Confucianism and Trade Imbalances

The enlightened dictatorship of money

Posts Tagged ‘the art of war

Mining and weiqi

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I’ve been learning more about the mining industry in China for a project I’m doing at work.  Chinese mining  has created a lot of publicity abroad due to its willingness to overpay for projects around the world with a strategic mineral output.  This publicity has often left out the fact that the industry has been quite stagnant and fragmented domestically, with little investment in technology.  It seems that the government has actually favored overseas acquisition at the expense of domestic development.

Hearing this situation made me think of this paper (pdf) on China’s strategic mindset, as it relates to weiqi, a Chinese version of chess.  (The paper – and Henry Kissinger’s subsequent endorsement in his book – focus on security and warfare, but I’ll be coming back to this argument to show apply it to economics as well).  Weiqi doesn’t end with the capture of a particular piece, but is rather scored at the end by the amount of territory captured, reflecting Sun Zi’s principles of warfare and the importance of geography.

I’ve been learning the game over the last few months, and one of the most difficult parts about it is knowing when to leave something alone.  Players who are much better than me will apparently abandon the most unsupported pieces, while going off to play in some other corner of the board.  The typical progression of the game is therefore to start at the corners, then the sides, and finally move towards the center.  This looks very much like the way China is approaching its natural resources problems.

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Written by Maofucious

November 4, 2012 at 5:51 PM

The Chinese view of money

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A few months ago, I was at the National Palace Museum in Taipei with a Chinese travelling companion. We were looking at some cute little drawers for storing doodads. Of course, these were used by royalty, so the deal was that each one was specially made for the objects to fit in it, i.e. if you had a comb, there would be a place to put that comb, and only that comb. She remarked something about how that was a place you could put your money.  Clearly, that was not cash she was referring to. That got me thinking about the traditional Chinese and Asian view of money, and how it differs from the Western view.

My theory is that money in Asia is tied in closely with the social institution of face (a concept that originated in China). China of course independently invented paper money, and their concept of money apparently emphasizes its role as a medium of savings over its role as a unit of account, as we tend to think of in the west as an arbiter of value. Their experiment with money without fundamental value ended with hyperinflation, which might explain why such trinkets are seen as possessing value in themselves. It might also relate to the value Confucianism places on other real investments like infrastructure and education – not to mention the way luxury markets work in Asia.

I ran into something today that might shed more light on the differences. In China, the rich and powerful can hire body doubles to do their prison time for them. Surprisingly, this is not a recent phenomenon.

“Replacement convicts” are not new. For centuries, the use of criminal substitutes was among the first things Westerners would mention when discussing China’s legal system.  … Some imperial Chinese officials who admitted to the use of substitute criminals justified its effectiveness. After all, the real criminal was punished by paying out the market value of his crime, while the stand-in’s punishment intimidated other criminals, keeping the overall crime rate low. In other words, a “cap-and-trade” policy for crime.

So, markets in everything. This reminds me of something else (pdf) I ran across at some point. In Korea, there is apparently an active sex-selection market for children. Parents take a look at the sex ratio in their locality among 20-29 year-olds. Eventually, things come into balance, although the girls end up being born to worse-off families, and the boys to better ones. Less controversially, marriage and other family relations are also seen in the context of money.

It seems that Asian cultures don’t have many of the ethical hangups related to money that Western cultures do. Another association to make here is to the Sun Zi conception of war, ‘economics by other means’ (as opposed to Clausewitz, “politics by other means”), a conception that has been born  out by modern Asian history.  Understanding what money means in Asian cultures might help one better understand economic warfare in the context of current trade disputes.

I leave with one final association. In a system with financial repression, it can be more important to keep the government out of your savings than to understand what it is you’re really investing in. Hence, gambling in Macao is used as an outlet for savings, and it may in some sense be more legitimate than ‘ordinary’ savings through the banking system. This may have something to do with Chinese attitudes towards both gambling and financial markets.

Written by Maofucious

August 5, 2012 at 12:38 AM