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Robert Near: If trade wars are class wars, should conservatives embrace it?


After a year of lockdowns and enormous government subsidies, Canada remains stuck in the COVID pandemic.

Faced with a crisis in March 2020, the federal government essentially decided to put the economy on its back — issuing generous wage subsidies, income replacements, business loans, and all manner of other supports. Canada’s fiscal capacity has deteriorated at an alarming rate as a result, and there’s a raging debate about whether Canada has spent too much on the country-wide bailout.

But what if Canada hasn’t spent enough? What if all this pandemic spending is merely making up for a generation of federal underinvestment, an austerity regime that’s been holding the country back?

These are the types of ideas presented in Michael Pettis and Matt Klein’s recent book, Trade Wars are Class Wars. Klein and Pettis forcefully argue that the global economy is wracked with dangerous imbalances. Debt gluts in China have led to persistent shortage in business investment in the U.S., Canada, and Western Europe.

Elites have benefitted from the arrangement, while the general population has suffered. Left unchecked, these inequities could blow up the entire international order. The proper response in the West and China is for governments to redistribute income from the elites to the broader populace: introduce more generous benefits and labour policies and, in the case of the West, spend more on public goods like infrastructure.

The book’s thesis is obviously resonating. Last week, it won the $15,000 Lionel Gelber Prize, which is given out annually to the world’s top English non-fiction book on international affairs. The award is presented by the University of Toronto’s Munk School of Global Affairs & Public Policy and Foreign Policy Magazine.

Pettis and Klein start in China, where Pettis lives and works. Pettis is an authority on the country, and his expertise in finance, history, and accounting give him greater insight into China than many other pundits. Pettis and Klein show that the country is terribly unequal. Elites in the business and political class (which, in China, tend to be one and the same) have successfully lowered their costs of doing business to a point whereby they can outcompete industries in other nations.

To keep up its ideal level of growth, China is spending more public debt and receiving less in return.

Non-existent labour and environmental policies lower wages and regulatory expenses. Politically connected businessmen get access to cheap loans (which they don’t have to write off, even if they go sour). Chinese businesses use these advantages to export their wares to the rest of the world, growing the country’s trade surplus.

China’s growth is an incredible story and it’s lifted millions of people out of poverty. However, the original post-Deng Xiaoping arrangement is running out of road. There’s no more profitable infrastructure investment in China. They have simply built too many roads, bridges, train tracks, and so on.

To keep up its ideal level of growth, China is having to spend more and more public debt and receiving less in return. There are trains and bridges to nowhere, empty airports and ghost towns full of unused skyscrapers and condos.

Pettis points to other countries that have successfully used a public investment, supply side growth economic model in the past, but had to retrench as it became increasingly unfeasible: Brazil, Japan and Korea. Some countries have been better at managing the transition than others, but, regardless, China will have to make its own transition soon.

Pettis and Klein suggest that China should stop subsidizing business investment and transfer more wealth to the working class and broader Chinese population. Currently, Chinese workers take home less share of their production than any other country in the world. True, they are marginally better off than they were under the strict communist rule of Mao Zedong, but they could be doing much better if labour and income distribution were more equitable.

More income would help Chinese workers as well as the entire economy. Consumption would rise, and that would benefit local and international business (in turn helping China lower its trade surpluses). Chinese mandarins know that it must make this transition, but it’s politically difficult to do so. Party bosses and their friends enjoy the profits from their businesses and they’re fighting reformers at every turn.

Whereas China is investing too much in public infrastructure and real estate, the opposite is true in Germany. For the past generation, German elites have consciously decided to underinvest in the country. That has led to rising trade surpluses (since the country is no longer importing as many goods and services), but at a cost of outdated and ineffectual public goods (Germany’s internet, for example, is of notoriously poor quality). Pettis and Klein provide a political history of Germany’s shift to austerity over the past generation, detailing how former Chancellor Gerhard Schröder and his government passed a series of reforms that have weakened German workers.

Making matters worse is that Germany has exported its austerity regime to other European countries. The European Union’s debt threshold (and German insistence on it) have led to other countries also underinvesting in much needed public goods. Like China, the solution for Germany is to reform its labour policies and business regulations, to the benefit of the many (but at the expense of the few German elites that benefit.)

Finally, Pettis and Klein get to the U.S., the world’s largest economy. The chapter mostly focuses on monetary policy and its history. The U.S. dollar is the world’s reserve currency and, rather than being a competitive advantage, it has become a critical American weakness. There is enormous demand for U.S. treasuries and other debt instruments, especially from Asia and Europe.

The U.S. has had to print money to keep up with this international demand, making America and U.S. citizen incredibly indebted. Americans increase their consumption with this debt, and they have become the “consumers of last resort,” hoovering up subsidized imports from China and elsewhere. U.S. trade deficits grow and American industries suffer.

Pettis and Klein believe that America and the world should agree to a different type of international reserve currency (referencing John Maynard Keynes original idea of bancor) and, again, transfer more wealth from American and international elites to the working class via investments in public infrastructure and the like.

The fact that Trade Wars are Class Wars won the Lionel Gelber Prize is a sign that Pettis and Klein’s ideas hold sway with a rising proportion of Canadian business and policyminded elites. Fiscal spending and full employment are in and restraint and macro theories about the proper proportion of fiscal to monetary policy are out.

Canadians want governments to spend and that contradicts bedrock conservative values of prudence and cautious fiscal management.

Prime Minister Justin Trudeau and his Liberal government have long argued for these types of ideas. The pandemic has only encouraged them further, and the federal government will be spending more than $100 billion on “shovel worthy” projects that will finally lead Canada to the promised land — an equitable, prosperous, green utopia.

On the face of it, Trade Wars are Class Wars is not a conservative book. It taps into a growing zeitgeist that the government can do more to promote equitable and inclusive growth, and they should do it now, when interest rates are low and business is underinvesting.

How can conservative-minded people engage with these ideas?

These are challenging political arguments for conservatives. The consensus that Canada should be living within its means and reducing deficits and debt appears to be over (or at least, put on the backburner until the next generation has to deal with the consequences). Canadians want governments to spend and that contradicts bedrock conservative values of prudence and cautious fiscal management.

But there is a way forward for conservatives. Pettis and Klein and likeminded elites want money to flow to the masses, so it spurs consumption, investment and production but they don’t necessarily specify the ideal vehicles. To them, it doesn’t particularly matter. The idea is to increase consumption, full stop.

Conservatives can certainly do that, and they can do it in a way that’s in line with their values. Canadian Conservatives have done it in the past. Prime Minister Stephen Harper cut the GST twice, and created the Universal Child Care benefit. More recently Ontario Premier Doug Ford’s Progressive Conservative government has issued direct cash subsidies to parents to help them manage the extra costs of the pandemic. These policies weren’t cheap, but they were conservative-minded policies that helped boost consumption. They flowed money away from the Ottawa and Toronto bureaucracies and their top-down central planning and into the hands of everyday Canadians.

The Trudeau Liberals have embraced the idea that government must lead a recovery because only government will provide the public goods necessary to defeat the challenges of the 21st century, like climate change and public health. That’s meant greater operating costs at the federal government and an ever-mushrooming set of commissions, roundtables, and expert panels.

The Conservative vision of how Canada gets to full employment can and should be different. Instead, let’s start with the ideas of Trade Wars are Class Wars and advocate for programs that will reduce Ottawa’s power and control over the economy and lead to more consumption and more investment for everyday Canadians.

Andrew Bennett: The Chinese Communist Party is routing its oldest foe: religion


China makes headlines for good reason, though often not because of good news. Consider how often today’s challenges have prompted you to reflect on the Middle Kingdom and the pall it casts.

In the misty origins of the present pandemic and the deception wrought by the Chinese government to cover up the initial extent of infection there linger many what-ifs. The ongoing unjust imprisonment of Michael Spavor and Michael Kovrig angers us. We stand shocked and helpless at the growing spread of authoritarianism in Hong Kong with the collapse of democratic rights and the flagrant violation of international law by China.

As ever, like a waving Mao now standing in stone atop a plinth stands the Chinese Communist Party (CCP) and President Xi Jinping. They act with utter impunity and disregard for what we in the West naively assumed were objectively and universally applicable: rule of law, human rights, an international order. The illusion of the last three decades that China could be brought into the liberal international system as it took its place as a global power have now been shown up as credulous. The rhetoric that surrounds the China of Xi speaks of a “new era” and “the progressing times,” all of which is reminiscent of the Cultural Revolution of the 1960s and the havoc it wrought on the Chinese people. Yet, this is not a return to the days of bands of Red Guards roaming every village and town brutally enforcing Maoist doctrine and purging all forms of legitimate self-expression and perceived foreign influence.

The current efforts of the CCP are focused on subordinating all of civil society to the state so that there can be no possibility of divided or unclear loyalties. Motivated by the need for unity and national security, the enslavement of Chinese civil society is being achieved through a highly organized system of intimidation, deprivation of social and economic status, arbitrary arrest, torture, so-called re-education, false imprisonment, and now genocide. For a clear illustration of how this is being accomplished on a mass scale one need only look at how the CCP is dealing with its old foe: religion.

At the CCP’s National Congress in 2017 Xi declared that “we will fully implement the Party’s basic policy on religious affairs, uphold the principle that religions in China must be Chinese in orientation and provide active guidance to religions so that they can adapt themselves to socialist society.”

This sinicization of religion in China has been aggressively pursued in the ensuing four years through the continuing instrumentalizing of religious communities to advance CCP propaganda goals. New regulations introduced in 2018 strictly prohibit “foreign forces” from controlling religion in China. These regulations have provided the CCP and government at all levels the authority to launch a full assault against unofficial religion in the country with disastrous effects. In the last three years there has been a significant increase in the destruction of churches and temples, arbitrary arrests of clergy and laity, disappearances, and measures such as the banning of anyone under the age of 18 from religious worship or religious education even in the home. Subtle forms of societal and economic discrimination against openly religious people affecting their employment and access to housing and government services assert state control.

The CCP’s relationship with religion goes back to the years immediately after the 1948 Maoist revolution that brought the CCP to power. In 1951, the Religious Affairs Bureau, later the State Administration for Religious Affairs (SARA) was established to regulate religion in the country. From its very beginning SARA was effectively under the control of the United Front Work Department of the Central Committee of the CCP — the main intelligence gathering organization and enforcer of CCP doctrine. In 2018, all pretense was abandoned and SARA was for all intents and purposes absorbed into the United Front Work Department. The UFWD directly responsible for the sinicization of religion.

The U.S. estimates there are more than one million Uyghurs being arbitrarily detained in internment camps.

In China there are effectively four categories of religion. The first are those beliefs which have been entirely co-opted to serve the CCP, namely Confucianism. Secondly there are the five officially sanctioned religious organizations wholly under CCP control: the Chinese Catholic Patriotic Association, the Three-Self Patriotic Movement (for Protestants), the Buddhist Association of China, the Chinese Taoist Association, and the Islamic Association of China. With their origin in the mid-1950s these are among the most effective controls the CCP has over religion. In concert with the new 2018 regulations, each one of these patriotic movements have adopted 5-year plans for the sinicization of their respective faith communities. Such plans include the mandatory singing of the Chinese national anthem and other patriotic songs in worship, flying the national flag at places of worship, commemorating significant CCP anniversaries, and reinterpreting doctrine and sacred texts through the lens of Chinese socialism.

The third category involves those religious communities viewed as being controlled by foreign entities and therefore posing a direct existential threat to the CCP: Tibetan Buddhists, Uyghur Muslims, the underground Catholic Church, and the diffuse network Protestant house churches. These groups are suppressed with varying degrees of brutality.

Finally, there are those communities identified as xie jiao, often translated as ‘evil cult’, such as Falun Gong and the Church of Almighty God, both of whose members have suffered imprisonment and torture. There are credible, independent reports cited by the U.S. State Department that conclude that China’s organ transplantation industry has benefitted significantly from the forced harvesting of organs from prisoners a majority of whom are thought to be Falun Gong practitioners. Members of these communities have been subject to mass arrests, including a roundup of 6,000 Falun Gong practitioners in 2019 alone as cited by the U.S. State Department.

The CCP’s highly organized policy in the Xinjiang Uyghur Autonomous Region is without doubt the most coordinated effort to suppress a religious group. Its efforts to eradicate what it has termed the “three evils” of “ethnic separatism, religious extremism, and violent terrorism” has been a brutal scourge against the ethnically Turkic Uyghurs of that region. The Uyghurs are predominantly Muslim and comprise more than half of China’s total Muslim population of between 21-23 million. The approach taken in Xinjiang is similar to the CCP’s decades-long persecution of Tibetan Buddhists with one major difference. In Xinjiang, the CCP has created a laboratory for the modern surveillance state with mandatory biometric ID cards that are required to undertake the most basic activities of daily life including use of public transport and shopping for groceries. Surveillance cameras that aid profiling and police stations exist on nearly every block in the regional capital Urumqi. The U.S. government estimates there are just over one million Uyghurs being arbitrarily detained in purpose-built internment camps, what the CCP terms ‘re-education centres’ where those imprisoned are subject to sleep deprivation, physical and psychological torture, forced sterilization, and sexual abuse.

In January of this year the U.S. government labelled the situation in Xinjiang a genocide; our own House of Commons subsequently passed a non-binding motion to the same effect with Prime Minister Trudeau and the cabinet abstaining from the vote. A report published this March by the Newlines Institute and Raoul Wallenberg Centre for Human Rights in which several Canadian human rights experts were involved, including former justice ministers Irwin Cotler and Allan Rock, concluded that China bears responsibility for breaching the 1948 U.N. Genocide Convention in its treatment of Uyghurs.

While the treatment of the Uyghurs is the most egregious example of China’s persecution of religious groups the persecution of Tibetan Buddhists continues unabated, both within Tibet and in the rest of China. The CCP controls all aspects of Buddhism in Tibet including monasteries, monks, and the schools. In 2016, Chinese authorities turned their attention to the large Tibetan Buddhist centres of Larung Gar and Yachen Gar in Sichuan province. In the past five years it is estimated that thousands of buildings have been destroyed in a so-called “renovation campaign” and that thousands of monks and nuns, possibly as many as 17,000 according to the U.S. state department, have been driven out of these communities and been subject to arbitrary arrest.

This situation facing Chinese Christians varies greatly depending on where you are in the country and whether you are a member of the two official patriotic associations. A sustained campaign demolishing churches and removing crosses, often based on the arbitrary interpretation of regulations by local officials, is now sustained country-wide with officials in provinces such as Shaanxi, Hubei, Inner Mongolia, Hebei, and Henan known for their zealotry. Local officials also enforce regulations requiring that closed-circuit cameras be installed in every place of worship. In churches across the country images of Christ and Mary and plaques with the Ten Commandments are being removed and replaced with images of Xi Jinping, the national flag, and the text of the Constitution.

Numerous Christian clergy have been arrested and imprisoned including Pastor Wang Yi of the Early Rain Covenant Church, a noted advocate for religious freedom who in December 2019 was imprisoned for nine years for “inciting to subvert state power,” a catch-all offence very much in vogue these days. Despite its still secret accord with the Chinese government, the Vatican has demonstrated that it has zero leverage in improving the situation of Catholics in China where 40 dioceses remain without a bishop and bishops critical of the CCP have been arrested and subject to re-education, including Bishop Augustine Cui Tai of Xuanhua and Bishop Peter Shao Zhumin of Wenzhao. The Holy See has sold Chinese Catholics down the Yangtze.

Such is the state of religious freedom in the “basic dictatorship” of China. What is our response?

It is axiomatic to speak about the conflict between a country’s interests and its values in conducting its foreign policy. The lack of coherency in the government of Canada’s approach to China reflects a confusion of its interests and a hypocrisy in its values.

René Lévesque once said that a nation is judged by how it treats its minorities. How then do we judge China on its treatment of religious believers? Harshly.