Copyright © 2011 by Loretta Napoleoni A Seven Stories Press First Edition All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including mechanical, electric, photocopying, recording, or otherwise, without the prior written permission of the publisher. Seven Stories Press 140 Watts Street New York, NY 10013 www.sevenstories.com College professors may order examination copies of Seven Stories Press titles for a free six-month trial period. To order, visit www.sevenstories.com/textbook or send a fax on school letterhead to (212) 226-1411. Library of Congress Cataloging-in-Publication Data Napoleoni, Loretta. [Maonomics. English] Maonomics : why Chinese communists make better capitalists than we do / Loretta Napoleoni; translated from the Italian by Stephen Twilley. – Seven Stories Press 1st ed. p. cm. eISBN: 978-1-60980-352-0 1. China–Economic conditions–2000-2. China–Economic conditions–1976-2000–Congresses. 3. Globalization–Economic aspects–China. 4. China–Foreign economic relations. I. Twilley, Stephen. II. Title. 427.95. 3713 2010 HC N 330.951–dc23 2011027285 v3.1 CONTENTS Cover Title Page Copyright Preface Introduction Prologue: Depressions in Progress PART ONE: GLOBALIZATION AND COMMUNISM 1. Exploitation Factories: Charles Dickens in Shenzhen 2. The Race to the Bottom 3. Chinese Nouvelle Cuisine: Marxism in a Neoliberal Sauce 4. Beyond the Great Wall 5. The Neoliberal Dream of Modernization PART TWO: GLOBALIZATION AND CAPITALISM 6. The World Is Flat 7. Financial Neoliberalism as Predator 8. In Union There Is Strength 9. From Muhammad to Confucius 10. The Great Wall of Renewable Energy PART THREE: GLOBALIZATION AND DEMOCRACY: A SHOTGUN WEDDING 11. Looking at Washington and Beijing through Chinese Eyes 12. Late Imperial Spin: Osama bin Laden as the Modern Attila 13. Saboteurs of the Nation-State 14. Supply-Side Economics 15. The Full Monty 16. Mediacracy 17. The Thousand Evitas of Berlusconi PART FOUR: IMAGES OF THE FUTURE 18. Scenes from a Marriage 19. The Last Frontier 20. Globalization and Crime 21. Rousseau in Chinese Characters Epilogue: China Hands Acknowledgments Notes Glossary Further Reading About the Author About Seven Stories Press PREFACE Can the extraordinary events that took place in North Africa and the Middle East in 2011 provide the framework for a much-needed critical evaluation of the Western economic and political system? And can this analysis be conducted using the Asian model of development not as an alternative to the traditional Western socioeconomic paradigm, but as something different, new, unique? From the outset of globalization this new formula has proven successful in all the emerging countries that have embraced it. This unusual exercise could help us to understand our mistakes and find reasonable answers as to why our economic model suddenly seems out of sync with the world we live in. And perhaps it could also shed some light on the murky complexity of a globalized economy. As we sail toward a multipolar world, it becomes apparent that no ideal development model exists, no single economic or political system fits every country. Complexity breeds uniqueness. Thus, a comparison between the economic performance of two distinct models of development, the Western and the Chinese, is a much needed exercise, one that opens a window upon the new world because it offers a sneak preview of the future. Indeed, while the West struggles to recover economically and the Middle East is on fire—an explosion caused by social and economic injustice— Asia is booming. For the first time in generations wealth is empowering people: economic growth brings better living standards and new business opportunities, and breeds a higher degree of independence. However, only a few of us seem conscious of the slow-motion movement toward political participation that the Asian economic growth propels; even fewer people are aware of the fundamental shift in the socioeconomic paradigm known as “capitalism and democracy” that is taking place in Asia, a political earthquake not caused by a revolution, but by maintaining a centralized form of government, which many still define as communism. As the freedom bug infects North African countries ruled by fake democracies and dictatorial regimes, as the masses attempt to depose oligarchic leaders whom the democratic West has backed for decades, the formula of Eastern authoritarianism, coupled with economic freedom that we in the West have for so long criticized and misunderstood, becomes an appealing alternative to an obsolete Western socioeconomic model of development. Ask yourself a fundamental question: if I were an Egyptian today, which economic system would I want to emulate, the Western or the Asian? Would I trust Western leaders and corporations, which for decades have been doing business with the oligarchic elite that oppressed and robbed me? Or would I look to politicians and firms from emerging countries, people who until a few decades ago were as poor and dispossessed as I am today? The propaganda machine that blinds the world would like us to believe that the Middle East ordeal has nothing to do with our political and economic model and that we have not fostered repressive and dictatorial regimes disguised in the cloth of economic freedom and democracy. In 2010 the European Union sold almost €400 million worth of arms and armaments to Libya’s Gaddafi alone— weapons that in 2011 he used against his own people. The price of our democracy could well be the defense of undemocratic regimes in far away countries such as Saudi Arabia, a repressive kingdom where women have fewer rights than men. Imagine the economic consequences of the fall of the House of Saud, the second-largest oil producer in the world after Russia, and the biggest exporter to the West. Our comforts could vanish in the blink of an eye. The credit crunch and the recession have outlined the endemic instability of our economy, exposing its idiosyncrasies and contradictions; the Arab uprising may well reveal the fragility of our democracies when deprived of endless cheap energy supplied by oligarchs and dictators who also keep our defense industry afloat. In a society truly ruled by democracy, an ideal world, who would buy our arms and political protection? The world is changing fast, too fast for those who desperately cling to a past long gone. Once again, in the space of a decade, the West has been taken by surprise by perfectly predictable events. And we feel once again deeply exposed. As stories of the atrocities that modern Arab dictators inflicted on their population reach our living rooms, as the media unveils the true nature of North African democracies and Gaddafi morphs back into a bloodthirsty madman, Westerners watch their certainties vanish. Egypt is a democracy and yet it was ruled by a dictator; China is a communist country and yet it champions capitalism. The propaganda machine hid the gathering political storm in North Africa and the Middle East. Constantly focusing on China’s atrocities and lack of democracy, our leaders and media ignored the abysmal human rights record of Mubarak in Egypt, the ruthless repression of opposition by Gaddafi, Ben Ali’s theft of Tunisia’s wealth, and so much more. The propaganda machine also hid from us both the true nature of the Chinese economic miracle and the difficulties of our own model. The world is changing fast and we must open our eyes if we want to avoid ending up crushed under its wheels. Demography is reshaping the Middle East. Over the last three decades, a population boom has taken place in this deeply volatile region. A youth explosion coupled with economic pressures—not Islamist terrorism—has brought down ruthless dictatorial regimes. There were no swords brandished against the West in Tunisia or Egypt, no bearded man preaching the Sharia, but young people armed with iPhones and Blackberries. They defied the traditional media propaganda thanks to Facebook, YouTube and Myspace, forcing us Westerners to confront a new, deeply uncomfortable reality. In Asia a different revolution is taking place and we are totally unaware of its nature and objectives. Billions of Asian people are catching up with our standards, and soon they will be the driving force of major economic and financial changes that will impact our everyday lives. We may never see Chinese youth challenging the status quo; those images may never reach our screens, but our destiny is deeply intertwined with theirs. And to understand what awaits us around the corner, we must rise above the propaganda and look at China and Asia with humility and hope, not with arrogance and bigotry. INTRODUCTION Nearly a quarter century after the end of the Cold War, Western democracies are struggling to cope with the first real economic crisis of globalization. Communist China, meanwhile, has not only managed to limit the impact of the crisis, but is taking advantage of shrinking world demand to set in motion revolutionary social and economic reforms. Among them are greater security for workers and the drafting of a new international monetary system, potentially pegged to the Chinese currency.1 Economic stability’s “true north” is relocating to China thanks to a series of financial cataclysms that are reshaping the macroeconomic structure of the planet. The latest, the credit crunch and the recession, has catapulted China into the ranks of the most powerful nations in the world. Today no one can deny that the Chinese “New Deal” has provided an anchor of salvation in this perfect storm of a recession and prevented the world from plunging into a new Great Depression. Many are convinced that the changes now underway will precipitate the end of the United States’ economic supremacy. The transformations in China are not, however, limited to the reshaping of the economy according to the principles of free trade. Gross domestic product (GDP) growth goes hand in hand with social and political reforms unthinkable under Maoism, an odd couple in a still-communist country. From the defense of human rights to the development of renewable energy, going so far as to include respect for the rules of the World Trade Organization (WTO) and aspirations to participatory democracy, this nation seems fully committed to producing a new model of society. Even if for the moment Western-style democracy does not appear to figure among China’s aims, it is nonetheless true that for at least a decade the nation has distanced itself from its postwar totalitarianism and looks solely to a bright economic future. Can we speak of a capitalist-communism, or capi-communism? A political and economic hybrid that could very well become the model for the twenty-first century? A visit to a city like Shanghai or Beijing offers a preview of the metropolises of tomorrow and a sense of what China’s new modernity means. The dynamism of these cities is a drug intoxicating for everyone, especially foreigners. Thousands of young Westerners choose to live in Shanghai because there they feel on the very edge of a new world. Those who have lived in China for some time are well aware of the imminence of the future and know they are participating in its creation; for them, China represents a breeding ground for socioeconomic transformations as well as political ideas. Western metropolises, still mired in postmodernism, project an entirely different image. A sense of decadence permeates their institutions; the political machine is rusty with age and the effects of deregulation. We’re old, say the faces of commuters, each day boarding ever more crowded and inefficient transport systems. We’re old, say our young people destined for precarious work or unemployment. We’re old, and the future wealth of Europe could be reduced to the historical and cultural patrimony of the continent, transformed into the world’s largest museum. Our economy too is old, and even our democracy shows signs of dementia. The young Westerners who do find work draw salaries too low compared to the cost of living; their parents, the golden generation of the baby boomers, continue to support them. Discrimination against immigrants performing the most menial tasks is the order of the day; they have become the scapegoats for the mismanagement of our political class, an elite no longer the expression of the popular will but a caste working exclusively to remain in power. And the press seem incapable of exercising the liberty that inspired so many struggles and cost so many lives in the past. Looking closely, it becomes clear that the origins of Western senility coincide with those of China’s socioeconomic rebirth: the fall of the Berlin Wall. Who really did win the Cold War? THE PYRRHIC VICTORY OF THE WEST Let’s go back to that fateful year, 1989, marked by two ostensibly opposing events: the violent repression of the Tiananmen Square protests and the fall of the Berlin Wall. Both set the process of globalization in motion and influenced the planet’s future economic policies. The Western Left imploded and neoliberalism became the triumphant socioeconomic and political model for the entire planet. In the euphoria of that neoliberal victory, few suspected that globalization represented the end of Western economic supremacy. Twenty years on, as the epochal reforms and readjustments produced by these two events