Published on Oct 8, 2016
How does paper money get introduced? Who has to lose their head to do so? And what does Marco Polo have to do with anything???
October 31, 2016
October 9, 2016
Published on 8 Oct 2016
In another exiting episode of Out Of The Ether, Indy reads a great comment by a Russian fan about the situation of Chinese workers in Russia.
July 30, 2016
Published on 23 Jul 2016
Order the limited edition Opium Wars wall scroll before it leaves forever on July 27! http://bit.ly/2a138ur
James talks about our mistakes, and adds additional stories, for Federico da Montefeltro and the First Opium War!
Quick story about Federico da Montefeltro: after losing an eye in a jousting accident, he ordered his doctor to cut a divot out of his nose so that his remaining eye had a better view and he could still fight in battles.
Now on to the Opium War! The Macartney expedition did not draw on the knowledge of Jesuit missionaries or even merchants who were familiar with Chinese court customs, because the British felt that a noble like Macartney was the only fitting representative. He didn’t come prepared to handle the kowtow, and he didn’t understand that the Chinese would have been more interested in British agricultural tech than they were in trinkets. James reads the disdainful letter which the Daoguang Emperor wrote to King George III in response to the embassy. There also happened to be a political upheaval in the Chinese palace at the time, so if the British had arrived sooner, they may have met with a different result and avoided the Opium Wars entirely. Once the war came to a head, it caused great division in Britain. Even though it was a war to sell illegal drugs, it was often recast as a war the Chinese provoked by insisting on the kowtow and treating other nations as vassals. Two traders by the names of James Matheson and William Jardine helped tip the scales for war because it helped their business, which had gotten a huge start in the opium trade. The Jardine-Matheson trading firm still exists today, and is a multibillion dollar company. Back in China, the British blockade of Canton’s port led to an odd first confrontation. A British ship called the Royal Saxon ran the blockade, so the British fired a warning shot to make it turn back. The Chinese, to prove they still controlled their sovereign waters, took this as an opportunity to challenge the blockade. Thus, their defense of a British smuggler led them into a war that, ironically, was about stopping British smugglers. The British official directing the war efforts, Charles Elliot, found himself in an awkward situation. He loved his country, but he morally objected to the British agenda in China. He tried to pave a moderate path, only to be fired and reviled as a failure. But after he left, the war truly got vicious. The British committed many atrocities in their campaign. They never sought to hold China, however, because their wars in India had taught them how impossible such an undertaking would be. Thus they settled on the unequal treaty. And as for Walpole… well, he started it, of course. Tea became such a large part of Britain’s economy because of the large tax levied on it. And who levied that tax? It was Walpole. He actually repealed an earlier, heavily resented tax and got political accolades for doing so, then introduced a much higher tax under a different name that flew under the radar even while it brought in hundreds of thousands of pounds for the government every year. The government’s reliance on tea for funding would later propel them to take such extraordinary measures to secure access to tea via Chinese trade. So who really started the Opium War? Well. It was Walpole.
July 23, 2016
Published on 9 Jul 2016
The Chinese attempt to retake Canton by force failed. New British commanders took charge and would accept nothing less than total Chinese capitulation. They captured cities all the way up to Nanking, forcing the Emperor to negotiate. He had no choice but to accept an unequal treaty, kicking off a period of subservience to Europe which China still remembers today as the Century of Humiliation.
Disappointed in the treaty, the Daoguang Emperor replaced Qishan with three new commanders. One of them wanted to buy time and modernize the army, but the Emperor insisted the British be repelled immediately. They assaulted Canton from across the river, firing cannons and sailing fire ships at the British fleet. Their efforts fell far short, and soon the British controlled the river again. The Chinese were forced to pay them an indemnity to leave Canton, but in their wake riots and looting plagued the city anyway. Elliot still led the British forces, but upon returning to Hong Kong, he learned that he was now being replaced. His replacements had no interest in the compromises he’d tried to establish. They pushed immediately towards Beijing. In each new fort they captured, they found evidence that the Chinese resistance had ironically been weakened by crippling opium addiction. As the Chinese attacks grew more desperate, British retaliation grew more brutal. Finally, they stood ready to seize Nanking. With it would come control of the Yangtze River on which all of China depended, so the Emperor was forced to negotiate. They had no bargaining power, and gave the British nearly everything they wanted: a huge indemnity, new trade ports, no more Hong monopoly, generous tariffs, consulates, and sovereignty over Hong Kong. The only two matters they refused were Christian missionaries and legalizing opium, but the latter would only lead to the Second Opium War with similar results. These “unequal treaties” would go down in Chinese history as the beginning of what the Communist government later called “The Century of Humiliation.” The spectre of this shame and forced subservience to European interests continues to shape politics today, as this history is often invoked or used as a rallying cry during dealings with the West.
July 20, 2016
Published on 2 Jul 2016
The British set up a blockade outside Canton, but one of their own private merchant ships tried to run through it. When the Chinese came to its defense, war began in earnest. Since the British had far superior firepower, they easily conquered Chuenpee and Chusan. Elliot and the Emperor’s new envoy, Qishan, soon sought a treaty and agreed on generous terms… which their overseers harshly rejected.
The British responded to the Chinese halting their ships by erecting a blockade outside Canton. They fired a warning shot to turn back a private British merchant ship, the Royal Saxon, which attempted a blockade run, and the Chinese sent out their own navy to defend the runner. They were demolished. The British had better ships and better firepower. They made to discuss a treaty, but the Chinese refused to give in to the British demands regarding ownership of Hong Kong. The British moved on to capture Chusan, an island near Shanghai. Then a rumor prompted them to believe that China planned to strike against them, so they acted pre-emptively and kicked off the Battle of Chuenpee. Again they won, but the slaughter was so horrifying that Superintendent Elliot was glad to seek a peace treaty with the emperor’s envoy, Qishan. Finally Qishan agreed to give up Hong Kong, to give the British better trade status, in exchange for which Britain returned the land they’d taken. But Elliot’s supervisor back in London, Lord Palmerston, felt the treaty didn’t go far enough, especially since it didn’t re-establsih opium trading rights. And the Emperor found Qishan’s capitulation disgraceful, even threatened to have him hanged for it. What had looked like moderate wins for both sides suddenly threatened to fall apart.
July 11, 2016
Published on 25 Jun 2016
Opium was illegal in China, but that didn’t stop the East India Company from manufacturing it for the black market. The Chinese emperor appointed an official, Lin Zexu, to stop it. He seized and burned huge opium caches held by British merchants, and ultimately ordered the British out of China entirely. Instead, they set up base on a barren island that would become known as Hong Kong.
The tea trade flowing from China had left the British government in staggering debt. They had loaned huge amounts to the Honourable East India Company (EIC) to conquer India, and to pay their debts, the EIC turned that land into poppy fields and manufactured opium in huge quantities. Since China had banned the opium trade, the EIC set up a market in Calcutta (part of their Indian territory) and turned a blind eye to the black market traders who smuggled it into China. By 1839, over 6.6 million pounds of opium were being smuggled into China every year. The Chinese DaoGuang Emperor appointed an upright official named Lin Zexu to halt this opium trade. Lin orchestrated a massive campaign to arrest opium traders, force addicts into rehab, and confiscate pipes. He even laid siege to British warehouses when the merchants refused to turn over their opium supply, instead taking it all by force and burning it. The outraged merchants sought redress from their government, but although the Chief Superintendant Charles Elliot promised them restitution, the government never had any intention of paying them back. Amid the unrest, two British sailors brutally murdered a Chinese man. Lin Zexu demanded their extradition, but Elliot insisted on trying them aboard his ship and sentencing them himself. Lin Zexu had enough. He halted the British food supply and ordered the Portuguese to eject them from Macau. They retreated to a barren island off the coast (now known as Hong Kong). Since the island could not support them, Elliot petitioned the Chinese to sell them food again. He received no response. Then he sent men to collect it directly, but on their way back they were halted by the Chinese navy, and the first engagement of the Opium Wars began.
July 7, 2016
Published on 18 Jun 2016
The British Empire’s grasp on the Americas was slipping right at the time when they needed those resources most. The massive amounts of tea they imported from China had created a huge trade deficit, but the Chinese were reluctant to let any Europeans trade outside of the Canton port strictly controlled by the Hong. So Britain sent a formal embassy led by Earl George Macartney.
In 1792, Great Britain had just come out of an expensive war that cost them their control over many of their colonies in North America. Other wars had also cost them their access to the silver mines of South America, which had been helping fund so much of their trade with the Qing Dynasty of China. European traders all wanted greater access to China, but the Emperor was wary of letting outsiders too far into his country and kept them all penned up at the port of Canton, which was strictly regulated by the Hong business group. A flourishing blackmarket trade grew, but Britain wanted more. One trader, acting on his own initiative, grew bold enough to approach Beijing and attempt to get a hearing over his trade grievances, but the Chinese considered this a huge breach of protocal and an offense to the Emperor. Britain had to do something, however: they imported over 10 million pounds of tea each year, equal to 10% of the government’s annual spending, and the fact that China did not have anywhere near as great an interest in British products meant that they were running an enormous trade deficit they could no longer sustain. The Crown appointed an official envoy, Earl George Macartney, with orders to end the Canton system, establish an embassy, and acquire rights to an island that would be under British control in the same way that the Porutuguese controlled Macao. The mission failed spectacularly. Although Macartney got permission to sail north and meet the Qianlong Emperor in his summer palace at Jehol, he refused to perform the traditional kowtow which was required upon meeting the Emperor. He presented gifts from the British court, but the Chinese interpreted these gifts as tribute, not trade enticements, and decided they had no need for nor interest in what he offered. Since he failed to get them to agree to any of his three requests, Britain wanted to find another way to address the trade imbalance with China. Soon, this would lead them to start bringing in opium.
May 24, 2016
Published on 23 May 2016
China was in a constant period of unrest and turmoil after the Opium Wars and the Boxer Rebellion. None of the new leaders and presidents could really consolidate their power in China and a struggle between the different warlords. broke out. At the same time, China was eyeing a more prominent role within the international community and sent 150,000 workers to the Western Front as part of the Chinese Labour Corps.
April 2, 2016
In retrospect the fight against Napoleon seems to have engendered a new strategic method, later employed against Germany in two world wars and against the Soviet Union thereafter. The French might call it the Anglo-Saxon encirclement strategy. Its essential aim was to avoid direct combat with a formidable enemy, or at least to limit engagement to a minimum. Instead of confronting one vast army with another – at Waterloo there were only 25,000 British troops – the Anglo-Saxon approach was to take on the big beast by assembling as many neighbourhood dogs and cats as possible, with a few squirrels and mice thrown in. With the obvious exception of the Western Front in the First World War, that is how the two world wars were fought, with an ever longer list of allies large, small and trivial (e.g. Guatemala, whose rulers could thereby expropriate the coffee plantations of German settlers), and that is how the Soviet Union was resisted after 1945, with what eventually became the North Atlantic Alliance. Like the anti-Napoleon coalition, Nato was – and remains – a ragbag of member states large and small, of vastly different capacity for war or deterrence, not all of them loyal all the time, though loyal and strong enough. Like the challenge to British diplomacy in the struggle against Napoleon, the great challenge to which American diplomacy successfully rose was to keep the alliance going by tending to the various political needs of its member governments, even those of countries as small as Luxembourg, whose rulers sat on all committees as equals, even though they could never field more than a single battalion of troops.
Now it is the turn of the Chinese, whose strength is still modest yet growing too rapidly for comfort, and who are inevitably provoking the emergence of a coalition against them; the members range in magnitude from India and Japan down to the Sultanate of Brunei, in addition of course to the US. Should they become powerful enough, the Chinese will force even the Russian Federation into the coalition regardless of the innate preferences of its rulers, for strategy is always stronger than politics, as it was for the anti-communist Nixon and the anti-American Mao in 1972. China cannot therefore overcome its inferiority to the American-led coalition by converting its economic strength into aircraft carriers and such, any more than Napoleon could have overcome strategic encirclement by winning one more battle. The exact repetition of Napoleon’s fatal error by imperial and Nazi Germany is easily explained: history teaches no lesson except that there is a persistent failure to learn its lessons. It remains to be seen whether the Chinese will do any better.
Edward Luttwak, “A Damned Nice Thing”, London Review of Books, 2014-12-18.
December 3, 2015
Published on 24 Oct 2015
After his success at Myeongnyang, Yi began rebuilding the Korean navy and strengthening his partnership with the Chinese. But then, Toyotomi Hideyoshi died. Japan’s new leaders had no interest in continuing the war, but although they sued for peace, Korea now held the upper hand and was determined to punish the people who had committed so many massacres against their people. Yi and the Chinese fleet bottled up the Japanese at the fort in Suncheon. When the Japanese called for reinforcements, Yi interrupted them in Noryang Strait. Again they were outnumbered, 500 to 150, but the Chinese commander did not yet understand Yi’s long range style of warfare and immediately closed for close combat. Yi ordered his flagship to rescue their allies, and as soon as the Japanese recognized him, they focused fire on him. This allowed the Chinese, suddenly forgotten, to fire freely on them. The Japanese realized their error and tried to flee, but Yi would have none of it. Beating the war drum himself, he urged his ships to chase the Japanese – to punish them for all the slaughter they brought to Korea. It was then that he was struck by a fatal gunshot. Before he died, he ordered his son and nephew to command the battle for him. They dressed in his armor to hide his death from the troops and continued beating the dream. Together, they carried the day – only for Yi’s tragic death to be revealed at the moment of victory. But although Yi did not live to see it, 300 Japanese ships were captured and destroyed that day and the rest of their invading force was rounded up soon after. For his tireless service, his brilliant leadership, and his unwavering devotion to Korea, Yi was given the posthumous title of Chungmugong, the Martial Lord of Loyalty.
October 18, 2015
Colby Cosh on why the Playboy brand is so attractive to the Chinese market:
… Playboy was once an important cultural force; and what are Chinese men and women buying when they buy jewelry or clothing with the Playboy bunny on it? They are buying a small stake in an anti-puritan, worldly vision of the good life. Hugh Hefner’s “Playboy philosophy,” which he used to set out in windy essays sandwiched between the pictorials, is still considered good for a laugh decades later. But every magazine does express a philosophy, whether or not it chooses to yammer on about doing so, and Playboy’s epicureanism was a powerful one. It practically amounted to a guarantee to the customer: if you bought Playboy, the only uplift you were at risk of encountering would involve lingerie, not morality.
When you were done being titillated by an issue of the magazine, the ads and the articles about stereos and cigars and cocktails were there to linger as an aftertaste, making a subtle but sharp imprint on one’s endocrine system. It is hard for us to appreciate what this kind of thing means in a strongly collectivist, egalitarian society. People who visited the old Soviet bloc, and who saw what blue jeans or heavy-metal cassettes did to the brains of the people there, will have some idea. It is an enigma of 20th-century history: stuff that seems trivial to a Western consumer somehow encodes a message of choice and private aspiration that can never be expressed as powerfully as an explicit proposition.
October 11, 2015
September 16, 2015
At Gods of the Copybook Headings, Richard Anderson comments on a story about Chinese drivers ensuring that pedestrians they hurt in traffic accidents don’t survive to sue them … because incentives matter:
Smelling a story that was too interesting to be true, I texted a friend who lives in China. He read the article and texted back that every word was correct. This behaviour was so common that it was a kind of dark joke. The phrase “drive to kill” was considered practical life advice for young and old alike. These are not members of some obscure and barbarous cult. China is one of the oldest and most accomplished of human civilizations.
The legal explanation for this — a moral explanation I suspect is impossible — is a combination of a weak insurance system and easily bribable courts. An injured pedestrian can become a lifetime financial liability for the driver. Murder convictions, even in cases with clear video evidence, are still unusual. Faced with a choice of becoming a bankrupt or a murderer the popular choice seems to be the latter.
Homo homini lupus est. Man is wolf to man.
Mainland China is, of course, a dictatorship. It seems likely that in a functioning liberal democracy, such as those of the West, very basic legal reforms would long ago have been implemented to remove these quite literally perverse incentives. The rulers of China have deigned it beneath their notice to make such minor improvements.
September 15, 2015
At Marginal Revolution Tyler Cowen pulls together the key economic points you need to know to understand what is happening in China’s economic downturn:
1. You can’t invest 45-50 percent of your GDP very well forever. It’s amazing how long China’s run has been, but it is over. The quality of their marginal investments is now low and that means their growth rate will be much lower too. The low hanging fruit is gone, at least for the time being. They might later on resurrect some new low-hanging fruit through institutional reform, we’ll see if they end up stuck in the middle income trap but right now they are at a sharp discontinuity.
2. There is no simple way to switch to a “consumption-driven” economy without the growth rate both falling and staying permanently lower. Structural reforms are absolutely called for, but in this context they represent a surrender to a lower rate of growth and thus they are especially difficult to pull off in a politically sustainable manner.
3. The Chinese have been growing at ten percent or nearly ten percent for about thirty-five years. More than a generation of Chinese is used to treating the risk premium as if they don’t have to worry about it. I shudder to think what economic and also political decisions have been made on that basis.
4. The Chinese economic response to the dwindling of their low-hanging fruit is sharp rather than smooth because there is a sudden revision of expectations, as people realize the risk premium isn’t zero after all. And seeing the others see that causes the new set of beliefs to spread pretty quickly. That is a very painful process for a macroeconomy, and it is not well captured by simple AD-AS analysis, although of course it has implications for both AD and AS.
5. I would not so quickly infer that the Chinese government is stupid when it comes to economics. It is true their actions do not correspond to what professional economists would recommend. But they are painted into a very unpleasant corner and have lots of interest groups to feed. Their observed response is possibly explained by some kind of public choice-constrained, nested game, internal conflict-driven seventh-best response. They were smart a few years ago, and they are still smart now. That doesn’t mean they will end up doing a good job.
6. Avoid mood affiliation! You can be a pessimist about the Chinese recession now without being a) a pessimist about China in the longer run, or b) a pessimist about Chinese political stability. Those are separate albeit related questions, and you are not forced to have the same mood response to all of them.
In the most recent edition of his wine review newsletter, Michael Pinkus just barely avoids sounding like an editorialist from the anti-Chinese era of American yellow journalism (er, sorry) over Chinese money being used to buy up Ontario wineries to concentrate on icewine production for the Chinese market:
Hinterbrook, Joseph’s, Marynissen, Alvento, Lailey – all wineries in Niagara that have seen a major shake-up of ownership over the past few years; in fact it is reported that about 8 or so wineries have seen new ownership, which potentially can be seen as a good thing: a revitalized interest in wineries in Ontario’s largest growing area.
Now before I go any further, I’m sure this topic is going to spark some controversy and some of the comments I’ll make might come off a tad inflammatory, but hear me out over the next few paragraphs.
The majority of these wineries have been purchased by those of Oriental decent, namely Chinese interests, who see exporting Ontario Icewine back to the homeland as a path paved with gold … On the positive side this provides wineries and workers with jobs, another bonus is that Icewine is still being made here at home, instead of being falsified, forged, misappropriated, and wrongly-labelled elsewhere; and some longtime growers and owners are finally cashing-in after a lifetime of tilling the soil, and growing the grapes to make the wines we all know and love … but at what cost to the industry and reputation of Ontario wine?
We have been battling a snake-belly-low reputation for years – one that never lets us forget we put Baby Duck and inferior Baco Noirs (with apologies to Henry of Pelham) into bottle. Now we have some of our most beloved names (namely Lailey and Marynissen) seemingly on the brink of becoming Icewine houses. The fear here is that Ontario will be bought up by foreign interests and our wines moved off-shore, and most, if not all our grapes used for the purpose of making Icewine – for all intents and purposes killing off our quality domestic dry wine production.
These fears were realized once again in July after reports were confirmed that Lailey had been sold. They then closed their doors for “renovations”, subsequently re-opened to sell their remaining inventory, and netted their entire 2015 crop to be used in the production of Icewine … As the French say, “quel domage!” (what a pity) – those beautiful old vines of Chardonnay and Pinot Noir, that fantastic Syrah, the Sauvignon Blanc … all the grapes that were lovingly nurtured so that they produced the fruit to make wines full of terroir / character will go into lifeless sweet Icewine. Frustration and dismay were echoed time and time again on Twitter and FaceBook with the hashtag “RIPLailey”.
No matter how we may try to romanticize them, wineries are just businesses. Not only businesses, but farm-related businesses. Farming is a hell of a way to earn a living — ask any farmer — so if someone comes up to your farm gate and offers you enough money to sell up … at least some farmers/grape growers/winery owners are going to take the cash and split. From the list of wineries that Michael lists, I’d had poor experiences at three of them … bad enough that I’ve never been back. If my experiences were typical of other customers, then selling up was a great thing for the former owners. Treat your customers like shit, don’t expect them to come back (but do expect them to mention you to all their friends).
If someone thinks that it’s worth the money to buy up these places and convert them to all-icewine production and concentrate on exporting to China, great. More wineries are opening every month, so the loss of a few under-performing (and customer-abusing) “old names” has more chance to improve the overall wine scene in Ontario.