marching around the world
in terms of soft power, hard power, trade, interestingly enough, you know, when they go
to another country, they don't ask questions about human rights. Doesn't matter what
kind of governance. If there's good business to be done, they do it. Burma, Iran, Sudan,
Venezuela, all fine. So there's a kind of a new sort of real economique that they've
adopted. And this means that they can move into areas where Western countries, United
States, would have some problems. And this gives them an amazing advantage, in terms
of global markets.
They've gotten to be friendly with Russia. They're talking with the Vatican, as you may
know, the Catholic Church, as in the case of the Protestant Church, are under the control
of the Communist Party, they're called the Patriotic Catholic Church, and the Protestant
Church, they do not recognize the any connection to the holy see, and the bishop is not
appointed by the Pope. They recognize Taiwan. That would be a great sort of moral, sort
of psychic coup if they could get the Vatican to dump Taiwan and recognize them, and
they've come very close. They're now playing a major role in talks with North Korea.
They've started actually to have a kind of an ingénue role in some diplomatic conflicts.
But they're still very wary about doing anything that in any sense would make it look like
they didn't fully respect and recognize the absolute power of sovereignty as a sort of
defense against any foreign intrusion. So they don't want to do anything in North Korea
which would establish any precedence of international powers prevailing or invading or
encroaching, that then might set them up at some point as being subject to similar kinds
of foreign intervention. It's a very 19th century notion of sovereignty, very absolute.
We're not quite sure of the number...200 million people taken out of poverty in the last 15
years, that's pretty impressive. Not quite joining the middle class in every case, but I don't
think there's been any society, any country, that's had anything like that in terms of the
level of economic benefit. Give or take 10, 20, 30, 40 million, there's 300 million people
with cell phones. Reception's great. You can go up to the foothills of Tibet and loud and
clear as a bell, I mean they really leapfrog all over the landlines. I mean, our cell phone
service is just a pathetic snarl of dropped calls compared to China.
There are roughly 150 million people online, and that number just keeps going up. An
interesting question, though, because how do you control online media when you're a
party that's used to doing that. That's a problem. We can talk about that. Every year they
graduate 350,000 engineering graduates. That's about 5 times more than us. They're
bigger, maybe their education isn't quite as good. This is one area of soft power the
United States still has, but I fear we are squandering it. We should have a massive
program of free fellowships and scholarships bringing, you know, hundred, two hundred
Chinese students to this country every year. And we don't. It's just a patchwork of
whatever anyone can throw together. If we wanted to really influence people, we'd do
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that. But we don't have such a thing, and we doubtless will not have it anytime soon.
Shanghai has just for example, a few little factoids, the largest shipyard, the largest ferris
wheel, the tallest building, I think this is a GVN factoid that I found in some book, and
they also have the fastest train. I think it's the only magnetic levitation train in the world
that the Germans built for them coming in from the airport. And they're talking about
building one now in Beijing, or you know, they can do more. It's quite astounding. The
infrastructural projects they've undertaken. They have plans for the tallest building. They
are the largest producer of steel, cement, coal...one could go on.
They garner every year roughly a third of the world's foreign direct investment. It's an
amazing statistic. Yes, they have a problem with their banks and with their own financial
markets, but still that's quite a statistic. Annually, they have a 17% increase in the rate of
production. Not bad. Now, all of these numbers are a bit spongy, I admit, no one knows
quite whether to trust them or not, but you know, give or take, it gives you an idea of
incredible growth. If you've been in China recently, you'll see the amazing amount of
new construction at airports, terminals, train stations, and railroad lines.
And I think the most impressive thing of all is the freeway system. You get out there and
start driving around China, it's quite astounding. When I first went there, there was
nothing but two lane highways. You know, peasants would throw their wheat out on, and
the trucks would winnow it as they drove over, and people going ten miles an hour. Of
course there wasn't much traffic either. But now it's an entirely different situation.
They've managed to do what this country did in the fifties, which is to really build very
impressive and well built trunk roads across the country.
The United States, somebody told me it was actually negative, but the statistics that I
have seen, we have a 1% savings rate. You know what China's is? About 40%. Now,
there's a reason for that too, because the welfare system is so bad they have to save to
look after themselves, but of course it bespeaks of the other obvious fact, which is we're
borrowing money, as China buys tea bills, and our debt has been subsidized by China so
we can go to Wal Mart. It's a kind of a co-dependent relationship. On the one hand it
does sort of work, on the other hand, there are all sorts of things implicit in that
relationship which could be very dangerous.
And of course, finally, China has a growth rate that 9, 10, 11, sometimes 12%. That's
staggering. Japan was hovering around 0, 1%, you know if it gets up to 3%, boy that's
great. And here's China chugging along, worried about overheating, not being too cool.
There is a huge trade surplus, most of it with the United States. Is this good or bad for us,
well many people are worrying about it. This August it was an 18.8 billion dollar trade
surplus for the year, it looks like it's going to head up to 135, 150 even. Foreign exchange
reserves are very high, almost a trillion dollars. We're at 900 trillion at this point. They
have in our tea bill account about 250 and rising billion dollars in tea bills. That's a lot of
leverage over the world's most powerful country.
And if you go to the cities, you know it's hard not to be impressed. You look at the
Olympic Village that's being built, that's really quite beautiful, beauteously designed
Olympic stadium, I mean I don't think America could construct something on that scale.
We try to build a bridge, and it's a big deal. One company bid on that bridge, and soon it
will be the Chinese who are building that bridge. We are losing our ability to do that kind
of infrastructural problem. And China's role in the world is growing, it's getting a much
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better reputation. It is a more constructive citizen and people are quite impressed and in
some cases worried about it. All right, that's a good scenario so far. What does it suggest
about the future. Well, let's talk about that.
Now, I'm going to put on my other hat and I want to completely bum you out. And I want
to sort of turn the thing over and allow you to look at the seamy side of China, that part of
China which can be seen as quite dysfunctional, and actually menacing of this grand
experiment. China has only 7% of the arable land and of course a quarter of the world's
population. Bad start. And a lot of that arable land has been gobbled up in industrial
parks and railways and freeways, and various other construction projects. They're not
going to be self reliant in food, in fact what they tend to do now is import food for the
coast and they're more self-reliant for food in the inland area, so they don't have the
transportation bottlenecks.
Car production, and this, one way, is a good scenario statistic, but in another way is a bad
scenario statistic. 2000, they made 640,000 cars. 2005, 3.1 million. And this number
has just skyrocketed. And those of you who've been to China know there isn't a car
company in the world that isn't trying to get in there, and a lot of Chinese companies that
are also building local cars, and every city is just crushed with traffic. It does not matter
how many ring roads they build around Beijing, you still, it's gridlock during rush hours.
It's a real problem. And you also know the consequences of automobiles. Not just traffic.
A small fact, that just throw away chopsticks take some 70 million board feet of timber
every year. Anything that China does is on a gargantuan scale, because of the population.
Two thirds of all its energy is coal. That's a very significant figure, because coal is king
in China. And as China turns, and the world turns, we will have to be mindful of coal,
because that is what keeps this whole gyroscope spinning. It is also what could threaten
the world, through climate change, acid rain, and various other kinds of pollutants.
Already in China, because of coal largely, and to some extent other automobiles, 30% of
the country has severe acid rain. That's a very serious number. People estimate, the
Academy of Social Sciences, some 400,000 to half a million people have premature
deaths because of the air pollution. If you've been to China you know you can go for
weeks in big cities and never see the sky.
I had a very interesting experience lately, I was there, I think it was May, and my kids
were in school in China, and had a vacation. And we wanted to take a little vacation tour.
So we got a van, got in, had a friend, and we went out to Shangshui province, which is
sort of in the northwest, which is coal country. And I thought, well you know, we'd drive
outside of Beijing, get past the Great Wall, then we'll see the sky. Well, we drove for, I
don't know, four or five days, and never saw the sun. Never saw the sky. And in fact
when you get beyond the Great Wall, and you get into coal country, what you see is one
power plant after another, one cement factory after another, one sort of industrial plant burning coal.
Indeed in China every week now, and again I've heard different statistics, one new coalfired power plant comes online. I also heard a statistic the other day that said two. It
doesn't matter: a lot. Those power plants are not retrofitted with anything. And they are
going to be there for thirty years, or whatever their actual table is on coal-fired power
plant. And it's a huge problem. 75% of China's lakes are polluted, and there is serious
deforestation, causing floods and various other sorts of dilemmas. 75% of the river water
adjacent to cities is undrinkable, and in many cases, it is unusable for industrial purposes,
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and what is even more shocking, is that an alarming number of rivers have stopped
flowing. To wit, the Yellow River, which stops flowing in the summer about 200 miles
up from its final delta.
And as I drove across Shangshui province in May, I didn't see a single river with any
water in it. You pass bridge after bridge after bridge, no water. So the ground table is
being pumped out, it's the only refuge for industry and people who need water. And I
should also say, that landscape in that province, which I visited a number of times, and
the first time long ago. Was one of the most desecrated landscapes I've ever seen in my
life. Piles of coal everywhere, fly ash, you know, cement factories with wind sort of
whipping the powdered limestone off in piles like off the face of Everest, and you will go
for mile after mile and there would be these incredible occursions of junky little shacks
with restaurants and truck stops, you know, soil saturated with solvents and oil and all up
and down these roads. Thousands and thousands of coal trucks.
There was an article just a day before yesterday in the New York Times about this coal
trucking industry. In fact, coming back into Beijing, it was May Day, a Communist
holiday. And all of the coal trucks were being kept out of Beijing. They had to wait for a
couple of days while the holiday got over. And so there were these armadas of these
trucks with truck drivers, you know thousands of trucks just stopped along the road,
waiting. And you got a sense of the incredible, the staggering dimension of this energy
question for China. The one that coal is the answer, because China has a lot of coal.
Unfortunately, it's very high sulfur content coal.
And I should say that the mining industry in China is extremely primitive. And there are
thousands of deaths every year for miners, it's very unregulated, and the Shangshui coal
barons are of course famous for their wealth, and they all live in Beijing and drive big
black cars, but you know, China's got the needle in its arm. But then so do we. 16 out of
the 20 most polluted cities in the world are said to be in China, I've also heard 6 out of the
10 most polluted cities. I mean, in China you hear a lot of statistics that sort of blow your
mind, and you don't know which is true, and sometimes they conflict, but most of them
are on the uphill side of astounding. The trouble with these environmental statistics is
that a large measure of unrest that is unfolding in China, grow out of environmental questions.
They also grow out of corruption, confiscation of land by officials, but the environment is
increasingly a cause of great restiveness. Pollution, you know, rivers being contaminated,
fields being taken away from peasants, air pollution, one thing and another, toxic dumps,
you know coastal waterways, coastal habitat destroyed, and this is something that the
Party's getting very concerned about. In fact, last year, by the Party's own admission,
there were 87,000 instances of notable public unrest. That isn't just somebody standing
with a picket sign. The year before, as I recall, the figure was 74,000. That's very high.
The year before that I think it was 50 or something. It's on the rise, and there are a lot of
different reasons causing it.
Corruption is a big problem in China. And one of the reasons corruption has such
purchase on the way things are done in China is for this reason. When the revolution
came about, the Communist Party confiscated everything. All buildings, all land.
Everything was nationalized. And nobody was compensated. Now that the market is on
fire, this land, these buildings, are worth a fortune. And the people who control them
control these state assets are officials that don't get paid very much. And they get in
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league with the banks and form projects, and they are the keepers for what land gets sold
to who and what goes into what project, and there's a huge temptation and a huge
prospect to make an awful lot of money.
It would be as if the government owned everything here and it fed it back into the
economy, and the market place and officials determining where it went, and profiting
from it. It's a very odd situation in China, because it's still, there's much state-owned
enterprise. And you have the anomalous situation where you know the army or the air
force or the public security bureau will own a hotel, or a series of restaurants, or a whore
house. Or a casino, or whatever it is. Their playing would be as if the department of
environmental protection here had a string of golf courses to raise a little income on the
side. Very curious, and I've never seen any reputable economist address that situation.
The state ownership and the way in which the state feeds property into the sort of the
private side of the marketplace, how that influences the economic picture, and how do
you build that in your mind.
People estimate, reputable economists, that somewhere between 8 and 12% of GDP
should be written down in terms of environmental cost, albeit perhaps long term rather
than short term. That's a very high figure. That's almost the entire growth rate of China.
And it is alarming because it suggests that in the long term there's going to be a real cost,
that in other words, they're burning up assets now which they'll come back to pay for later on.
Now, it's also a Leninist state, lest we forget. China's reformed economically. It hasn't
reformed politically. And the real question is, what does it do with the institutions that
are sort of on the political side of the ledger, that remain. If you walk to Tienanmen
Square now, from the east, you'll pass a giant building on the left hand side just before
you get there, right across from the Beijing Hotel, and that is the new public security
building. I mean, it's vast. Not badly designed either. But the question that you finally
have to ask when you think in terms of China's peaceful evolution, is What do they do
with that? What do they do with the Party? What do they do with the military? What do
they do with the state security? What do they do with the people's armed police? What
do they do with these myriad institutions which have hundreds of millions of people in
them, how do you reform that? That's a lot harder to reform than some of the things
they've already tackled. It's a problem.
China has twice as many people as they had fifty years ago. There's a problem. Twelve
million new mouths each year, new people to get jobs for, it has an aging population, very
much weighted on the side of people who have now retired. It also has a very weak
pension plan. It used to be that everybody's welfare was taken care of by their state
enterprise. If you worked in a factory, you had health care, your kids went to school, you
got an apartment, they took care of you, you get married, you die, they got you a coffin,
when you got sick you went to the hospital. And you got a little pension when you
retired. That is melting away. And they have not managed to reconstitute a pension
program that really will do the job. That's why there's such a high savings rate.
That's a real problem.
There's a broken health care system. It used to be that health care was free. But that
came with your unit. Now hospitals are increasingly privatized, or they will take you out
of the common wheel, and there is a price for an appendectomy, but you will never get
that appendectomy performed unless you slip a substantial amount of money to the
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doctors under the table to get on the schedule. And they don't know quite what to do with
that. It's a dilemma of transition. The new system is not born,
the old system is not working.
Banks, real problem. Huge amount of loans out that the state has made banks give.
Banks are not commercial banks in the sense that we know them, that they look at an
investment in terms of risk, and then they make the loan. Banks very often have to make
huge investments just to satisfy the government. They're trying to wean them away from
that, but constantly the government requires this to happen because they fear instability,
they don't want to let a state owned enterprise with fifty thousand employees collapse if
those fifty thousand people are going to be out on the street, so they loan it more money.
So the non performing loans and banks are huge.
Stock markets, traditional way as you all know that a capitalist society raises money. You
sell stock. You have a company, you sell stock. China has two stock markets, and
they've grown, but they're basically casinos. They get manipulated in a lot of ways. And
one of the biggest problems of these stock markets is that companies early on learned, hey
let's issue stock, we'll get a lot of money and we'll all buy cars and we'll buy houses and
it'll be great. And they did. But one of the things they couldn't do because the market
was so small, they couldn't put all of their stock on the market. They call it overhang. So
half, two thirds, nobody quite knows, of all the stock that companies own isn't on the
market, and the government won't let it go on the market, so in effect what you have is a
rigged market. A market that doesn't operate according to market principles.
But that is being controlled by the government. And the government feeds a lot of stock,
the market usually goes down. So it's a, how do they get out of that trap, nobody quite
knows. But without financial markets to finance their own development, they're forced to
rely on the banks and outsiders. So it's a strange system that's not like anything financiers
here would recognize. I might add, that doesn't weaken the armor of many invenstors
who in my experience, many of them don't really want to know what's going on, they just
want to get in. They figure they cannot but be there. And some of them make money,
and a lot of them have come a croppin because the powerful sort of psychological
urgency of getting into the largest and most dynamic market in the world.
And then you know you have things lingering around in China like the legacy of 1989,
that undigested massacre, that moment in history, greatly tragic, that nobody has been
able to lay to rest. It's like an uninterred corpse. Does it matter, well, it all depends on
what you think. Does it matter that human beings or societies come to terms with their
past, does it matter that Villi Bront got down on his knees in a Warsaw ghetto to
apologize for what the Germans had done during the war, who's to say? Does it matter
that the Japanese repent and apologize? I think in some deep way it does, and there is no
nation that has avoided its history more sort of consistently than China.
And can it escape from what it's done? Can it escape what the Party did to the people?
It's a great leap forward, 30 million dead in famine, whether it's a cultural revolution,
whether you name it. Does it matter that-- can you just take that and say listen, let's not
talk about it, let's not, we've got a good thing going here, let's not dwell on it. It depends
on what you think is important and what you think is a state of health for a society.
So. I could go on. But I won't. There you have these two very interesting sort of panels
of facts, phenomena, dynamics, and there are many many others I haven't gotten to on
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both sides of the ledger. Now you probably sort of forgotten the first group, at the least
that sort of light bulb in your mind after you turn it out is probably dimmed a bit as I've
recounted this other group. So how do we reconcile these two kind of very contradictory
lists of conditions? I don't think we can. I think what one can think in terms of is this.
That the best possible scenario for China is what the Party is very wary of hearing called
Peaceful Evolution. That means Piecemeal Change.
Deng Xiaoping, when he was asked, you know, Where is China going? He used an
expression that's now very common in China...We're feeling our way across-- No, "We're
crossing the river by feeling our way over the stones on the bottom." And it does not
bespeak of a tremendously highly evolved notion of destination. It's all in the process,
and it's going there very rapidly, and if you want to talk to people about where it's going,
you get a kind of deer in the headlights look. And if you then ask about well, politically,
what's the aspiration. You get the same look. Maybe a little more democracy, what does
that mean, well, who knows.
And the interesting part of that aversion is this, that having had the big dream of socialist
utopianism dangled over them for so long, with all the steps of how to get there, the
bourgeois national revolution, the this the that, and then they're going to get to paradise,
you know, I think the Chinese are a little sick of the picture. A little sick of grand
visions. And a little wary at this point of charismatic big top rulers who run them over
the cliff. And so in a curious way, not only does the party not find it expeditious to speak
of grand visions of where they're going, but people too are just, you know, leave me
alone, let me redecorate my bathroom. Let me get that car. Just as long as everything's
okay, hey, I won't make trouble. But as we know in societies, there are always
troublemakers, and what we also know, indelibly, that as long as economies are going up
and expectations are hopeful, and people are on the escalator which they are in China
now, you can get away with almost anything in terms of contradictions and unresolved
institutions and lack of clarity of vision.
The problem comes, as inevitably it does, and China has been incredibly lucky that it
hasn't come yet, and it may not come, is in the cycles. We know there are business
cycles, we know there are economic cycles, and even more important, we know the world
is highly fragile in its construction, economically, and that some perturbation outside of
China could have a very profound effect in China. Let's just take something that could
happen here. The housing market goes south. Nobody can borrow money anymore.
They're losing their houses. And their credit cards are run out. They can't go to Wal
Mart. They can't go to Home Depot. That could have a very profound effect on China.
So the thing to watch out for, and the thing I think ultimately China fears most, of course
there are all these internal problems that they have to deal with, but what they fear most is
that the economic situation will slow down to a point where they'll have more people in
the streets and unhappy, and they'll have more people saying, who are we going to blame?
Someone's got to be at fault. Why don't I have a job. And that, to me, is the main danger
to look towards, because the legitimacy base of China's base very narrow in an economic
sense. Nobody much believes in Communism or the Party and in fact the whole value
system is rather vague. If you're Chinese, who are you? Are you Confucian? Taoist?
Maybe you could be Christian? Are you Communist, are you Marxist, are you Maoist,
are you Deng Xiaopingist, are you Adam Smith? I mean, what do you believe in? And
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where do you turn when you need to know how to do something right? How to relate to
someone in the proper way.
It's very vague now, very uncertain, and it creates a lot of not only instability, but a kind
of murkiness in people knowing what to do when push comes to shove. Maybe I'll just
end here and we can have some questions. China is a work in progress, and it is a country
trying to molt out of one system into another system that is not too clear. And it is a
country that's had incredible success and chosen incredible promise and it's an awful lot
of extraordinarily bright young people in China, who have immense capacity and yet
there are a lot of things that don't confront other countries by way of dealing with past
business, past institutions, that nobody quite has an answer for. And that makes it very
interesting. It makes it probably the most interesting country in the world.
But it also makes it a very provisional country, whose future is not gloomy by any means,
but whose future is not, let's say, assured, like give or take, Canada's going to be Canada,
right? Growth rate'll go up and down. France, I mean you name it, most countries, they
could have some problems, even Argentina, but they don't have built within them the
kinds of structural anomalies and contradictions that China does. And China's challenge
will be somehow managing to manage to keep evolving and to resolve those in a way that
doesn't cause any sort of precipitous bump in the road. All right, I'll stop here, let's have
some questions.
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