In China's Orbit

By NIALL FERGUSON

"We are the masters now." I wonder if President Barack Obama saw those words in the thought bubble over the head of his Chinese counterpart, Hu Jintao, at the G20 summit in Seoul last week. If the president was hoping for change he could believe in—in China's currency policy, that is—all he got was small change. Maybe Treasury Secretary Timothy Geithner also heard "We are the masters now" as the Chinese shot down his proposal for capping imbalances in global current accounts. Federal Reserve Chairman Ben Bernanke got the same treatment when he announced a new round of "quantitative easing" to try to jump start the U.S. economy, a move described by one leading Chinese commentator as "uncontrolled" and "irresponsible."

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Illustration by Harry Camp

"We are the masters now." That was certainly the refrain that I kept hearing in my head when I was in China two weeks ago. It wasn't so much the glitzy, Olympic-quality party I attended in the Tai Miao Temple, next to the Forbidden City, that made this impression. The displays of bell ringing, martial arts and all-girl drumming are the kind of thing that Western visitors expect. It was the understated but unmistakable self-confidence of the economists I met that told me something had changed in relations between China and the West.
One of them, Cheng Siwei, explained over dinner China's plan to become a leader in green energy technology. Between swigs of rice wine, Xia Bin, an adviser to the People's Bank of China, outlined the need for a thorough privatization program, "including even the Great Hall of the People." And in faultless English, David Li of Tsinghua University confessed his dissatisfaction with the quality of Chinese Ph.D.s.
You could not ask for smarter people with whom to discuss the two most interesting questions in economic history today: Why did the West come to dominate not only China but the rest of the world in the five centuries after the Forbidden City was built? And is that period of Western dominance now finally coming to an end?
In a brilliant paper that has yet to be published in English, Mr. Li and his co-author Guan Hanhui demolish the fashionable view that China was economically neck-and-neck with the West until as recently as 1800. Per capita gross domestic product, they show, stagnated in the Ming era (1402-1626) and was significantly lower than that of pre-industrial Britain. China still had an overwhelmingly agricultural economy, with low-productivity cultivation accounting for 90% of GDP. And for a century after 1520, the Chinese national savings rate was actually negative. There was no capital accumulation in late Ming China; rather the opposite.
The story of what Kenneth Pomeranz, a history professor at the University of California, Irvine, has called "the Great Divergence" between East and West began much earlier. Even the late economist Angus Maddison may have been over-optimistic when he argued that in 1700 the average inhabitant of China was probably slightly better off than the average inhabitant of the future United States. Mr. Maddison was closer to the mark when he estimated that, in 1600, per capita GDP in Britain was already 60% higher than in China.
For the next several hundred years, China continued to stagnate and, in the 20th century, even to retreat, while the English-speaking world, closely followed by northwestern Europe, surged ahead. By 1820 U.S. per capita GDP was twice that of China; by 1870 it was nearly five times greater; by 1913 the ratio was nearly 10 to one.
Despite the painful interruption of the Great Depression, the U.S. suffered nothing so devastating as China's wretched mid-20th century ordeal of revolution, civil war, Japanese invasion, more revolution, man-made famine and yet more ("cultural") revolution. In 1968 the average American was 33 times richer than the average Chinese, using figures calculated on the basis of purchasing power parity (allowing for the different costs of living in the two countries). Calculated in current dollar terms, the differential at its peak was more like 70 to 1.
This was the ultimate global imbalance, the result of centuries of economic and political divergence. How did it come about? And is it over?
As I've researched my forthcoming book over the past two years, I've concluded that the West developed six "killer applications" that "the Rest" lacked. These were:
• Competition: Europe was politically fragmented, and within each monarchy or republic there were multiple competing corporate entities.
• The Scientific Revolution: All the major 17th-century breakthroughs in mathematics, astronomy, physics, chemistry and biology happened in Western Europe.
• The rule of law and representative government: This optimal system of social and political order emerged in the English-speaking world, based on property rights and the representation of property owners in elected legislatures.
• Modern medicine: All the major 19th- and 20th-century advances in health care, including the control of tropical diseases, were made by Western Europeans and North Americans.
• The consumer society: The Industrial Revolution took place where there was both a supply of productivity-enhancing technologies and a demand for more, better and cheaper goods, beginning with cotton garments.
• The work ethic: Westerners were the first people in the world to combine more extensive and intensive labor with higher savings rates, permitting sustained capital accumulation.
Those six killer apps were the key to Western ascendancy. The story of our time, which can be traced back to the reign of the Meiji Emperor in Japan (1867-1912), is that the Rest finally began to download them. It was far from a smooth process. The Japanese had no idea which elements of Western culture were the crucial ones, so they ended up copying everything, from Western clothes and hairstyles to the practice of colonizing foreign peoples. Unfortunately, they took up empire-building at precisely the moment when the costs of imperialism began to exceed the benefits. Other Asian powers—notably India—wasted decades on the erroneous premise that the socialist institutions pioneered in the Soviet Union were superior to the market-based institutions of the West.

Beginning in the 1950s, however, a growing band of East Asian countries followed Japan in mimicking the West's industrial model, beginning with textiles and steel and moving up the value chain from there. The downloading of Western applications was now more selective. Competition and representative government did not figure much in Asian development, which instead focused on science, medicine, the consumer society and the work ethic (less Protestant than Max Weber had thought). Today Singapore is ranked third in the World Economic Forum's assessment of competitiveness. Hong Kong is 11th, followed by Taiwan (13th), South Korea (22nd) and China (27th). This is roughly the order, historically, in which these countries Westernized their economies.
Today per capita GDP in China is 19% that of the U.S., compared with 4% when economic reform began just over 30 years ago. Hong Kong, Japan and Singapore were already there as early as 1950; Taiwan got there in 1970, and South Korea got there in 1975. According to the Conference Board, Singapore's per capita GDP is now 21% higher than that of the U.S., Hong Kong's is about the same, Japan's and Taiwan's are about 25% lower, and South Korea's 36% lower. Only a foolhardy man would bet against China's following the same trajectory in the decades ahead.
China's has been the biggest and fastest of all the industrialization revolutions. In the space of 26 years, China's GDP grew by a factor of 10. It took the U.K. 70 years after 1830 to grow by a factor of four. According to the International Monetary Fund, China's share of global GDP (measured in current prices) will pass the 10% mark in 2013. Goldman Sachs continues to forecast that China will overtake the U.S. in terms of GDP in 2027, just as it recently overtook Japan.
But in some ways the Asian century has already arrived. China is on the brink of surpassing the American share of global manufacturing, having overtaken Germany and Japan in the past 10 years. China's biggest city, Shanghai, already sits atop the ranks of the world's megacities, with Mumbai right behind; no American city comes close.
Nothing is more certain to accelerate the shift of global economic power from West to East than the looming U.S. fiscal crisis. With a debt-to-revenue ratio of 312%, Greece is in dire straits already. But the debt-to-revenue ratio of the U.S. is 358%, according to Morgan Stanley. The Congressional Budget Office estimates that interest payments on the federal debt will rise from 9% of federal tax revenues to 20% in 2020, 36% in 2030 and 58% in 2040. Only America's "exorbitant privilege" of being able to print the world's premier reserve currency gives it breathing space. Yet this very privilege is under mounting attack from the Chinese government.
For many commentators, the resumption of quantitative easing by the Federal Reserve has appeared to spark a currency war between the U.S. and China. If the "Chinese don't take actions" to end the manipulation of their currency, President Obama declared in New York in September, "we have other means of protecting U.S. interests." The Chinese premier Wen Jiabao was quick to respond: "Do not work to pressure us on the renminbi rate…. Many of our exporting companies would have to close down, migrant workers would have to return to their villages. If China saw social and economic turbulence, then it would be a disaster for the world."
Such exchanges are a form of pi ying xi, China's traditional shadow puppet theater. In reality, today's currency war is between "Chimerica"—as I've called the united economies of China and America—and the rest of the world. If the U.S. prints money while China effectively still pegs its currency to the dollar, both parties benefit. The losers are countries like Indonesia and Brazil, whose real trade-weighted exchange rates have appreciated since January 2008 by 18% and 17%, respectively.
But who now gains more from this partnership? With China's output currently 20% above its pre-crisis level and that of the U.S. still 2% below, the answer seems clear. American policy-makers may utter the mantra that "they need us as much as we need them" and refer ominously to Lawrence Summers's famous phrase about "mutually assured financial destruction." But the Chinese already have a plan to reduce their dependence on dollar reserve accumulation and subsidized exports. It is a strategy not so much for world domination on the model of Western imperialism as for reestablishing China as the Middle Kingdom—the dominant tributary state in the Asia-Pacific region.
If I had to summarize China's new grand strategy, I would do it, Chinese-style, as the Four "Mores": Consume more, import more, invest abroad more and innovate more. In each case, a change of economic strategy pays a handsome geopolitical dividend.
By consuming more, China can reduce its trade surplus and, in the process, endear itself to its major trading partners, especially the other emerging markets. China recently overtook the U.S. as the world's biggest automobile market (14 million sales a year, compared to 11 million), and its demand is projected to rise tenfold in the years ahead.
By 2035, according to the International Energy Agency, China will be using a fifth of all global energy, a 75% increase since 2008. It accounted for about 46% of global coal consumption in 2009, the World Coal Institute estimates, and consumes a similar share of the world's aluminum, copper, nickel and zinc production. Last year China used twice as much crude steel as the European Union, United States and Japan combined.
Such figures translate into major gains for the exporters of these and other commodities. China is already Australia's biggest export market, accounting for 22% of Australian exports in 2009. It buys 12% of Brazil's exports and 10% of South Africa's. It has also become a big purchaser of high-end manufactured goods from Japan and Germany. Once China was mainly an exporter of low-price manufactures. Now that it accounts for fully a fifth of global growth, it has become the most dynamic new market for other people's stuff. And that wins friends.
The Chinese are justifiably nervous, however, about the vagaries of world commodity prices. How could they feel otherwise after the huge price swings of the past few years? So it makes sense for them to invest abroad more. In January 2010 alone, the Chinese made direct investments worth a total of $2.4 billion in 420 overseas enterprises in 75 countries and regions. The overwhelming majority of these were in Asia and Africa. The biggest sectors were mining, transportation and petrochemicals. Across Africa, the Chinese mode of operation is now well established. Typical deals exchange highway and other infrastructure investments for long leases of mines or agricultural land, with no questions asked about human rights abuses or political corruption.
Growing overseas investment in natural resources not only makes sense as a diversification strategy to reduce China's exposure to the risk of dollar depreciation. It also allows China to increase its financial power, not least through its vast and influential sovereign wealth fund. And it justifies ambitious plans for naval expansion. In the words of Rear Admiral Zhang Huachen, deputy commander of the East Sea Fleet: "With the expansion of the country's economic interests, the navy wants to better protect the country's transportation routes and the safety of our major sea-lanes." The South China Sea has already been declared a "core national interest," and deep-water ports are projected in Pakistan, Burma and Sri Lanka.
Finally, and contrary to the view that China is condemned to remain an assembly line for products "designed in California," the country is innovating more, aiming to become, for example, the world's leading manufacturer of wind turbines and photovoltaic panels. In 2007 China overtook Germany in terms of new patent applications. This is part of a wider story of Eastern ascendancy. In 2008, for the first time, the number of patent applications from China, India, Japan and South Korea exceeded those from the West.
The dilemma posed to the "departing" power by the "arriving" power is always agonizing. The cost of resisting Germany's rise was heavy indeed for Britain; it was much easier to slide quietly into the role of junior partner to the U.S. Should America seek to contain China or to accommodate it? Opinion polls suggest that ordinary Americans are no more certain how to respond than the president. In a recent survey by the Pew Research Center, 49% of respondents said they did not expect China to "overtake the U.S. as the world's main superpower," but 46% took the opposite view.
Coming to terms with a new global order was hard enough after the collapse of the Soviet Union, which went to the heads of many Western commentators. (Who now remembers talk of American hyperpuissance without a wince?) But the Cold War lasted little more than four decades, and the Soviet Union never came close to overtaking the U.S. economically. What we are living through now is the end of 500 years of Western predominance. This time the Eastern challenger is for real, both economically and geopolitically.
The gentlemen in Beijing may not be the masters just yet. But one thing is certain: They are no longer the apprentices.
—Niall Ferguson is a professor of history at Harvard University and a professor of business administration at the Harvard Business School. His next book, "Civilization: The West and the Rest," will be published in March.

WHY I KILLED GANDHI ??? - NATHURAM GODSE’S STATEMENT IN THE COURT

by Ashish Anil Mhatre on Sunday, 26 September 2010 at 07:38

Born in a devotional Brahmin family, I instinctively came to revere Hindu religion, Hindu history and Hindu culture. I had, therefore, been intensely proud of Hinduism as a whole. As I grew up, I developed a tendency to free thinking unfettered by any superstitious allegiance to any isms, political or religious. That is why I worked actively for the eradication of untouchability and the caste system based on birth alone. I openly joined anti-caste movements and maintained that all Hindus were of equal status as to rights, social and religious and should be considered high or low on merit alone and not through the accident of birth in a particular caste or profession. I used publicly to take part in organized anti-caste dinners in which thousands of Hindus, Brahmins, Kshatriyas, Vaisyas, Chamars and Bhangis participated. We broke the caste rules and dined in the company of each other. I have read the speeches and writings of Dadabhai Nairoji, Vivekanand, Gokhale, Tilak, along with the books of ancient and modern history of India and some prominent countries like England, France, America and’ Russia. Moreover, I studied the tenets of Socialism and Marxism. But above all I studied very closely whatever Veer Savarkar and Gandhiji had written and spoken, as to my mind these two ideologies have contributed more to the moulding of the thought and action of the Indian people during the last thirty years or so, than any other single factor has done. All this reading and thinking led me to believe it was my first duty to serve Hindudom and Hindus both as a patriot and as a world citizen. To secure the freedom and to safeguard the just interests of some thirty crores (300 million) of Hindus would automatically constitute the freedom and the well-being of all India, one fifth of human race. This conviction led me naturally to devote myself to the Hindu Sanghtanist ideology and programme, which alone, I came to believe, could win and preserve the national independence of Hindustan, my Motherland, and enable her to render true service to humanity as well.
 Since the year 1920, that is, after the demise of Lokamanya Tilak, Gandhiji’s influence in the Congress first increased and then became supreme. His activities for public awakening were phenomenal in their intensity and were reinforced by the slogan of truth and non-violence, which he paraded ostentatiously before the country. No sensible or enlightened person could object to those slogans. In fact, there is nothing new or original in them. They are implicit in every constitutional public movement. But it is nothing but a mere dream if you imagine that the bulk of mankind is, or can ever become, capable of scrupulous adherence to these lofty principles in its normal life from day to day. In fact, honour, duty and love of one’s own kith and kin and country might often compel us to disregard non-violence and to use force. I could never conceive that an armed resistance to an aggression is unjust. I would consider it a religious and moral duty to resist and, if possible, to overpower such an enemy by use of force. [In the Ramayana] Rama killed Ravana in a tumultuous fight and relieved Sita. [In the Mahabharata], Krishna killed Kansa to end his wickedness; and Arjuna had to fight and slay quite a number of his friends and relations including the revered Bhishma because the latter was on the side of the aggressor. It is my firm belief that in dubbing Rama, Krishna and Arjuna as guilty of violence, the Mahatma betrayed a total ignorance of the springs of human action.
 In more recent history, it was the heroic fight put up by Chhatrapati Shivaji that first checked and eventually destroyed the Muslim tyranny in India. It was absolutely essentially for Shivaji to overpower and kill an aggressive Afzal Khan, failing which he would have lost his own life. In condemning history’s towering warriors like Shivaji, Rana Pratap and Guru Gobind Singh as misguided patriots, Gandhiji has merely exposed his self-conceit. He was, paradoxical, as it may appear, a violent pacifist who brought untold calamities on the country in the name of truth and non-violence, while Rana Pratap, Shivaji and the Guru will remain enshrined in the hearts of their countrymen forever for the freedom they brought to them.
The accumulating provocation of thirty-two years, culminating in his last pro-Muslim fast, at last goaded me to the conclusion that the existence of Gandhi should be brought to an end immediately. Gandhi had done very well in South Africa to uphold the rights and well-being of the Indian community there. But when he finally returned to India he developed a subjective mentality under which he alone was to be the final judge of what was right or wrong. If the country wanted his leadership, it had to accept his infallibility; if it did not, he would stand aloof from the Congress and carry on his own way. Against such an attitude there can be no halfway house. Either Congress had to surrender its will to his and had to be content with playing second fiddle to all his eccentricity, whimsicality, metaphysics and primitive vision, or it had to carry on without him. He alone was the Judge of everyone and everything; he was the master brain guiding the civil disobedience movement; no other could know the technique of that movement. He alone knew when to begin and when to withdraw it. The movement might succeed or fail, it might bring untold disaster and political reverses but that could make no difference to the Mahatma’s infallibility. ‘A Satyagrahi can never fail’ was his formula for declaring his own infallibility and nobody except himself knew what a Satyagrahi is.
Thus, the Mahatma became the judge and jury in his own cause. These childish insanities and obstinacies, coupled with a most severe austerity of life, ceaseless work and lofty character made Gandhi formidable and irresistible. Many people thought that his politics were irrational but they had either to withdraw from the Congress or place their intelligence at his feet to do with, as he liked. In a position of such absolute irresponsibility, Gandhi was guilty of blunder after blunder, failure after failure, disaster after disaster.
 Gandhi’s pro-Muslim policy is blatantly in his perverse attitude on the question of the national language of India. It is quite obvious that Hindi has the most prior claim to be accepted as the premier language. In the beginning of his career in India, Gandhi gave a great impetus to Hindi but as he found that the Muslims did not like it, he became a champion of what is called Hindustani. Everybody in India knows that there is no language called Hindustani; it has no grammar; it has no vocabulary. It is a mere dialect; it is spoken, but not written. It is a bastard tongue and crossbreed between Hindi and Urdu, and not even the Mahatma’s sophistry could make it popular. But in his desire to please the Muslims he insisted that Hindustani alone should be the national language of India. His blind followers, of course, supported him and the so-called hybrid language began to be used. The charm and purity of the Hindi language was to be prostituted to please the Muslims. All his experiments were at the expense of the Hindus.
 From August 1946, onwards the private armies of the Muslim League began a massacre of the Hindus. The then Viceroy, Lord Wavell, though distressed at what was happening, would not use his powers under the Government of India Act of 1935 to prevent the rape, murder and arson. The Hindu blood began to flow from Bengal to Karachi with some retaliation by the Hindus. The Interim Government formed in September was sabotaged by its Muslim League member’s right from its inception, but the more they became disloyal and treasonable to the government of which they were a part, the greater was Gandhi’s infatuation for them. Lord Wavell had to resign as he could not bring about a settlement and he was succeeded by Lord Mountbatten. King Log was followed by King Stork.
The Congress, which had boasted of its nationalism and socialism, secretly accepted Pakistan literally at the point of the bayonet and abjectly surrendered to Jinnah. India was vivisected and one-third of the Indian Territory became foreign land to us from August 15, 1947. Lord Mountbatten came to be described in Congress circles as the greatest Viceroy and Governor-General this country ever had. The official date for handing over power was fixed for June 30, 1948, but Mountbatten with his ruthless surgery gave us a gift of vivisected India ten months in advance. This is what Gandhi had achieved after thirty years of undisputed dictatorship and this is what Congress party calls ‘freedom’ and ‘peaceful transfer of power’. The Hindu-Muslim unity bubble was finally burst and a theocratic state was established with the consent of Nehru and his crowd and they have called ‘freedom won by them with sacrifice’ – whose sacrifice? When top leaders of Congress, with the consent of Gandhi, divided and tore the country – which we consider a deity of worship – my mind was filled with direful anger.
                                                                                              

 One of the conditions imposed by Gandhi for his breaking of the fast unto death related to the mosques in Delhi occupied by the Hindu refugees. But when Hindus in Pakistan were subjected to violent attacks he did not so much as utter a single word to protest and censure the Pakistan Government or the Muslims concerned. Gandhi was shrewd enough to know that while undertaking a fast unto death, had he imposed for its break some condition on the Muslims in Pakistan, there would have been found hardly any Muslims who could have shown some grief if the fast had ended in his death. It was for this reason that he purposely avoided imposing any condition on the Muslims. He was fully aware of from the experience that Jinnah was not at all perturbed or influenced by his fast and the Muslim League hardly attached any value to the inner voice of Gandhi.
 Gandhi is being referred to as the Father of the Nation. But if that is so, he had failed his paternal duty inasmuch as he has acted very treacherously to the nation by his consenting to the partitioning of it. I stoutly maintain that Gandhi has failed in his duty. He has proved to be the Father of Pakistan. His inner-voice, his spiritual power and his doctrine of non-violence of which so much is made of, all crumbled before Jinnah’s iron will and proved to be powerless.
Briefly speaking, I thought to myself and foresaw I shall be totally ruined, and the only thing I could expect from the people would be nothing but hatred and that I shall have lost all my honour, even more valuable than my life, if I were to kill Gandhiji. But at the same time I felt that the Indian politics in the absence of Gandhiji would surely be proved practical, able to retaliate, and would be powerful with armed forces. No doubt, my own future would be totally ruined, but the nation would be saved from the inroads of Pakistan. People may even call me and dub me as devoid of any sense or foolish, but the nation would be free to follow the course founded on the reason which I consider to be necessary for sound nation-building. After having fully considered the question, I took the final decision in the matter, but I did not speak about it to anyone whatsoever. I took courage in both my hands and I did fire the shots at Gandhiji on 30 January 1948, on the prayer-grounds of Birla House.
I do say that my shots were fired at the person whose policy and action had brought rack, ruin, and destruction to millions of Hindus. There was no legal machinery by which such an offender could be brought to book and for this reason, I fired those fatal shots.
I bear no ill will towards anyone individually but I do say that I had no respect for the present government owing to their policy, which was unfairly favourable towards the Muslims. But at the same time I could clearly see that the policy was entirely due to the presence of Gandhi. I have to say with great regret that Prime Minister Nehru quite forgets that his preachings and deeds are at times at variances with each other when he talks about India as a secular state in season and out of season, because it is significant to note that Nehru has played a leading role in the establishment of the theocratic state of Pakistan, and his job was made easier by Gandhi’s persistent policy of appeasement towards the Muslims.
I now stand before the court to accept the full share of my responsibility for what I have done and the judge would, of course, pass against me such orders of sentence as may be considered proper. But I would like to add that I do not desire any mercy to be shown to me, nor do I wish that anyone else should beg for mercy on my behalf. My confidence about the moral side of my action has not been shaken even by the criticism levelled against it on all sides. I have no doubt that honest writers of history will weigh my act and find the true value thereof some day in future.
-NATHURAM GODSE

The Indians

India is one of the oldest and richest civilizations in the world. It is home to the world’s first planned cities, where every house had its own bathroom and toilet five thousand years ago. The Ancient Indians have not only given us yoga, meditation and complementary medicines, but they have furthered our knowledge of science, maths – and invented Chaturanga, which became the game of chess.

According to Albert Einstein, they “taught us how to count”, as they invented the numbers 1-9 and ‘zero’, without which there would be no computers or digital age. Unfairly we call this system of counting Arabic numbers – a misplaced credit.

Two thousand years ago the Indians pioneered plastic surgery, reconstructing the noses and ears on the faces of people who had been disfigured through punishment or warfare. They performed eye operations such as cataract removal and invented inoculation to protect their population from Smallpox, saving thousands of lives. (Excerpt from open2.net)

http://topdocumentaryfilms.com/the-indians/