China Grows 'Faster, Higher, Stronger'
by James A. Dorn
From an economic perspective, no country better represents the Olympic motto — "faster, higher, stronger" — than China. During the last 30 years of opening to the outside world and economic liberalization, China has grown to be the world's third-largest trading nation and fourth-largest economy. More important, the increase in economic freedom has widened the range of personal choices and given millions of people the opportunity to leave the state sector and "jump into the sea of private enterprise."
During the Cultural Revolution, central planning dominated, capitalism was a crime, and Mao Zedong called upon people to "strike hard against the slightest sign of private ownership." Today most prices are set by market demand and supply, capitalists can join the Chinese Communist Party, and the PRC constitution proclaims, "The lawful private property of citizens is inviolable."
It would be foolish to focus only on China's flaws without recognizing the progress made in improving people's lives…
The Property Law, enacted in 2007, gives further protection to the private sector and to individual property rights. That legislation reflects the political influence of the growing middle class and private entrepreneurs who have a large stake in continued economic liberalization, which has allowed them a lifestyle few would have dreamed of just a short time ago. Millions of people now enjoy the privacy of their own homes and cars, the freedom to travel, and the enormous benefits of cell phones and the Internet.
While China would win an Olympic gold medal for its economic performance since 1978, it would clearly not be a medalist in the quest for personal freedom. But China also would not be in last place. In 1995, Chinese journalist Jianying Zha wrote in her book China Pop, "The economic reforms have created new opportunities, new dreams and to some extent a new atmosphere and new mindsets. . . . There is a growing sense of increased space for personal freedom." Many would agree.
It would be foolish to focus only on China's flaws without recognizing the progress made in improving people's lives — progress due to the removal of restrictions on economic and personal choices, rather than to central planning. In particular, globalization and the information revolution have played crucial roles in China's development. Without the benefits of trade, China would still be poor.
The slow pace of political reform and the violation of human rights should be of serious concern, but using trade sanctions against China to promote human rights would do the opposite. Unlike trade, protectionism denies individuals the freedom to expand their effective alternatives, thus limiting their choices. Sanctions would fuel the flames of economic nationalism, harm U.S. consumers, and embolden hardliners in Beijing.
It makes no sense to use such a blunt instrument in an attempt to "advance" human rights in China when trade itself is an important human right. Instead, the United States can best help the Chinese people by continuing its policy of engagement and avoiding destructive protectionism.
Trade increases the wealth of nations and reduces the risk of conflict. Hong Kong, the world's freest economy, learned long ago the benefits of international trade and the rule of law. Its development strategy — "small government, big market" — has clearly influenced the Mainland, and the "freedom virus" is spreading.
The challenge for China's new generation of leaders is to continue on the path of "peaceful development" and not let politics get in the way of the market. If China is to prosper and become the world's largest economy, Beijing needs to allow market socialism to wither away and market liberalism to flourish. That transformation would require a transparent and just legal system that fully protects people's rights to life, liberty and property.
To help China along that path, the United States should continue the Strategic Economic Dialogue initiated by Presidents Bush and Hu Jintao. Two other positive steps would be to end the discrimination against China in antidumping cases by recognizing the PRC as a market economy, and admit China to the G-8 as a normal rising power. Those acts of friendship would reassure Beijing that the United States welcomes China's rise and does not view the Middle Kingdom as an inevitable enemy. At the same time, we should not ignore the human rights violations that do occur and use diplomatic pressure to help move China toward a legitimate rule of law.
While tourists admire the compelling architecture in Beijing and other cities, they should not forget that what counts in the long run is not the physical infrastructure but the formal and informal institutions that limit government power and enhance freedom.
Ultimately, the Chinese people must determine the form of their governmental and other institutions, but the United States can help by upholding the same market-liberal principles it wants China to adopt. Finally, by adhering to a free-trade agenda, the U.S. government can show the Chinese people that Americans practice what they preach.
The Galbraith Effect?
By Thomas SowellMany years ago, when I was a college student, I took a course from John Kenneth Galbraith. On the first day of class, Professor Galbraith gave a brilliant opening lecture, after which the students gave him a standing ovation.
Galbraith kept on giving brilliant opening lectures the whole semester. But, instead of standing ovations, there were now dwindling numbers of students and some of them got up and walked out in the middle of his lectures.
Galbraith never got beyond the glittering generalities that marked his first lecture. After a while, the students got tired of not getting any real substance.
Senator Barack Obama's campaign this year reminds me very much of that course from Professor Galbraith. Many people were ecstatic during the early primaries, as each state's voters heard his glittering generalities for the first time.
The media loved the novelty of a black candidate with a real chance to become president, and his left-wing vision of the world was largely their vision as well. There was a veritable media honeymoon for Obama.
There was outrage in the mainstream media when ABC anchor man Charles Gibson asked Obama a serious question about the economic effects of a capital gains tax. Who interrupts honeymooners to talk economics?
The fact that Senator Obama did not have a very coherent answer made things worse-- for Charles Gibson. Since Obama can do no wrong in the eyes of many of his supporters, they resented Gibson's having asked him such a question.
The question, incidentally was why Senator Obama was advocating a higher capital gains tax rate, when experience had shown that the government typically collected more revenue from a lower capital gains tax rate than from a higher rate.
Senator Obama acted as if he had never thought about it that way. He probably hadn't. He is a politician, not an economist.
Politically, what matters to the left-wing base that Obama has been playing to for decades is sticking it to "the rich." What effect that has on the tax revenues received by the government is secondary, at best.
What effect a higher capital gains tax rate will have on the economy today and on people's pensions in later years is a question that is not even on Senator Obama's radar screen.
Economists may say that higher capital gains tax rates can translate into lower levels of economic activity and fewer jobs, but Obama will leave that kind of analysis to the economists. He is in politics, and what matters politically is what wins votes right here and right now.
The kind of talk that won the votes-- and the hearts-- of the left-wing base of the Democratic Party during the primaries may not be enough to carry the day with voters in the general election. So Senator Obama has been changing his tune or, as he puts it, "refining" his message.
This was not the kind of "change" that the true believers among Obama's supporters were expecting. So there has been some wavering among the faithful and some ups and downs in the polls.
Despite an impressive political machine and a huge image makeover this year to turn a decades-long, divisive grievance-promoting activist into someone who is supposed to unite us all and lead us into the promised land of "change," little glimpses of the truth keep coming out.
The elitist sneers at people who believe in religion and who own guns, the Americans who don't speak foreign languages and the views of the "typical white person," are all like rays of light that show through the cracks in Obama's carefully crafted image.
The overwhelming votes for Obama in some virtually all-white states show that many Americans are ready to move beyond race. But Obama himself wants to have it both ways, by attributing racist notions to the McCain camp that has never made race an issue.
The problem with clever people is that they don't know when to stop being clever-- and Senator Obama is a very clever man, perhaps "too clever by half" as the British say. But maybe he can't keep getting by with glittering generalities, any more than Galbraith could.Scanning the skies for Russian bombers
By Charles Clover in Kareleti
"Aviation! Aviation!"
There is no word that is more dreaded on the narrow country roads and villages that surround the embattled city of Tskhinvali than this constantly heard cry from Georgian troops.
As three plumes of smoke rose lazily from the outskirts of the city at 4pm yesterday with a sliver of black arcing through the sky from the Russian border, Georgian soldiers looking down from their vantage point in Mamara instantly reacted with this now-habitual cry. Getting under their camouflaged vehicles, they cinched up body armour and helmets.
Doors slammed. Cars did steep U-turns and drove in the other direction, drivers frantically gesturing with the upraised twirling index finger gesture to oncoming traffic to turn round.
With his squad, army Sergeant Zurab Gulashvili got into his car, a black Mercedes he borrowed from his brother. They started driving like madmen back to the town of Kareleti, where they were based, making the 10km drive to relative safety at Formula One speed. Arms, heads, and guns were sticking out of the windows of the overloaded sedan, all occupants' eyes glued to the heavens, shouting at passers-by: "Aviation! Aviation!"
For Georgian soldiers there is no escape from the constant threat of the Russian warplanes that dart through the heavens and bomb them at will. The war between Russia and Georgia has been fought mainly this way for days: between defenceless Georgian forces that line the roads and orchards outside Tskhinvali, and predatory Russian fighter-bombers.
The land battle between Russia and Georgia - which started on Thursday with a Georgian offensive against the South Ossetian separatists and Russia's iron-fisted response - now appears to be static. Both sides continue to trade fire, Georgians shelling Russian positions and Russian jets dipping and diving on the Georgians. But neither side appears to want to move or attack anywhere urgently.
On Monday Russian forces appeared to be consolidating their gains in the enclave, and have crossed only a few kilometres over into Georgia proper in order to create a buffer zone. Dmitry Medvedev, Russia's president, said yesterday that Russian objectives in South Ossetia had been almost all accomplished, seemingly trying to allay fears in the west that Russia would break out of the enclave.
Despite rumours that swept Tbilisi on Sunday night and Monday, stoked by the Georgian government, that Russian troops had broken out from the South Ossetian enclave and were headed for the regional centre of Gori 30km to the south, no such invasion materialised, though a nearby army base was hit by one bomb.
"We all evacuated, thinking the Russians were rolling into town any minute, but when we came back in the morning, the people said they'd had a peaceful night's sleep," said a correspondent with Al-Jazeera television.
According to Sgt Gulashvili, who had been at the front since Thursday night, Georgian units have all withdrawn from the enclave (though 12 of their soldiers are unaccounted for) and are holding the roads between Tskhinvali and Gori. The Russian units, he said, are holding their positions, though they have pushed out a few kilometres from the border of South Ossetia to form a buffer zone.
Behind the lines, in Gori, the people were skittish after the bombing of the local army base on Monday morning. On Saturday as many as 20 people died after several bombs aimed at the base missed and hit an apartment building.
Outside the large military hospital there was commotion every time wounded were brought back from the front, as fighting and airstrikes around Tskhinvali continued.
The slightest rumour of a Russian jet sighting sets the population in panic, and in a flash, the streets are empty. Yesterday, the rumour was yet again that the Russian army was headed towards Gori.
"They want to bring us to our knees," said Sgt Gulashvili. "We want to be with the west, but Russia won't let us."
Sarkozy says Russia and Georgia not yet at peace
By Charles Clover and Roman Olearchyk in Tbilisi; Catherine Belton and Isabel Gorst in Moscow; and Harvey Morris at the United Nations
Nicolas Sarkozy, the French president, speaking from Moscow on Tuesday said that Russia and Georgia were not yet at peace but had agreed to an end to hostilities. Flanked by his Russian counterpart, Dmitry Medvedev, Mr Sarkozy told a televised press conference that the Russians had confirmed that they had “no intention of staying in Georgia”.
But Mr Medvedev announced that Russian peacekeepers would remain in South Ossetia and Georgia’s other breakaway enclave Abkhazia
Georgia’s claims of continued fighting on Tuesday seemed to slow down the negotiations between Mr Medvedev Mr Sarkozy who arrived in Moscow as part of a round of shuttle diplomacy aimed at resolving the conflict.
Mr Medvedev and Mr Sarkozy must agree a three-point plan drafted by French foreign minister Bernard Kouchner. This states Georgia and Russia must go back to status quo before the conflict broke out last week and agree on the presence of an international peace keeping force. The Russians appeared to be bogged down by the issue of peace keepers.
Hours after Dmitry Medvedev ordered a ceasefire, Georgia’s President Mikheil Saakashvili continued to present a defiant front, telling tens of thousands of his countrymen gathered at a rally in the capital, Tbilisi on Tuesday that Russia ‘would pay’ for its actions.
Russians can’t turn Georgia “into another Grozny,” Mr Saakashvili told an estimated 150,000 protesters crowding outside the country’s parliament. He said Georgia would quit the Commonwealth of Independent States (CIS), a Moscow-led group of former-Soviet countries.
”We are leaving the CIS for good and propose that other countries leave this body run by Russia,” Mr Saakashvili told supporters.
The claims of continued fighting on Tuesday seemed to be slowing down the negotiations between Mr Medvedev and his French counterpart Nicolas Sarkozy who arrived in Moscow as part of a round of shuttle diplomacy aimed at resolving the conflict.
Mr Medvedev and Mr Sarkozy must agree a three-point plan drafted by French foreign minister Bernard Kouchner. This states Georgia and Russia must go back to status quo before the conflict broke out last week and agree on the presence of an international peace keeping force. The Russians appear to be bogged down by the issue of peace keepers.
The Russian foreign ministry accused Georgia of propaganda over its claims that Russian jets were bombing Georgian villages beyond South Ossetia despite Mr Medvedev’s ceasefire declaration.
Sergei Lavrov, Russia’s foreign minister, called for Mr Saakashvili to quit accusing him of ”criminal acts against his people”.
“Our position is that Mr Saakashvili cannot be our partner, and the best thing would be if he left office...I don’t think Russia will be in a mood to conduct negotiations or even to talk with Mikheil Saakashvili”.
Nato on Tuesday said that the situation in Georgia must be restored to “the way it was” before the hostilities started in the breakaway enclave of South Ossetia last week.
It said its pledge at a summit in Bucharest in April eventually admit Georgia to the alliance still holds, despite the violent conflict with Russia.
”I think that the Bucharest communique stands,” Jaap de Hoop Scheffer, the Nato general secretary, said after a meeting with Georgia’s ambassador to Belgium, Reuters reported.
Earlier announcing the ceasefire Mr Medvedev said “They have taken the decision to end the operation to force the Georgian authorities into peace” Mr Medvedev said during a meeting with his defence minister and army chief of staff. “The aim of our operation has been reached, the safety of our peace keepers and the civilian population has been restored...the aggressor has been punished”.
A Russian army official told the Interfax news agency that Russian forces would continue active duties in the region despite the ceasefire.
”If we have received an order to cease fire, that does not mean that we will stop all action, in particular investigative (action), ” Anatoly Nogovitsyn, the deputy chief of the Russian armed forces said.
“Russia is awaiting a reaction from Tbilisi to Medvedev’s order” Colonel Nogovitsyn said. He warned that Russia would retaliate against any ‘provocation’ from the Georgian troops.
On Monday night US president George W. Bush accused Russia of invading Georgia and said Moscow appeared to be mounting an effort to overthrow the “duly elected government” in Tbilisi.
The sharply tougher tone from Washington came after Russia defied mounting international pressure and opened a new front in its five-day-old war with Georgia on Monday, sending tanks and troops deeper into the territory of its southern neighbour.
“Russia has invaded a sovereign neighbouring state and threatens a democratic government elected by its people. Such an action is unacceptable in the 21st century,” Mr Bush said.
He demanded that Moscow accept a peace agreement being brokered by the European Union, saying its actions “jeopardise Russia’s relations with the United States and Europe”.
Mikheil Saakashvili, the Georgian president, and other senior Georgian officials on Monday night appealed for urgent help from the west. “We are dealing with an attempt to totally occupy Georgia,” Mr Saakashvili said.
Russia denied it was mounting a full-scale invasion and President Dmitry Medvedev said his forces had “completed a significant part” of what the Kremlin has sought to portray as a peacekeeping operation.
Moscow insisted its latest moves were intended to create a buffer zone around the breakaway enclaves of South Ossetia and Abkhazia and it had no plans to push farther into Georgian territory.
It was still unclear on Monday night how far Russian troops had advanced into Georgia beyond South Ossetia, where the conflict began last week.
Mr Bush said he was concerned by reports that Russian troops had moved beyond the conflict zone, were attacking the town of Gori and threatening Tbilisi. “There’s evidence that Russian forces may soon begin bombing the civilian airport in the capital city,” he said.
Russia did confirm it had seized a Georgian military base in Senaki in the west of the country, advancing from Abkhazia. But the defence ministry in Moscow said Russian troops left late on Monday night, having “liquidated the danger of fire on South Ossetia...from the town”.
It also said a reconnaissance group had briefly been on the outskirts of Poti, but denied a Georgian report that its troops had entered the Black Sea port.
Speaking before Mr Bush’s statement, Vladimir Putin, Russian prime minister, lashed out at the US for airlifting Georgian troops to the conflict from Iraq. “It is a shame that some of our partners are not helping us, and are trying to interfere,” he said.
The trade deficit in goods and services declined to $56.8 billion in June
Crude oil and other petroleum products accounted for all of the gain in imports in June.
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