Deciphering the Middle Kingdom (sort of...)

I really love prognosticators – honestly, I do.

Most of my personal exposure to the crystal ball comes from the yearly statements and advertisements from my provider of RESP’s (to you non-Canadians, a Registered Education Savings Plan that allows a tax-deferred account for the sole purpose of financing your child’s Frat House exploits when they go to the Ivory Tower of their choice / the one that will take them).

Of course, I know it is expensive, and that saving early and often (like voting in some jurisdictions) is the sure path to victory. But how much? Oh, please, how much?

Like latter day Delphic Oracles, the actuarial cadre declares that ceteris paribus, if the trend continues unabated, the cost of a four-year degree for your little Johnny or Sally will be the equivalent of the GDP of Slovenia – every year!

What do to?! Well, like the good sales associate says, you need to double down on the pre-authorized withdrawals, of course.

Now, all of this is based on what is, in essence, a linear path of causality. That is, the crap that you dealt with this year was three percent stinkier than last year’s manure. Now, just imagine what the olf factor of that steaming pile, amortized over 15-20 years would be?

You could increase your monthly contributions from $200 to $5000 in order to gain some piece of mind (and lose your home and other possessions in the process), but this whole strategy is predicated on one idea, that if something cost ten percent more this year, add another ten percent each and every year ad infinitum.

Well, life don’t work like that, do it?

The philosopher Bertrand Russell used to talk about the life of a turkey. For a year, each day of its life is one of relative indulgence – food, water, and care in abundance. The turkey, for 364 consecutive days, lives the Life of Reilly. Why, then, should this bird assume that Day 365 is going to be any different? But then, instead of a pail of delicious organically grown corn, Farmer Brown shows up wielding a very shiny – and very sharp – axe.

Oops.

Much of the talk about China seems to follow this same trajectory – ever upward, unfailing and unblinking. By a certain proscribed date, we will all live in the shadow of the dragon. Oooohhh. Sends shivers up the spine!

Hu Jintao’s recent visit to Washington, and all of the trees that gave their lives in order to allow commentators to expound their theories and thoughts, got me thinking about how seriously we should be taking all of this.

While former US Defence Secretary Donald Rumsfeld’s oratorio about ‘knowns’,’unknowns’ and ‘known unknowns’ stands as a classic alliteration of the phenomenon (alongside former Canadian PM Jean Chretien’s “da proof is a proof” monologue), they point to a central fact of global politics and life. In my own words, everything falls into three categories: the stuff you know, they stuff you don’t know, and the stuff that you had no idea existed to begin with.

So, what’s that got to do with China? Okay, dear friends, let’s break it way down, old school.

First, the things we know:

1. China’s got an enormous crapload of people and a government that is in a hell or a rush to get where we in the West are in a very short time;

2. China has the ability to harness domestic resources (human and natural) in a way that no one else can;

3. What China does not own herself, she have a crapload of cash to pay for it.

Now, the things that we don’t know:

1. When is China going to surpass the US?

2. What will China do with their newfound status?

3. What are China’s intentions globally?

4. Will China play by the same rules as the West, or seek the West to play by her rules?

Okay, now let’s add a little flavor to the mix with the stuff that may, or may not exist – the ‘Black Swan’ stuff:

1. Can the Communist Party hold onto power? Will there be a Tiananmen part deux?

2. Will there be a peasant revolt – over living standards, over the cost of food or fuel?

3. Will a buildup of China’s military siphon off too many resources?

4. Will China’s one-child policy alter the nation just as it becomes prima inter pares?

5. What happens when affluent Chinese want more from their government?

6. What happens if the PRC government infrastructure runs itself ragged trying to shut down every website and blog that pops up, like a ‘Whack a Mole’ game on steroids?

7. What happens when the PRC, like the West’s dealings with OPEC in 1973, finds itself beholding to resource rich countries that want more clout in the global marketplace?

8. What about social cohesion? Despite the predominance of Han Chinese, there are many ethnicities in the PRC. Even outside that, the dialects are so different that many can hardly understand what their countrymen are saying – like English to French to German.

9. What about peer competitors? India, for example, shares a border, a history of tensions, a rapid GDP growth rate and a population that will surpass China within the next 3-4 decades.


In short, the things we think will happen, or are confident in predicting, may very well define the path we take. Far too often, however, our path gets interrupted by things we either did not consider, or things we could never have predicted (like the credit crisis...hellooo?)

One human failing is to assume that everything falls into some neat little package with a bow.

While I am more of a Hayek / Von Mises guy, I acknowledge the prescience of John Maynard Keynes' observation that "In the long run, we are all dead." More true to my upbringing would be the rough-hewn bromide about opinions being like a particular orifice in that everyone has one, and they usually stink.

In the end, I think that the safe money is that, in the short- to medium term, China will grow to a degree of prominence that we will all have to sort out how the world is going to work going forward. China, too, will have to figure out its relationships – both with its international partners and with its own citizens.

The world has an interesting way of rebalancing itself. The rise of one power usually spurs the rise of a peer competitor, or a grouping, to act as a counterbalance.

If China enjoys its own ‘unipolar moment’, I suspect that the rest of the world will, by some means, make it as shortlived as that enjoyed by the United States.

That I believe, whether or not my kid’s degree ends up costing me everything – including the clothes on my back.

Thoughts on Tucson

The tragedy in Tucson, Arizona this past weekend, like so many other similarly horrific events in life, engender a certain predictable mix of emotion. People are seized with a combination of grief and confusion.

The former serves to bring people together in common cause - to reaffirm life, and a process where our differences are resolved free of violence. The latter, unfortunately - and with equal potency - seeks to undermine that unifying affirmation.

It is human nature that we try to make sense of things that defy logic, or at least our understanding of it. We consider ourselves to be rational men and women, and would never dare to contemplate the actions of one Jared Lee Loughner, or those in our midst who have deemed it acceptable to perpetrate such violence.

Of course, the good thing about sanity is also its deficiency in dealing with resolution in such cases. That is, we are too much in control of our senses to appreciate what it is to take leave of them.

Continually, we commit the error of attempting to rationalize what defies such definitions.

Consider the discussion of what brand of political stooge Loughner was based on his reading habits. He read both the Communist Manifesto and Ayn Rand. This, of course, allows one faction to argue that he was a Marxist 'Fellow Traveller" weaned on Hegelian didactics, while others could suggest that he was a paid up charter member of the Wasilla, Alaska Hunt Club.

In this political environment, crazy means rationality directed in favour of the other side.

Left and Right both have their own particular means of doing this. After all, even in the midst of this radically outrageous event, the political discourse still needs to find a way of making the other side seem out to lunch without actually saying it.

Those to the right of Fox News will always resort to the tried and true method of lowering Old Glory from the flagpole, and wrapping themselves in the colourful banner as if it were Roman toga, or some magical talisman that has powers comparable to Harry Potter's invisibility cloak. Evil spirits and socialism begone!

Not to be outdone, those to the left of MSNBC have their own equally potent, albeit less overt, means of saying the same thing. It is the old bait and switch that Marx and Hegel introduced to the world - 'class consciousness', or essentially, 'knowing what's best for you.' It's a magical essence that only manifests itself in those who, coincidentally, agree with you unconditionally. What?! A difference of opinion?! Well, young man / lady, you lack 'class consciousness'. You must be ____________ (Your choice of crazy, uneducated, uninformed, racist, religious, or some other moniker du jour).

So, what is the answer?

Frankly, I know as much as any other person who has commented on this - and that's very little.

I have read more than one book listed among Mr. Loughner's faves. I have also read "Catcher in the Rye", which seemed to have served as the lit fuse for the shootings of a former Beatle and a sitting US President. Beyond the annoyance I have for the rather gauche act of spinning murder for political profit, I cannot say that I am moved to any great act of barbarity. Perhaps my trigger is different, and that I should avoid any tome of the "Twilight" saga or current selection of Oprah Winfrey's Book Club.

Sigmund Freud, the father of Psychoanalysis, who seemed to write off a lot of human behaviour to repressed sexual feelings, himself famously admitted that "sometimes a cigar is just a cigar." In this case, political pundits and social commentators are keen to read the tea leaves, or in this case, stand in front of a painting comprising three horizontal lines and explain how it means everything from a statement about "man's inhumanity toward man" to it being some "allegory about Christ and the Resurrection." Then again, folks, maybe it's just three horizontal lines.

For me, it all comes down to what I know, and what I don't know.

I don't know what makes Jared Lee Loughner tick. I don't know what combination of life experiences, induction, influences and brain chemistry created this debased mind who killed without emotion or mercy. It's likely that I'll never know.

What I do know is that people died, people are fighting for their lives, and those closest to them are in a great deal of emotional pain.

Anyone who tells you they know more than that either has the ability to look fully into a killer's soul, or they are lying.

You decide.

If you don't like the weather, wait five minutes

Okay, so now I am on the economy rant.

Lately the chorus has been lamenting the 'fact' (notice the parentheses) that Canada's economy is lagging behind other G7 nations.

Egad, how can this be? Weren't we the calm port in a stormy sea? Weren't we the epitomy of fiscal probity in a world gone mad?

As usual, people fit the facts to their opinions, rather than vice versa. In my humble and unvarnished opinion, neither the caffeine driven cheerleaders nor the Greek Chorus tripped out on Zoloft were right. The porridge was neither too hot nor cold, Goldilocks.

At the same time we are told that we are lagging the US, Goldman Sachs now says the humble loonie will top US $1.05.

So, our GDP lagging the US indicates weakness, but a rising currency indicates strength. It's flip a coin time, folks.

The truth is this. The rest of the G7 is still priming the pump and we aren't. Face it, if you are sprinting the 100 meters, and all of your opponents have just given themselves an injection of human growth hormone, cocaine, amphetamine, bull semen or Jack Daniels, you are likely to get your clock cleaned.

We are slow on a percentage basis for two reasons:

1. Other countries dropped further in the meltdown, so their gains will register higher. C'mon folks - it's like saying that 100% of ten is bigger than 10% of one hundred.

2. Unlike our friends, we are not spending money like a drunken sailor on shoreleave. While the feds are bringing in deficit numbers that are below last year's estimates, everybody else is growing their debt, or their money supply.

In the end, the other G7 nations will no longer be able to give their motor another shot of nitrous oxide, and they'll have to deal with the fact that their reliance on those shots has burned out their pistons.

So, to sum up - how can Canada regain its title of the strongest economy in the G7?

Easy - just like we used to say about the weather in Dawson Creek, BC - If you don't like it, just wait five minutes.