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The End of the BRICs

“The only function of economic forecasting is to make astrology look respectable,” said John Kenneth Galbraith, the wisest American economist of his generation. (“A paltry honour,” he would have murmured.) But you still can’t resist wondering when the Chinese economy will be bigger than the US economy – or the Brazilian bigger than the British, or the Turkish bigger than the Italian – as if it were some kind of horse race.

The latest document to tackle these questions is “The World in 2050″, drawn up by HSBC bank, which ranks the world’s hundred biggest economies as they are now, and as (it thinks) they will be in 2050. It contains the usual little surprises, like a prediction that per capita incomes in the Philippines and Indonesia, now roughly the same, will diverge so fast that the average Filipino will have twice the income of the average Indonesian by 2050.

The Venezuelan economy will only triple in size, but Peru’s economy will grow eightfold. Per capita income will double-and-a-bit in Nigeria; in Ethiopia it will grow sixfold. Bangladesh powers past Pakistan, with a per capita income in 2050 that’s half again as big as Pakistan’s. (It’s only two-thirds of Pakistan’s at the moment.) And so on and so forth: local phenomena mostly of interest to local people.

But what’s happening at the top of the list is of interest to everybody. That’s where the great powers all live, with the BRICs nipping at their heels. Or rather, some of the BRICs are nipping at their heels, and some are not. That’s the big news.

We owe the concept of the BRICs to Jim O’Neill, who came up with it almost fifteen years ago when he was head of economics at Goldman Sachs. He was the first to realise that some big, poor countries were growing so fast economically that they would overtake the established great powers in a matter of decades.

The really impressive performers were Brazil, Russia, India and China, so he just called them the BRICs – and pointed out that at current growth rates the Chinese economy would be bigger than that of the United States by the 2040s. We’re quite familiar with that kind of prediction today, but at the time it was shocking (especially to Americans), and the term BRIC has become firmly entrenched in the language. Just in time for HSBC to spoil it.

By now the BRICs are formally the BRICS (with a capital S added for South Africa), . But the South African economy is only in the group out of courtesy, because you couldn’t leave Africa out altogether. It’s much smaller than any of the others and growing very slowly, so you can safely leave it out of the calculations altogether.

China is performing roughly as expected, and by 2050 its economy will be around 10 percent bigger than that of the United States. (Per capita income, of course, is a different matter, and even then China’s will be only a third of America’s.) India will come next, but with an economy only one-third as big as China or the United States
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But the other BRICs practically vanish from view. Brazil hasn’t even overtaken Britain by 2050, despite having three times as many people. And Russia’s performance is downright embarrassing: its economy barely doubles in the next 35 years, and it ends up smaller than Spain’s. So six of the top ten countries in the 2050 list are already there today, and the world isn’t going to look so dramatically different at all.

Now, predictions like this are open to all sorts of criticism. China’s growth rate has consistently been two or three percentage points higher than India’s for several decades. Project that to 2050, and China ends up far ahead of India. But China’s growth rate is falling, and India’s may even overtake it this year.

India will almost certainly grow faster in the long run, because it has a young, rapidly growing labour force and China does not. There’s enough time for that to change the pecking order radically by 2050.

The recent performance of the economy obviously affects the long-range forecast more than it should, so Russia drops down the list and Mexico goes soaring up. Five years ago it would have been the other way around, and yet there’s no reason to believe that the fundamental strengths of either economy have changed.

And then there are the “Black Swans”, events like the Sarajevo assassination that tumbled the world into the First World War and invalidated all existing assumptions about the economic future. Not to mention the disasters that you know are coming, like catastrophic climate change – but leave out of your calculations anyway, because you don’t know how to quantify them and don’t know when they will arrive even to the nearest decade.

All that said, some sketchy notion of what the future may bring is better than no idea whatever. And the basic idea behind the BRICs is still sound: the centre of gravity of the world economy is moving south and east.
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To shorten to 725 words, omit paragraphs 3, 7 and 12. (“The Venezuelan…people”; “By now….altogether”, and “The recent…changed”)

Breakthrough on Climate Change

When news got out that US President Barack Obama and China’s President Xi Jinping had reached an agreement on climate change, the American blogosphere lit up with negative comments. “The problem is, Obama probably means it,” wrote Jazz Shaw of the major conservative political blog Hot Air, “while China is almost certainly just yanking the world’s collective chain yet again with a bit of lip service as they seek better trade arrangements.”

But Jazz Shaw has got it exactly backwards. It’s the United States that cannot be trusted to keep its commitments, because the American political system is mired in a perpetual civil war and at the moment it is the climate-change deniers who have the upper hand. Whereas the Chinese will probably keep their word, because there are no denialists in China and the government is genuinely terrified of climate change.

The Obama-Xi deal is not wonderful, but it is the first step in the right direction that the world’s two biggest emitters of carbon dioxide have taken together. Obama promised that the US will reduce its greenhouse gas emissions to at least 26 percent below the 2005 level by 2025. Xi promised more vaguely that China’s emission would peak by 2030 or earlier (and, by implication, then start to decline).

That looks a bit lopsided, of course, but any deal that takes account of current realities is bound to look like that. China is still a poor country, and it is racing to grow its economy fast enough to preserve political stability. That means it has to generate a lot more energy fast.

China is installing a great deal of clean power (around half the world’s new solar energy plants last year, for example), but just to keep the lights on it has to go on building lots of fossil-fuel plants as well – and most of them burn the dirtiest fuel, coal. Official policy is driving the number of new coal-fired plants down, however, which is one reason why Xi thinks he can keep his promise that emissions will stop growing by 2030.

Obama, by contrast, presides over an economy that is already very rich. The average American citizen still consumes twice as much energy as the average Chinese, but total US energy consumption stopped rising years ago. Making 26 percent cuts in American energy use over the next ten years is not a huge challenge; it only requires a reduction of about 2.6 percent a year.

So the American and Chinese commitments in the new deal, while asymmetrical, are not unequal in terms of the political and economic burdens they impose. The real difference lies in the likelihood that the two sides will stick to the deal over the next 10-15 years as they have promised. China probably will. The United States probably won’t.

The Chinese regime knows what global warming will do to the country if it is not contained. A study commissioned by the World Bank about a decade ago, but never published (quite likely at China’s insistence), concluded that if average global temperature rises by 2 degrees C, China will lose about 38 percent of its food production.

As in all predictions of this sort, that number may be wrong by five or even ten percentage points, but that doesn’t really matter. Even a 28 percent loss of food production would mean semi-permanent famine in China. The regime would not survive that, and much of the growth that has been achieved by great sacrifice in the past three decades would be lost.

Beijing takes climate change VERY seriously. Even though the regime must also keep the economic growth going if it wishes to survive, it knows that it must start making real concessions on emissions in order to facilitate a global deal.

Xi did not set this target of capping Chinese emissions by 2030 without a great deal of discussion and debate within the regime. Having made the promise, he will keep it. So will his successors, at least so long as the Communist Party goes on ruling China. Whereas Obama will be gone in two years, and cannot bind his successors to keep his promise in any way.

Indeed, even in the past six years he has never got any legislation on climate change through the Republican-dominated House of Representatives. Instead, he had to resort to issuing executive orders through the Environmental Protection Agency (EPA) to make even modest improvements like raising the fuel efficiency of US-made cars.

Now the House has voted to repeal the EPA’s authority to regulate greenhouse gases under the Clean Air Act, which would strip even that power from him. The new Republican majority in the Senate will probably do the same. Obama could veto such a law, but all the Republicans have to do is attach it to the budget and they would set up a confrontation that would shut the US government down again.

The Chinese know this, of course, but they are so desperate to get matters moving on the climate front that they are willing to take a chance that the deal will survive.
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To shorten to 725 words, omit paragraphs 10, 12 and 13. (“Beijing…deal”; and “Indeed…again”)

Hong Kong: Xi’s Choice

The crowds of protesters in the streets of Hong Kong continue to grow, and they have spread beyond Central (the business district) to Kowloon and Causeway Bay. The police are already using tear gas and pepper spray, and rubber bullets will be next.

It’s not exactly Armageddon, but it’s the most serious organized protest that China has seen since the pro-democracy movement on Tiananmen Square was drowned in blood 25 years ago.

Hong Kong isn’t exactly China, of course, in the sense that it doesn’t live under the same arbitrary dictatorship as the rest of the country.

While it has been under the ultimate control of the Communist regime in Beijing since Britain handed the territory back to China in 1997, the deal London made before the hand-over guaranteed Hong Kong’s existing social system, including freedom of speech and the rule of law, for another 50 years.

Indeed, the “one country, two systems” deal even stipulated that the “Hong Kong Special Administrative Region” would get more democratic as time went on. There was already an elected Legislative Council when the British left, but by 2017, Beijing promised, there would also be a democratically elected Chief Executive.

(The holder of that office is now chosen by a 1,200-person “Election Committee” that is packed with pro-Beijing members).

But free elections for the Chief Executive turned out to be more democracy than the Beijing regime could swallow, mainly because it’s terrified of the example spreading to the rest of China.

So it broke its promise: late last month the National People’s Congress (NPC) in Beijing declared that it will allow only three candidates to run for Chief Executive, and that all of them must be approved by a nominating committee chosen by the regime.

That’s what triggered the current wave of demonstrations. As Martin Lee, founding chairman of the Democratic Party, said at a pro-democracy rally in Hong Kong: “What’s the difference between a rotten orange, a rotten apple, and a rotten banana? We want genuine universal suffrage, not democracy with Chinese characteristics.”

Li Fei, deputy secretary-general of the NPC standing committee that wrote the new rule, said that opening up nominations would cause a “chaotic society”, and that the Chief Executive must “love the country and love the Party.”

It’s the classic Communist mind-set, and it left Hong Kong democrats with no options other than surrender or popular protest. Now thousands of people are out in the streets. Where does it go from here?

This confrontation comes at a particularly unfortunate time for Hong Kong’s pro-democratic movement, because the relatively new supreme leader in Beijing, President Xi Jinping, cannot afford to make any concessions.

Since he came to power two years ago, Xi has launched a massive anti-corruption purge that has made him a lot of enemies. At least 30 senior officials and hundreds of their family members and associates have been put under investigation or taken into custody. Thousands of other officials might also face arrest (and rightly so) if the purge spreads. About 70 officials have actually committed suicide in the past year and a half.

The campaign against corruption is necessary and long overdue, but it is widely resented by those who fear that they and their families might also be caught in the net (including the family and associates of former presidents Hu Jintao and Jiang Zemin).

The resentment is all the deeper because Xi Jinping’s own family and associates are magically untouched by the purge.

Many powerful people in the Communist hierarchy would therefore be greatly relieved if Xi lost power, or at least was forced to end the anti-corruption campaign. If he were to surrender to pro-democracy protests in Hong Kong, he would be giving those people an excuse to unite against him in defence of the Communist Party’s monopoly of power, and not just of their own personal interests.

Using excessive force to quell the protests, up to and including massacres, would also leave Xi open to criticism, of course, but mainly to criticism from abroad. As we saw in the suppression of the Tiananmen Square protests in 1989, in the end Communist Party cadres will usually support the use of violence in defence of their power and privileges.

As for the general public in China, the events in Hong Kong are already represented in the state-controlled media (to the extent that they are reported at all) as the anti-patriotic actions of people who are being manipulated by hostile foreign powers.

Many ordinary Chinese people won’t believe that, but they probably won’t risk much to support of the people of Hong Kong. (If the protests spread to the mainland, of course, it’s a whole different game.)

Xi Jinping would doubtless prefer to win his confrontation with Hong Kong’s pro-democracy movement peacefully, but he will use as much violence as necessary to suppress it.

Massacres would do great damage to China’s relations with the rest of the world, but he knows where his priorities lie.

“China’s Chechnya”: Terrorism in Xijiang

It’s not really “China’s Chechnya” yet, but the insurgency in Xinjiang is growing fast. Incidents of anti-Chinese violence are getting bigger and much more frequent. Since March, 176 people have been killed in six separate attacks on Chinese police and government officials, local collaborators and ordinary Chinese residents of Xinjiang Uighur Autonomous Region in northwestern China, and the authorities don’t seem to have a clue what to do about it.

The Uighur attackers have mostly used knives or explosives in their attacks (guns are hard to get in China), but nobody has suggested that they are so technologically backward that their bombs come with long, trailing fuses that have to be lit by hand. Yet Chinese police in Xinjiang last month seized tens of thousands of boxes of matches.

“The confiscation has enabled us to strengthen controls over important elements of public security and thus eliminate potential security threats,” said the Kashgar police. The police website in Changji declared that they had acted “to ensure matches would not be used by terrorist groups and extremist individuals to conduct criminal activities.” No disrespect intended (well, maybe a little), but these are not serious people.

The rebels, on the other hand, are very serious people. Like most independence movements of the colonial era, they believe that you have to take the war to the homeland of the “oppressor” if you can. One of those recent attacks was not in Xinkiang but in Kunming in southwestern China, where a band of eight knife-wielding Uighurs killed 29 ordinary Chinese citizens and wounded 143 in the main railway station.

Another standard tactic in this sort of war is the use of violence to deter one’s own people from collaborating with the colonial power. On 30 July Jume Tahir, the imam of China’s largest mosque, in the city of Kashgar in Xinjiang, was stabbed to death just after leading early morning prayers. His crime? Praising Communist Party policies and blaming the rising tide of violence on  Uighur separatists and extremists.

The Uighurs are overwhelmingly Sunni Muslims, and the official Chinese line blames the separatist violence on foreign Islamists who are stirring up the local people. The separatists themselves say that it is a legitimate response to Chinese oppression, and in particular to the Chinese government’s policy of flooding Xinjiang with Han Chinese immigrants in an attempt to change the territory’s demographic balance. The truth, as usual, is more complicated.

Xinjiang (literally “New Territory) was conquered by Chinese troops in the 1750s, but the population mix did not change. In the early 19th century a census reported the population as 30 percent Han Chinese (almost all living north of the Tian Shan mountains) and 60 percent Uighurs, Turkic-speaking Muslim farmers who accounted for almost the entire population south of the mountains. The rest were Kazakhs, Huis, Mongols and others.

The Uighurs had grown to 75 percent of the total population by the 1953 census, with many by then living north of the mountains. The Han Chinese had fallen to only 6 percent. But now, thanks to large-scale immigration, the Chinese are back up to fully 40 percent of Xinkiang’s population, while the 10 million Uighurs are down to 45 percent.

In other words, the numbers will support almost any argument you want to make, if you choose your census dates carefully. But it is certainly not true that Han Chinese people are newcomers to Xinjiang, and it is probably not true that the Chinese government has a policy of encouraging Han immigration to reduce the Uighurs to a marginal minority.

Chinese officials themselves say that they are trying to develop the Xinjiang economy and raise local living standards, with the (unstated) goal of making people so prosperous and content that they will not even think of “betraying the motherland” by seeking independence. It’s just that a developed economy requires job skills that are not plentiful among the Uighurs, so large numbers of Han Chinese are drawn in to do those jobs.

Beijing’s officials make the same argument about Tibet, and they are probably being sincere about their intentions there too. They just have a huge cultural blind spot that makes it almost impossible for them to imagine how all this feels to the average Uighur who sees more and more Chinese coming in and getting all the good jobs

Add in all the resentment about the brutal assaults on the Uighurs’ culture and religion that happened during the Cultural Revolution – and continue in a minor key even today, thanks mainly to ignorant government officials who have never before lived outside an exclusively Chinese cultural context. And now there is also a radical Islamist ideology available, for those who are thinking about rebellion.

So now it’s getting really serious in Xinkiang: the last big incident, on 28 July, saw hundreds of Uighurs storm a police station and government offices armed with knives and axes. 59 of the attackers were killed and 215 arrested, while 37 (presumably Chinese) civilians were murdered. When you have organised groups doing violence on this scale, you are already in a low-level war.

It will probably never be as bad as Chechnya, and it is very unlikely that Xinkiang will ever be independent, but it may be a long and ugly counter-insurgency war, with many deaths. At least they’ve got the matches under control.
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To shorten to 725 words, omit paragraphs 3, 5 and 11. (“The confiscation…people”; “Another…extremists”; and “Beijing’s…jobs”)