By Michael HUDSON
In a Financial Timesop-ed, “Investors in Xi’s China face an impolite awakening” (August 30, 2021), George Soros writes that Xi’s “crackdown on private business reveals he does not understand the marketplace economy … Xi Jinping, China’s leader, has hit economic truth. His crackdown on personal enterprise has been a significant drag on the economy.”
Translated out of Orwellian Doublethink, the “crackdown on personal business” suggests cutting back on what the classical economic experts called rent-seeking and unearned income. When it comes to its expected “drag on the economy,” Mr. Soros implies the economy’s polarization focusing wealth and income in the hands of the richest One Percent.
Soros sets out his plan for how U.S. retaliation may punish China by keeping U.S. financing of its business (as if China can not produce its own credit) till China capitulates and enforces the kind of deregulation and de-taxation that Russia did after 1991. He cautions that China will suffer depression by conserving its economy along socialist lines and withstanding U.S.-style privatization and its involved debt deflation.
Mr. Soros does acknowledge that China’s “most susceptible sector is property, especially housing. China has taken pleasure in an extended home boom over the previous 20 years, but that is now pertaining to an end. Evergrande, the biggest realty business, is over-indebted and in risk of default. This might cause a crash.” By that, he suggests a decrease of real estate prices. That’s simply what is needed in order to hinder land ending up being a speculative vehicle. I and others have actually advised a policy of land taxation in order to collect the land’s rising site value, so that it will not be vowed to banks for mortgage credit to further pump up china’s housing costs.
Warning about the economic repercussions of China’s falling birth rate, Soros writes: “One of the reasons why middle-class families hesitate to have more than one child is that they want to make certain that their kids will have an intense future.” This is naturally true of every advanced country today. It is most extreme in the neoliberalized nations, e.g., the Baltics and Ukraine– Soros’s poster countries.
Soros offers his game away by mentioning that “Xi does not understand how markets run.” What he indicates is that President Xi declines rapacious rent-seeking, exploitative free-for-all, and shapes markets to serve overall prosperity for China’s 99 Percent. “As an effect, the sell-off was allowed to go too far,” Soros continues. What he means is, too far to preserve the supremacy of the One Percent. China is seeking to reverse economic polarization, not magnify it.
Soros declares that China’s socialist policies are harming its objectives on the planet. However what he actually is complaining about is that it is injuring America’s neoliberal objectives for how it had hoped to earn money for itself off China. This leads Soros to remind Western pension fund supervisors to “allocate their possessions in ways that are carefully aligned with the benchmarks versus which their efficiency is measured.” However the catastrophe of financializing pensions is that fund managers are rated on generating income financially– in ways that harm the industrial economy by promoting financial engineering rather of commercial engineering.
“Practically all of them declare that they factor ecological, social and business governance (ESG) standards into their investment choices,” Soros writes. A minimum of, that’s what their public relations advisors market. Exxon claims to be cleaning up the environment by expanding overseas oil drilling in Guyana, and so on. When it comes to “social requirements,” the neoliberal mantra is trickle-down economics: by making our stock costs increase, by stock buybacks and greater dividend payouts, we are helping wage-earners earn a pension, although we are offshoring and de-industrializing the economy, de-unionizing it and “releasing” the economy from customer and office defense laws.
Soros has an extreme service, which he recommends “should obviously use to the efficiency standards selected by pensions and other retirement portfolios: … The United States Congress should pass a bipartisan expense clearly requiring that property managers invest just in business where actual governance structures are both transparent and aligned with stakeholders.”
Wow. Such a bill would block Americans from purchasing numerous American business whose habits is not at all lined up with stakeholders. What proportion: 50%? 75? More?
“If Congress were to enact these measures,” Soros concludes, “it would offer the Securities and Exchange Commission the tools it needs to secure American investors, including those who are uninformed of owning Chinese stocks and Chinese shell business. That would likewise serve the interests of the United States and the broader worldwide community of democracies.” So Mr. Soros wishes to block the United States from investing in China. He appears not to see that this is President Xi’s goal also: China does not need U.S. dollars, and is in truth de-dollarizing.
George Soros is certainly disturbed that President Xi is not Boris Yeltsin, and that China is not following the kleptocracy dependency that warped Russia’s economy. Soros believed the ending of the Cold War would just let him buy up the most rewarding rent-yielding properties, as he has aimed to do in the Baltics and Ukraine. China said “No,” so it is not deemed to be a “market economy,” Soros-style. It has actually not made its social organization marketable, and has actually prevented the financial dependence that makes “markets” a vehicle for U.S. control through sanctions and foreign buyouts.