Thanks for your comment: “That’s not quite true…vice versa. We may be looking at different political entities.

Your comment focuses on the balancing within the CCP organization, and I would tend to agree with that although I am very short of facts. However what I was referring to was the consequence of the quasi class structure created by the hukou system (i.e. the population rather than the CCP). One thing universal suffrage did in Europe during the first half of the past century was to break down (at least formally) very strong class structures and hence defuse class conflict by creating room for the political wings of trade unions and other non-party political movements to develop labour parties that were initially non-status quo but also not quite revolutionary (as Bismarck had correctly guessed some 40 years earlier). The interaction between economic development, economic cyclicality, expansion of the franchise and the taming of revolutionary labor is poorly studied, but should be instructive for authoritarian or paternalistic governments considering voluntary structural change (possibly under threat of “social forces”). Lenin understood the dangers of plurality, markets and economic openness for his regime, and certainly understood, together with his German sponsors, that advancing democratization (of a rather anarchic type) would destroy the opportunity for an ersatz-aristocracy like the KPSSSR. The institutions that allowed continued elite government (with labor participation) in Germany were strong enough and class polarity heterogeneous enough to handle the effects of a franchise expansion, building upon the earlier version under Bismarck. Russia had extreme polarity and very weak institutions and hence Russian democracy after the collapse of the monarchy would be inimical to German interests.

I think that the lesson for China is that the CCP (with a very different legacy and backgorund than the KPSSSR of course, but still capable of marxian reasoning) will have to be diligent and creative to avoid entrenching of the rural-urban class polarity (especially during a relative downturn) yet will have no opportunity for further democratization (for instance leading to popuplist movements outside the CCP’s control led by opportunistic members of the current elite like Thai Rak Thai in Thailand) since that would alert the urbanites. I wonder how Western politicians will deal with this situation when interacting with China. No one should like China to be dominated by nationalist populists, pandering to an extremely ignorant audience.

One way of tracking what is happening to trade flows is to follow the Baltic Sea Dry Index. What we have is (Bloomberg):

June 5th 2008: 11.689
December 5th 2008: 663 (!)
March 10th 2009: 2298
and now
April 7th: 1466

The collapse from 11.689 to 663 needs no explanation (I think), but how do you read numbers after December 2008?

Thank you for answering my question. I don’t know how you manage to disentangle foreign and private savings!

If for no other reason than transparency, we should start taxing the interest earned by foreign private savings. Then governments, whose savings would remain untaxed, would invest under their own name,

Howard

It’s actually not. There has been no significant increase protectionist sentiment since Q4, and there no one has taken any real actions since Q4 2008 that would be could be considered protectionist.