"The China Price" - The best business article I have seen in years.

Quote from m4a1:

the only reason why ronnie chan said that is because he is a Hong Kong executive in Beijing and he's trying to kiss Beijing's ass. hong kong companies are notorious for having family controlled corporations. someone should ask him what's the democratic process at his company to replace him.

sure, you can find examples of how a benevolent dictator did just as well as a democracy, but it is just a matter of time before the guy abuses his power or a not so benevolent dictator rises to power. a democracy protects the entire system into the future. china's economy is great right now, but how do you know the next person won't screw everything up?

the world critisizes american democracy for electing Bush. but guess what? he can only stay in power for 8 years. that's the absolute maximum. now imagine you are in a country where no such democratic process exists. one bad apple makes it up there and the entire country is completely screwd for at least a few decades.
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Re 1st para, running corporations: No one actually believes democracy would work and its not present in US corporations. Democracy isn't efficient and effective, its just less worse than other forms of government.

Re 3rd para, 8 year term: First, you still got 8 glorious years of George and Dick. Second, no such limitation exists in other democracies such as New Zealand or Australia; if the sheep are stupid enough to keep voting them in then their influence is extended.

Re: Italian/French Catholic culture in Brazil vs Spanish Colonial Catholic culture in most of SA and CA ... do you think it changed the equation much and how?
 
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November 17, 2006

SouthAmerica: Reply to kiwi trader


I hope you know what happened between the church and the new way of secular thinking of the leaders of the French Revolution.

The Brazilian nation has reason to be proud of its intellectual roots; its roots are connected to the French Revolution and its intellectual minds. France was the major power in the world during that period of time (1750-1815), and Paris was the major artistic, scientific, and intellectual center of that time. The French Revolution had a major impact on world history; it changed the world.

In 1823, the Andrada brothers (José Bonifácio, Martim Francisco and Antônio Carlos), with their leadership, had a major impact on the Constituent Assembly. They guided the proceedings of the process of framing the first Brazilian Constitution. This Constitution was effective December 13, 1823. They used as a model the French Constitution of 1816 which is also referred to as the "Lamartine Constitution".

Jose Bonifacio and his brothers were Masons and they believed on the separation between church and state. In May 28, 1822 they created a Masonic Lodge in Rio de Janeiro - the “Grand Orient Masonic Lodge of Brazil” and Jose Bonifacio was elected its first “Grand Master.”



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The Brazilian legal and judicial system is based on Roman law and the Napoleonic Code.


1) Roman Law

Roman law is the legal system of ancient Rome. The development of Roman law covers more than one thousand years from the law of the twelve tables (from 449 BC) to the Corpus Juris Civilis of Emperor Justinian I (around 530). Roman law as preserved in Justinian's codes became the basis of legal practice in the Byzantine Empire and—later—in continental Europe.

Using the term Roman law in a broader sense, one may say that Roman law is not only the legal system of ancient Rome, but also the law that was applied throughout most of Europe until the end of the 18th century. In some countries like Germany the practical application of Roman law lasted even longer. For these reasons, Roman law heavily influenced many modern civil law systems in Europe and elsewhere. This is especially true in the field of private law.



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2) Napoleonic Code - The Civil Code


Napoleon in later life considered the Civil Code to be the most significant of his achievements.

The Code represented a comprehensive reformation and codification of the French civil laws. Under the ancient regime more than 400 codes of laws were in place in various parts of France, with common law predominating in the north and Roman law in the south. The Revolution overturned many of these laws.

In addition, the revolutionary governments had enacted more than 14,000 pieces of legislation. Five attempts were made to codify the new laws of France during the periods of the National Convention and the Directory.

Through the efforts of Napoleon the drafting the new Civil Code in an expert commission, in which Jean-Etienne-Marie Portalis took a leading role, took place in the second half of 1801.

Napoleon attended in person 36 of the commission's 87 meetings. Although the draft was completed at the end of 1801, the Code was not published until 21 March 1804.

The Civil Code represents a typically Napoleonic mix of liberalism and conservatism, although most of the basic revolutionary gains - equality before the law, freedom of religion and the abolition of feudalism - were consolidated within its laws. Property rights, including the rights of the purchasers of the biens nationaux were made absolute.

The Code also reinforced patriarchal power by making the husband the ruler of the household. The Napoleonic Code was to be promulgated, with modifications, throughout the Empire.

The Civil Code it was followed by a Code of Civil Procedure in 1806, a Commercial Code in 1807, a Criminal Code and Code of Criminal Procedure in 1808 and a Penal Code in 1810. A Rural Code was debated, but never promulgated. The Code Napoleon, renamed the Civil Code, was retained in its majority after the restoration of the Bourbons in 1815.

The Civil Code has served as the model for the codes of law of more than twenty nations throughout the world.


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November 19, 2006

SouthAmerica: Reply to kiwi trader

Today I was reading Forbes magazine and came across a book review of a new book ”The Victory of Reason: How Christianity Led to Freedom, Capitalism, and Western Success”--by Rodney Stark (Random House). This book can answer some of your questions regarding Christianity’s impact on the development of the capitalist system as we know today.


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The latest issue of Forbes magazine had an interesting book review. Forbes magazine said: They Didn't Teach This in Econ 101

”The Victory of Reason: How Christianity Led to Freedom, Capitalism, and Western Success”--by Rodney Stark (Random House).

Christianity is at the root of the rise of capitalism and modern democracy, says this thoroughly engaging and stimulating book about why the West pulled so far ahead of the rest of the world, economically and politically. "While the other world religions emphasized mystery and intuition, Christianity alone embraced reason and logic as the primary guide to religious truth," writes Stark. "From early days, the church fathers taught that reason was the supreme gift from God and the means to progressively increase their understanding of scripture and revelation. Consequently, Christianity was oriented to the future, while the other major religions asserted the superiority of the past.… Faith in the power of reason infused Western culture, stimulating the pursuit of science and the evolution of democratic theory and practice.… Capitalism is in essence the systematic and sustained application of reason to commerce."

This openness to inquiry explains how Church doctrine evolved, so that by the early part of the second millennium there were no theological barriers to commerce, including profit and the charging of interest. What made possible the flourishing rise of Christian Europe was the collapse of the increasingly oppressive, stultifying and sclerotic Roman Empire.

Stark fascinatingly details how monasteries, as they evolved from producing bare necessities for monks to specializing in growing crops and making goods that could be traded, were the forerunners of modern businesses. Modern managerial business skills and methods--production, transportation and the development of credit--began at monasteries and became more sophisticated as their scope expanded.

Contrary to myth, medieval Europe was a font of innovation: water- and wind-powered mills, clocks, eyeglasses, chimneys and the wheelbarrow, as well as advances in shipbuilding, compass making and ironmongery (making wagon axles sturdier). The invention of a superior harness enabled a horse to pull loads of far greater weight for longer periods of time, making the horse the primary farm animal. Agricultural output was also greatly stimulated by the creation of three-field farming instead of the old Roman practice of two-field farming.

In contrast, other powerful religions often looked askance at new mechanical devices. Ottoman Turkey, for instance, banned clocks when they first appeared.

Modern banking arose in the then relatively free cities of northern Italy. These institutions developed sophisticated networks throughout Europe and did more than lend money and develop ways to facilitate the flow of capital. For example, in Flanders, the textile center of the world, the banks forced productivity-oriented consolidations of hundreds of small producers into a few textile firms.

Christianity generated advances in human rights. Slavery had virtually disappeared from Europe by the 11th century. Several hundred years later the church vigorously protested the rise of African slavery; its edicts, sadly, had as much impact on restricting slavery as its modern-day ones have had on abortion.

So why did England, Holland and later America advance, while the very Catholic France and Spain lagged? Primarily, Stark posits, because religion was decreed and rigidly enforced from the top in those two kingdoms, while elsewhere there was a relatively looser, more tolerant atmosphere. Religiosity, paradoxically, flourished in England and America precisely because it did not emanate from the edicts of absolute monarchs.

Great history and an intriguing thesis combine to produce a well-written and provocatively enlightening book.



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If you prefer you can also read the book review of the same book on The New York Times at the following web site:

http://www.nytimes.com/2005/12/30/b...ceae3c8b521a67&ei=5088&partner=rssnyt&emc=rss


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JR@rutledgecapital.com.

China Update

I just got back from China and here are a few points:

- I was in Beijing on November 7, Election Day. Everyone there knew the results of the election in real time. People in China--especially young people--know a lot more about America than people in the U.S. do about China. It's time for us to learn.

- The Democrat's sweep was important for China because it increases protectionist pressure on the Hill and could lead to a tariff bill.

- Erecting trade barriers against China would be very dumb. It would not reduce the trade deficit. It would increase the U.S. price level, push interest rates up, and worsen the housing crunch.

- China is beginning to take steps to make their currency convertible. This is much more important that the exchange rate. It is currently illegal for people in China to hold foreign currency.

- The big words in China are entrepreneurship and innovation ... The Chinese government knows they will not be able to continue growth through manufacturing. There is not enough oil, gas, and coal and the air and water quality is terrible. They have decided to grow by investing in IT (fiber optic communications networks) and human capital (education) to increase productivity. Fighting over textiles is yesterday's war. We should be thinking about where Cisco puts their next R&D facility. China is currently bidding very hard for such operations to relocate to their country.

- The Democrat's victory here has also killed the chance for the telecom reform bill which would have resulted in huge capital spending on high-speed networks. Not having high-speed networks hurts our U.S. businesses ability to compete in the global market.

- The Chinese capital markets open December 5 to foreign (U.S.) financial firms. There is going to be an Oklahoma land rush to set up shop there.

- November 11 was the 5th anniversary of China joining the WTO. It was a very big deal.

- The Olympics are China's coming out party--they will not screw it up. That is why they 'solved' the North Korea problem week before last week.

Bottom line: China today is much more capitalist than the U.S.
JR
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Quoting from above:

November 10, 2006

SouthAmerica: There are also other negative trends that will have an impact on the value of the US dollar in the coming months.

But it is just a matter of time for the US dollar to be trading at
US$ 1.40 = 1 Euro.

We will get there.



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November 24, 2006

SouthAmerica: And I repeat once again – with a little patience we will get there.



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FOREX-Dollar slides to 1-1/2-year low vs euro
Reuters - Fri Nov 24, 2006 3:11pm ET
By Kevin Plumberg


NEW YORK, Nov 24 (Reuters) - The dollar fell sharply on Friday, pushing the euro above $1.31 for the first time since April 2005, on concerns about central banks diversifying their reserves and the greenback's narrowing yield advantage over other currencies.

The dollar's fourth consecutive session of weakness was the culmination of a host of negative developments over the last several weeks, including weaker-than-expected U.S. economic data and comments from central banks in Asia and the Middle East underscoring the risk of keeping large reserves of dollars.

"It is the aggregate accumulation of these bearish bits and pieces that has the dollar on the defensive," said Dennis Gartman, an independent investment advisor who writes the Gartman Letter.

The euro had risen to its highest in 19 months, at $1.3109 <EUR=>, a little more than 5 cents away from a record high set in late 2004. By mid-afternoon it was trading at $1.3100, up 1.2 percent from Thursday…..


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December 20, 2006

SouthAmerica: There are opportunities that appear only once in a lifetime and when one of these opportunities present itself you have to recognize and take some action immediately, and be ahead of the herd.

China can take advantage of one of these once in a lifetime opportunities, and if China acts on right now, China would be able to beat the United States on its own game – capitalism.

As a matter of fact China can give the United States a lesson in capitalism and good timing.

What China has to do to take advantage of this unique opportunity?

China has to invest a few billion US dollars in “Cuba.”

China can use to its advantage the fact that it is called a communist nation and they belong to the same club as Cuba, and they can prepare the ground for a major market take over in Cuba after Fidel Castro has died.

Right now, China can invest in a major ethanol production facility in Cuba, and also can prepare itself to control a big chunk of sugar-cane production in Cuba (there are various ways for China to accomplish that.) – The Chinese are major world traders and they should know how to accomplish that goal.

They can also prepare a major scale development of that island to take advantage of the tourism trade after Fidel Castro is gone, and all the international barriers have been lifted against that island.

All it will take is a few billion US dollars investment – and that would be just a drop in the bucket when compared with the billions of US dollars that the Chinese has been dumping on US investments.

It would be very easy for China to play its cards right and become the major investor in Cuba.

That would be a major lesson about capitalism from China to the United States. As the US foreign policy regarding Cuba continues stuck in the period 1959 to mid-1960’s – the Chinese comes along taking advantage of superb timing and they take the rug from under the United States.

As the Chinese embrace this new project in Cuba by making billions of US dollars in investments at the same time they can help the current Cuban government to put in place a plan for a smooth transition to a new era when Fidel Castro passed away.

From its Cuban base the Chinese can expand its sugar production and ethanol program to places such as Haiti – a place where they have 80 percent unemployment and a country in chaos. For the Chinese to help the Haitians back into their feet revolving around sugar and ethanol production it would be a piece of cake since China has a vast experience in dealing with most African countries and that would come handy when dealing with Haiti.

China can extend its influence right into the doorsteps of the United States since today the United States can’t recognize a good opportunity even when you put it right in front their noses.

Just a reminder:

The Chinese can also hook up with Brazilian companies to develop the sugar industry in Cuba and in Haiti and also they can take advantage of Brazilian state-of-the-art technology in ethanol production. And ethanol production from sugar cane has an advantage of 10 to 1 when compared with ethanol produced from corn.

If you have the chance to choose producing ethanol from sugar cane or from corn – only fools would go with corn since you can get almost 10 times more ethanol from sugar cane production than from corn from the same type of effort.

As the United States attention is completely concentrated on that lost proposition in the Middle East – and the United States is making a major investment on top of quicksand - In the meantime and very quietly the Chinese can invest instead in the future and help on the rebirth of Cuba - and they also can make a ton of money.


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Excellent Commentary As Usual............

With Brazilian expertise...there can be a renaissance of alternative energy production in not only Cuba, Haiti...buy several more energy dependent Latin countries...who can turn their local economies around 180 degrees.....because they are getting slammed by outflows of much needed money to the fossil fuel producing countries...

The comparative advantage is CLIMATE...which is a very dear natural advantage when it comes to sugar cane based production...

There are also oil based seed producing plants that can be grown whose life span is more than 20 years...and can start producing in 3 years...that yield far more than any of the other plant species such as soy, etc...

Furthermore the incomes of these countries are very similar to Chinese incomes...and they are already buying Chinese products...but these products can get even cheaper with closer trading ties...

And of course the solar electricity manufacturers with Chinese low cost production...when combined with renewable fuel production because of CLIMATE advantage and ideal land resources,,,and a ready and willing population group...the local governments..and so on....

The CHINESE CONNECTION is an ideal fit for several of the Carib-SA countries.....

In other words...it is not just Cuba...Cuba is the tip of the iceberg...China has the capability to transform the non oil producing Latin countries...as well as further complementing Venezuela...

The cost structures in the US are simply not competitive versus the Latin countries.......
 
SouthAmerica,

that was a well thought out post on cuba, and the timing is great as we debated cuba in the office yesterday. I cannot stand how (pardon the emotion) FUCKING stupid the US has been with the sanctions that have not worked for 40+years. fidel was not punished, the poor cuban people were and the americans have been, we can't even light up a cuban cigar? get real. american politicians are ignorant pussies.
 
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