Trump vs. Beijing

There are many ways of measuring the advance of the Chinese economy in comparison with that of the United States. But one of them is this: in 2019, for the first time, the number of Chinese companies on the Forbes Global 500 list exceeded the number of U.S. firms.

When the rulers of China decided to turn their country into an international economic powerhouse, there was a widespread assumption that the adoption of capitalism by the world’s largest country would inevitably result in a transition from Communism to democracy.

Xi

That hasn’t happened. China has gotten rich – and a few million managerial-class Chinese people have gotten rich, too – by exporting cheaply made goods to the West and by using sky-high tariffs to keep out Western products. But at the same time it has remained resolutely totalitarian, and its blue-collar workers – you know, those proletarians whose welfare is theoretically at the heart of the entire Marxist project – continue to be drastically underpaid in comparison to their Western counterparts, which of course is why China can sell its manufactured goods so cheap.

In any event, the fact that a Communist country, for the first time in history, either has the planet’s largest economy or is close to it, should be a cause for deep concern throughout the free world.

Trump

It isn’t. Not yet. Not really. President Trump, who has tried to rein in the Chinese dynamo by raising U.S. tariffs on Chinese imports – although those tariffs are almost nothing compared to the Chinese tariffs on U.S. goods – has been accused of waging a trade war. In fact he’s simply making a modest effort to come somewhere near evening out what has for all too long been a very uneven situation.

Anyway, China has thrived. Which would not be a bad thing if not for the fact that, as Bill Gertz of the Washington Free Beacon putitin a September appearance on The Mark Levin Show, Chinese President Xi Jinping has turned his country into a “communist nightmare.”

Gertz

Gertz, who has written a new book entitled Deceiving the Sky: Inside Communist China’s Drive for Global Supremacy, told Levin that Xi “has his eyes set on global hegemony, he wants China to be the dominant superpower in the world, and in order to do that, he has to diminish the power of the United States.”

Some Americans in positions of authority recognize that. Most do not. Too many of them are distracted by thoughts of Vladimir Putin’s Russia, where the vodka-addled population is taking a nosedive and the economy is no bigger than that of Texas.

On the Levin program, Gertz praised Trump for taking on China – not only by fighting for fair trade but by “cracking down on China” when it comes to “law enforcement, intelligence gathering, and spying.” Gertz didn’t claim to have a crystal ball, but he contended that just as the USSR collapsed, so might China: “with a little bit of pressure” of the sort being exerted by Trump, “the whole thing could come crumbling down in Beijing.” Which would be a magnificent development for the oppressed, brutalized, and painfully unfree people of China, and would also make the whole free world breathe a good deal more easily.

Congratulations, Venezuela! Your inflation rate is down to 135,000%!

Havana

Over the years, we’ve written a good deal here about the western hemisphere’s cozy Commie tag team. We’re referring, of course, to the so-called Republic of Cuba and the so-called Bolivarian Republic of Venezuela, each of which, through various actions, helps keep the other’s totalitarian system in place. Now, however, both of these tyrannies are undergoing dramatic changes. On September 13, Reuters reported that Cuba was experiencing a fuel shortage. “Cubans,” wrote Nelson Acosta, “queued for hours for public transport on Friday at peak times in Havana, sweating in the heavy heat, while queues at gas stations snaked several blocks long.”

PDVSA headquarters

The Cuban government blamed this crisis on the Trump Administration’s enhancement of U.S. efforts to block imports into Cuba – including oil shipments from Venezuela – and Trump’s new sanctions on Venezuela’s famously corrupt national oil company, PDVSA. Acosta noted, however, that it can’t all be blamed on Trump: Venezuelan oil imports into Cuba have been on the decline for years, obliging the Havana government to ration energy. Which means, among other things, shutting off streetlights and reducing “the use of electricity in state-run institutions,” whatever that entails.

Nicolas Maduro

Meanwhile, what’s up in Venezuela? According to a September 17 article in the Wall Street Journal, the Maduro government has responded to that country’s economic death spiral – a consequence of socialist policies introduced by the late Hugo Chavez – by “quietly and cautiously begun implementing free-market policies” in order to “correct an economic contraction worse than America’s Great Depression.” That’s putting it mildly: the situation in Venezuela makes The Grapes of Wrath look like Keeping Up with the Kardashians.

What exactly has the Maduro regime done? It’s “scaled back its once frenzied printing of money, nearly ended frequent salary hikes, and largely stopped enforcing the price controls that had led to dire food shortages and a thriving black market.” As the Journal ‘s Kejal Vyas observes, these are significant actions “for a government that has publicly championed its state-led, socialist economic model as the country’s only salvation from greedy capitalists.”

Venezuelans in a supermarket queue

In any event, the new policies are having an impact – kind of. The hyperinflation rate, wrote Vyas, has dropped “from seven to six figures.” To be specific, “Inflation has fallen from a peak 12-month rate of 2.6 million percent in January to 135,000% in August.” Now, that kind of inflation rate is still terrifying, but, okay, it’s better than seven figures. Just like it’s presumably better to be hit by a car going 60 miles an hour than by a train going 200.

To be sure, it’s news that the Maduro gang is finally seeing the light – sort of. It remains to be seen whether this implicit acknowledgment of the power of the free market will lead to changes in the regime’s rhetoric. Somehow we doubt it. Maduro has been rhapsodizing over chavista ideology so ardently for so many years that it’s hard to imagine him actually admitting that he’s been wrong all along.

Sergi Lanau

In any event, Vyas quotes Sergi Lanau of the Institute of International Finance in Washington to the effect that Maduro’s new measures aren’t exactly leading Venezuela out of the woods. “Is this a turning point? I would say no, definitely not,” said Lanau. “Who knows in a few months if the decision will be ‘Well, we need money again. Let’s print some more.’” In any event, despite the significant drop, Venezuela’s inflation rate remains the world’s highest. Even as America’s economy goes from strength to strength, the economies of the two totalitarian enemies on its doorstep continue to be basket cases.

Sanders: praising China

The other day we wrote here about a prominent psychiatrist who, in an interview on CNN, maintained that President Trump is worse than Mao, Stalin, or Hitler. As we observed, to make such comparisons is irresponsible beyond measure, because it diminishes the scale of those tyrants’ destructiveness at a time when many Americans – especially young people – are poorly educated about twentieth-century totalitarianism.

Bernie Sanders

A few days later, a far more famous person than that psychiatrist made an equally outrageous statement. In a late August interview with The Hill, Democratic presidential candidate Bernie Sanders, while acknowledging that China is growing “more authoritarian” in many ways, claimed that the Communist dictatorship has “made more progress in addressing extreme poverty than any country in the history of civilization.”

Mao Zedong

Is this true? Well, first of all, let’s make two things clear: China is a massive country (it’s by far the most populous on earth, and has been for a very long time) and it has long been a very poor country as well. Yes, it has undergone a major economic transformation. But because it started at almost zero, in the wake of Mao’s disastrous Cultural Revolution, even achieving a middling level of prosperity per capita would have been a big deal. Yes, thanks to its gigantic population, China has managed in the course of a few decades to develop an economy that rivals the size of America’s; but that still means that the average inhabitant of China is nowhere near as affluent as his counterparts in the West.

Deng Xiaoping

In any event,what exactly changed? Well, let’s recall, to begin with, that Bernie Sanders loves Communism, and that when he celebrates Chinese accomplishment he is implicitly cheering on Communism. But China has experienced an economic boom not because it has clung to its Communist ideology and systems of social control but because, under Mao’s successor, Deng Xiaoping, it abandoned its fierce devotion to Marxist economics and introduced elements of capitalism even as it remained a Communist dictatorship. It helped enrich itself, furthermore, by underpaying factory workers and selling its products abroad at dirt-cheap prices. This policy, which continued under Deng’s successors, was aided by the refusal of Western countries to impose tariffs on Chinese imports – a refusal that resulted in profound damage to large portions of the industrial base of the U.S. and other countries and great suffering on the part of blue-collar Western workers. China’s success also owed a great deal to its currency manipulation and its shameless theft of intellectual property from Western countries. Oh, and it also killed a lot of poor people, which of course is one easy way of eliminating poverty.

Xi Jinping

Hence, yes, poverty in China has declined to a considerable degree. Thanks to the spectacular growth of Chinese industries, the country now has a great many more very rich people than it had a few decades ago. But while its biggest cities now teem with gleaming skyscrapers and its richest citizens travel the world and send their kids to Harvard and Oxford, tens of millions of people in rural areas continue to live at a level of poverty that brings to mind the 1931 Pearl Buck novel The Good Earth. Indeed, the changes that Sanders so enthusiastically extols have resulted in what may well be the most formidable case of economic equality – a topic he frets over endlessly when talking about the American economy – in the history of human civilization. And let’s not forget this small detail: everyone in China is still unfree.

Nicolas Maduro

But of course that doesn’t matter to Sanders. He was a fan of the USSR. He loves Castro’s Cuba. Until recently, anyway, he was defending the Maduro regime in Venezuela. As Jim Geraghty noted in National Review, this is a presidential candidate who in 1985, while the USSR was still around, commented: “It’s funny, sometimes American journalists talk about how bad a country is, that people are lining up for food. That is a good thing! In other countries people don’t line up for food: The rich get the food, and the poor starve to death.” Well, the fact is that in cities like Shanghai and Beijing and Guangzhou, the new Party-connected super-rich managerial class enjoys a whole lot of first-class cuisine, while out in the sticks there are still millions who are, yes, starving.

More idiocy from Joe Stiglitz

How do you destroy a country’s economy? Well, here are a few ideas. Hike taxes. Overregulate. Ratchet up government spending. Increase welfare entitlements. Make it your goal not to achieve greater prosperity for everyone but to achieve greater income and wealth equality.

Joseph Stiglitz

This, after all, is how the chavistas ran Venezuela, once one of the world’s most prosperous nations, into the ground. And, believe it or not, these are the prescriptions offered by economist Joseph Stiglitz, whom we profiled here at some length in October 2015 and whom we’re revisiting now because of a characteristically wacky article by him that appeared in the Guardian on May 30.

But first, a reminder: this, as we noted four years ago, is a man who has taught at Yale, Oxford, Stanford, Princeton, and Columbia; who served as chief economist at the World Bank; who was a top advisor to the United Nations; who was named one of the world’s 100 most influential people by Time magazine; and who, yes, won the Nobel Memorial Prize in Economic Sciences in 2001.

Paul Krugman

How, you may ask, did a man with such cockeyed economic ideas win a Nobel Memorial Prize in Economics? Well, remember, Paul Krugman won one too. And Yasir Arafat won the Nobel Peace Prize. Not every decision they make in Stockholm or Oslo is a brilliant one.

If you think it’s unfair to compare the economic philosophy of a Nobel laureate with the cockeyed socialist ideas that ruined Venezuela, consider this: Stiglitz is a socialist – an actual member of the Socialist International who, in 2008, headed up a Socialist International commission charged with figuring out a solution to the global financial crisis. He’s an enemy of the nation-state and particularly of American-style democratic capitalism, and would replace the current world order with a socialist global government, complete with a new global currency and a global income tax.

Georg Papandreou

But while we still have nation-states, Stiglitz isn’t above profiting from some of the more poorly run ones in ways that call into question his professional integrity. For example, he weighed in repeatedly in places like Time magazine on the Greek financial crisis, which he blamed entirely on Germany, not on Greece; what he failed to mention was he was a paid advisor to Greek prime minister George Papandreou. In 2014, when New York judge Thomas P. Griesa ordered Argentina to pay its creditors, Stiglitz badmouthed the judge, called the creditors “vultures,” pronounced that “America is throwing a bomb into the global economic system,” and passionately defended Argentinian president Cristina Kirchner; again, he omitted to inform his readers that he had long been on the Kirchner payroll, supposedly serving as an economic advisor, although to many observers it certainly looked as if he was selling his name and reputation to whitewash a kleptocracy.

Cristina Kirchner

Which brings us to Stiglitz’s recent piece for the Guardian. There’s not really anything new in it; what’s remarkable is the timing. Here’s the headline: “Neoliberalism must be pronounced dead and buried. Where next?” And here’s the subhead: “For decades the US and others have pursued a free-market agenda which has failed spectacularly.” An incredible thing to say at a time when the American economy is stronger than it has been in decades and is the world’s most competitive, with record employment and income levels for pretty much every population group and every category of job.

Donald J. Trump

Many people credit President Trump for this extraordinary boom. Not Stiglitz. He not only pretends that the boom isn’t happening; he smears Trump as an avatar of “far-right nationalism,” which to him is even worse than plain old neoliberalism or the “centre-left reformism” of Tony Blair and Bill Clinton. In Stiglitz’s view, all three of these approaches should be junked in favor of a “radically different economic agenda” that he calls “progressive capitalism,” under which free markets would be a thing of the past and state-run economies would be the order of the day.

Stiglitz’s picture of what “progressive capitalism” would look like and how it would work is heavy on abstractions and light on specifics. “Governments have a duty to limit and shape markets…. government [should take] a more active role than neoliberalism prescribes.” Yet by the end of the article it’s clear what he‘s calling for. To be sure, he’s careful not to use the word Communism or even socialism, but those are the generally accepted names for what he prefers to call “progressive capitalism.”

Again, how weird to encounter a brief for socialism at a time when the chavistas’ Venezuela is dying and Trump’s America is thriving! But that’s old Joe for you.

How to improve New Orleans? Copy Cuba!

Some of New Orleans’ housing stock.

New Orleans has a load of problems. It’s a city whose economy is based largely on letting tourists drink beer in the street and urinate in public. It has one of America’s highest poverty levels and one of the world’s worst murder rates. Property taxes and home insurance costs are prohibitive. Much of the housing stock is very rundown. Public transit is crap. The streets are filled with potholes and the sewage system is so inadequate that the place floods every time there’s a serious rainstorm. The schools are lousy. Political corruption is endemic. High local taxes and excessive regulations discourage business development. There are no major art museums and there’s no real high-culture scene to speak of. Rats, roaches, and termites abound. In short, the Big Easy is in desperate need of a massive influx of business activity that would provide jobs and fund civic improvements, but it’s not going to experience that kind of renaissance unless it makes itself more attractive both to established corporations and small start-ups.

The mayor.

Mayor LaToya Cantrell knows what NoLa needs. So where did she travel in early April in order to pick up tips on economic development? Give up? Cuba.

Yes, Cuba. According to press secretary LaTonya Norton (yes, the mayor is named LaToya and her press secretary is named LaTonya), Cantrell flew to Havana to “see firsthand how [Cuba’s] history has produced unique opportunities and challenges in the areas of economic development, trade, health care, education and other quality of life issues.” Accompanying Cantrell was a group of 35 people, including both public officials and private citizens. Among her planned stops during the trip were a medical school, the Literacy Museum, and the University of Havana, because the mayor and her crew have, like many American progressives, bought into the propaganda about Cuba’s wondrous achievements in medicine and education. Indeed after arriving in Cuba, Cantrell told her hosts that New Orleans’s maternity mortality rates are up, and she was therefore eager to learn the secrets of Cuba’s first-rate community health care. Of course, anyone in the know could have told Cantrell that while Cuban elites do enjoy pretty good health care, the hospitals for ordinary Cubans are backward, with severely limited supplies, primitive equipment, and a narrow range of available treatments.

The mayor at a Havana hospital

To its credit, the editors of the local paper, the Times-Picayune, raised questions about the junket. “Mayor LaToya Cantrell didn’t even try to explain why she’s in Cuba this week,” they wrote in an editorial. “She didn’t announce the trip at all.” Nor did city officials “provide an itinerary or the cost of the trip.” Noting that this wasn’t the first time Cantrell had taken major action without informing the public beforehand, the editors concluded: “The lack of transparency of this administration is astounding. In fact, it’s a lot like Cuba.”

This one’s of Havana.

Commenting on the trip, Humberto Fontova, a Cuban-American author and longtime critic of the Castro regime, pointed out that “learning about ‘quality of life’ from a place that saw multiple times as many desperate people die trying to escape it, as died trying to escape over the Berlin Wall, sounds like shameless click-bait, or even a Saturday Night Live or Monty Python skit.” Fontova reminded readers that Cantrell’s hosts “converted a nation with a higher per capita income than half of Europe, the lowest inflation rate in the Western hemisphere, a larger middle class than Switzerland, a huge influx of immigrants, and workers who enjoyed the 8th highest industrial wages in the world into one that repels Haitians….and in the process jailed and tortured the most and longest-suffering BLACK political prisoners in the modern history of the Western Hemisphere.” True enough. But such facts, it seems, will never overcome the illusions of certain starry-eyed folks who’ve been seduced by Cuban propaganda.

Maduro: down but not out

Nicolas Maduro

We’ve written about Venezuela a great deal at this sight, but not lately. What more is there to say? We reported faithfully on its decline, which now seems pretty much complete. Why repeat ourselves? Given what the people of Venezuela are being put through because of the idiocy of chavismo, it seems almost cruel – almost like rubbing it in, like slumming, like saying “I told you so” – to keep returning to the scene of the crime and gazing, like callous rubberneckers at a car accident, at the sad wreckage of Hugo’s and Nicolás’s tyranny.

On the other hand, there have been a few developments worth taking note of. For example, the fact that while most of the governments in the Western hemisphere have joined the U.S. in recognizing Juan Guaidó as the new president of the beleaguered country, Maduro, the former bus driver who inherited the Bolivarian throne from Chávez, still has allies.

Hugo Chavez

One of them is Cuba, whose Communist regime was the model for Chávez’s own. As Eli Lake of Bloomberg News reported recently, the Venezuelan military and police are infiltrated with members of Cuban intelligence, some of whom are responsible for giving Maduro daily briefings. Thousands of Cuban “security forces” harass Venezuelan citizens. The Organization of American States has said that Cuba has what amounts to an “occupying army” in Venezuela numbering about 15,000. “This contingent of Cuban advisers,” Lake wrote “will make it much more difficult for Venezuela’s military to help Guaidó prepare for new elections, as it is being pressured to do.”

Moreover, the ties Chávez forged with Russia and China are still strong. Maduro has shipped cheap oil to China and allowed Russian warships into its ports. Russia, like Cuba, has “military advisers” in Venezuela, and promised in late March to keep them there as long as Maduro needed them — in response to which Trump, while meeting with Guaidó’s wife at the White House, demanded that they be called home. The ayatollas in Iran also continue to support Maduro. Those alliances, of course, are to be expected. Rather more surprising is the apparent coziness between Mexico’s new leftist president, Andres Manuel Lopez Obrador, and Maduro, whom he invited to his inauguration in January.

Juan Guaido

Even after month after month of painful headlines about the present social and economic conditions in what was once one of the world’s richest countries, some Western politicians continued to profess admiration for Maduro, and some Western media not only find ingenious ways to avoid blaming his nation’s catastrophe on socialism but even try to perform at least a partial whitewash that catastrophe. As recently as in late January, for example, the BBC described Venezuela as having experienced a “reduction in inequality and poverty.” What kind of way is that to describe a country where countless people are eating pets, countless more are fleeing to neighboring Colombia, and the inflation rate is just shy of 10 million percent?

In Seoul, a waning Moon

Moon Jae-in

On February 5, The Diplomat ran an article by Tae-jun Kang whose headline asked the question: “Is Moon Jae-in Becoming a Lame Duck?” Noting that presidents of South Korea serve five-year terms and are ineligible for re-election, Kang explained that there’s a saying in that country: “the nightmare of the third year makes the president a lame duck.” As it happens, President Moon, the incumbent, will begin his third year in office in May – and “signs of the ‘nightmare’ for Moon and his government,” wrote Kang, “have already begun to emerge.”

It sounds fatalistic – as if Moon’s “nightmare” were foreordained. In fact, as Kang goes on to explain, Moon would appear to have surrounded himself with a bunch of crooks. There are so many of them that it can be hard to keep track of them all.

Sohn Hye-won

One of them is legislator Sohn Hye-won, who is suspected of covert involvement in the purchase of properties that were later officially designated as cultural assets, thus automatically enhancing their values. In late January, in a bizarre effort to prove her innocence, she offered to donate her collection of lacquerware to the government.

Another of Moon’s party hacks is legislator Seo Young-kyo, who purportedly asked a judge to reduce the punishment for a crony’s son accused of attempted sexual abuse. Yet another member of the party, Moon’s economic advisor Kim Hyun-chul, resigned on January 29 over some remarks about South Korean retirees and allies that were deemed offensive.

Moon Da-hye

Then there’s Moon’s daughter, Moon Da-hye, who recently moved out of the country with her husband and children, the supposed reason for which was that her husband had embezzled $2.7 million of a government subsidy received by his employer and left the country to protect his assets from seizure.

Finally, there’s Kim Kyung-soo, governor of the South Gyeongsang province and a former Moon campaign aide, who was sentenced on January 30 to two years behind bars for helping to rig an opinion survey.

As a result of all this, Moon’s approval rating has dropped from a high of over 70 percent to below 50 percent.

Kim Kyung-Soo

In a January 22 piece for the East Asia Forum, Kim Kee-seok, a political scientist at Kangwon National University, was even blunter than Kang. Whereas Kang’s headline ended in a question mark, Kim’s made a firm statement: “Moon’s popularity wanes as South Korea’s economy stalls.” As the headline indicates, Kim, unlike Kang, cited the nation’s faltering economy as a reason for Moon’s declining fortunes. Kim also mentioned the failure of the North Korea peace initiative to bear any fruit thus far.

But Kim, like Kang, also focused on corruption. Whereas Kang itemized the sleazy presidential sidekicks and family members who are dropping like flies, Kim attended not to these specifics but to the general issue of reform.

As Kim put it, South Korean voters who “demanded fundamental innovation of the political system,” including changes in the constitution, electoral process, and judicial system, become “sceptical of the prospects for innovations of this kind as the Moon administration continues to lose golden time.” We could hardly put it better ourselves. In 2017, Moon Jae-in made big promises to an electorate that’s increasingly sick of routine corruption at the highest levels of politics and business – and he’s utterly failed to deliver on them.

Has Hanjin’s ship sailed?

Hanjin HQ in Seoul

The Hanjin Group is one of South Korea’s largest family-owned conglomerates – or, as they say in Seoul, chaebols. It owns Korean Air and Jin Air, and has major holdings in shipping and industry. And like the other chaebols, it is at once admired for its wealth and power, notorious for its endemic corruption and shady political ties, and resented for the ease with which it can crush competition by upstart entrepreneurs as well as for its executives’ ability to routinely escape punishment for even the most egregious acts of embezzlement, money laundering, and bribery.

As we reported last week, a newly hatched activist fund called Korea Corporate Governance Improvement (KCGI) – which is now Hanjin’s second largest shareholder – is pushing for reforms of the sort that one South Korean government after another has promised for decades and that the current president, Moon Jae-in – who, upon taking office in 2017, insisted would be a central objective of his administration – has utterly failed to carry out.

Moon Jae-in

Now, as we noted, KCGI is seeking to get Hanjin to sell off its hotel chain, which includes major hostelries in Los Angeles and Hawaii, and – in a truly radical move – to force the firm to ditch the traditional practice that is at the heart of chaebol culture: namely, the passing on of top leadership positions from one generation of the company’s founding family to the next. Instead, KCGI wants Hanjin to agree to have its leaders appointed by an independent committee.

We’re still waiting to see how that drama works itself out. Meanwhile, a new subplot has developed – one that underscores the fact that the once seemingly invincible chaebols have entered a new era of vulnerability. At this point it should be noted that in 2016, a division of Hanjin, Hanjin Shipping, declared bankruptcy and was liquidated. It had been the world’s seventh largest container shipping line. The loss of Hanjin Shipping was a major blow to Hanjin, to the chaebols, and to the South Korean economy.

Hanjin’s shipyard at Subic Bay

Now Hanjin is facing another significant loss, also involving shipping. Hanjin Philippines is a division of the chaebol that runs a shipyard at Subic Bay, the former U.S. naval base. It is the biggest shipyard in the Philippines, and one of the biggest in the world, and has been a cornerstone of the Philippines’s ambition to become a top-flight shipbuilding nation.

Hanjin Philippines, however, has not been doing well. In January, the division, which has massive assets but is cash-poor, declared bankruptcy, defaulting on $400 million in bank loans – the largest such bankruptcy in the history of the Philippines and an event that was described as being, for the world’s shipping sector, equivalent to the collapse of Lehman Brothers. It filed for “court-assisted rehabilitation,” meaning that it wanted the courts to help it arrange debt payment with five banks in that country that had lent it a total of $412 million.

An image from the glory days of Hanjin Shipping

This month, it was reported that Hanjin Philippines might soon have to let go of thousands of employees, and that several other international corporations, most of them based in Europe but one based in North America, might be willing to help Hanjin out by snapping them up. Another report indicated that “at least two major Chinese shipbuilders” were looking into a much more sweeping move – namely, taking over Hanjin’s entire operation in the Philippines.

This would be a drastic development indeed. For one thing, a Chinese purchase of Hanjin Philippines would also contribute to ongoing expansion of the PRC’s presence in East Asia, and would be troubling news for the U.S. and all of its allies in that region. In its own small way, it could cause a shift in the worldwide balance of power.

Part of Korean Air’s fleet

In South Korea, however, such a purchase would have an even stronger impact. Like the disappearance of Hanjin Shipping, it would not only mark yet another downturn for the Hanjin Group. It would also be a blow to South Korean national pride, which rested for decades upon the bedrock of its powerhouse economy. Not least, it would further tarnish, in the eyes of South Koreans at both the top and bottom levels of society, the already fading luster of the chaebol model. So it is that the closing or sale of a shipyard in the Philippines may have a very real impact on the volatile economic developments in the Republic of South Korea.

An end to chavismo?

Venezuelans queue up to buy groceries that may or may not be on the store shelves

Since we’ve devoted so much space at this site to the plight of Venezuela under chavismo, it’s only right for us to acknowledge – and celebrate – an extraordinary turning point in the history of that country.

We need hardly go into detail here about the devastation wrought upon Venezuela, once one of the richest nations in the world, by hard-core socialism. That the land with the world’s largest oil reserves should decline into such terrible poverty – to say nothing of the steady erosion of individual liberty and human rights – is a classic lesson in the horrible consequences of socialist policies.


Juan Guaidó

On January 5, Juan Guaidó, a fierce opponent of chavismo, was sworn in as President of Venezuela’s National Assembly. Five days later, Nicolás Maduro, who had succeeded his mentor, Hugo Chávez, as President of Venezuela, in 2013, was inaugurated for his second term after being re-elected in what was widely considered an illegitimate election. The next day, Guaidó led a massive rally, attended by hundreds of thousands of Venezuelans, at which it was announced that, in accordance with the Venezuelan Constitution, he would be assuming the presidency. On January 15, the Washington Post ran an op-ed by Guaidó headlined “Maduro is a usurper. It’s time to restore democracy in Venezuela.”

Nicolas Maduro

“We are living in a crisis without precedent in Venezuela,” the op-ed began. “We have a government that has dismantled the state and kidnapped all institutions to manipulate them at will.” Truthfully enough, Guaidó called Maduro a dictator, but a dictator with a difference, who had “ties to drug trafficking and guerrilla groups,” but whose nation continued to have “a functioning, democratically elected parliament, the National Assembly,” which enjoyed “the backing of the international community and the majority of Venezuelans.”

On January 23, Guaidó formally declared himself President of Venezuela. Almost immediately, he was recognized as the country’s legitimate head of state by U.S. President Donald Trump. By the end of day, he had been recognized as President by the Organization of American States as well as by the governments of Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Panama, Paraguay, and Peru. In all of Latin America, only Communist Cuba and socialist Bolivia reiterated their full support for Maduro, while Mexico’s new left-wing leader, Andres Manuel Lopez Obrador, criticized Guaidó but instead of totally backing Maduro called for “dialogue.”

Mauricio Macri

The swiftness with which so many Latin American governments endorsed Guaidó’s ascent to power is a reflection of the degree to which socialism in that region has, in a relatively short time, given way to a renewed wave of democratic capitalism. A few years ago, for example, Cristina Fernandez, then President of Argentina, would surely have stood behind Maduro; now, her successor, Mauricio Macri, took to Twitter and explicitly cheered on “all efforts toward rebuilding democracy in Venezuela and reestablishing conditions of life worthy of all its citizens.” Likewise, in Brazil, the new president, Jair Bolsonaro, widely known as the Trump of Latin America, tweeted that “Brazil supports politically and economically the transition back to democracy and social peace in Venezuela.”

To be sure, it’s all easier said than done. At this writing, Maduro seems determined to stay in Miraflores, the White House of Caracas. He still enjoys the support of the military, of the Supreme Court (which he has packed with cronies), and of the powerful and notoriously corrupt national oil company, PDVSA. So it will be interesting to see how things develop in the days and weeks to come.

A bad year for the chaebols

Samsung headquarters

The verdict is in. Briefly put, 2018 was a bad year for the chaebols. A very bad year.

This news should not come as a big surprise to regular readers of this site.

In recent months, we’ve seen that entrepreneurs in South Korea have become increasingly outspoken in their resentment toward the giant family-run conglomerates, whose massive power enables them to smother competitors in their cradles.

Hyundai headquarters

We’ve seen that the chaebols’ continued dominance of the South Korean economy, by preventing the flowering of major new firms, has kept that economy from growing as fast as it used to.

We’ve seen that South Koreans generally are getting more and more tired of the privileged position of chaebol families, one consequence of which is that corruption in their ranks routinely goes unpunished.

LG headquarters

Not least, we’ve seen that foreign chaebol stockholders who have begun to challenge the distinctively South Korean policies that deny those stockholders the ability to influence major chaebol decisions, even if they own bigger shares of the companies than the ruling families do.

Now all of these critics of the chaebols have more ammunition to use against the system. On December 27, 2018, it was reported that South Korea’s ten largest chaebols experienced a twenty percent reduction in market value over the course of 2018.

SK headquarters

That’s a stunning number, especially given how robustly other Western economies – such as that of the U.S. – performed during the same year.

By the end of 2018, the combined value of the top ten chaebols was $173 billion. All by itself, Samsung, the largest of the chaebols, accounted for half of the loss. One of the companies that make up the Samsung Group, Samsung Electronics, dropped a full 30 percent in value.

Hanjin headquarters

But Samsung wasn’t alone in bleeding badly. LG Group lost 21 percent of its value. SK and Hyundai also posted huge losses. Only two major chaebols – Hyundai and GS – had a good year.

Obviously, these lousy results aren’t good news for the legendary families that run the chaebols. On the contrary. They also mean that shareholders in these firms lost a lot of money. And given the central importance of the chaebols to the South Korean economy, these figures will have a negative impact on South Koreans as a whole.

Then again, this isn’t entirely bad news. A dramatically poor showing almost all the way across the chaebol board may well help speed efforts at substantial systematic reform. One South Korean president after another has promised such reform and failed to deliver. The current president, Moon Jae-in, installed a so-called “chaebol sniper” who has proven to be a paper tiger.

Moon Jae-in

Repeatedly, critics of the chaebols have been told that the chaebols are simply too vital to the South Korean economy to justify major overhauls. Break up Samsung? Knock the chaebol dynasties down a peg or two? Impossible! But numbers like the ones we’ve seen here may open up more people in power to the possibility of real change. South Koreans won’t endure too many years of chaebol contraction without accepting – indeed, clamoring for – radical transformation.

In short, 2019 promises to be an interesting year for the chaebols. Stay tuned.