Category: Capitalism

Hong Kong’s “Unofficials” Begged Britain to Bargain Better with Beijing’s Communists

(p. C4) In the 1980s and 1990s, the political scientist Steve Tsang conducted dozens of interviews with industrialists, bankers and lawyers appointed as unofficial members of Hong Kong’s Legislative Council or Executive Council. Known as the “Unofficials,” they were advisers to the British government. The British Official Secrets Act prevented them from speaking about the negotiations during their lifetimes, but the interviews restore a vital, often anguished Hong Kong voice to the historical record.

. . .

The Joint Declaration provided for Hong Kong to be handed back to China in 1997 with its capitalist system intact and a Chinese pledge that its way of life should continue for 50 years. Hong Kong was to hold elections for its Legislative Council and chief executive, but there was no clear timeline for democracy or mechanism to ensure Chinese compliance. “If we cannot devise the right political system, then Hong Kong may not survive,” Chung warned, telling the British that “the Chinese concept of an agreement was worthless.”

Thatcher’s response to them, in January 1984, was frosty: “The Chinese could walk into Hong Kong at present but had not done so. We had to negotiate with the cards that we possessed.” . . .

In June, Chung traveled to Beijing with two other Unofficials to express their concerns directly to Deng Xiaoping: that in the future Hong Kong might be governed from Beijing instead of being administered by Hong Kongers; that Chinese officials might not accept Hong Kong’s lifestyle; and that China’s future leaders might follow “extreme left policies.”

. . .

Would it have made any difference if more attention had been paid to the Unofficials? In 2019, as protests roiled the city, I put this question to Hong Kong’s last governor, Chris Patten. “I think it might have done, actually,” he said. He recalled that British policy in the 1980s “was driven by officials with only the most vestigial, shadowy input from ministers. The Cradocks and others, they didn’t listen to people in Hong Kong. They knew what Hong Kong required, and what Hong Kong, they thought, required was whatever would be acceptable with China for a quiet life.”

The dominant narrative in the British press in the run-up to the handover in 1997 was one of an honorable retreat. The Unofficials tell a different story: One of political expediency that set in motion the foreseeable—and foreseen—unraveling of one of the world’s greatest cities.

For the full essay, see:

Louisa Lim. “The Unofficial Story of the Handover of Hong Kong.” The Wall Street Journal (Saturday, April 23, 2022): C4.

(Note: ellipses added.)

(Note: the online version of the essay has the date April 22, 2022, and has the same title as the print version.)

The essay is adapted from Lim’s book:

Lim, Louisa. Indelible City: Dispossession and Defiance in Hong Kong. New York: Riverhead Books, 2022.

Sugarman Spent $500,000 in a Losing Fight Against a $100,000 FTC Fine

(p. A12) Though many of his wackier ideas bombed, Mr. Sugarman came up with a big winner now and then, including pocket calculators in the early 1970s and his BluBlocker sunglasses, designed to filter out ultraviolet and blue light waves, starting in the 1980s.

. . .

Trouble came in 1979 when the Federal Trade Commission accused him of violating a rule requiring firms to send out mail-order items promptly or notify customers of delays. Mr. Sugarman said the delays were caused by blizzards and a computer breakdown. The FTC proposed a $100,000 fine.

Mr. Sugarman counterattacked with a pamphlet, “The Monster That Eats Business,” an indictment of the FTC illustrated with cartoons in the style of Mad magazine. He accused FTC officials of hounding him over trivial lapses. After six years of fighting, he agreed to a settlement requiring him to pay a fine of $115,000 over four years. Mr. Sugarman said he had spent $500,000 on legal fees and added that “we are completely innocent of the charges.”

The success of BluBlocker sunglasses dug him out of that hole. Mr. Sugarman had a home on Maui, where he published a weekly newspaper. He flew small airplanes. He drove a Ferrari Testarossa. He looked dapper in his BluBlockers.

For the full obituary, see:

James R. Hagerty. “Marketing Guru Survived His Flops and Found Hits.” The Wall Street Journal (Saturday, April 2, 2022): A12.

(Note: ellipsis added.)

(Note: the online version of the obituary has the date March 29, 2022, and has the title “Marketing Maverick Survived Flops, Found Hits.”)

Large Retailers Chartered Ships to Avoid the Most Crowded Ports

(p. A1) Global supply-chain delays are so severe that some of the biggest U.S. retailers have resorted to an extreme—and expensive—tactic to try to stock shelves this holiday season: They are chartering their own cargo ships to import goods.

Port delays, Covid-19 outbreaks and worker shortages have snarled the flow of products between Asia and North America, threatening the supplies of everything from holiday decorations and toys to appliances and furniture. It is taking roughly 80 days to transport goods across the Pacific, or twice as long as before the pandemic, retail and shipping executives said.

Walmart Inc., Home Depot Inc., Costco Wholesale Corp. and Target Corp. —some of the biggest U.S. retailers by revenue—are among the companies that are paying for their own chartered ships as part of wider plans to mitigate the disruptions, a costly and unattainable option for most companies.

For the full story, see:

Sarah Nassauer and Costas Paris. “Retailers Charter Ships to Ensure Supplies.” The Wall Street Journal (Monday, October 11, 2021): A1 & A6.

(Note: the online version of the story has the date October 10, 2021, and has the title “Big U.S. Retailers Charter Private Cargo Ships Amid Port Delays.”)

Could Principled Investors Make the Walt Disney Company Great Again?

Robert Nozick defended firms that maximize profits subject to ethical side constraints. Presumably the ethical side constraints include not capitulating to totalitarian governments that suppress free speech. The recent “meme” investors in GameStop and AMC sparked in me the question whether principled investors loyal to ethical side constraints could return the Walt Disney Company to the principled greatness of Walt Disney, the man?

(p. 1) It has been a year since Mat Bowen, who was the pastor of a small church in Gibson City, Ill., had the dream — the one where Elon Musk, the head of Tesla, urged him to buy Dogecoin.

Mr. Bowen had just begun to dabble in investing. He soon discovered WallStreetBets, the online forum on Reddit where throngs of small investors were plotting to buy shares of GameStop, the troubled video game retailer, in a bid to teach Wall Street a lesson. Some hedge funds had bet that shares of GameStop would fall. Instead, they took off, as the investors banded together last January to drive the price up more than 1,700 percent.

Caught up in the frenzy, Mr. Bowen bought GameStop, too. In July [2021], he quit the church to become a full-time trader, convinced he was joining a fight against financial injustice.

The beliefs underpinning last year’s meme stock phenomenon are stronger than ever. For a large number of individual investors, the stock market has become the battleground on which they join forces to right perceived wrongs and fight the powerful. So much so that when the stock market seesawed this past week, many small investors were undeterred. Falling prices were another opportunity to buy more shares of their favorite companies.

“The reason I am still in this, and the reason I am willing to ride these stocks to zero, is for my fellow citizens,” said Mr. Bowen, who received his master’s degree in divinity (p. 7) at the Princeton Theological Seminary. He cast the so-called meme stock fight in moral terms. “The battle of good versus evil is not just limited to the walls of a church or a synagogue or a mosque,” he said.

. . .

Jesus Gonzalez was drawn into the meme stock trade by what he saw as a power imbalance. Mr. Gonzalez, 22, had invested in stocks off and on as a teenager, but “AMC and GameStop are different from any other play in the stock market,” he said. “We have never seen a congregation of retail investors who have collectively come together on the internet and formed the largest, most powerful decentralized hedge fund in the world.”

Mr. Gonzalez, who graduated from Arizona State University with a bachelor’s degree in finance last month, is buying more shares of GameStop and AMC, even though his $220,000 portfolio is off 37 percent from its November [2021] high, he said.

His 34-year-old sister, Ruby Gonzalez, a behavioral health therapist who works at Phoenix Children’s Hospital and is studying to become a nurse, followed her brother’s lead and invested most of her savings in the two companies. “I want to change market manipulation,” she said.

For the full story, see:

Tara Siegel Bernard, Emily Flitter and Anupreeta Das. “How GameStop Turned into a Fight for Good vs. Evil.” The New York Times, SundayBusiness Section (Sunday, January 30, 2022): 1 & 7.

(Note: ellipsis, and bracketed year, added.)

(Note: the online version of the story has the date Jan. 29, 2022, and has the title “Buy GameStop, Fight Injustice. Just Don’t Sell.”)

Robert Nozick’s libertarian masterpiece is:

Nozick, Robert. Anarchy, State, and Utopia. New York: Basic Books, Inc., 1974.

Identifying as “Taiwanese,” They “Love the Freedom”

(p. A1) CHIAYI, Taiwan — When Li Yuan-hsin, a 36-year-old high school teacher, travels abroad, people often assume she is Chinese.

No, she tells them. She is Taiwanese.

To her, the distinction is important. China may be the land of her ancestors, but Taiwan is where she was born and raised, a home she defines as much by its verdant mountains and bustling night markets as by its robust democracy. In high school, she had planted a little blue flag on her desk to show support for her preferred political candidate; since then, she has voted in every presidential election.

“I love this island,” Ms. Li said in an interview. “I love the freedom here.”

Well over 90 percent of Taiwan’s people trace their roots to mainland China, but more than ever, they are embracing an identity that is distinct from that of their Communist-ruled neighbor. Beijing’s strident authoritarianism — and its claim over Taiwan — has only solidified the island’s identity, now central to a dispute that has turned the Taiwan Strait into one of Asia’s biggest potential flash points.

. . .

(p. A8) When nearby Hong Kong erupted in anti-government protests in 2019, Ms. Li, the schoolteacher, followed the news every day. She saw Beijing’s crackdown there and its destruction of civil liberties as evidence that the party could not be trusted to keep its promise to preserve Taiwan’s autonomy if the sides unified.

Ms. Li’s wariness has only grown with the pandemic. Beijing continues to block Taiwan from international groups, such as the World Health Organization, a clear sign to her that the Communist Party values politics above people. Taiwan’s success in combating the coronavirus, despite these challenges, had filled her with pride.

. . .

“We are Taiwanese in our thinking,” she said. “We do not need to declare independence because we already are essentially independent.”

That emerging confidence has now come to define Taiwan’s contemporary individuality, along with the island’s firm embrace of democracy. To many young people in Taiwan, to call yourself Taiwanese is increasingly to take a stand for democratic values — to not, in other words, be a part of Communist-ruled China.

Under its current president, Tsai Ing-wen, the Taiwan government has positioned the island as a Chinese society that is democratic and tolerant, unlike the colossus across the strait. As Beijing has ramped up its oppression of ethnic minorities in the name of national unity, the Taiwan government has sought to embrace the island’s Indigenous groups and other minorities.

Taiwan “represents at once an affront to the narrative and an impediment to the regional ambitions of the Chinese Communist Party,” Ms. Tsai said last year.

. . .

Growing up in the 1980s, Ms. Li was faintly aware of the divide between the Taiwanese and mainlanders. She knew that going to her “mainlander” grandparents’ house after school meant getting to eat pork buns and chive dumplings — heavier, saltier food than the Taiwanese palate of her maternal grandparents, who fed her fried rice noodles and sautéed bitter melon.

Such distinctions became less evident over time. Many of Taiwan’s residents are now proud of their island’s culinary offerings, whether it is the classic beef noodle soup — a mix of mainland influences unique to Taiwan — or bubble milk tea, a modern invention.

. . .

Ms. Li points to Beijing controls on speech and dissent as antithetical to Taiwan.

She compares Tiananmen Square in Beijing, which she visited in 2005 as a university student, with public spaces in Taipei. In the Chinese capital, surveillance cameras loomed in every direction while armed police watched the crowds. Her government-approved guide made no mention of the Communist Party’s brutal crackdown in 1989 on pro-democracy protesters that she had learned about as a middle school student in Taiwan.

She thought of Liberty Square in Taipei, by comparison, a vast plaza where people often gather to play music, dance, exercise and protest.

“After that trip, I cherished Taiwan so much more,” Ms. Li said.

For the full story, see:

Amy Qin and Amy Chang Chien. “‘We Are Taiwanese’: A Rising National Identity.” The New York Times (Wednesday, January 19, 2022): A1 & A8.

(Note: ellipses added.)

(Note: the online version of the story has the same date as the print version, and has the title “‘We Are Taiwanese’: China’s Growing Menace Hardens Island’s Identity.”)

“Two Self-Made Mill Owners” in Golden Age of Capitalism Collected and Preserved “Literary Treasures”

(p. C6) A consortium of British libraries and museums has announced that it successfully raised more than $20 million to buy a “lost” library containing rare manuscripts by Robert Burns, Walter Scott and the Brontës, heading off an auction and preserving the collection intact.

. . .

“A collection of literary treasures of this importance comes around only once in a generation,” Richard Ovenden, the head of the Bodleian Libraries at Oxford, said in a news release earlier this month announcing the deal.

. . .

Alfred and William Law, two self-made mill owners who grew up less than 20 miles from the Brontë home in Haworth (which is now the Brontë Parsonage Museum), began collecting what became the Honresfield Library in the 1890s.

. . .

In the announcement, Gabriel Heaton, the Sotheby’s specialist who organized the planned sale, called it “a collection like no other that has come to market in recent decades.”

For the full story, see:

Jennifer Schuessler. “$20 Million Raised to Preserve a ‘Lost Library’.” The New York Times (Saturday, December 25, 2021): C6.

(Note: ellipses added.)

(Note: the online version of the story has the date Dec. 24, 2021, and has the title “Group Raises $20 Million to Preserve ‘Lost’ Brontë Library.”)

“People Come to This Country to Build Amazing Businesses”

(p. 1) WASHINGTON — ADW Capital Partners would appear to be the kind of hedge fund that Democrats on the Senate Finance Committee would like to tax more heavily: small but growing fast, with $330 million in assets, an incorporation in Delaware but doing business in Florida, and an offshore “feeder” corporation shielding some of its clients from U.S. taxation.

No wonder, then, that its owner, Adam Wyden, has come out as a vocal and vociferous critic of the tax increases being pushed by the committee’s chairman, Senator Ron Wyden of Oregon — his father.

. . .

(p. 25) “The issue is bigger than my father. I’m not interested in discussing anything personal,” he said in a brief phone call before declining to go further. He said he was “not a Trumper” and “not an Ocasio” — referring to Representative Alexandria Ocasio-Cortez of New York, an icon of the Democratic left. He is a libertarian, he said, raised in Washington, D.C., who moved to Florida “to get away from the food fight.”

But he has gone public with his grievances against his father’s proposals, in an appearance last month on CNBC that he recommended for viewing, and in a tweet responding to the elder Mr. Wyden’s assertion that Elon Musk and other billionaires should not get to decide whether to pay taxes based on a Twitter poll.

“Why does he hate us / the American dream so much?!?!?!?!” Adam Wyden said in the Twitter post last month. “Reality is: most legislators have never built anything … so I guess it’s easier to mindlessly and haphazardly try and tear stuff down.”

. . .

“Thankfully, I think I can compound” investment gains “faster than my dad and his cronies can confiscate it,” Adam Wyden wrote.

Lauded on CNBC’s “Squawk Box,” he elaborated on air. “Amazon, Netflix, Google, Tesla: I mean, we are the envy of the rest of the world,” he said. “People come to this country to build amazing businesses, and I want that to continue.”

Without referring to his son, the elder Mr. Wyden suggested a possible reason for his stance: “Many millionaires perhaps may consider themselves tomorrow’s billionaires.”

For the full story, see:

Jonathan Weisman. “Rift Between Senator and Son Shows Challenge of Taxing the Ultrarich.” The New York Times, First Section (Sunday, December 12, 2021): 1 & 25.

(Note: ellipses added.)

(Note: the online version of the story was updated Dec. 11, 2021, and has the title “Rift Between Senator and Son Shows the Challenge of Taxing the Ultrarich.” The online version says that the article appeared on p. 24 of the New York edition of the print version.)

Communist China Pays World Bank for Higher Ranking in “Doing Business” Report

(p. A1) The World Bank canceled a prominent report rating the business environment of the world’s countries after an investigation concluded that senior bank management pressured staff to alter data affecting the ranking of China and other nations.

The leaders implicated include then World Bank Chief Executive Kristalina Georgieva, now managing director of the International Monetary Fund, and then World Bank President Jim Yong Kim.

The episode is a reputational hit for Ms. Georgieva, who disagreed with the investigators’ conclusions. As leader of the IMF, the lender of last resort to struggling countries around the world, she is in part responsible for managing political pressure from nations seeking to advance their own interests. It was also the latest example of the Chinese government seeking myriad ways to burnish its global standing.

(p. A10) The Doing Business report has been the subject of an external probe into the integrity of the report’s data.

. . .

The World Bank was in the middle of difficult international negotiations to receive a $13 billion capital increase. Despite being the world’s second largest economy, China is the No. 3 shareholder at the World Bank, following the U.S. and Japan, and Beijing was eager to see its power increased as part of a deal for more funding.

In October 2017, Ms. Georgieva convened a meeting of the World Bank’s country director for China, as well as the staff economists that compile Doing Business. She criticized “mismanaging the Bank’s relationship with China and failing to appreciate the importance of the Doing Business report to the country,” according to the investigative report’s summary of the meeting.

. . .

Ultimately, the team identified three data points that could be altered to raise China’s score, the investigative report said. For example, China had passed a law related to secured transactions, such as when someone makes a loan with collateral. The World Bank staff determined it could give China a significant improvement to its score for legal rights, citing the law as the reason.

World Bank employees knew the changes were inappropriate but “a majority of the Doing Business employees with whom we spoke expressed a fear of retaliation,” the investigative report said.

Although the data-gathering process for the 2018 report was finished, the World Bank’s economists reopened the data tables and altered China’s data, the investigative report said. Instead of ranking 85th among the world’s countries, China climbed to 78th due to the alterations.

For the full story, see:

Josh Zumbrun. “World Bank Cancels Report After Investigation.” The Wall Street Journal (Friday, Sept. 17, 2021): A1 & A10.

(Note: the online version of the story has the date September 16, 2021, and has the title “World Bank Cancels Flagship Report After Investigation.”)

Ray Dalio Lacks Principles in His Kowtowing to Chinese Communism

Ray Dalio has authored a book called Principles, but that does not imply that he has any. See the story below.

(p. B1) This year has been unsettling for Chinese business. The ruling Communist Party has gone after the private sector industry by industry. The stock markets have taken a huge hit. The country’s biggest property developer is on the verge of collapse.

But for some of the biggest names on Wall Street, China’s economic prospects look rosier than ever.

BlackRock, the world’s biggest asset manager, urged investors to increase their exposure to China by as much as three times.

“Is China investable?” asked J.P. Morgan, before answering, “We think so.” Goldman Sachs says “yes,” too.

Their bullishness in the face of growing uncertainty has puzzled China experts and drawn criticism from a wide political spectrum, from George Soros, the progressive investor, to congressional Republicans. Mr. Soros has called BlackRock’s stance a “tragic mistake” that’s “likely to lose money” for its clients and would “damage the national security interests of the U.S. and other democracies.”

. . .

(p. B5) Ray Dalio, founder of the hedge fund Bridgewater, wrote in late July [2021] that people in the West should not interpret Beijing’s crackdowns as “the Communist Party leaders showing their true anticapitalist stripes.” Instead, he wrote, the party believed those moves were “better for the country even if the shareholders don’t like it.”

The relationship has been good to Bridgewater so far. Mr. Dalio’s firm has raised billions of dollars from Chinese clients such as the China Investment Corporation, the sovereign wealth fund, and State Administration of Foreign Exchange, which manages the country’s currency reserves. (Bridgewater declined to comment.)

This is a balance that business has played with China for a long time: Say nice things to Beijing, lobby back home on China’s behalf, then ask for access to markets and capital.

Goldman Sachs became the first foreign bank to seek full ownership of a securities business in China in December. BlackRock, which describes China as an “undiscovered” market, hired a former regulator to head its China business. So many global financial firms are expanding in the country that there’s a talent war.

. . .

The Wall Street firms are apparently betting that China’s past successes will continue. They have a long track record on their side, but they would do well to remember what they constantly tell their customers: Past performance isn’t necessarily indicative of future results.

For the full commentary, see:

Li Yuan. “Uncertainty Is Rocking China. Why Is Wall Street Bullish?” The New York Times (Saturday, October 7, 2021): B1 & B5.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the commentary has the date Oct. 6, 2021, and has the title “China is Rocked by Uncertainty. Why is Wall Street Bullish?”)

Rogge and Friedman on Bread and Freedom

At the start and end of the movie above, you can hear the voice and thoughts of my Wabash College mentor Ben Rogge. His interview of Milton Friedman at the end is especially wonderful if you are a libertarian fan of Rogge and Friedman. I believe Rogge had an important hand in the production of this movie, as he did in a couple of movies from Liberty Fund. I think he also advised Milton Friedman on his famous “Free to Choose” television series. Rogge was a libertarian intellectual entrepreneur, who encouraged and enabled many now-more-famous libertarians to think, write, and speak. Whether he is remembered or forgotten, Rogge made a difference.

The movie is based on the book of the same title:

Brown, Susan Love, Karl Keating, David Mellinger, Patrea Post, Stuart Smith, and Catriona Tudor. The Incredible Bread Machine. San Diego: World Research, Inc., 1975.

(Note: the book is based on a poem by R.W. Grant that had the title “Tom Smith and His Incredible Bread Machine.” I believe, but have not confirmed my memory, that a version of Grant’s poem appears in the book by Love et al.)