Market fundamentalism

The free market has helped Hong Kong prosper, but it is also the cause of many of its problems today, including market dominance by a few firms in some industries (real estate, telephone, and autos come to mind) and polarization between rich and poor. Hong Kong has a number of very vocal economists who nevertheless continuously spout the Economics Party Line that government is bad and the free market is good.  A recent column in the SCMP is a good example; Tom Holland writes (17 April 2012) "Government is the cause of market failure, not its solution." In fairness, he was responding to a strikingly interventionist statement by the Chief Executive-elect C.Y. Leung. The new CE in waiting is reported to have said, "the government should intervene to prevent market failure and keep property prices at a level affordable to the public."  Holland argues that if we look at the recent housing crisis in the US, we see the opposite: "more often than not it's government interference that causes markets to fail."  Note the word "interference," which creates the illusion that the market is a natural thing, something that should not be tampered with.


He argues:

The popular narrative insists the crisis was caused by the excessive greed of investment bankers, abetted by hands-off politicians in thrall to Wall Street's financial donations.

It's a simple story, with easily identifiable villains. And it has an obvious solution: more government involvement in markets.

He then argues that in fact the cause is too much government interference, which he traces back to the Franklin administration's programs to encourage home ownership. And he explains the timing of the "take-off" in home values in 1995 to government programs intended to help minorities.

In 1995, Washington tweaked the Community Reinvestment Act to press banks into giving mortgages to borrowers from low income areas, threatening to penalise them if they failed to lend equally to ethnic minorities.

At the same time, government-sponsored enterprises like Fannie Mae and Freddie Mac were instructed to increase the proportion of their portfolios devoted to mortgage loans in poor neighbourhoods.

He recognizes that government programs were important to help minorities buy homes in poor neighborhoods, because banks thought they were less likely to repay loans. (He does not address the research that shows that this was not true, especially when class is factored out, meaning that these government programs were not taking on more risk but fixing a market malfunction due to racism.)  And then he says, "The intention was worthy enough: to make home ownership more affordable. But affordability was achieved only by abandoning credit standards as banks reduced the downpayments required on home purchases to zero."

He thus blames the "explosion of 'sub-prime' lending to borrowers who had no equity stakes in their homes and who were always likely to struggle to meet their debt service obligations."

So he blames the "sub-prime" crisis on political manipulation of the market to allow poor people to buy more house than they could afford, not on the bankers that gave people these loans.  He blames the crisis on government policies that promote home ownership, not on the securitization of real estate debt and the invention of CDOs and credit default swaps that became prominent in the 1990s.


Certainly, the problem is complex, and the factors he notes distorted the market. Most important, Fannie Mae and Freddie Mac spent huge amounts (and earned a lot of patronage money for their politically connected executives) to assure that they could do business.


But surely the big change in the 1990s was securitization; loans generated by one bank were sold on to other investors, so that the issuing bank no longer cared if the loan failed.  It is astonishing that economists like Holland refuse to see securitization without regulation as a problem. They define anything new and novel invented by the capitalist sector as "progress."  

I think an anthropological approach that sees these as cultural institutions that evolve and need to be maintained is more productive.


It is hard, sometimes, not to see economists as just the cheerleaders for the capitalist elite. They cling to their fundamentalist orthodoxy regardless of the facts. Though initially  Alan Greenspan said the housing crisis challenged his beliefs, even he has gotten back on message. The belief that free markets are natural and should be "left alone" is deep in economics. It is amazing that even the current crisis does not shake that belief. That is a sign of it being like a fundamentalist religion.

Admissions Exercise

Spring is time for admissions exercises for our PhD, MPhil, and MA programs. I have long known that there are interesting discussions on the web where mainland students exchange information on our teachers and our interviews. Some kind souls post a detailed description of their interview to help others prepare.  What is astonishing is how much of the information is simply wrong. Also fascinating is how many students misunderstand what is going on. I did a search on one of the main bulletin boards for these kinds of discussions in China and found a candidate that we interviewed in the past few years who posted her side of the interview.  I have my notes of the interview and they are quite different from her view. I will go through her description to identify the ways our perceptions (and positions, of course) were very different.

The interview was conducted on skype, with video. She begins, as many posts do, by commenting that we started late. It is true that we sometimes run as much as 20 minutes late, but I'm surprised that students expect such precision in the interviews. Then the student admits that she did not catch the name of my "assistant"--actually my colleague!  (Note to me for future interviews: speak more slowly in the introduction and repeat the name in Chinese to be sure students are clear who is there). The student then comments, as others do, that we did not allow her to introduce herself. This is interesting because, given that we have read the file (including personal statement, transcripts, letters of recommendation, writing sample), a self-introduction seems rather superfluous.  (A student has explained that they are told, in training for interviews with foreign enterprises in China, that normally an interview begins with a self-introduction.) In fact, we always try to start with a relatively easy question to calm the student down. But she did not view it like that, saying that when we "directly asked her why she wanted to study anthropology," she panicked, and gave a foolish answer about theory and practice.  Then she says we asked her about her long-term plans. She says she choked: "I started to talk nonsense, the most horribly, I did not know what to think, ... "a classic case of brain freeze."

"Then they started on some academic questions." She describes how we picked The Interpretation of Cultures, one of the books mentioned in her statement of purpose, and asked her what the book was about and why it was important. (Wow, we did that? That's a pretty good question!)  She says that she had prepared an answer to this question beforehand, "but I don't know why but after my answer, he turned with an inscrutable face to his assistant. Is it possible I got the wrong book??? It made me suddenly lose all confidence."  Actually, my turning to my colleague was my nonverbal way of saying, "Your turn."

She continues, "Then it was the woman's turn to ask questions" (thereby proving my point). The student was put out because we asked her questions about her term paper, which was about moral tales and sayings, so she did not know how to talk about that in English, she said. She comments, "..continue falling apart."  At this point in reading her description, I feel bad that the student is under so much pressure, and find it hard to believe. She has viewed everything we do to minimize pressure as causing more stress. She tries to deflect the question by commenting on how difficult it is to get English books in Chinese libraries. Interestingly, despite the fact that we are on skype, she detects that my colleague and I give an understanding smile, but she does not know why, and says she is speechless. In fact, we are probably smirking because we know (and surely she also knows), that many books are available in China for free online in high quality PDF copies. These are not scanned versions, but the real original PDFs.  Applicants regularly complain that they can't get English books in China, and we may have smiled because we can't very well tell them to download books illegally, but we know that interested students can obtain all the books they need or want. But we did not press her on this because she was doing well overall.

The student then notes that at the end, we asked her if she had any questions, and that she asked about fieldtrips. We told her there is a fieldtrip at the end of the year for MA students but it is self-paying, and she took that to be another sign of the discrimination against MA students. But this is not true. We usually do not take the research program students on field trips, and in any case, all such trips are self-paying (and they just cover the cost--we do not "make money" on these trips). Indeed, we go to a lot of trouble to try to avoid making our MA students second-class citizens, as they often are in major US universities. But it is easy to misunderstand the situation while applying. Our exit surveys show students are generally satisfied.

What is surprising is that despite the agony and angst expressed by this candidate, my notes show that her English was very good, and that her answers were not bad.  She was a good candidate. In answer to a question about Geertz, she said "culture is like a net" (well, he said "web," but that is close enough for admission to the MA program, since it is designed for people interested in anthropology who have not studied it previously). She was a good candidate and we certainly did not intend to make her life miserable. One person I discussed this with suggested her tone was perhaps exaggerated since, as a female and in Chinese culture, she could not very well say the interview went well. There is probably nothing that can be done to make interviews less stressful. At least most messages have me as the "good cop."

The use of these websites to share information is interesting because it reflects a Chinese tendency to go through connections rather than public information. I remember in the mid 1980s showing my friends in Taipei how to use the Yellow Pages. They did not know what that was, and once they saw it, they said they would never use such a book; they would ask their friends for a recommendation instead.  One of our students from China has mentioned that friends will ask her for information on applying to other departments at CUHK. Even though all the information is posted on the web, they ask her for help, assuming that there might be some secrets or tricks that she can impart. The websites are also interesting because they require altruism; those who post do not get anything in return, except messages of thanks from later applicants. From a strictly competitive point of view, they might even think that helping others to have a better interview might make their interview performance look worse by comparison. It is a good sign of a developing civil society (or at least civility) that students share this kind of information. I just wish it were more accurate. For accuracy, however, they should really go to our department website.

Sports and violence

In honor of the Hong Kong Sevens taking place this week, I provide links to two very negative views on sport.  Most famous is George Orwell's essay "The Sporting Spirit" in which he notes,

Serious sport has nothing to do with fair play. It is bound up with hatred, jealousy, boastfulness, disregard of all rules and sadistic pleasure in witnessing violence: in other words it is war minus the shooting.

Dominic Hobson on the BBC website talks about "The dark side of sport."

The reason the HK Sevens is different is that there are 24 countries represented, and in no game does the crowd cheer predominantly for one team (except, perhaps, for Hong Kong--everyone cheers for the home team).  Visitors from the UK or New Zealand who sit together in clusters of perhaps 12 people are surrounded by fans from other countries. This keeps every group from behaving in an excessively jingoistic manner. It also helps, I suspect, that the players get to know each other. They play in 9 tournaments this season, and there is a banquet after each one. Though winning is important for each team, it is more difficult to demonize and dehumanize the opponent, when you've met him before and socialized with him.

In any case, those who know the Sevens like it precisely because it is NOT like what Orwell and Hobson say. It is worth thinking more about why it is different.

Apple's labor problems

All users of Apple products should be more concerned about how those products are made. In fact, all users of all computer products should be, since Foxconn makes computers and other products for Dell, Samsung, and many other  manufacturers.  Among the best story tellers on the issue is Mike Daisey, and he takes David Pogue to task for his whitewashing of Apple in a good blog here, noting in passing that since Pogue has several books on Apple products, he has a conflict of interest. The problem is, we all do, since we all use their products. Daisey is great because he is an  unabashed Apple fan. I'm a Pogue fan, but I am disappointed by his Times column on this, and Daisey does a great job of tearing Pogue's excuses apart.  It is good that this issue is getting more and more exposure, because only when shoppers start thinking about it, and demanding changes, will changes be made by Apple. But are we really willing to pay more for our gadgets?  Other good links include this Henry Blodgett conversation on MSNBC, and most dramatically, an episode from January on This American Life featuring the one-man show on Apple by Mike Daisey.  The SACOM petition on Apple is here. Most people will feel that they can't make a difference, but then when you hear about labor organizers taking huge risks in China, how can we who believe we live in freedom not do things to support them?

Anti-Mainlander Rumors in Hong Kong

The level of anti-mainlander sentiment in Hong Kong has gotten close to the danger level. In the past two weeks, since the government announced a scheme to allow Hong Kong cars to drive in the mainland and mainlander cars to come to Hong Kong, people have been furious about this, more angry than at the number of mainlander women coming to Hong Kong to give birth. Even though the number of cars would be small (50 per day for a maximum of 7 days, so a total maximum of 350 cars in HK at any one time), people are up in arms. People comment on how dangerous it will be with mainlanders driving on the left side, but in cars designed for the right side, and how mainlanders don't follow the rules. There are even photos of the few mainland cars that do now have licenses to enter HK (which are placed below their Guangdong Province license plates) making illegal turns.

A sign of a new dangerous level in tension comes from rumors circulating on the web and a story on Yahoo News that a "gang" of mainlanders tried to kidnap a 3-year old girl. The story is illogical and vague, claiming that a man and a woman and 13-year old boy tried to walk away with a 3-year old girl who was crying loudly, but they somehow got away. A mother then appeared with a stroller saying the girl was hers. The story has all the marks of a moral panic type rumor, including lack of any evidence, or witnesses.

With worries about the world economy, about who is going to be the next Chief Executive (and with the two leading candidates embroiled in scandal accusations, and our current CE embarrassed and humiliated and being found running around with tycoons and Macau gambling moguls), there is plenty to be worried about. Hong Kongers keep waiting to see who Beijing will give the nod to; so far they have not indicated a preference, which is actually good, and allows "HK people to run HK."  But the uncertainty is leading to all sorts of conspiracy theories.

Mainlanders used to be looked down upon as "A-Chan" bumpkins; now they come in the thousands to shop in Hong Kong's cheaper, duty-free stores, especially in luxury goods stores, which are so popular with tourists that one must line up to enter.  Resentment is rising, and many see mainlanders as driven by money. In their moral condemnation of mainlanders, they are willing to believe a rather illogical rumor of an attempted kidnapping. (As one poster noted in an online forum, if mainlanders wanted to kidnap a child, it would be a lot easier to do it in the mainland rather than in HK). But the rumor does provide evidence that all is not well in HK; there  is a lot of anxiety and resentment.

Role of Government

The New York Times article "Middle Class Criticizes Aid Even as It Gets More" is fascinating.  (Here is the abbreviated Columbus Dispatch version). Contrary to theories that voters in democracies will always want more and more benefits from government, it shows data that in the past 30 years, those who are most against government spending are voters from states that benefit the most from state largesse.

Support for Republican candidates, who generally promise to cut government spending, has increased since 1980 in states where the federal government spends more than it collects. The greater the dependence, the greater the support for Republican candidates.

Conversely, states that pay more in taxes than they receive in benefits tend to support Democratic candidates. And Lacy found that the pattern could not be explained by demographics or social issues.

It suggests that there are values and worldviews involved, leading voters to vote against their economic interests.  It seems that resentment of others' economic improvement, and frustration at the (lower) middle-class' stagnation, leads many to blame the government.

This is very interesting because from an Asian perspective, it is hard to understand where the Tea Party and others in the US get their animus against the government.  Especially in China, but even in supposedly laissez-faire Hong Kong, most people look to the state to solve many problems.  Of course people also worry about government corruption, and official collusion with business, but the idea that people can solve their own problems is not held up as an ideal like it is in the US.  The question of the role of the state in promoting economic growth is one of the big questions of the past century, and continues to be so.

Innumeracy

The inability of the press to report poll and survey results is astonishing. The most recent glaring example comes from the BBC.  In an online article on interracial marriage,  the second paragraph reads:

The study, done by Pew Research Center also shows increasing public acceptance of intermarriage, with 43% saying it as been a societal change for the better.

I actually found this rather alarming, in that it suggests 57% of Americans either thought it was a change for the worse or were not sure.  But as I suspected, it is the lack of understanding of statistics (or at least poor writing) that led to this unfortunate sentence.  The beauty of the web is that I can go to the original, and find out what they actually said:

More than four-in-ten Americans (43%) say that more people of different races marrying each other has been a change for the better in our society, while 11% say it has been a change for the worse and 44% say it has made no difference.

In fact, the "made no difference" is probably the "correct" non-racial answer; "for the better" is a racial PC answer. The original report also goes on to indicate that this is part of a major change in attitudes over the past 25 years:

Also, nearly two-thirds of Americans (63%) say it “would be fine” with them if a member of their own family were to marry someone outside their own racial or ethnic group. In 1986, the public was divided about this. Nearly three-in-ten Americans (28%) said people of different races marrying each other was not acceptable for anyone, and an additional 37% said this may be acceptable for others, but not for themselves. Only one-third of the public (33%) viewed intermarriage as acceptable for everyone.

 This is also reported in the BBC report, but the contrast is not made as clearly. This is not entirely the BBC's fault, because the questions were apparently not the same in the two surveys.

The Pew report itself is worth reading; among the interesting discoveries (quoting the executive summary):

Gender patterns in intermarriage vary widely. About 24% of all black male newlyweds in 2010 married outside their race, compared with just 9% of black female newlyweds. Among Asians, the gender pattern runs the other way. About 36% of Asian female newlyweds married outside their race in 2010, compared with just 17% of Asian male newlyweds. Intermarriage rates among white and Hispanic newlyweds do not vary by gender.

About one-in-five (22%) of all newlyweds in Western states married someone of a different race or ethnicity between 2008 and 2010, compared with 14% in the South, 13% in the Northeast and 11% in the Midwest.

More than one-third of Americans (35%) say that a member of their immediate family or a close relative is currently married to someone of a different race.