Category Archives: industry

by | 18 February 2022 · 9:07 am

Spanish Repression in the Americas

From Bolivar: American Liberator, by Marie Arana (Simon & Schuster, 2013), Kindle pp. 25-28:

FOR TWO HUNDRED YEARS, FROM the mid-1500s through the mid-1700s, the world that Spain had made had struggled against fiscal failure. The empire whose motto had once been a rousing Plus Ultra! had glutted world markets with silver, thwarted the economic growth of its colonies, and brought itself more than once to the brink of financial ruin. Nowhere was Spain’s misguided fiscal strategy more evident than in the streets of Caracas in the late 1700s, where a deep rage against the madre patria was on the rise.

The case of the Spanish American colonies had no precedent in modern history: a vital colonial economy was being forced, at times by violent means, to kowtow to an underdeveloped mother country. The principal—as Montesquieu had predicted a half century before—was now slave to the accessory. Even as England burst into the industrial age, Spain made no attempt to develop factories; it ignored the road to modernization and stuck stubbornly to its primitive, agricultural roots. But the Bourbon kings and their courts could not ignore the pressures of the day: Spain’s population was burgeoning; its infrastructure, tottering; there was a pressing need to increase the imperial revenue. Rather than try something new, the Spanish kings decided to hold on firmly to what they had.

At midnight on April 1, 1767, all Jesuit priests were expelled from Spanish America. Five thousand clerics, most of them American-born, were marched to the coast, put on ships, and deported to Europe, giving the crown unfettered reign over education as well as over the widespread property of the Church’s missions. King Carlos IV made it very clear that he did not consider learning advisable for America: Spain would be better off, and its subjects easier to manage, if it kept its colonies in ignorance. Absolute rule had always been the hallmark of Spanish colonialism. From the outset, each viceroy and captain-general had reported directly to the Spanish court, making the king the supreme overseer of American resources. Under his auspices, Spain had wrung vast quantities of gold and silver from the New World and sold them in Europe as raw material. It controlled the entire world supply of cocoa and rerouted it to points around the globe from storehouses in Cádiz. It had done much the same with copper, indigo, sugar, pearls, emeralds, cotton, wool, tomatoes, potatoes, and leather. To prevent the colonies from trading these goods themselves, it imposed an onerous system of domination. All foreign contact was forbidden. Contraband was punishable by death. Movement between the colonies was closely monitored. But as the years of colonial rule wore on, oversight had grown lax. The war that had flared between Britain and Spain in 1779 had crippled Spanish commerce, prompting a lively contraband trade. A traffic of forbidden books flourished. It was said that all Caracas was awash in smuggled goods. To put a stop to this, Spain moved to overhaul its laws, impose harsher ones, and forbid Americans even the most basic freedoms.

The Tribunal of the Inquisition, imposed in 1480 by Ferdinand and Isabel to keep a firm hold on empire, was given more power. Its laws, which called for penalties of death or torture, were diligently enforced. Books or newspapers could not be published or sold without the permission of Spain’s Council of the Indies. Colonials were barred from owning printing presses. The implementation of every document, the approval of every venture, the mailing of every letter was a long, costly affair that required government approval. No foreigners, not even Spaniards, could visit the colonies without permission from the king. All non-Spanish ships in American waters were deemed enemy craft and attacked.

Spain also fiercely suppressed American entrepreneurship. Only the Spanish-born were allowed to own stores or sell goods in the streets. No American was permitted to plant grapes, own vineyards, grow tobacco, make spirits, or propagate olive trees—Spain brooked no competition. It earned $60 million a year, after all (the equivalent of almost a billion today), by selling goods back to its colonies.

But, in a bizarre act of self-immolation, Spain enforced strict regulations on its colonies’ productivity and initiative. Creoles were subject to punishing taxes; Indians or mestizos could labor only in menial trades; black slaves could work only in the fields, or as domestics in houses. No American was allowed to own a mine; nor could he work a vein of ore without reporting it to colonial authorities. Factories were forbidden, unless they were registered sugar mills. Basque businesses controlled all the shipping. Manufacturing was rigorously banned, although Spain had no competing manufacturing industry. Most galling of all, the revenue raised from the new, exorbitantly high taxes—a profit of $46 million a year—was not used to improve conditions in the colonies. The money was shipped back, in its entirety, to Spain.

Americans balked at this. “Nature has separated us from Spain by immense seas,” exiled Peruvian Jesuit Viscardo y Guzmán wrote in 1791. “A son who found himself at such a distance would be a fool, if, in managing his own affairs, he constantly awaited the decision of his father.” It was as potent a commentary on the inherent flaws of colonialism as Thomas Jefferson’s “A Summary View of the Rights of British America.”

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by | 17 February 2022 · 10:27 am

Home Country Hegemony in Spain’s Colonies

From Bolivar: American Liberator, by Marie Arana (Simon & Schuster, 2013), Kindle pp. 18-20:

AS DON JUAN VICENTE [Bolivar, Simon’s father] SETTLED into his new life, he began to be alarmed by Spain’s dominion over it. For fifty years he had been a loyal subject of the king, a trusted judge, governor, and military commander, but by 1776, just as the British colonies declared their independence, Don Juan, too, was dreaming of insurrection. He had good reason to. Spain’s Bourbon regime, which had high ambitions, had decided to impose a strict rule over its colonies. It put into place a number of anti-Creole laws that had a direct effect on Don Juan Vicente’s businesses. First, Venezuela was separated from the viceroyalty of New Granada, a sprawling region that originally reached from the Pacific to the Atlantic over the northern territories of South America; next, an intendant was installed in Caracas to administer economic affairs, and a captain-general to rule over political and military matters. With a direct umbilical to Madrid now, Venezuela began to suffer tighter restrictions on its ranches, mines, and plantations. The Council of the Indies, which governed the Americas from Madrid and Seville, strengthened its hold. Taxes were increased. A ubiquitous imperial presence was felt in all transactions. The Guipuzcoana Company, a powerful Basque corporation that monopolized imports and exports, was reaping great profits on every sale.

If Don Juan Vicente feared the impact of these new regulations, he saw that the blow would be more than financial. Creoles were being squeezed out of government roles. Throughout the Spanish Americas, from California to Buenos Aires, Spain began appointing only peninsulares—those born in Spain or the Canary Islands—to offices that decided important affairs. This was a sweeping, ultimately radicalizing change, reversing a culture of trust between Creoles and Spaniards that had been nurtured for more than two hundred years. In Italy, an exiled Peruvian Jesuit priest, Juan Pablo Viscardo y Guzmán, wrote angrily that it was tantamount to declaring Americans “incapable of filling, even in our own countries, places which, in the strictest right, belong to us.”

The most infuriating aspect of this for Creoles such as Don Juan Vicente was that the peninsulares being assigned the highest positions were often inferior in education and pedigree. This was similar to a sentiment held for years in British America. Both George Washington and Benjamin Franklin had registered strong objections to preferences given to British-born subjects when it was clear that the American-born were far more skilled. In the Spanish colonies, the new emissaries of the crown were largely members of Spain’s middle class: merchants or midlevel functionaries with little sophistication. As they took over the most coveted seats of power, their inadequacies were not lost on Creoles who now had to step aside. In Spain, not everyone was blind to the implications. A Bourbon minister mused that colonial subjects in the Indies might have learned to live without freedoms, but once they acquired them as a right, they weren’t going to stand by idly as they were taken away. Whether or not the court in Madrid understood the ramifications, Spain had drawn a line in the sand. Its colonial strategy shifted from consensus to confrontation, from collaboration to coercion; and to ensure its grip on the enormous wealth that America represented, it put a firm clamp on its laws.

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by | 14 February 2022 · 8:23 am

Japan’s Home Front, 1941

From Storm Clouds over the Pacific, 1931–1941, by Peter Harmsen (War in the Far East, Book 1;  Casemate, 2018), Kindle pp. 253-256:

What kind of nation was Japan in 1941? Who were the 73 million people that would soon find themselves in the most devastating war in their island nation’s long history? Foreign affairs writer Henry C. Wolfe visited Tokyo in the fall of 1941 and was shocked by the gloom and dreariness of life in the once vibrant city of 6.5 million inhabitants. Four years of war and accompanying austerity had turned it into a “capital of shadows” with long lines of customers waiting in front of stores selling low-quality products made from ersatz material. Shoes of real leather could not be found. Clothes were made from a little cotton mixed with bark and wood pulp and ripped easily. Wolfe described what happened when an American diner at a restaurant asked for a second helping of pudding, the only part of his meal that was somewhat palatable. The head waiter replied, “Do you want me to go to jail!”

Wartime regulations had started out in a small way. Local governments had introduced rationing of sugar and matches in 1939, and it had become a national policy in 1940. Since then official controls had exploded, and by the fall of 1941 more than 100,000 goods and services were being regulated. Energy shortages were particularly conspicuous. Many vehicles were converted to run on charcoal, although that fuel was also in short supply. Police were soon forced to stop all public vehicles from running between midnight and 5 am. Adding to the woes, trams and trains were overloaded with people, since cars that had broken down could not be repaired due to a lack of spare parts.

The American trade curbs worsened an already steep decline in the standard of living, but they did not cause it. The tougher conditions faced by the average Japanese were equally due to the priorities of the Japanese rulers, which allocated ever larger resources to military purposes, leaving the civilians to pay. The war in China had taken its toll. In 1931, military expenditures had taken up 31.2 percent of the government budget, but a decade later it had increased to a staggering 75.6 percent. Average wages dropped by more than 20 percent from the mid-1930s until 1941. Meanwhile, there was less and less to be had for the shrinking incomes. The light industrial sector, where consumer products were manufactured, saw its share of overall production drop precipitously over the same period.

The finer things in life were, of course, virtually non-existent. Dance halls had been prohibited, despite their immense popularity, along with most jazz performances. Foreign movies were strictly limited, and Japanese cinemagoers, who were once among the most ardent foreign fans of Hollywood and even copied manners and slang from major American releases, were now limited to grim German propaganda fare with titles such as Victory in the West. The lights were out, also, in a quite literal sense. In Tokyo’s Ginza shopping district, the famous glittering neon signs had been turned off to save electricity. Five-star hotels, too, were wrapped in gloom after they were urged to keep lighting at a minimum.

Miyamoto Takenosuke, vice director of Planning Board, argued that “the people should be satisfied with the lowest standard of living.” He went on: “The craving for a life of luxury must be abandoned. At this time, when the nation is risking its fate, there is no individual any more. What remains is the nation and the nation alone. The storm of economic warfare will become more furious. Come rain! Blow wind! We are firmly determined to fight against the storm.” Japan’s largest candy maker Meijing [sic] Confectionary Company chimed in with an ad campaign featuring the slogan “Luxury is the Enemy!” The National Defense Women’s Association also did its part in imposing wartime rigor, posting members on street corners to stop women who were dressed too extravagantly, passing them handbills with stern admonitions about the need for thrift in light of the national emergency.

At the same time, a thriving black market for regulated goods had emerged almost immediately, and a special economic police set up to rein in the activities made more than two million arrests within just 15 months. The vigorous law enforcement did not curb the illegal transactions, but simply encouraged them to be carried out in more ingenious ways. A modern historian gives an example of how it remained possible to trade coal at the black-market price of 1300 yen, well above the official 1000 yen price tag: “To secure the additional 300-yen profit without running afoul of the law, a vendor, for example, might arrange for a customer to ‘accidentally’ drop 3000 yen next to the vendor’s stall. He would then take the money to the nearest official who would instruct the buyer to pay ten percent in thank-you money (300 yen) to the vendor.”

Despite the hardship, the Japanese government pretended it was in a position not only to care for its own population but for the peoples of all Asia.

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by | 21 January 2022 · 11:19 am

Japan’s Industrial Pollution in 1897

From Emperor of Japan: Meiji and His World, 1852–1912, by Donald Keene (Columbia U. Press, 2005), Kindle pp. 532-534:

Another internal matter that disturbed the emperor in 1897 and would have future ramifications was the copper poisoning caused by the mines at Ashio. On March 24 a cabinet committee was established to investigate the situation. The extent of the harm to the environment and the suffering of the inhabitants of the region could hardly be exaggerated. Fish had disappeared from the Watarase River and its tributaries. Innumerable dry and wet fields had been ravaged. In recent years there had been frequent flooding, and the damage increased each year. At every session of the Diet, [early environmental activist] Tanaka Shōzō (1841–1913), a member of the House of Representatives, described the terrible damage, appealing for preventive measures and relief. However, neither the government nor the mine owners did anything to help the people of the region, and it was feared they might stage a march on Tōkyō to appeal directly to the government.

Shortly before the investigating committee was established, the minister of agriculture and commerce, Enomoto Takeaki, traveled to Ashio in mufti to observe the effects of mineral poisoning. He was so shocked by what he saw that he resigned his post, taking blame for the disaster. The emperor was much upset when he was informed of conditions in Ashio, and on April 7, at his request, Tokudaiji Sanetsune sent letters to the governors of Gumma, Tochigi, Saitama, and Ibaraki Prefectures asking if they thought that the sudden spate of public criticism was occasioned by the damage caused by the flooding of 1896 or if it went back to 1892 and 1893 when the frightening effects of pollution were first discovered.

At the time some observers blamed the disasters on the indiscriminate felling of trees, resulting in landslides that filled the riverbeds. The rivers, unable to flow freely in their normal courses, had broken through the embankments and spread the poison in their water over the land. The governors were requested to reply without concealing anything and appending relevant documents.

As a result of the reports received from the cabinet committee, on May 27 [“Copper King”] Furukawa Ichibei, the operator of the mines, was issued a set of thirty-seven orders requiring him to provide settling ponds, filter beds, and similar facilities to prevent the mine water from overflowing and to eliminate smoke pollution. He was told that these improvements must be completed within 150 days and that mining operations would be halted until the settling ponds and filter beds were ready. In the event that Furukawa disobeyed these orders, he would be forbidden to engage in further mining.

On November 27 the cabinet, satisfied that the work of the committee investigating the mineral poisoning at Ashio was more or less completed, relieved the committee of its functions, and assigned to the appropriate ministries the supervision of preventive measures and restoration of affected land. Judging from the persistence into the late Meiji era of the issue of copper poisoning, it is obvious that the pollution controls ordered by the government at this time were not strictly enforced. The desire to build a modern, rich country was so strong that the Japanese tended to tolerate environmental pollution, even when it was as extreme as at the Ashio copper mines.

Eleven years earlier, in 1886, Suehiro Tetchō had published Setchūbai (Plum Blossoms in the Snow), a work often praised as the finest of the Meiji-period political novels. It is set in 2040, the 173rd year of the reign of Emperor Meiji, and opens with the sounds of cannons and bugles blowing to celebrate the 150th anniversary of the proclamation of the constitution. The accompanying illustrations depict the Tōkyō of the future. It is a city of grim rows of brick buildings from which innumerable tall chimneys emit black smoke. Tetchō wrote enthusiastically, “Telegraph wires spread like spiders’ webs, and trains run to and fro to every point of the compass. The electric lamps are so bright that even at night the streets look no different than in broad daylight.”

A reader today may shudder at the thought of a city so devoid of amenities and so tainted by industrial pollution, but Tetchō undoubtedly believed that his readers would be delighted by a future rich with the progress represented by chimneys belching smoke; he seems to have thought that the more Tōkyō resembled London, the greatest of the Western cities, the happier the Japanese would be. The chamberlain Hinonishi Sukehiro recalled:

Whenever His Majesty made a journey in the Kansai region, a little before the train passed Ōsaka he would say, “We’re getting close to the smoke capital…. Now we’re in the smoke capital.” Whenever we approached Ōsaka, he would look out of the window at the landscape. When he saw a great deal of smoke rising, he would be extremely satisfied.

For Emperor Meiji, no less than for Suehiro Tetchō, the “smoke capital” was a term of praise; but the copper mines at Ashio served as a grim reminder of the cost to the environment and to human lives of such progress.

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by | 8 November 2021 · 5:15 pm

Amur River Boom and Bust

From The Amur River: Between Russia and China, by Colin Thubron (Harper, 2021), Kindle pp. 265-268:

The enormous silence of the river, its shrinking human populace and its virgin forest, give the illusion of return to some primeval Arcadia, of recoil from a stricken present. But to its inhabitants it means desolation. For almost four centuries the Amur has been the stuff of dreams, but also of promise forever delayed. In the mid-nineteenth century, especially, there arose in Russia a grand and delusive exhilaration. Just as in the seventeenth century the Cossacks were lured south by rumours of a Daurian river valley spread with wheat and sable-filled forests, even silver and precious stones, so the accession of the initially liberal Czar Alexander II, in an empire that had been stagnating for thirty years, released a groundswell of intoxicating hope. Momentarily Russia turned her back on Europe, with its old humiliations, and found a visionary future in Siberia’s east.

Suddenly the immense but little-known Amur loomed into brilliant focus. Here would be Russia’s artery to the Pacific, a titanic waterway flowing, as if by providence, from the belly of Siberia into an ocean of infinite promise. The trading concessions wrenched from China by the British and French, the prising open of Japan, and above all the arrival of a young and vigorous America on the opposite coast, would surely transform the Pacific into an arena of world commerce. Russians had watched the American advance westward with awe. It seemed to mirror their own headlong drive across Siberia to the same ocean, and now the two countries might flourish together in a shared oceanic commonwealth. There was even heady talk, in Siberia, of a political alliance.

With Muraviev-Amursky’s seizure of the Amur from a helpless China in 1858, the vision of an eastern destiny became euphoria. The Amur, it was declared, would become Russia’s Mississippi, and Muraviev was hailed, without irony, as ‘one courageous, enterprising Yankee’. Such dreams climaxed in the energies of the American entrepreneur Perry McDonough Collins, quaintly named his country’s ‘commercial agent’ on the Amur. ‘Upon this generous river shall float navies, richer and more powerful than those of Tarshish,’ he announced, and at its mouth ‘shall rise a vast city, wherein shall congregate the merchant princes of the earth’.

Even before Muraviev’s land grab, St Petersburg was rife with reports of foreign merchant ships making for the Amur. Soon a lighthouse at De Castries was raised to guide them. A fleet of steamboats began plying the once-quiet waters. The lower river valley was declared a free trade zone. And the fulcrum of these hopes was the newly founded port of Nikolaevsk at the Amur’s mouth, which Alexander and I were approaching on the lonely Meteor. For a few years German and American trading firms went up here, housed in stout log cabins with iron and zinc roofs. A library of over four thousand books was assembled, with recent Paris and St Petersburg newspapers, happily uncensored. The officers’ club flaunted a dining hall and ballroom. Life was reported delightful. The Nikolaevsk stores were selling Havana cigars, French pâté and cognac, port and fine Japanese and Chinese furniture. Susceptible minds twinned the town with San Francisco. And Perry Collins, of course, went further, looking forward to the day when St Petersburg itself would be replicated on the Amur.

Then, within a decade, harsh realities broke in. Far from being a riverine highway, the Amur was revealed as a labyrinth of shoals, shallows and dead ends, and for seven months of the year was sealed in ice or adrift with dangerous floes. Even cargo boats of low draught might not reach Khabarovsk, let alone Sretensk. And the river mouth offered no simple access. The straits between the mainland and the obstructing island of Sakhalin made for hazardous steering, especially from the tempestuous Okhotsk Sea. Ships sank even in the estuary. As for the Amur shores, for hundreds of miles they were peopled only by a sprinkling of Cossacks, natives and subsistence farmers, many forcibly settled on poor land, and open to the floods that still ravage it. For its inhabitants, this became a cursed river: not the ‘Little Father’ of Russia’s affection, wrote a dismayed naturalist, but her ‘sickly child’. The structures of commerce that worked elsewhere – the trading houses, the shipping agents, the free zones – had been imposed upon an indifferent wilderness. In the simple, brutal realization of those most disillusioned, there was nobody to trade with and nothing to trade. Within a few years the agents and flotillas were gone, transferring first to De Castries and then to the ice-free harbour of Vladivostok.

As for Nikolaevsk, even Collins had expressed misgivings. Its waterside was so shallow that ships had to drop anchor half a mile offshore, and their cargo was transported by lighters to a swampy coast. In winter the town was blasted by Arctic blizzards and lay sometimes six feet deep in snow. Even the reports of foreign commerce were exposed as delusion. The shipping had never been significant. Within a few years Nikolaevsk became a byword for boredom, immorality and petty scandals. In its celebrated officers’ club, remarked a worldly sea captain, the newspapers were few and several months old; it compared poorly to a low German beer house. The great explorer Nikolai Przhevalsky equated the whole place with Dante’s hell.

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by | 14 October 2021 · 5:36 am

North Korea’s Masters of Money

From The Great Successor: The Divinely Perfect Destiny of Brilliant Comrade Kim Jong Un, by Anna Fifield (PublicAffairs, 2019), Kindle pp. 147-148:

Private property ownership is still technically illegal in North Korea, but that hasn’t stopped the emergence of a vibrant housing market. Sometimes people lease out the right to live in the apartments assigned to them by the state; at other times, masters of money sell the apartments they’ve been allocated in these new developments for substantial profits.

As a result, real estate prices have soared, with prices in Pyongyang increasing as much as tenfold. A decent two- or three-bedroom apartment in the capital costs up to $80,000, but a luxury three-bedroom apartment in a sought-after complex in central Pyongyang can fetch $180,000. It is an unimaginable sum in a country where the official government salary remains at about $4 a month.

Another reason for the real estate boom is the almost complete lack of a banking system. The masters of money can’t stash their cash in an interest-bearing account or investment fund, so they channel it into bricks and mortar.

Ri Jong Ho’s entrepreneurial good fortune began in the mid-’80s, when he began working for Office 39. By earning money for Kim Jong Il’s slush fund, he was enabling the Dear Leader to buy all that cognac and sushi. That made Ri an important person to the regime, and he lived a good life as a result.

His last job was in the Chinese port city of Dalian, not far from the border with North Korea, where he was the head of a branch of Taehung, a North Korean trading company involved in shipping, coal and seafood exports, and oil imports. He had previously been president of a ship-trading company and chairman of Korea Kumgang Group, a company that formed a venture with Sam Pa, a [notorious] Chinese businessman, to start a taxi company in Pyongyang. Ri showed me a photo of him and Pa onboard a private jet to Pyongyang.

As head of the Dalian branch of the Taehung export business, Ri would send millions of dollars in profits—denominated in American dollars or Chinese yuan—to Pyongyang. In the first nine months of 2014, until his defection in October that year, Ri said he sent the equivalent of about $10 million to the regime. Despite all the sanctions, the US dollar is still the preferred currency for North Korean businessmen since it is easiest to convert and spend.

It didn’t matter that there were supposedly stringent international sanctions in place. Ri’s underlings simply handed a bag of cash to the captain of a ship leaving from Dalian to the North Korean port of Nampho or gave it to someone to take on the train across the border.

But Uncle Jang’s downfall at the end of 2013 spooked many masters of money, including Ri. He and his family escaped from Dalian to South Korea and then eventually to the United States.

He clearly made a tidy sum of money for himself on the sidelines of his official job. The family lived a comfortable life in the Virginia suburbs. But even in the United States, Ri was cagey about meeting me and careful about what he said. “There are so many other stories, but I can’t tell you all them. Do you understand?”

He gives occasional public speeches about the North Korean regime—and much more private advice to the American government—while his children work on their English and study to go to an American university. They want Ivy League or, failing that, Georgetown.

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by | 12 October 2021 · 8:24 am

North Korea’s Caste System

From The Great Successor: The Divinely Perfect Destiny of Brilliant Comrade Kim Jong Un, by Anna Fifield (PublicAffairs, 2019), Kindle pp. 120-123:

Why, then, if so many North Koreans know about the outside world, and know that the regime is lying to them, has the system survived? The answer lies in the unparalleled brutality of the regime, which has no compunction in meting out severe punishments for the smallest hint of disaffection.

To enforce the lie that he’s the best man for the job, Kim Jong Un has perpetuated North Korea’s political caste system with zeal, rewarding those deemed most loyal to him and ruthlessly punishing those who dare question him.

This caste system is another legacy of his grandfather. When he was creating his ideal state, Kim Il Sung borrowed some of the feudal practices of the Chosun Dynasty, which had ruled Korea for five centuries until almost 1900. He adopted the Chosun-era system of guilt by association. It is this system that, even now, can lead to three generations of an entire family being imprisoned, sometimes for life, for one person’s wrongdoing.

He also stole the discriminatory class system called songbun from the Chosun era, dividing North Korea into fifty-one different categories that fall into three broad classes: loyal, wavering, and hostile.

To this day, in Kim Jong Un’s North Korea, the loyal are given every advantage. They are the 10 to 15 percent of the population who are considered the most politically committed to the system and have the most interest in it continuing. They get to live in Pyongyang and receive better schooling, including the possibility of attending Kim II Sung University. They are set up for plum jobs and have a head start on Workers’ Party membership. The loyal caste live in better apartments, wear better clothes, eat better and more food, and are more likely to be able to visit a doctor who actually has medicine.

At the bottom are the hostiles: the Japanese collaborators, the Christians, the skeptics. They comprise about 40 percent of the population and are generally banished to the inhospitable mountains of the north, where winters are unbearable and food is scarce even by North Korean standards.

These “undesirables” have no social mobility and no hope of advancement. Their lives revolve around a collective farm or factory—an assignment that, for the last few decades, has meant fending for themselves.

In between the loyal and the hostile is the wavering class, the ordinary people who make up about half the North Korean population. They exist in a kind of limbo. They have no chance of going to college or having a professional job, but if they’re lucky, they might secure a good assignment during their military service that will help them work their way to a slightly better standard of living.

Someone born with bad songbun has no hope of moving up the social hierarchy. The upper levels, however, can plummet all the way to the bottom if they put a foot wrong. Through this system, and the constant threat of being demoted down the classes, Kim Jong Un has been able to maintain power.

If you’re a member of the loyal class—living in Pyongyang and able to earn some money on the side of your ministry job to send your children to university—you would think twice before openly questioning whether the leader could really drive a car at age five or criticizing the decision to spend millions on nuclear weapons instead of on hospitals and schools. There is always someone to keep an eye on you and report if you’re not sufficiently devoted to the regime. At the grassroots level, it starts with the inminban, literally “people’s group,” a kind of neighborhood watch system. Each neighborhood is broken down into groups of thirty or forty households, with a leader who is always an interfering middle-aged woman. It is her job to keep an eye on what people in her assigned households are up to. North Koreans like to say that the leader of their neighborhood group is supposed to know how many chopsticks and how many spoons each house has.

She is responsible for registering overnight visitors—in North Korea, a person can’t stay at a friend or relative’s house without notifying the authorities—and often, together with the local police, conducts dead-of-night raids to ensure there are no forbidden guests or that residents like Man-bok or Jung-a are not watching South Korean movies. She inspects everyone’s state-issued radio to make sure they haven’t tuned it to anything other than the state station. She checks cell phones to make sure they don’t contain unauthorized music or photos from the outside world.

She also encourages neighbors to report on one another. If a family is thought to be eating white rice and meat suspiciously often, people might wonder how they’re making their money.

…

North Koreans live in a system where every aspect of their lives is monitored, where every infraction is recorded, where the smallest deviation from the system will result in punishment. It is ubiquitous, and it keeps many people from even raising an eyebrow at the regime. The neighborhood leader needs to report transgressions in order to stay in good stead with the higher authorities, especially the two main security agencies.

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by | 16 September 2021 · 10:58 am

Negative Human Development in Resource States

From The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa’s Wealth, by Tom Burgis (PublicAffairs, 2016), Kindle pp. 211-212:

In 1970, the year the Olympic movement expelled South Africa, the government passed legislation formally stripping blacks of their citizenship and restricting them to destitute “homelands,” and the authorities appointed a barbaric new commanding officer at Robben Island prison to watch over Mandela and his fellow inmates, South Africa produced some 62 percent of the gold mined worldwide. From the early 1970s to 1993 gold, diamonds, and other minerals accounted for between half and two-thirds of South Africa’s exports annually.

South Africa’s gold and diamonds provided the financial means for apartheid to exist. In that sense white rule was an extreme manifestation of the resource state: the harnessing of a national endowment of mineral wealth to ensure the power and prosperity of the few while the rest are cast into penury and impotence. None of Africa’s resource states today come close to the level of orchestrated subjugation of the majority that the apartheid regime achieved. Neither do they employ apartheid’s racial creed, even if ethnicity has combined poisonously with the struggle to capture resource rent in Nigeria, Angola, Guinea, and elsewhere. But as their rulers, in concert with the multinational corporations of the resource industry, horde the fruits of their nations’ oil and minerals, Africa’s resource states have come to bear a troubling resemblance to the divisions of apartheid.

While the children of eastern Congo, northern Nigeria, Guinea, and Niger waste away, the beneficiaries of the looting machine grow fat. Amartya Sen, the Nobel Prize–winning Indian economist who has examined with great insight why mass starvation occurs, writes, “The sense of distance between the ruler and the ruled—between ‘us’ and ‘them’—is a crucial feature of famines.” That same reasoning could be applied to the provision of other basic needs, including clean water and schooling. And rarely is the distance Sen describes as wide as in Africa’s resource states.

Many of Africa’s resource states experienced very high rates of economic growth during the commodity boom of the past decade. The usual measure of average incomes—GDP per head—has risen. But on closer examination such is the concentration of wealth in the hands of the ruling class that that growth has predominantly benefited those who were already rich and powerful, rendering the increase in GDP per head misleading. A more revealing picture comes from a different calculation. Each year the United Nations ranks all the countries for which it can gather sufficient data (186 in 2012) by their level of human development, things like rates of infant mortality and years of schooling. It also ranks them by GDP per head. If you subtract a country’s rank on the human development index from its rank on the GDP per head index, you get an indication of the extent to which economic growth is actually bettering the lot of the average person in that country. In countries that score zero—as Congo, Rwanda, Russia, and Portugal did in 2012—living standards are roughly where you might expect them to be, given that country’s GDP per head. People in countries with positive scores enjoy disproportionately pleasant living conditions relative to income—Cuba, Georgia, and Samoa top the table with scores of 44, 37, and 28, respectively. A negative score indicates a failure to turn national income into longer lives, better health, and more years of education for the population at large. Of the ten countries that come out worst, five are African resource states: Angola (–35), Gabon (–40), South Africa (–42), Botswana (–55), and Equatorial Guinea.

Equatorial Guinea’s score (–97), comfortably the worst in the world, is all the more remarkable because its GDP per head is close to $30,000 a year, not far below the level of Spain or New Zealand and seventy times that of Congo.

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by | 13 September 2021 · 7:08 am

How Multinationals Dodge Taxes

From The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa’s Wealth, by Tom Burgis (PublicAffairs, 2016), Kindle pp. 165-167:

Two-thirds of trade happens within multinational corporations. To a large extent those companies decide where to pay taxes on which portions of their earnings. That leaves ample scope to avoid paying taxes anywhere or to pay taxes at a rate far below what purely domestic companies pay.

Imagine a multinational company making rubber chickens, called Fowl Play Incorporated. Fowl Play’s headquarters and most of its customers are in the United States. A subsidiary, Fowl Play Cameroon, runs a rubber plantation in Cameroon. The rubber is shipped to a factory in China, owned by another subsidiary, Fowl Play China, where it is made into rubber chickens and packaged. The rubber chickens are shipped to Fowl Play’s parent company in the United States, which sells them to mainly US customers.

Fowl Play could simply pay taxes in each location based on an honest assessment of the proportion of its income that accrues there. But it has a duty to its shareholders to maximize returns, and its executives want the bonuses that come from turning big profits, so its accountants are instructed to minimize the effective tax rate Fowl Play pays by booking more revenues in places with low tax rates and fewer revenues in places with high tax rates. If, for example, Fowl Play wanted to reduce its tax liability in Cameroon and the United States by shifting profits to China, where it has been granted a tax holiday to build its factory, it would undervalue the price at which the rubber is sold from the Cameroonian subsidiary to the Chinese one, then overvalue the price at which the Chinese subsidiary sells the finished rubber chickens to the parent company in the United States. All this happens within one company and bears scant relation to the actual costs involved. The result is that the group’s overall effective tax rate is much lower than it would have been had it apportioned profits fairly. Many such tax maneuvers are perfectly legal. When it is done ethically “transfer pricing,” as the technique in this example is known, uses the same prices when selling goods and services within one company as when selling between companies at market rates. But the ruses to fiddle transfer pricing are legion. A mining company might tweak the value of machinery it ships in from abroad, or an oil company might charge a subsidiary a fortune to use the parent’s corporate logo.

Suppose Fowl Play gets even cannier. It creates another subsidiary, this time in the British Virgin Islands, one of the tax havens where the rate of corporation tax is zero. Fowl Play BVI extends a loan to the Cameroonian subsidiary at an astronomical interest rate. The Cameroonian subsidiary’s profits are canceled out by the interest payments on the loan, which accrue, untaxed, to Fowl Play BVI. And all the while Fowl Play and the rubber chicken industry’s lobbyists can loudly warn Cameroon, China, and the United States that, should they try to raise taxes or clamp down on fiddling, the company could move its business, and the attendant jobs, elsewhere. (The BVI company is only a piece of paper and doesn’t employ anyone, but then there is no need to threaten the British Virgin Islands—its tax rate could not be lower.)

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by | 10 September 2021 · 6:13 am

New African Infrastructure for Whom?

From The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa’s Wealth, by Tom Burgis (PublicAffairs, 2016), Kindle pp. 147-149:

It is too simplistic to see China’s quest for African resources as a Manichean struggle for nature’s treasure between East and West. There is competition, but there is also cooperation in the business of resource extraction. And for all its increased attractiveness to rival investors from overseas, much of Africa remains locked at the foot of the global economy.

Ibrahim Iddi Ango, the industrialist who headed Niger’s chamber of commerce, told me that Niger’s rulers had sold the country short in their negotiations with the Chinese. “They need strategic resources. You must say, ‘You are interested in that? These are the conditions. First, you must use local labor. Second, all the needs you have—for example, the transit—you must use at a minimum 50 percent local operators.’ But when they came the government said none of this. The state took a percentage of the businesses and let the Chinese do what they want.” A brief window of opportunity to use China’s desire for African minerals to insist on securing for Niger the skills and infrastructure that might help to salve the resource curse by broadening the economy was closing. “To diversify, it’s central,” Iddi Ango said—and with good reason. Niger is among the African states most acutely dependent on a handful of raw commodity exports, their economic fortunes yoked to the whims of far-off consumers. On the African Development Bank’s index, where a higher score indicates a more diversified economy, relatively wealthy countries not shackled to the resource trade such as Mauritius and Morocco score 22 and 41, respectively. The average for the whole of Africa, including more prosperous North Africa, is 4.8. The most oil-dependent states, Angola and Chad, record the lowest scores, 1.1. Niger does only marginally better, with a score of 2.4.

“But if you let China do what it wants—as many African countries have—they pay for the oil or the resources and use Chinese labor, Chinese trucks. It’s a big problem,” Iddi Ango said. “They are coming because the resources are here. This moment will not be repeated. We can’t miss it. When the uranium or the oil is finished, they will leave.”

The fall of Tandja demonstrated the limits of China’s readiness to get involved in domestic politics to protect African allies. But Xia Huang, the Chinese ambassador in Niamey, encapsulated how China’s readiness to spend and build allowed Beijing to gain a foothold sufficiently strong that its interests could withstand a coup against an ally. “Today there is a bridge between the two sides of the River Niger,” he told me. “But there is also a bridge that links China and Niger.”

Yet the true value of China’s offer to guide Africa on a path to economic diversification and industrialization—the road that led the rich world to prosperity—rests on whether its construction spree is geared primarily toward cultivating the rulers who govern access to resources or toward broadening the opportunities of the population at large. Neither railways that simply connect Chinese-owned mines to Chinese-built ports for the export of commodities nor vanity projects of great cost but little economic usefulness will lift resource states’ inhabitants from their poverty. Martyn Davies, the chief executive of a South African consultancy called Frontier Advisory who has worked as an adviser on Chinese deals in Africa, told me, “When you have a commodity-driven economy, where a lot of people are excluded, it’s a silo economy. It’s very difficult to build infrastructure that supports inclusive growth. Is Chinese-financed infrastructure going to provide diversification? Which comes first?” He added, “African governments should never assume that responsibility for the development of our continent has been outsourced to Beijing.”

Beijing appears to be undercutting its side of the deal. Chinese goods like the counterfeit textiles flooding into northern Nigeria drown out hopes for industrialization, regardless of how many roads and railways Chinese companies lay. Lamido Sanusi, governor of Nigeria’s central bank from 2009 to 2014, put it well: “So China takes our primary goods and sells us manufactured ones. This was also the essence of colonialism. The British went to Africa and India to secure raw materials and markets. Africa is now willingly opening itself up to a new form of imperialism.”

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Filed under Africa, China, economics, industry, labor, Niger