A Tale of Two Cities

• 06-May-21
• admin

The revulsion most people around the world felt when the bastion of democracy, the US Capitol, was swarmed by insurrectionists on Jan 6, 2021 should evoke memories of another event on the other side of the world just 18 months ago. This was the breakdown of law and order in Hong Kong, on July 1, 2019 when the Territory’s Legislative Council was also under assault by a violent crowd, and occupied in much the same way as the US Capitol was. Rioting, vandalism and insurrection happened in two of the most developed places on the planet, Hong Kong and Washington DC, places where such violence was totally unexpected before it happened. By all standards, both events should not be tolerated and its perpetrators condemned.

It is a tale of two cities that has more similarities than differences. In the US, although the rioting happened only on Capitol grounds, this was only the focal point of developments in the country itself. Our analysis in this write-up would therefore apply to the country as a whole.

Since the HK turmoil has ended peacefully, it may be useful to see if there are parallels to help us guess at how the current events in America will end. From what we can see, both in the instance of HK, and from an understanding of the background factors in the Capitol insurrection, the unrest in America may take some time yet to die down. But it will die.

 

 

 

Photo by Markus Spiske from Pexels

 

The events which happened in HK between May 2019 and Feb 2020 are very well covered in the media and there is no need to regurgitate the facts here. The coverage of the Washington DC insurrection, on the other hand, is still ongoing, and there are still a lot of unknowns to be disclosed by investigators, the press and perhaps, the perpetrators themselves. It is too early to do a “final” analysis on the US riots.

At this time, the first conclusion that can be made is that both situations have obvious political drivers. The politics are different. However, there are common economic factors behind both these events of unexpected violence in ordinarily peaceful societies, and their eruption came as a shock to all participants and observers. A long term deterioration of the economic condition of the people who form the rank and file of the rioters is the most important cause for both events. Throughout human history, civil war typically occurs during a time of great poverty among the peasants.

The basic economic problem in both societies is the severe unequal distribution of wealth. In the case of Hong Kong, the economic problem arises from a mismanagement of the property sector in the Territory which marginalized at least 50 percent of the population who cannot afford the roof over their heads however hard they work, and even if they graduate from university. This has created despair among the poor, as living conditions are atrocious by the standards of any rich city in the world. Secondarily, because of a mistaken policy shortly after 1997 by the HK government to emphasize Cantonese as a medium of instruction in its schools, twenty years later, many young people have become uncompetitive in a world that uses English and Mandarin. So the employability of the young is worsening. Contrasted against this, the upper middle class and the rich continue to push property prices up and enjoy high standards of living side by side with the poor, and the discontent of the latter has reached boiling point. This is the fuel that fed the flames of insurrection in HK.

In America, essentially, it was the same underlying cause. For a couple of decades now since the end of the Cold War, the economy has seen a number of slow moving but impactful changes. On the one hand, there has been world changing innovations in the economy including e-commerce, automation in manufacturing and IT technologies, making all economic activity increasingly efficient, less labour intensive. The world beating entrepreneurial and the supporting STEM talent that has made this happen belong to an upper class segment of the population that have the highest income/wealth levels in the country and indeed the world.

On the other hand, the Americans who do not have the skillsets to participate in this extremely competitive economy have basically stagnated. Trump came along and lied to them about why they are left behind. He blamed it on urban elites generally designated as Democrats, the media, a “deep state” in the government and China. This segment of the population is sizeable, about 50 percent of the population living mostly outside of cities and are clueless why they cannot get the enviable standard of living of their fellow Americans.

There are also cultural aspects to this, including a misplaced self confidence that they are citizens of a shining city on the hill and are not themselves to be faulted for lagging in careers, incomes and wealth. This problem of economic inequality has also led to envy and a longing for a society where blue collar work was previously well rewarded. With the pandemic recession, they are hurting and hating.

The basic cause of the riots in HK and Washington DC is the same – it was a poor peasants’ revolt.

The second underlying cause of the insurrection in the two places is tribalism. The HK mobs are all Cantonese speaking locals. They perceive the local government (even though they are also Cantonese speaking locals) as agents of the Mandarin-speaking Mainland. The Mainlanders have become regarded as usurpers of things these localists desire to remain unchanged – a local HK lifestyle which has marginally different characteristics other than the spoken language. The increasing integration of HK into Mainland China since 1997 is viewed with great suspicion, because the HK that had its heyday under British Administration has to change. They don’t like that. They resented the influx of mainlanders into HK, to take up scarce hospital beds, buy baby milk powder and pushing up the price of apartments. The HKers who are not into the economic benefits of working in the Greater China market, see themselves as being marginalized in their own home, and they deeply resent it. They are after all, Cantonese speaking HKers and the oppressors are Mandarin speakers representing the Communist Party of China. They don’t see it like the rest of the world – they are all Chinese, citizens in the same country.

The insurrectionists in the US Capitol were also mostly of the same kind – white folks from the American underclass. Until more is known about these people, we can surmise from previous broad descriptions of the Trump loyalists as non-college educated whites living mostly in rural America. There are of course exceptions to this general picture, but it is clear they have common characteristics. They also belong to a tribe.

Finally, if there is one thing that is common among the two groups of insurrectionists in HK and America, it is an education handicap. In the US, the common education denominator is the lack of a college degree. It can be postulated that when people go to college, they become more liberal, more tolerant of other people’s opinions because university trains people to be more enquiring and gives people the ability to change their minds. That’s progressive, by definition. It is the antithesis of a frame of mind that wants the world to remain the same, that life goes on forever in the same old ways – conservatism simply defined. The insurrectionists in America did not get the exposure to the benefits of an education that enables them to adapt to an ever changing world, in line with technological and societal improvements to the human experience. That lack of education limits their mental horizons.

The inadequacy of their education is also true of the rioters in HK. They have been the recipients of a post colonial education system that emphasizes localism. Firstly, the schools in HK have never adopted Mandarin as the medium of teaching, preferring to use Cantonese which has no international appeal. It is just a dialect, albeit a major one within the Chinese nation. They do not teach history that covers the entire country, China, to which the territory belongs. Their books are still steeped in colonial tradition, where the British administrators had emphasized a world bifurcated in Cold War terms, casting China as an evil empire, part of the global communist threat to the “free and democratic societies” to which HK belongs. No word about China’s century of humiliation, that started with the British’s despicable drug-dealing role in the Opium Wars. Worse of all, they are given no insight to the profound changes in the Mainland, wrought by the CCP.

So the current generation of youngsters brought up since 1997 has been brain-washed by lopsided, if not biased, textbooks towards the country in which HK is really an integral part, both historically as well as by definition of its sovereignty set forth in every possible legal definition. It is a distorted situation when a couple of million of Chinese people in HK think of colonial white Britain as their sovereign, which has been actually been most responsible for inflicting untold misery on China during the years from the mid 19th century to just before WW2. This anomaly is a reflection of a politically warped education system.

The inability of the young in HK, imbibed with these distorted ideas, to understand the realities of the 21st Century, has led to the core of the pro-democracy movement in HK thinking they are being occupied by a foreign power. They are the victims of vicious propaganda.

As such, while there are vast differences between the HK and Capitol insurrectionists, the similarities are also not surprising. To sum it up, the insurrectionists belong to an economic underclass, politically deviant because of brain washing, made possible by the lack of an analytical education, which would have enabled them to avoid being lied to and led like sheep. Add to this distorted ideas from social media feeding on a tribalism which sells them the easy belief that they are not at fault for the misery they are suffering, and we have a dispirited class looking for leadership. In both cases, they are falsely led up the garden path by opportunists into a mindset which bands them together to fight perceived oppressors out to destroy the tribe’s traditions.

What are the implications of this analysis? The HK problem is temporarily contained, not solved. Their sovereign, which is the CCP, has capped the insurrection peacefully. It is of course not to the satisfaction of the so-called democracy movement in HK, but since they are not in a position, being economically and militarily outclassed by China, to change that state of political defeat. That is the current reality. China did not reimpose order through military means, and the rioters did themselves in when they showed that they were far more violent than the people they are fighting against, when they became intolerant of different views. For their youthful bravado, they were easily succumbed when they find themselves caught to defend fixed positions in Nov 2019 at the HK Polytechnic and in just a matter of a couple of days, they are soundly and ignominiously defeated. No heroics, no defiant last stand; just a bunch of scared kids looking to escape a jail sentence for rioting.

For the immediate future, there will be no more riots, because a legal structure (the national security law) is now in place to prevent that. In another ten years, the impending integration into China will gain full cognizance and the inevitability of integration will become apparent. It is a small village HKers are living in, with no real political possibility of their changing anything, and unfortunately, they will have to comply with the dictates of the village headman, China.

On the other side of the political divide, to solve the problem of economic disparity, there will have to be urgent solutions in the housing sector and of giving the Cantonese speaking underclass the ability to earn a living in the booming economy to the north, especially in the Greater Bay area of the Pearl River Delta. Whether these disenfranchised people in HK will get to see the light and change to accept their political reality and rightfully claim a stake in the economic pie, is what enlightened local government and Beijing’s magnanimity can effect.

The problem in America is much more entrenched. Beyond those who are violent, the rest of the economically disadvantaged deserve to have their hardships looked into. Trump was an opportunist who did not have any solutions for his followers, but in pretending to give them a better life, he fraudulently persuaded a voiceless group that there is hope. That hope is not the Trumpian solution that all the misery is due to factors that come from external forces; that hope for a better living can avoid transformation of the tribe's core values. Nevertheless, this group now has political power, and the newly elected Biden Administration has to do something about it. There are some obvious ways :

1) Minimize the rhetoric of what is the role of government in a capitalist economy. Participation in the imperfect capitalist economy by government is not necessarily communism or socialism. A kind of Marshall Plan to help the displaced underclass is not Stalinism. There is no perfect economic ideology in the history of mankind and the American system is certainly far from it. It is in fact on the verge of breakdown. Government must step in.

2) Minimize the idea that conservatism, which now represents a stagnation of human skills, and individualism getting in the way of collaborative economic systems, is a successful model. People must be made to see that conservatism blocks human innovation and hence the progress of societal wellbeing.

3) Targeted social spending is necessary. This will not be frivolous spending that will repeat the largesse of the Great Society years, but to give a hand to those badly affected by the pandemic. It is the same idea as having everybody on the same sports team moving in the direction of one goal, as a team rather than each in the team trying to score goals. In a single nation, where most citizens must work together to achieve common economic goals, teamwork is as necessary as a sports team working to score. If teamwork is needed in sports, why not in a national economy? Individualism is not the best way to develop a 21st century economy.

4) Everyone in the economy must contribute to its functioning through tax contributions. The design of taxation systems is complex. Too high a tax level will disincentivise work and too low a level on the rich, leads to stratification of social classes. A bad tax system will break apart a unified society. This is a problem which America has to confront, rather than passing off the simplistic argument that high taxes is the nemesis of a free capitalist society. A sophisticated modern society cannot be built on simplistic notions. Tax reform is a necessity.

5) These tax and spending reforms and economic restructuring in favour of collaborative cohesion rather than individualism have to be conducted by the elites in society who can see what happens three steps before it does. People not endowed to do that should not complain about how nature divines some who can do it; and capitalism allows for different rewards for different abilities. The man-made rhetoric that creates conflict between the elites and the rest is not productive. In every properly functioning society, elites must take the lead, and leadership cannot rest with those who can be brainwashed by social media untruths. They will also need to de-sensitize the fear of “elites” because this is actually where leadership lies, now and in the future.

6) Beyond such philosophical issues, the Americans have to develop a new economy that unfortunately for its pride, has to mimic China’s. Infrastructure renewal needs to be a big part of new economic activity.

7) Part of the American economy is the global champion in technology and finance, and it can stay that way, even in the face of competition from a confident and ascendant China. China is not aiming to eat its lunch, and is only trying to do well for its own citizenry, which it has a right to do. Americans must realize that it is no longer in a position militarily to maintain itself as the only “haves” relative to the rest of the world, with the rest as “have-nots”. The subtle underpinnings of being the only shining city on the hill, defended by a powerful military, is a notion being challenged by China, and this battle has been lost. Just as the “have-nots” in its own society are trying to break free from the shackles of capitalism's underclass, so would the rest of the world, previously underprivileged. That’s the new global reality. America has to adjust peacefully to global competition where each country has to find its competitive advantages in enlarged trade, and economic policy must find the intermediate solutions that bring adjustment to people affected by frictional unemployment. There is no military solution in this adjustment when military power is evenly distributed.

8) On its own, America has the means and resources to adjust to the new world, but they are kept in silos which will split the country. There is the advanced America which is the most sophisticated of all nations on Planet Earth, but this has to learn to unlock its riches to help its own “have nots” in order to stay on top. Wealth inequality, if not changed, will split and destroy the nation.

How it is going to do that will depend on the new leadership that will take over from the utter incompetence that has dominated the country for a good four years. It is too early to know.

Finally, the biggest takeaway from the tale of these two cities that have seen insurrection in the last two years is that durable political movements cannot be built on lies. In HK, the pro-democracy movement lied about almost everything – from their interpretation of the Basic Law, how evil the CCP is, the Extradiction Bill, police brutality, the faked death toll from police action and even the size of its crowds showing up at demonstrations. Most importantly, their moral high ground was unsustainable when they cannot demonstrate that the very democracy they advocate is tolerant of competing viewpoints by violently suppressing them. The HK pro-democracy movement ended in a few days of unsustainable naivety in the pathetic HK Polytechnic defense. It was a clear terminal event.

In the United States, the solutions that Trump promised his disenfranchised supporters were also based on lies. The biggest lies of all came in the last two months, when he tried to bulldoze falsehoods onto his base about election fraud and the ability of his party to change the outcome through the courts and Congressional action. His final lie that he would “march with” his followers up Pennsylvania Avenue to the Capitol has ended in infamy. The movement of Idiots who cannot tell fact from fantasy now have to understand that to regain respect and a viable place in the economy, they have to stop blaming others, get an education that liberates their minds from self-aggrandizement, and to gain the skills needed In global trade.

The history of insurrection is that there is only one chance at change. If they succeed, insurrection brings change for better or worse. If insurrection fails, the movement that attempts it will fail. The HK insurrection has already failed and the pro-democracy movement will fade away. Unfortunately it may also be the fatal blow for the development of a HK that can gain from leadership in the Greater Bay Area project that was intended for it. That benefit will now accrue to Shenzhen. HK’s glorious days in the sun may have died with the embers at HK Polytechnic.

The Trump insurgency of 2020 is also practically over. It may take another year or so for the Trumpian movement to dissipate, but legalistic America will hunt down the militias that exist on the fringe of society that contributed to insurrection. Racism and a tendency towards violence will not end, and will just slip back into social invisibility. Trump having lost all his megaphones, the bully pulpit of the Presidency, will just be a private citizen who is not even welcome in his home town of NYC and his adopted home in Florida. He will probably be in lots of legal trouble after the immunity of the White House, and if the Great Leader goes down, so will the movement he has built on lies. It is only a matter of time.

 

 

Wai Cheong

Investment Committee

 

The writer has been in financial services for more than forty years. He graduated with First Class Honours in Economics and Statistics, winning a prize in 1976 for being top student for the whole university in his year. He also holds an MBA with Honors from the University of Chicago. He is a Chartered Financial Analyst.