Eat the Rich: A Treatise on Economics (32 page)

The traffic jams seem normal for a moment. Modern cars look alike. But these modern cars look alike for the simple reason that they’re all the same. They’re all locally made Volkswagen Santanas, and all of them are painted half-gallon screw-top burgundy red.

The city streets are full to the point of stasis, but the four-lane turnpikes coming in and out of town are deserted. And in the roadside plazas where other countries would have restaurants and gas stations, there are police checkpoints instead—arrest stops.

The Chinese countryside is screwed on backward. It has vacant highways running through crowded agricultural fields. All the farmwork is being done by hand. The only tractor I saw was a rototiller thing being used in a flooded rice paddy. The operator looked like a man mowing his kid’s wading pool.

Back in the city, I was walking along the Nanjing Donglu, with its store windows full of Lee jeans and Adidas shoes and Revlon eye shadow, when I peeked into an alley, and there, six feet from the makeup counter, was a man in his underwear giving himself a bath at a sink. Because that’s where his sink was. If you live in the one-room warrens of Shanghai, the lavatory is in the street, shared with a half dozen other families. And a sink is luxury. Sometimes it’s just a water tap, padlocked so that the folks from the next warren over don’t poach. The toilet is down the block, if there is one. Wagons come through the alleys in the mornings, collecting wooden chamber pots.

The houses built when Shanghai was a treaty port were huddled into narrow streets and squeezed around dainty courtyards. They are pastiches of French style, English fenestration, German brickwork, and Chinese smiley-lip tile roofs, as odd in a small way as modern Shanghai’s skyscrapers, and typically Asian in crowding. In the 1950s the little houses were divided into tiny apartments. In the 1960s the Communists inserted concrete prefab housing into every remaining open space. Hundreds of rows of two-story tin-roofed cubicles were built from tarjointed slabs of concrete in people’s areaways, in front of their doors, and along their sidewalks between the housefronts and the curb. Now the old neighborhoods of Shanghai are as intricate as Parcheesi boards and practically on the same scale.

Ground-floor rooms open directly onto the street. People live in the middle of the road, wander the snack stalls in their pajamas, tip back their kitchen chairs amid bike and motorcycle traffic, and sell cigarettes and newspapers to the passing throngs without needing to get out of bed.

And this is not poverty. Not by Chinese standards. By Chinese standards this kind of material deprivation isn’t even worth noticing. It’s negligible, one might say. And that’s what the World Bank does say. The World Bank publication
China 2020 Series: Sharing Rising Incomes
asserts that there are “70 million absolute poor in China,” and that “about 100 million additional people survive on less than $1 of income a day,” and then, in the same paragraph, the World Bank states, “urban poverty is negligible.”

Conditions in Shanghai are an
improvement
for the Chinese. This urban squalor is sought after. You need a government permit to move to Shanghai. People travel thousands of miles and sneak into town to live like this.

There’s also another kind of living in Shanghai—living large. There are women whose every item of jewelry, apparel, and accessorization bears the mirror-image C’s of Chanel—the golden ass crack. There are men in college-education-priced Hugo Boss suits (which have an unfortunate tendency to be as wide as Shanghai tycoons are high). Long black BMWs and Benzes, missing from the wino-hued daytime traffic, show up at night in front of the Hard Rock Cafe (but not, I noticed, in front of restaurants featuring cobra blood). In a real-estate-agency window was a picture of a comfy suburban house for rent: $10,000 a month. A largish three-bedroom apartment goes for $6,000 a month, a smallish one for $4,500, and golf memberships (also sold by real-estate brokers, in frank admission of snobbery’s price tag) start at 83,000 yuan, which is $10,250, almost 200 times the average monthly Chinese wage.

The average monthly Chinese wage is also about what a round of drinks costs in a Shanghai bar where double-dating Chinese fifteen-year-olds were flopping and bobbling drunk on a weekday midnight while the car and driver waited outside and one of the girls cradled a cell phone like the stuffed animal she should have been home in bed with. According to
Sharing Rising Incomes,
between 1981 and 1995 the Chinese increase in income inequality “was by far the largest of all countries for which comparable data are available.” The disparity of wealth is enough to turn all the people in China, me included, into Communists.

Wait a minute. They’re Communists already.

In a capitalist country we can shrug off the dress-hog broads, cash brats, and limo’d pudgies. We’ll put up with this kind of thing because it’s the price of freedom. But China doesn’t have freedom. It’s illegal to strike. It’s illegal to go to a church if that church isn’t government approved. In January 1996, Father Guo Bo Le of Shanghai was sentenced to two years in a labor camp for, in the words of the court record, “saying Mass.” Exercising rights of speech or assembly is a nonstarter. According to the U.S. State Department’s 1996 human-rights review, “All public dissent against party and government was effectively silenced by intimidation, exile, or the imposition of prison terms, administrative detention, or house arrest. No dissidents were known to be active at the year’s end.” Sixty-five crimes are punished with the death penalty, including forging tax invoices. Torture is routine. Journalism must conform to the guidelines of the Communist Party’s brazenly yclept Propaganda Department. Women are subjected to forced sterilization, and baby women are aborted so that families can get a son as their one allowable child. Most laborers belong to a
danwei,
a state work unit, that controls everything from the right to change residences to permission to have that kid. The Freedom House organization, in its annual
Freedom in the World
report, says, “China continues to have one of the worst human rights records in the world and the rule of law is nonexistent.”

I had come to Shanghai for an academic conference with, of all things, a libertarian think tank. The confab was officially sanctioned and cosponsored by a Chinese university. Why would Communists invite to their country people who are absolutely woolly on the subject of freedom? There were folks in our delegation who think Ben and Jerry’s ought to be able to sell Morphine Mint, and folks who, at a certain hour of the evening—when sufficiently full of cobra blood—mutter, “I have just two things to say to Timothy McVeigh: ‘IRS.’ ‘3
A.M
.’”

But it turns out that libertarians are the only policy boffins in Washington who favor free trade, no matter what. And free trade is the only freedom on the Chinese agenda at the moment. Libertarians reason that government has no business telling independent citizens whom they can do business with or why. And some libertarians have a further theory that trading fried chicken and Pepsi with the mainland Chinese is like trading smallpox-infested blankets with the Plains Indians—that the Communists will come down with a fatal case of Western values.

So the libertarians would talk about individualism and responsibility, legal self-possession, civil society, and natural law. And the Chinese would stare into the middle distance, applaud politely, and ask us if China was going to get most-favored-nation trading status without kissing the business end of Boris Yeltsin.

The other thing the Chinese wanted to know about was Social Security privatization. This, like free trade, is a policy favored by libertarians, but not for the reason the Chinese gave. A “pro-market” Party cadre told the audience that “too high Social Security benefits encourage laziness.”

The academic conference was like being sent back to college unstoned and less practiced at doodling. The Chinese college students’ amateur simultaneous translation didn’t help. Usually the kids got just the nouns: “Problems China reforms industry strategy 1950s structure.” Afternoons and evenings, there were official banquets—the Chinese version of Thanksgiving dinner twice a day. And we should be grateful that Columbus really didn’t find the Orient, or our Pilgrim forefathers would have dined on chicken feet, pig’s face, black “preserved” duck eggs, and many less identifiable entrées. (One thing you learn in China is: Never ask, “What’s cooking?”)

My reaction to academia hadn’t changed in twenty-eight years. I ditched. I spent my time hiking the imbroglio of Shanghai through the First Bank of Mars architecture and the Third Supermall from the Sun shopping, pushing between construction workers in their rattan hard hats (an idea for U.S. real-estate developers who want an earth-friendly look), and weaving my way among the backstreet food vendors (don’t look into a bucket of live eels right after breakfast).

Retailing in Shanghai is a matter of either megastores or coolie baskets. And industry is either corporations so large that they rate a seat on the UN Security Council, or bike shops with sales-and-service facilities on the sidewalk. There are no middle-sized businesses in Shanghai, no middle-priced goods, and being middle class seems to be actively discouraged.

Take, for example, that defining bourgeois act, buying a car. In China you have to get approval to buy it from the government’s Business Administration Department, buy it, present the receipt to the revenue authorities, pay a 10 percent sales tax, and, if the car’s imported, pay Customs duty of as much as 150 percent of the car’s value. (China favors free trade—for
other
countries.) There’s an inspection where they don’t just inspect but tell you to install fire extinguishers and so forth. You need a parking permit from the traffic bureau, liability insurance at $1,000 per year, a temporary car-registration license, and a receipt for your road-maintenance fees. Then you take a photograph of your car displaying all its documentation, and present it to the Car Administration Department, which will—if it feels like it—grant you a permanent car registration after you pay to have your license number recorded.

This explains why none of those VWs in the Shanghai traffic jams is a private vehicle. They’re all government-owned taxis.

The Chinese economy has grown. According to the World Bank, “China’s GDP per capita has grown at a remarkable 8.2 percent a year since economic reforms started in 1978.” But what, exactly, is growing? One of the professors from the Chinese university gave us a tour of Pudong, Shanghai’s $36 billion commerce and industry “New Area” across the Huangpu River. We took a bus through a homemade-looking tunnel and arrived in a flat, planned sterility of immense dimensions, the office park as Nebraska. Here and there the landscape was decorated with blandly abstract corporate art. Wiggly steel shapes in red, yellow, and blue rose from the middle of a traffic circle.

“What is the meaning of the sculpture?” asked the professor, who answered himself: “I don’t know.” He seemed to be a reasonable guy. He didn’t exactly criticize the government, but he pointed to ranks of new condominiums, unprepossessing with their Plexiglas-screened sunrooms and window air-conditioner units. He said that the condos sold for between $100,000 and $200,000. Or didn’t. Almost all the units were vacant. “Why are these buildings empty?” asked the professor.

“Overbuilding and overpriced.”

Multinationals were visible in every direction, Shanghai booby-hatch headquarters for Hewlett-Packard, Siemens, Sharp, Coca-Cola, SmithKline Beecham, Hoffmann La Roche, Sony. There was just one thing wrong with this business district—no business. Nobody seemed to be there at all. In the middle of a Tuesday afternoon, nothing was going on. We drove up and down empty streets along concrete fences decorated with those international cross-out silhouettes indicating prohibition of this or that: No spitting. No martial arts. No cutting trees. No firecrackers. No breaking the phone.

No breaking the phone? Along the ground were miles of conduits that formed into tall pipe arches at every intersection. These were water and waste lines. Pudong had been built on a floodplain only a few feet above sea level, on ground too muddy to dig sewers in. This hadn’t slowed construction. “The floor space of high-rises in Pudong,” said the professor, rolling his eyes slightly, “exceeds New York City.”

The real-estate glut in Shanghai is such that prices had already fallen by 30 percent in the first half of 1997. Yet the city’s supply of office space was set to increase by a third in 1998.

A free market is a natural evolution of freedom. There’s a missing link in Shanghai. This is not a Darwinian economy where enterprises prosper according to their ability to survive and grow. This is a creationist economy where prosperity is bestowed by a greater power.

Pudong is prosperous in just this way. An article in
The Asian Wall Street Journal
said of the government officials in charge of Pudong: “Harking back to their authoritarian instincts…they are deploying every tactic to fill the cavernous neighborhoods they’re building.” The article said that foreign banks are told they must have headquarters in Pudong if they want to do domestic-currency business, and that the International School had been moved there in hopes of luring foreign executives to the empty apartment houses. Of Shanghai in general,
The Asian Wall Street Journal
said, “The city was, quite literally, ordered to be great.”

The Chinese Communists are attempting to build capitalism from the top down, as if the ancient Egyptians had constructed the Pyramid of Khufu by saying, “Thutnefer, you hold up this two-ton pointy piece while the rest of the slaves go get 2,300,000 blocks of stone.”

A few months after I took my tour of Pudong, a famous economic crisis developed in Asia. And I had been staring out my bus window at the cause of it. Pudong-like senselessness had been going on all over the continent. Instead of money being invested where that money would make as much more money as possible, money was invested in strange, showy stuff. Some of these bad investments were made due to “national industrial policies,” some because of corruption, some out of local pride, and some for murky political reasons. From Thailand to Japan, bad credit had been extended, bad equities had been sold, and bad ventures had been subsidized—all in the hope that success could be had by some method other than succeeding.