Opinion | Chinese Bankers Go Communist – Good for Them
The sky has fallen on China International Capital Corp (CICC), the country’s once-legendary investment bank. At least, that’s what a new report from Bloomberg says. CICC is still a big company in mainland China, but its international presence has been reduced, partly because of a deliberate state policy to crack down on unruly financial firms and promote greater economic equality as part of “common prosperity.”
The country’s economic elite has been demoted a notch or two, while more than three out of ten bankers have become members of the Communist Party. This means that they are subject not only to Chinese law, but also to Party discipline.
The author of the Bloomberg report sounds horrified when he talks about the reign of terror that has been unleashed against CICC, where – horror of horrors – senior executives have had their salaries cut by up to 25% and most bonuses cancelled. But it’s not just CICC. Across the financial sector, major companies have asked their senior executives to defer bonus payments or even give up past rewards.
I suppose that would be like canceling Christmas in the United States. But what’s the harm in that? A serious financial crime could get you executed in China, although that’s rare these days. While I’m against capital punishment, I’m all for long prison sentences. If only the United States could jail a few hundred of the top financiers and bankers most responsible for the last global financial crisis. That would clean up its financial and banking sectors in no time.
So now I understand why this all seemed so horrible to the Bloomberg writer. In the United States, society is at the service of finance. In China, it is the other way around.
Of course, things don’t always work out that way. But overall, the respective societal priorities are the same in the United States and China. And I always side with the Chinese. There is no reason to pay tens of millions, or even billions, to financiers when so many others are struggling to make ends meet, even while working multiple jobs.
China is supposed to be inefficient, wasteful, and prone to corruption. That’s true to some extent, but the same can be said of the American way. But here’s the difference. In my own experience, the Chinese are hypersensitive to injustices—especially when they’re committed by government officials and party functionaries—they see them around them, whereas Americans are so in thrall to propaganda that they barely acknowledge their own, or even defend them as if injustices were part of the natural order of things. I’ve read in some history books that feudal serfs were like that in the Middle Ages.
How can people know that the American economic system is inefficient, wasteful, and prone to corruption? There is something called the efficient market hypothesis, which states that when financial markets are truly efficient, there are no opportunities to make profits because everything that is bought and sold in a given market has been priced efficiently or fairly.
If that’s the case, how can Wall Street make trillions every year by gaming the markets? That means those markets are full of economic inefficiencies, legal loopholes, and exploitable features, and they’re also poorly regulated, with laws and rules that deliberately favor the financial elite over the general public. And the political class has made sure it stays that way.
Compare this with China, where financial crime and irregularities are heavily punished, and where the state has no qualms about directing capital to more productive areas or at least to places deemed more beneficial to society than simply the financial sector or the wealthy elite.
In a socialist or mixed economy, health care, education, housing, and food security for the general population are guaranteed or socialized, without these services being monopolized and turned into vending machines by a rentier class. Private gains may be permitted, but not at the expense of social and economic benefits.
But this would of course run counter to the very principles of Anglo-American free-market capitalism. Most Americans can only see the rest of the world through their own mental horizons. When this applies to China, it inevitably amounts to seeing it as a competition between Eastern authoritarianism and Western democracy.
But, as one learned correspondent once said, “for most people, in matters of domestic and foreign policy, what matters most about their system of governance is not whether it is ‘democratic’ or ‘autocratic’, but whether it is competent, coherent and logical or incompetent, incoherent and inconsistent and whether it improves the quality of life for the vast majority of its people.”
The American economic pie may be even bigger than China’s. But what good is it if the 1% gets most of the slices, leaving crumbs for the rest? A smaller pie, distributed more fairly and equitably, is, in my view, much more desirable – “the greatest happiness of the greatest number.”
Another way to put it is not whether a state is free, but whether it is predatory. Most Americans automatically assume that the Chinese state is predatory, but not their own government. But I think if they step back and dig a little deeper, they might come to a completely different view. At the very least, I think it’s fair to say that the financial services industry in the United States is highly predatory, and its most effective weapon has been debt, whether it’s for consumers, mortgage holders, or student loan borrowers. The same is true for private health care and the pharmaceutical industry, which offers the most expensive drugs and medical treatments in the world. This is possible because the state not only allows it, but actively enables it.
It can be said that the Chinese have learned a lot from the Americans during their economic reforms over the decades. They have finally understood that they do not want to be like the Americans. This is one of the main reasons why the United States is so angry with China.
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