"Seriously Inadequate"

If the tens of thousands of people who demonstration in Taiwan’s capital last Saturday against China’s new “anti-secession” law passed by China’s lawmakers in mid-March were really worried about their security, they might have directed some of their protest energies at their own lawmakers.

Even as they marched, the Legislative Yuan is once again considering whether to appropriate the equivalent of the $18 billion needed to purchase the arms necessary to maintain a balance of power across the Taiwan Strait that is now perceptibly moving in favor of China.

It is time now for the legislators to stop the endless debating – more like haggling – and get down to business. For if it appears that Taiwan is not ready to do what it can for its own self defense, how can it call on the help of others, the United States in particular, to come to its aid in the event China does attack?

What’s involved is the acquisition of eight new submarines, six Patriot III anti-missile batteries, and a dozen P-3C anti-submarine patrol aircraft. The new patrol aircraft would replace aircraft that have been in service for the better part of 40 years. The Patriot IIIwould augment the older Patriot II system protecting Taipei and extend the anti-missile umbrella to the rest of the island. The submarines would help defend against a Chinese naval blockade of the island.

President George W. Bush authorized these sales soon after he became president in 2001. Four years later Taiwan has yet to come up with the funds. The members of the opposition-controlled body have raised all kinds of objections. Some have questioned the reliability of the Patriot system, using Washington’s own assessments of the weapon’s performance in Gulf War I.

Some opposition members are still miffed that the U.S. won’t sell Taiwan top-of-the-line destroyers with anti-missile capabilities (Washington says it would consider the sales once Taiwan’s navy adapts to manning the somewhat older and less sophisticated Kidd Class destroyers.) Some even accuse Taiwan of being asked to pay “tribute” to the U.S.

Mostly the legislators balk at the price tag, citing competing demands for improved social services. It is true that the total cost is high – roughly twice Taiwan’s total annual defense budget. But it doesn’t have to be paid all at once. Indeed, the first installment would only increase defense expenditures by about 15 per cent. That would still leave defense spending below 3 per cent of GDP.

Much has been said about China’s military modernization and rising defense budgets. But few outside of official circles express much concern about Taiwan’s declining defense budgets. Yet the budget has steadily shrunk in real terms and as a proportion of the country’s gross domestic product for ten years. Defense spending amounted to 3.5% of GDP in 1995 and had fallen to 2.5% in 2004.

As far back as 1999 the then Taiwan Minister of Defense, Tang Fei, argued that defense spending was “seriously inadequate” to keep Taiwan secure. At that time Taipei was spending about 2.7 per cent of GDP on defense. He maintained that it be increased to roughly 3 per cent. Otherwise in five years China would be capable of launching an attack. That was five years ago.

American officials have politely expressed their concern over this state of affairs. Peter. W. Rodman, assistant secretary of defense for international security affairs, had this to say to Congress on the 25th anniversary of the Taiwan Relations act a year ago:

“We have made clear to our friends on Taiwan that we expect them to reverse this defense budget decline. Though our commitments to Taiwan are enduring, the American people and both the Executive Branch and Congress expect the people of Taiwan to make their own appropriate commitment to their freedom and security.”

The irony is that as Taiwan has become more democratic, its defense expenditures have become more subject to political pressures and competing demands. In the bad old days of martial law, the army general staff reported directly to the President, and a compliant legislature produced what funds they needed.

Now Taiwan has a civilian minister of national defense, and he has to ask for, not demand, appropriations. Meanwhile, Taiwan’s people have developed a taste for social welfare programs, and legislative candidates campaign on promises to provide them. At the same time, Taiwan’s people oppose raising taxes (which are low). It’s not an uncommon conundrum in democracies.

Opinion polls in Taiwan have consistently indicated a lack of concern about an attack from China and consequently indifference to shrinking defense budgets. Statements such as President Bush’s pledge shortly after taking office that the U.S. “would do whatever it takes to help Taiwan defend itself” are often interpreted as an open-ended commitment to defend Taiwan no matter what it does.

Taiwan’s main claim to American help and possibly its blood, aside from strategic considerations (Chinese submarines based on Taiwan’s east coast), is its status as a functioning democracy, But it cannot expect America to risk war with China if it is not pulling its own weight. It’s time for the people chanting “Taiwan, yes, China no” to put up or shut up.

Ground Zero, 8:10 a.m., March 20, 1995

Kazumasu Takahashi, an assistant station master on the Chiyoda subway line in central Tokyo was on duty when the 8:10 train pulled in on that Monday morning in March 1995. Many of the passengers were civil servants working in the government ministries in the Kasumigaseki district close by the Imperial Palace.

Before the doors shut, Takahashi noticed that some liquid had spilled onto the train floor. He mopped it up and waved the train on. Then he keeled over on the platform and died. Within minutes thousands of commuter were staggering out of the subway exits gasping for air, coughing, rubbing their eyes or foaming at the mouth.

Urban terrorists had planted sarin nerve gas at five widely scattered locations along three central city subway lines in the world’s first and so far only use of a weapon of mass destruction (WMD) delivered in a bento (lunch) box. Twelve people died in the attack. It would be a long time before any Japanese entered a subway without feeling trepidation.

Ten years have passed since this opening shot in the Global War of Terrorism. Although the death toll was much lower than the attacks on New York and Washington, the number of injured surpassed 5,000, and many of the survivors are still bedridden with little or no prospects of recovery.

Suspicion quickly fell on a cult called the Aum Shinrikyo (Shining Light), and for a while the menacing portrait of its hirsute guru Chizuo Matsumoto (alias Shoko Asahara) was as common then as portraits of Osama bin Laden are today. Perversely, one of his lieutenants in crime, Fumihiro Joyu, became almost like a pop idol to many teenagers. Girls thought he was kawai (cute).

The authorities were stunned when they discovered in the ashram’s laboratory at the base of Mt. Fuji equipment capable of producing sarin gas in quantities sufficient to kill literally millions of people. Nor did the cult ignore any of the WMD branches – chemical, biological, nuclear. The cult even had a rudimentary nuclear lab in the Australian outback.

That an obscure doomsday cult with no known track record of international terrorism was able to manufacture sarin gas in such quantities so easily and spray it indiscriminately in the middle of the world’s largest city is a timely reminder of what terrorists can do with chemical weapons.

It is also worth remembering that not all ideologies of doomsday or apocalyptic terror are incubated in Muslim madrasses – Juyo was a graduate of Waseda University, one of Japan’s most prestigious institutions of higher learning. Nor did these dedicated terrorists have to brew their deadly chemicals in caves in remote border areas. They lived in the suburbs.

In the ensuing decade 189 Aum followers have been tried in Japanese courts. Twelve have received death penalties, although none has been hanged. The guru himself was sentenced to death about a year ago after a trial that lasted the better part of nine years. Japanese justice grinds slowly.

Asahara’s appeal may not be heard until 2006, and the process may drag on for another decade. Many think he may die of old age before he ever sees the hangman. By way of comparison the Tokyo sarin attack occurred less than one month before the Oklahoma City bombing. Yet Timothy McVeigh has been tried, sentenced, executed and dead for more than three years.

In America the terror attacks of September 11, 2001 spawned the Patriot Act, and Japan too has tightened security measures in the wake of the sarin attacks. The Diet (parliament) passed a wire tapping law that gives the Japanese police the authority to eavesdrop on telephone calls, fax messages and e-mails for serious crimes. As in the U.S., civil rights advocates say it is an invasion of privacy and have urged its repeal.

The sarin attacks may also have solidified the public’s support of capital punishment. In a poll taken in February more than 80 percent of the people said they favored the death penalty, the highest figure ever recorded on this subject. Some think that a wave of school killings has also contributed to the high percentage.

Unlike the U.S. Congress, the Diet never convened any kind of high profile investigation similar to the 9/11 Commission. That combined with the continuing silence of the main leaders means that, ten years later, the motives behind the attacks are still not fully understood – if indeed they are capable of being understood by rational people.

During all those years he was on trial the blind guru said nothing. He never testified in his defense, never tried to justify or set out any kind of rationale for the murders. When he was found guilty of mass murder, he accepted his sentence without a word, made no apology or admission of guilt.

And while the victims of the 9/ll attacks in America have received millions in compensation, the Japanese government provided nothing specific for the victims of the commuter train attack. The sect, which still exists and at one time had fairly large business interests, has paid an average of about $10,000 to each of the survivors or bereaved families.

However, the survivors have had one significant success. Last year persistent lobbying paid off in passage of Japan’s first crime victims’ law, which states in part that, “The central and local governments and the Japanese people are responsible for protecting crime victims.”

Ten years later cults still flourish in Japan and continue to draw in more young people. They seem to fill a spiritual void at the heart of Japan’s consumer society. The two traditional religions, Buddhism and Shinto, are basically empty shells. For the overwhelming majority of Japanese, their precepts are only practiced for rites of passage, such as marriages and funerals. Otherwise they are ignored.

Strangely, the Aum Shinrikyo was never outlawed. It still has branches in 17 out of Japan’s 47 prefectures and perhaps 2,000 adherents. It is said that the guru is gaining new respect among followers, now in their late teens, or early 20s, who were only 10 or so when the gas attacks occurred and have no real personal memories of the attack.

The Chinese often point to Aum Shinrikyo in offering an explanation as to why the government banned and persecuted another sect called the Falungong as being an “evil cult,” even though it never hurt anyone. So it says something about Japan’s commitment to freedom of religion and association that it allows such a sect to exist, though closely watched.

These days one hears a lot about how terrorism can be traced to rootless young people trapped in poverty and held down by the dead hand of dictatorships. So it is worth remembering that the world’s first and only terrorist attack with a WMD took place in a functioning democracy by indigenous young people with good educations and prospects.

Japan’s most famous contemporary novelist, Haruki Murakami turned his attention to the cult in a book called Underground. The Tokyo Gas Attacks and the Japanese Psyche first published in 1997. In his interviews he asked if any of young followers regretted joining the cult. Almost all said no. “They found a purity of purpose they could not find in ordinary society,” he wrote.

Todd Crowell is the author of Tokyo: City on the Edge

What Would The Emperor Do?

News Item: Chinese Premier Wen Jiabao told reporters recently that changes in the renminbi may come about unexpectedly .

Suppose you were the Emperor of China. What would you do about the renminbi? Listen in on a conversation inside the Imperial chambers at the Forbidden City in Beijing. The Emperor is talking with his Grand Vizier, Wen Jiabao.

“Wen, what am I going to do? The Americans keep telling me I have to revalue our currency. That woman Rice, who recently left, pushed me very hard. It was all I could do to remain polite. The Japanese are pushing me hard too.

“Well, sire, if it is your wish, you could abolish the peg to the dollar with a stroke of your ink brush. Just let the currency float, that is rise to its natural level.”

“What would that be?”

“Opinions differ, sire, but most economists I’ve read say that the currency is undervalued by at least ten percent. Some say as much as 40 percent.”

“That much, huh?”

“That, sire, is the conventional wisdom – if you allow it to float. There would be some other advantages to floating the currency in managing the economy, but it might be . . . destabilizing”

“Destabilizing? Oh, I don’t like that. Isn’t there something else I could do?”

“Well, sire, you could revalue. Just change the peg. Maybe move it to six or seven to the dollar. It would be simple and easy and it would make the foreign devils happy.”

“I don’t like that either. Makes me look like I’m kowtowing to the West. Anyway, I’m getting a lot of advice to do nothing. Just the other day that foreign devil, Mundell, told me resist all pressure to revalue, at least until our banks are in better shape. He ought to know what he’s talking about. Didn’t he invent the euro?”

“Yes, sire, and won the Nobel Prize for Economics in 1999.”

“Right, and that Japanese fellow, the one they call Mr. Yen. He tells me that floating the yuan would be a disaster for Asia. And, by the way, Wen, why can’t we fix our banks?”

“We’re working on it, sire. Anyway, with respect, it might not be wise to simply do nothing. For one thing too much money is flowing into the country. It’s fueling inflation and pushing property prices up here and in Shanghai and . . .”

“I know. I’d like to get in on a little of that action myself. But, Wen, what should I do? I’m tired of listing to all these experts and their conflicting advice. I want to take some action.”

Well, sire. I would advise widening the peg, creating a creeping peg.”

“A what?

“A creeping peg, sire. Periodically adjust the currency band. Allow the yuan to appreciate in increments of, say, four or five percent. That’s about what the market expects. Over the next two or three year it should appreciate 10 percent.”

“Won’t that hurt our exports? You know I don’t want to hurt our exports. I can’t afford any more unemployment.”

“A gradual appreciation in this range should not adversely affect exports, sire. The only problem is it may invite speculation, bringing more hot money into the country as the day the peg is changed approaches.”

“But would it make the foreign devils happy?”

“Reasonably happy, sire.”

“How would you institute such a policy?”

“I would advise announcing it when the market is, how shall we say, distracted, by some other event. Leave it to me.”

Chuckling. “I like it, Wen. Keep them guessing.”

Farewell to a Decent Man

I always had a soft spot for Tung Chee-hwa, who resigned as Hong Kong’s first Chinese Chief Executive, seven years after the handover to China and two years before the end of his second term. I remember him standing outside one of the flophouses in Mongkok where the cage men live in wire cages as in dog kennels. The rich scion of a wealthy shipping family was obviously moved by what he saw. Standing before a clutch of reporters, he said, “It was worse than I imagined.”

That underscored, for me at least, one of his fundamental strengths as Hong Kong’s first post-handover leader, the fact that he is a decent man, a quality that seemed to be accentuated by his broad, honest, friendly Chinese face and unstylish crew cut. It is a quality that is rare, it not impossible to find, among political leaders.

It may be that he was a little too decent for the position he was thrust in. One of the many criticisms of his administration was that he never fired anyone, most notably the former Financial Secretary, Anthony Leung, after he had purchased a luxury car knowing in advance that he was going to raise the tax on them. Any other democratic leader would have wasted little time giving Leung the heave.

Moreover, Tung, a complete political novice, had the misfortune to follow in the footsteps of a consummate politician with an entirely different governing style, the last British Governor of Hong Kong, Christopher (call me Chris) Patten. He was a master politician who probably represented the ideal for many expatriates and who also had caught the imagination of many of Hong Kong’s Chinese residents as well.

Tung couldn’t strike the happy medium between being a Mandarin, which was probably his natural bent, and a Western-style politician. He never seemed comfortable or authentic when his handlers thrust him into crowded shopping mall in Kowloon so that the photographers could take a picture of him munching custard egg tarts.

During the early years of his administration, Tung maintained respectable polls ratings despite the economic hardships spawned by the Asian Financial Crisis (which broke out his second day in office). People were willing to give him a chance despite such foul-ups as the bird flu scare, a bungled opening of the new airport, scandals in the public hospitals and a badly managed and later abandoned scheme to reduce property prices.

The new chief had one advantage: people believed he was trusted by Beijing, and thus in a position to insulate Hong Kong from overt interference by China. As the years passed and anxiety about mainland meddling receded, Hong Kongers, mired in more mundane concerns such as jobs and asset values, became less forgiving of their leader, and his approval ratings sank into the cellar.

But in the long term, Tung won’t be judged on how he handled bird flu or SARS or the civil service or whether he was too beholden to local property tycoons, or all the other things people held against him. His historic mission was to guide Hong Kong through the stormy early years of this unprecedented political experiment called “one-country, two systems.” Judged from that perspective he hasn’t done badly.

Either by calculation or serendipity – I suspect the latter – the Chief played a pretty shrewd game. When Beijing banned a quasi-religious group called the Falungong he issued a stern warning for them to obey the law and described them in the legislature as having aspects of an “evil cult,” using the same language of Beijing. Of course, this infuriated liberals, democrats and expatriates. Yet the leaders in Beijing hear these words and think, “Our man in Hong Kong is sound” and leave Hong Kong alone.

One can easily imagine what Chris Patten would have done in similar circumstances. He would have gone on radio and issued a blistering attack on China’s persecution of peaceful religions and praised how things were done differently in Hong Kong. Beijing would have seethed. Yet in the end the outcome would have been the same. The Falungong continue doing legally in Hong Kong what they would be arrested for doing in Tiananmen Square.

Before the handover, conventional wisdom held that Hong Kong, being a purely economic entity should have as its first Chief Executive somebody who was plugged into the business community. Tung seemed to fit the bill, but it proved to be a costly mistake. Hong Kong has more than enough people with the business savvy to weather the economic tempests of recent years. What it lacks are good politicians.

Hong Kong, post-handover, has proven itself to be very much a political organism. By some estimates an average of 20 public protests of various sizes and stripes take place every day. Hong Kong needs somebody at the helm with considerably more political suppleness than Tung ever displayed. That is why the denouement and early retirement is a merciful outcome – for him and for Hong Kong.

Ever the Confucian gentleman, Tung knew that the Mandate of Heaven had been withdrawn after he was publicly berated last December in Macau by China’s President Hu Jintao. The only thing left was a face-saving way to ease him out of office and make way for somebody more attuned to Hong Kong’s current realities, someone with perhaps a few more political skills if not charisma.


A NOTE ON APPROVAL RATINGS

It has always puzzled me how Tung could be so unpopular yet still boast what would appear to be fairly respectable public approval ratings. On the day of his resignation, The South China Morning Post reported that his “popularity rating” was 47.9 percent as if this were some kind of record low.

Yet if one equates this to a “public approval” rating, it is about where President George W. Bush was last summer. A rating of 47.9 per cent, of course, is nothing to boast about. When Bush’s numbers were in that range, things looked touch and go for him, but he went on to win re-election by a convincing margin.

Japan’s ruling Liberal Democratic Party has consistently polled badly. The last approval rating I saw for Prime Minister Junichiro Koizumi was 35 percent, yet nobody is clamoring for his resignation. When the late Keizo Obuchi came in, the LDP was polling at about 20 per cent. His hapless successor Yoshiro Mori’s approval ratings fell as low as 9 per cent. Only then did he resign. Yet the LDP goes on and on, celebrating this years 50 years of almost unbroken power.

Either something is not quite right with Hong Kong’s polling system or Tung is the biggest political wimp of all time. I’m told that the most widely used poll, the one produced by Hong Kong University, uses a scale of 100 with 50 being a “pass” as if it were some kind of public school examination. A mark of 100 means the respondent agrees with everything Tung does, while a 0 means he disagrees with everything.

This is not the same as most polls in Western democracies, which basically ask whether the public figure is doing a good job. It isn’t even consistent with the university’s own figures which showed that only 16 per cent of the people would vote for Tung if they had a chance. This figure has been even lower, in the 12 per cent range, and has stayed consistently low for several years.

The Hong Kong Transition Project at Baptist University has shown only about 25 per cent of the respondents voicing satisfaction with Tung for a long time. The last one, taken in December, showed 29 percent were satisfied and 63 percent dissatisfied or very dissatisfied with his performance. He was far from having a public approval rating sufficient to retain office in an open election.

Polls are important in Hong Kong, since they are kind of a substitute for elections. In the run-up to the handover in 1997, Tung was continually dogged by low public approval ratings. Even after months of speculation that he would be the first Chief Executive, his public support languished in single digits compared with other prospective candidates (former Chief Secretary Anson Chan blew everybody away).

That’s one reason why he campaigned so strenuously (showing up at the Mongkok flophouse, for example) even after he had the nomination and selection sown up. To come into office with such low ratings would have been a humiliation. Eventually he did get up to a respectable range, pulling in 46 per cent support, well ahead of the two other active candidates on the eve of his selection in December, 1996. By then Chan had been dropped from the polling. Interesting that he should poll slightly higher the day he resigned than the day he was elected.


Todd Crowell is the author of Farewell My Colony: Last Days of British Hong Kong.

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The Guns of August

Normally, few people except professional China-watchers pay much attention to the proceedings of China’s nominal parliament, the National People’s Congress. The congress meets once a year in March for about a week. The 3,000 hand-picked, un-elected delegates pass laws and ratify, usually by acclamation, government appointments, such as president or premier.

This year’s meeting had a special edge to it that drew the attention of the world’s press and spawned headlines across Asia. The congress passed a law making it state policy to use force as a “last resort” to defend China’s sovereignty and territorial integrity. This law is, of course, aimed specifically at Taiwan, which has been politically separated from mainland China since it was first annexed by Japan in 1895. It was again separated after the Kuomintang, defeated in the Civil War, found refuge there.

In some respects, the law seems superfluous. Beijing has never renounced using force against Taiwan should it formally declare itself an independent country. The new law also says that force would be used only “when all our efforts for a peaceful reunification should prove futile.”

Moreover, Beijing has never before needed any kind of special law to send its armies into battle. It didn’t need one when it intervened in the Korean War in 1950, attacked India in 1962 or invaded Vietnam in 1979. Why should this action make things any more dangerous than they already are?

For one thing Taipei is likely to respond with mirror-image legislation of its own. President Chen Shui-bian, is already talking about introducing some kind of “anti-annexation” law into Taiwan’s legislature to counter Beijing’s “anti-secession” law, or perhaps place it on the ballot in a national referendum.

Meanwhile, the United States has its own long-standing Taiwan Relations Act, passed soon after Washington recognized Beijing in 1979 and broke off diplomatic relations with Taipei. It does not formally commit the U.S. to defend Taiwan in the event of an attack, but it mandates that the U.S. supply arms necessary for Taiwan to defend itself.

Before long, there may be a kind of Guns of August quality to the situation, where the three main parties, China, Taiwan and the U.S. are legally bound, or feel themselves legally bound, to take actions they may not want to take, much the way the great European powers felt compelled to go to war in the summer of 1914 because of agreements and treaties they had made.

If nothing else, China’s action may build a fire under Taiwan’s Legislature to do more in Taiwan’s self-defense. Unlike China’s congress, Taiwan’s legislature is really democratic, and it has been doing what democratic assemblies are wont to do: haggle, procrastinate, roll the pork.

Three years ago, to Beijing’s great annoyance, the Bush administration approved an arms sale to Taiwan worth $18 billion. The money would be used to buy eight diesel-powered submarines, three Patriot anti-missile batteries and a small fleet of anti-submarine planes. Taiwan’s defense minister has said that this package could maintain the balance of power in the Strait for 30 years. Without it, China might have the capacity to overrun Taiwan in two or three years.

Nevertheless, the opposition-controlled legislature has acted as if it were some kind of bazaar, demanding that the cost of the package be cut in half, that the submarines be built in Taiwan, that in return for the favor of buying weapons needed for its own defense the U.S. specifically promise to defend Taiwan in the event of an attack. It is hardly surprising that even a conservative administration has less and less patience with Taipei.

Anxious to get Taiwan to do something to defend itself, Washington is even outsourcing re-supply of the U.S. army’s ammunition to Taiwan. In exchange for shipping 400 harpoon air-to-ground missiles to the Taiwan Air Force, the Pentagon plans to obtain 300 million rounds of rifle ammunition from a munitions plant in Kaohsiung, replacing bullets expended in Iraq and Afghanistan.

The barter deal accomplishes two things. It gets more missiles in the hands of the armed forces, presumably without having to get an appropriations bill through the stingy Taiwan legislature. It keeps open production lines on Taiwan’s main armory that might otherwise have to shutdown due to lack of demand from Taiwan’s own army.

Taiwan lives in a kind of dream world. Being a democracy, it assumes that the U.S. and other democracies will come to its aid should China attack, no matter what it might do to provoke such an attack. Therefore it is unworried about its own self-defense. The anti- secession law may be a necessary wakeup call.

The Chinese Challenge

BOOK REVIEW

In the final analysis, it comes down to people, millions and millions of people – 1.3 billion people by official count, unofficially probably closer to 1.5 billion people. “First and foremost, the country’s [China] huge population changes the fundamental rules,” says the author of China Inc, Ted. C. Fishman (Scribner, 342 pages, $26).

These millions are drawn to factory towns nobody in America has heard of with names nobody can pronounce that are larger than Chicago. These towns have become the new Ruhr Valley, the new Pittsburgh-Detroit, soon perhaps the new Silicon Valley. Three shoe factories in the city of Dongguan alone employ a quarter of a million workers.

No industry is safe from the inexorable pressure of these workers, from cheap, simple Christmas tree ornaments, made by the nimble fingers of thousands of women who haven’t the faintest idea what an angel is, to sophisticated electronics components, car parts and machine tools. Soon Chinese cars will begin to appear in American showrooms (or maybe Wal-Mart).

Of course, to simply say that China has a lot of people is to state the obvious. The issue is how China has marshaled this enormous workforce to create the world’s fastest growing economy. This is the subject of Fishman’s excellent and very readable new book that deftly combines anecdotes and analysis to help us understand China’s economic miracle.

Basically, the Chinese communists broke centuries of feudalism to mold this inchoate mass of people into a docile and disciplined workforce. Then the economic reforms set in motion by of former leader Deng Xiaoping in 1979 unleashed the pent-up natural entrepreneurial spirit of the Chinese people, producing a workforce that has become irresistible to the world’s manufacturers.

Strangely, the still nominal communists who run China have succeeded in turning Marxism on its head. Classical Marxism holds that capitalism is the final stage of human development before communism. In China, communism has become the final stage before the full fruition of capitalism.

When Japan Inc. seemed poised to conquer the world, the iconic image of Japan’s economic prowess was the fully automated automobile factory, robotic arms looking like arms of a giant praying mantis, sparks flying, not a human anywhere in sight. The iconic image of China Inc. is row of young woman, all wearing identical blue uniforms, hunched over an assembly line in an electronic-components factory, like an endless chorus line seemly stretching out forever. Not a robot in sight.

Who needs robots when every day brings more and more recruits to the labor force from the countryside, more cogs, if you will, in the giant Chinese manufacturing machine, a vast floating population of migrant workers advancing on China’s cities that is larger in itself than the entire American workforce? Therein lies the challenge for America and the rest of the world.

In retrospect it was not so difficult for America to meet Japan’s challenge, which was fundamentally founded on quality, automation and productivity. Japan is a sizeable country, but it never based its competitive advantage on armies of low-paid workers alone, nor its marketing strategy simply on price. Basically, Japan competed by raising standards of quality and productivity.

That gave America an opening for a comeback. Quality can be improved, productivity can be raised, robots can be replicated. It mainly took determination and capital. But how, short of annexing Mexico (which would still leave China three times as populous), do you compete with China’s endless supply of workers?

Alas, Fishman offers few answers. China’s millions, of course, are a potential market for American and other countries’ products, and the numbers of people with the wherewithal to buy things is large and rapidly growing. But for many American manufacturers the Chinese market is a double-edged sword, the author says.

Any exporter faces the prospect that his technology will be assiduously studied, dissected and replicated at a much lower cost. This does not even take into account outright piracy. As Fishman points out, piracy of computer operating software not only robs Microsoft (which seems strangely tolerant about it) but also gives industries that use computers an advantage across the board.

The term “economic miracle” has been over-worked since the end of World War II. First came the “German miracle,” then the Japanese miracle, then the Asian Tigers miracle, and now the Chinese miracle. But in this case the rise of China in the past 20 years has truly been miraculous.

One can cite the usual statistics, such as years of consistent 7-9% annual growth, but the fundamental fact is that China in recent years has lifted more people out of poverty than any other country in the world, anytime, anywhere. That, of course, is good news for China. For the rest of the world it is a mixed blessing and poses a supreme challenge for the 21st century.