China top paper warns officials against ‘spiritual anaesthesia’, the root of corruptions

The founder of modern China chairman Mao Zedong.


BEIJING: China’s top newspaper warned Communist Party officials not to “pray to God and worship Buddha”, because communism is about atheism and superstition is at the root of many corrupt officials who fall from grace.

China officially guarantees freedom of religion for major belief systems like Christianity, Buddhism and Islam, but party members are meant to be atheists and are especially banned from participating in what China calls superstitious practices like visiting soothsayers.

The party’s official People’s Daily yesterday said in a commentary it had not been uncommon over the past few years to see officials taken down for corruption to have also participated in “feudalistic superstitious activities”.

“In fact, some officials often go to monasteries, pray to God and worship Buddha,” it said.

“Some officials are obsessed with rubbing shoulders with masters, fraternising with them as brothers and becoming their lackeys and their money-trees.”

Chinese people, especially the country’s leaders, have a long tradition of putting their faith in soothsaying and geomancy, looking for answers in times of doubt, need and chaos.

The practice has grown more risky amid a sweeping crackdown on deep-seated corruption launched by President Xi Jinping upon assuming power in late 2012, in which dozens of senior officials have been imprisoned.

The People’s Daily pointed to the example of Li Chuncheng, a former deputy party chief in Sichuan who was jailed for 13 years in 2015 for bribery and abuse of power, who it said was an enthusiastic user of the traditional Chinese geomancy practice of feng shui.

“As an official, if you spend all your time fixating on crooked ways, sooner or later you’ll come to grief,” it said.

The People’s Daily said officials must remember Marx’s guiding words that “Communism begins from the outset with atheism”.

“Superstition is thought pollution and spiritual anaesthesia that cannot be underestimated and must be thoroughly purged,” it said. — Reuters


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Flawed perception remembering Heroes and Zeroes

Chen Peng_YuenYuen, a Special Branch officer, spent most of his time being hunted down by the communists and was even shot in the chest. 

Remembering heroes and villains 

There is a flawed perception that the fight against the CPM was a battle only between the Chinese-dominated movement and the Malay-majority soldiers and police. Many innocent Chinese lives were also taken by the CPM.

THIS is not another comment about Chin Peng but a reflection on how two Special Branch officers, both of Chinese descent, fought against him. It is also a timely reminder to many of us who have not heard about them, or simply forgotten about these heroes in our midst.

It is also about the thousands of Chinese civilians who lost their lives because of the Communist Party of Malaya (CPM), a reality which many have forgotten or, worse, chosen to ignore.

There is a terribly flawed perception that the fight against the CPM was simply a bitter battle between the Chinese-dominated movement and the Malay-majority soldiers and police.

The two Malaysians who dedicated their lives to fighting the communists were the late Tan Sri Too Chee Chew, or better known as CC Too to his Special Branch colleagues; and Aloysius Chin, the former Senior Assistant Commissioner of Police and Deputy Director of Special Branch (Operations) at Bukit Aman.

Too was highly regarded as the master of psychological warfare and counter-insurgency and his deep knowledge of the CPM helped the authorities to fight the guerrillas. In fact, he was widely acknowledged as one of the world’s top experts on psy-war as head of Bukit Aman’s psychological warfare desk from 1956 to 1983.

In the words of his long-time friend, Lim Cheng Leng, who wrote his biography, “CC Too could read the communist mind like a communist.”

The web of intrigue of how friends can become foes is exemplified in Too’s relationship with Kuantan-born Eu Chooi Yip, the communist mastermind in Singapore. Eu was Too’s special friend and Raffles College mate, but the two ended up as foes in different arenas.

Aloysius Chin also dedicated his life to fight the CPM and I had the privilege of meeting Chin, who wrote the book The Communist Party of Malaya: The Inside Story, which reveals the various tactics used by the CPM during different periods in their attempts to overthrow the government.

Malaysians have never had much fondness for serious history books. Worse, their views of historic events are often shaped by the movies they have watched.

Unfortunately, movie producers, armed with what is called poetic licence, often dramatise events to make their movies much more interesting.

Who can fault them as they have to sell their movies?

But we really need to read up more about the events during the Emergency era, especially the assassinations of Special Branch personnel and the many ordinary policemen, who were mostly Chinese.

The CPM’s biggest hatred was directed at the Chinese policemen, who were regarded as “running dogs” as far as Chin Peng was concerned.

The reality was that these Chinese policemen were the biggest fear of the CPM as many had sacrificed their lives to infiltrate the movement, posing as communists in the jungle.

It would have been impossible for the Malay policemen to pose as CPM fighters, even if there were senior Malay CPM leaders, because of the predominantly Chinese make-up of the guerrillas. It was these dedicated Chinese officers who bravely gave up their lives for the nation.

Between 1974 and 1978 alone, at least 23 Chinese SB officers were shot and killed by the CPM, according to reports.

In one instance, a Chinese police clerk attached to the Special Branch in Kuala Lumpur was mistaken for an officer and was shot on his way home.

The CPM targets included a number of Chinese informers, who provided crucial information, as well as Chinese civilians.

One recorded case which showed how cruel the communists could be was the murder of the pregnant wife of a Special Branch Chinese officer at Jalan Imbi as the couple walked out of a restaurant.

This was the work of Chin Peng’s mobile hit squads. The assassination of the Perak CPO Tan Sri Koo Chong Kong on Nov 13, 1975, in Ipoh was carried out by two CPM killers from the 1st Mobile Squad who posed as students, wearing white school uniforms, near the Anderson School.

Other members of the same squad went to Singapore in 1976, shortly before Chinese New Year, in an attempt to kill the republic’s commissioner of police, Tan Sri Tan Teik Khim, but they were nabbed.

Another notable figure in our Malaysian history is Tan Sri Yuen Yuet Leng, a former Special Branch officer who spent most of his life being hunted down by the communists during and after the Emergency years, as one news report described him.

Yuen was shot in the chest in Grik back in 1951 in an encounter with the CPM and the communists even tried to kidnap his daughter while he was Perak police chief, so much so he had to send her to the United Kingdom in the 1970s for her safety.

Their top targets included former IGP Tan Sri Abdul Rahman Hashim who was killed in 1974 and the Chief of the Armed Forces Staff Tan Sri Ibrahim Ismail who faced three attempts to kill him.

The CPM targets also included many active grassroots MCA leaders. After all, at the Baling talks in 1955, the government side was represented by Tunku Abdul Rahman, David Marshall, the Chief Minister of Singapore, and Sir Tan Cheng Lock of the MCA. The CPM was represented by Chin Peng, Chen Tian, and Abdul Rashid Maidin.

The talks broke down after two days – the deadlock was simple with Chin Peng wanting legal recognition for the CPM while the Government demanded the dissolution of the CPM, or, in short, their surrender.

In a research paper, Dr Cheah Boon Kheng wrote that as of June 1957, “a total of 1,700 Chinese civilians were killed against 318 Malays, 226 Indians, 106 Europeans, 69 aborigines and 37 others.”

At the end of the Emergency, the final toll was as follows – 1,865 in the security forces killed and 2,560 wounded, 4,000 civilians killed and 800 missing, and 1,346 in the police force killed and 1,601 wounded.

The figures, quoted by Dr Cheah, a renowned CPM expert, were taken from Brian Stewart’s Smashing Terrorism in Malayan Emergency.

The fact is this – many innocent Chinese lives were taken by the CPM, and the killings continued even after the Emergency ended in 1960.

Anthony Short, in his book The Communist Insurrection in Malaya, 1948-1960, also wrote that the Chinese civilians suffered the highest casualties in the fight with the CPM.

At Chin Peng’s funeral wake in Bangkok, some of his old comrades put on a brave front to say they fought for revolution.

But they must have been let down by China, which they looked up to, because in the end, it was Beijing which first down-graded its ties with CPM and eventually stopped funding them entirely when it forged diplomatic relations with Kuala Lumpur.

And today, China is a communist nation in name only as its elites and people openly flout their wealth and compete for the trappings of a capitalistic society along with its ills, including corruption.

The CPM said they wanted to fight the Japanese and the British but in the end, faced with the resistance of the Malay majority, the people they killed the most were Chinese civilians and the policemen.

And let us not also forget the indigenous people of the peninsula, Sabah and Sarawak who served in the security forces and were renowned for their jungle tracking skills. They too suffered many casualties.

Among our forgotten heroes are some who were awarded the highest bravery awards. The point here is that all laid down their lives for the country as Malaysians.

These are the facts of history. There’s no need to be bleary-eyed because, in the end, we should let the realities and the facts sink in.

Comment contributed by  WONG CHUN WAI \

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Chin Peng’s Farewell: A Letter to Comrades and Compatriots

Chin Peng_my storyMy dear comrades, my dear compatriots,

When you read this letter, I am no more in this world.It was my original intention to pass away quietly and let my relatives handle the funeral matters in private. However, the repercussions of erroneous media reports of me in critical condition during October 2011, had persuaded me that leaving behind such a letter is desirable.

Ever since I joined the Communist Party of Malaya and eventually became its secretary-general, I have given both my spiritual and physical self in the service of the cause that my party represented, that is, to fight for a fairer and better society based on socialist ideals. Now with my passing away, it is time that my body be returned to my family.
I draw immense comfort in the fact that my two children are willing to take care of me, a father who could not give them family love, warmth and protection ever since their birth. I could only return my love to them after I had relinquished my political and public duties, ironically only at a time when I have no more life left to give to them as a father.
It was regrettable that I had to be introduced to them well advanced in their adulthood as a stranger. I have no right to ask them to understand, nor to forgive. They have no choice but to face this harsh reality. Like families of many martyrs and comrades, they too have to endure hardship and suffering not out of their own doing, but out of a consequence of our decision to challenge the cruel forces in the society which we sought to change.
It is most unfortunate that I couldn’t, after all, pay my last respects to my parents buried in hometown of Sitiawan (in Perak), nor could I set foot on the beloved motherland that my comrades and I had fought so hard for against the aggressors and colonialists.
chinpeng01My comrades and I had dedicated our lives to a political cause that we believed in and had to pay whatever price there was as a result. Whatever consequences on ourselves, our family and the society, we would accept with serenity.
In the final analysis, I wish to be remembered simply as a good man who could tell the world that he had dared to spend his entire life in pursuit of his own ideals to create a better world for his people.
It is irrelevant whether I succeeded or failed, at least I did what I did. Hopefully the path I had walked on would be followed and improved upon by the young after me. It is my conviction that the flames of social justice and humanity will never die. – September 21, 2013.
* Chin Peng died at hospital in Bangkok on Malaysia Day, September 16, 2013 at the age of 89. This is his final letter to his comrades and compatriots published in his memorial booklet.
* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.
DM latest3MY COMMENT: My views on the status of the late Chin Peng are well known. I think his remains should be brought home and his wish to be interred with his parents should be granted. It is not being magnanimous but about honouring our treaty obligations. 
I therefore compliment the former Inspector-General of Police Tan Sri Rahim Noor for standing up for the rights of Chin Peng under the 1989 Hatyai Peace Agreement between the Malaysian Government and the Communist Party of Malaya (CPM). On the other hand, former Prime Minister Tun Dr. Mahathir under whose administration the peace deal was signed did not make any comment on the Chin Peng matter. I suppose it is convenient for him not speak on this issue since his son, Dato Mukhriz, has entered the race for UMNO Vice Presidency.
Now that Chin Peng is dead, his cremated remains should be brought home to be buried beside his parents. This is not about politics. It is the most honorable and decent thing to do. We must also learn to accept our history, and recognise that Chin Peng fought the Japanese and British imperialists, although we may not accept his ideology and methods. More importantly, when our government signed that peace treaty, we accepted him and his comrades as non-combatants and partners in peace.
Yes, many lives were lost during the Emergency (1948-1960). Armed conflicts cost lives. The United States lost 55,000 soldiers and Vietnam many times more. But once the Americans and the Vietnamese signed the Paris Peace agreement,  they began the process of rebuilding their relations, and today both former combatants are working together to advance their common interests. Reconciliation is possible only if we can come to terms with our past and learn the lessons of our history.–Din Merican
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Time to leave the CPM era behind; Chin Peng, CPM no longer Enemy No. 1

Chin peng_CPM

The death of Chin Peng has created a buzz about the relevance of the Red spectre in Malaysia, especially among Malaysian Gen Yers. 

IT has been an educational week for finance manager Rita Wong* as she tried to find the answers for her 10-year-old son’s questions.

“He’s always curious and this week it has been all about Chin Peng,” Wong relates. “‘Who is he, mum; why can’t he come home; why do we have to be scared of his ashes?’”

Wong, a 40-something working mother, says she has had to recall her history lessons in school but even then “most of the answers he is asking for are hard to give as I don’t really understand it myself.”

Chin Peng, the Malayan-born guerilla who led a fierce Communist insurgency against the British in the peninsula after World War Two, and later against the government after independence, died early last week after living in exile in Thailand for more than two decades. He had fought alongside the British during the Japanese military occupation, but had started a fight to establish an independent Communist state here in 1948.

Thousands were reportedly killed during the insurgency, tagged by the British administration as the Malayan Emergency, that lasted until 1960.

Hence, even in death, his name still evokes much bitterness in Malaysia, as seen during the week in the media and social media network.

“I can never forgive him because the Communists killed my grandfathers and uncles,” says a marketing manager in his 30s.

But for over 80% of the Malaysian population aged below 55 (some 25,610,000 Malaysians) who would have been in their diapers or not born when the Emergency ended, Chin Peng remains a distant grandfather story or, at the most, an answer to an examination question.

With his death, many are saying it’s time to also put the CPM ghost to rest, as can be seen in the comments in cyber space.

“Does Chin Peng’s death really matter?” writes secondary school student Tianqian Tong. “I thought he had died for years actually…”

Like many young people, Tong does not see Chin Peng and communism as a security threat any more.

“Chin Peng and the CPM are in the past, not in the present, neither will they be in the future. We are now free and independent,” notes Tong.

“Anyway, history is a lesson for the future – every single thing will be remembered. It will be good for us to learn that ‘In the practice of tolerance, one’s enemy is the best teacher’.”

A number of the comments in cyber space are also quite light-hearted and related to a topic that’s very popular among Gen Yers these days.

“His ashes could spread around the country and invade the body of every Malaysian. This could be worse than an alien invasion …” says one in a long line of zombie jokes about the “Chin Peng ashes – to return or not to return” debate.

A budding entrepreneur who only wants to be known as Amin admits that he finds the issue a tad confusing. “We all now want to ‘make friends’ with communist China and break into their market,” he observes.

Chin Peng and the CPM have not been a valid bogeyman for a long time, local theatre director and lecturer Mark Teh says.

“Bogeymen are ghosts or phantoms. The reason we have them is to create an irrational fear in people,” he opines.

For many young people, the Emergency and communists are lumped together with the Japanese Occupation and fight for indepen­dence under the topic of “War in History”, Teh points out.

“Many do not know the difference. But it is not completely their fault that they are confused. It’s because the history books present it in a sketchy manner. It is presented in a linear way that does not add up sometimes and discussions are not encouraged.”

This may have led to a thirst for information on communism among some, but not to the point where they want to stage a revolution, he adds.

“They are intrigued by it because of the gaps in history but I don’t think they are interested in the ideology or to embrace communism.”

Teh, who used to teach Culture and Society in Malaysia, had organised an “Emergency Festival” with a loose collective of young artists in 2008 to mark the 60th anniversary of the insurgency.

It was an attempt to re-examine the documents, images and narratives of the Malaysian Emergency from the younger generation’s perspective, he explains.

“We saw many students participate because they wanted to create alternative spaces for themselves and answer the questions they have about this part of Malaysian history.”

Teh feels this is the underlying issue in the debate on Chin Peng and the CPM’s role in the struggle for independence.

“The argument is contemporary because it is really about people fighting for their own version of Malaysia now – and they are reclaiming a past, whether it includes the CPM, Chin Peng or a past that excludes their contribution or labels them only as terrorist,” he says.

Writer Zedeck Siew, in his 20s, agrees, saying that any interest in communism among the young is mainly due to the suppression of communism’s place in history.

“In the classroom, we had the impression of the communist as an evil, grimacing Chinese fellow creeping through the jungle, killing cops and citizens. People have realised that this is not a complete picture.

“Those who want to learn about the CPM and Chin Peng are merely trying to find out more about the country’s past,” he reasons.

Crucially, interest does not equal participation, he stresses. “Frankly, I just can’t see my peers leaving their iPad, artisanal cupcakes and comfortable suburban warrens to join a people’s Armed Struggle and subsist on rations.”

Women rights activist Smita E concurs, saying that young people now seem to be largely anti-ideological. “I base this statement on my observation that people don’t read enough and don’t have time to read big books and think big thoughts.”

What is true, however, is that young people are starved for local histories, she adds. “It’s about alternative histories, not communism per se.”

Postgraduate student Ahmad Z also feels ideology rarely survives these days. “The grand narrative is history, though I believe young people see communism as a symbolic representation of change.

“If there is a resurgence in interest, it is a romantic interest of communism in Malaysia but not in the sense that people are trying to revive it and to suddenly pick up arms,” he says.

Putting the academic input into the issue, Boon Kia Meng believes that for many young people, the communist armed struggle belongs in the annals of history now.

“As Chin Peng mentioned in his memoirs, he was a man of his time and circumstances, where the world, in the immediate aftermath of the Japanese occupation, was overtaken by nationalist and anti-colonial movements and liberation struggles,” explains the academic.

“The armed resistance of the CPM was conditioned by those wars and the realistic options before them, in the context of British detention of firstly the Malay anti-colonial Left (a thousand were detained before the Emergency) and the crackdown on labour unions and political groups. The Emergency in 1948 was the culmination of British desire to secure their economic and geopolitical interests in the region.

“The CPM, rightly or wrongly, decided on armed struggle in the face of such challenges.”

Today, conditions are very different, says Boon. “A measure of formal democratic institutions has prevailed, and capitalism is triumphant globally, including in so-called communist China. As such, the bogeyman of communist terror in Malaysia is no longer a plausible claim.”

In fact, he highlights, most left-wing political movements today are democratic grassroots movements or parties.

“Just look at the elected governments of Bolivia, Venezuela and Ecuador, or even the growing popularity of the Greek radical left, Syriza (a likely winner in the next Greek elections) and the Occupy Wall Street movement. They are all non-violent, popular struggles.”

Ironically, even Chin Peng had noted the change of the times. Writing in his 2003 memoir My Side of History, he said: “A revolution based on violence has no application in modern Malaysia or Singapore… The youths who have known only stable governments and live in an independent age of affluence will find the choices I made as a teenager deeply puzzling… I was young in a different age that demanded very different approaches.”

He also stated that one of his final wishes was to “exchange views with young Malaysians nowadays to understand how history is shaped, exchanging ideas about how things move the world.”

Open dialogue and ­reconciliation

For many young people, an open dialogue on Chin Peng and communism is something they hope will happen now.

Student Nik Zurin Nik Rashid says it might be difficult for them to feel the victims’ experience but it will not hamper them from empathising.

“To ask the current generation that live in ignorance of such an experience is like asking a Malaysian what it feels like to be at Auschwitz: they can’t answer, and neither should they,” says the 19-year-old who is currently an undergraduate in a university in Texas.

The fact is that in the modern context, any way you look at it, the CPM is no longer around, she says.

“The CPM is no longer the enemy for the simple fact that it does not, for all intents and purposes, exist as a cohesive force that mobilises the masses since it signed the armistice with our government in 1989. By that alone, they are no longer the “Number One Enemy” as much as the Russian Federation is no longer a de facto enemy to Nato or the US since the Soviet Union collapsed.”

Nevertheless, she does not believe the CPM deserves any form of pardon.

“If Hitler is still unforgiven for his crimes, then I don’t see why Chin Peng needs to be forgiven for his Red Terror campaigns during the Emergency.

“To many, Chin Peng and his Commies will not be forgiven, and that is understandable.”

Alternative musician A. Nair feels that an open dialogue will help reconcile our nation with its painful past.

“If we try to be politically correct all the time, we will not get any idea across. If the older generation gets upset about us not caring or being insensitive about what they went through, it is something we need to learn to understand.

“But they also need to understand that it is not relevant to us now. We are moving towards a developed society, so we need to be more open and less sensitive.”

Lessons from Marx to market

Karl Marx
Cover of Karl Marx

Perhaps his views on capitalism could be considered to right what’s wrong


TODAY we still face not just about the worst recession since the 1930s, but a challenge to the rich West’s economic order. The poverty of orthodox economics is now exposed. It showed up capitalism as fundamentally flawed. Karl Marx had contentiously labelled capitalism as inherently unstable. Sure, some of Marx’s predictions had failed: no dictatorship of the proletariat; nor has the state withered away. Even among Americans, just 50% surveyed was positive on capitalism; 40% not. Young people are markedly more disillusioned.

So, recent vogue for Marx should not surprise now that the euro stands on the precipice of collapse; and Jeffrey Sach’s The Price of Civilisation pointed to US poverty levels not seen since 1929. Indeed, the Vatican’s L’Osservatore Romano recently praised Marx’s diagnosis of income inequality. Brazil elected a former Marxist guerrilla, Dihma Rousseff, as President in 2010. Marx may still be misguided, but his written pieces can be shockingly perceptive.

Marx and global disorder

Examine the daily European headlines: there is the spectre of a possible Greek default, an impending explosive bank-made disaster, the imminent collapse of the euro all reflecting a bewildering mixture of denial, misdiagnosis and bickering undermining European policy response.

As Mohamed El-Erian (CEO of Pimco, the world’s largest bond dealer) observed: “Rather than proceeding in an orderly manner, today’s global changes are being driven by disorderly forces …” We see a crisis that has shaken the foundations of the prevailing international economic order.

It is remarkable that in Das Kapital Marx diagnosed capitalism’s instability at a time when his contemporaries and predecessors (Adam Smith and John Stuart Mill) were mostly enthralled by its ability to serve human wants. George Magnus (UBS Investment Bank) wrote: “today’s global economy bears some uncanny resemblances” to what Marx foresaw.

Marx had predicted that enterprises would need fewer workers as productivity rose, creating an “industrial reserve army” of unemployed whose very presence exerts downward pressure on wages.

Reality comes home readily with US unemployment still at 8.5% (13.3 million jobless). Nearly 5.6 million Americans have been out of work for at least six months; 3.9 million of them for a year or more. Last September, US Census Bureau data showed that median income (adjusted for inflation) in the US fell from 1973 to 2010 for full-time male workers aged 15 and above. True, the condition of blue-collar US workers is still a far cry from the subsistence wage and “accumulation of misery” that Marx figured. Again, French economist Jean-Baptiste Say had postulated that markets will always match supply and demand hence, gluts don’t arise.

Against this conventional wisdom, Marx argued that over-production is endemic to capitalism simply because the proletariat isn’t paid enough to buy up the supply capitalists produce. Recent experience showed that the only way middle-America managed to maintain consumption in the last 10 years was to over-borrow. When the housing market collapsed, consumers were left with crippling debt they can’t service. The resulting default is still being played out.

Marx also predicted capitalism sows the seeds of its own destruction. Unbridled capitalism tends towards wild excesses. The 2007/08 Wall Street crisis had demonstrated how reckless deregulation (for example, in allowing banking leverage to rise unabatedly) proved disastrous for the financial system, attracting extensive moral hazard in massive bailouts.

“The Republican Party is en route to destroy capitalism,” radical geographer Prof David Harvey says, “and they may do a better job of it than the working class could.”

Now once again, we see unbridled capitalism threatening to undermine itself. European banks financially weak but politically powerful, are putting on the pressure to rescue their balance sheets. We see the same in the United States as home-owners struggle to stay afloat while renegotiating their mortgages. Similarly, creditor nations (e.g. Germany and China) are trying to shift the pain of rebalancing onto debtor nations, even though squeezing them threatens to be counter-productive and eventually, cause economic disaster.

Even so, prolonged economic weakness is contributing to rethinking on the value of capitalism. Countries scraping for scarce demand are now resorting to currency wars. America’s senate has turned protectionist. Within Europe, the crisis turmoil is encouraging ugly nationalists, some racist. Their extremism is mild against the wrecking horrors of Nazism. Even so, it’s unacceptable.

Unbalanced times ahead

The outlook for 2012 is dismal (my column 2011: Annus Horribilis dated Dec 31, 2011): recession in Europe, anaemic growth at best in the United States and a significant slowdown in emerging nations. We also know the world is far from decoupled. Export economies in Asia (South Korea, Taiwan and China) and commodity exporters (Indonesia, Malaysia and Brazil) are already feeling the pain.

What’s going to happen in Europe is critical. The eurozone is already in recession. Germany’s economy contracted in 4Q 2011 at a time the region is looking to its biggest economy to give the zone a lift. Add to this, continuing credit crunch, sovereign debt problems, lack of competitiveness and intensifying fiscal austerity we have a serious downturn ahead.

Downside risks in the United States can be as serious fiscal drag, ongoing financial unwinding among households in the face of stagnant incomes, weak job creation, losses on wealth, rising inequality and political gridlock. In Japan, weak governance will show-up soon enough. Rising inequality is impacting domestic demand big time! This is also fuelling popular protests around the world, bringing with it social and political instability adding further risks to economic performance. Turmoil in the Middle-east gathers geopolitical risks of its own making persistent high oil prices will constrain growth. On present course, conditions will get worse before they get any better.

Policymakers are running out of options. Monetary policy is already less effective and ineffective where problems stem from insolvency (as in Europe) rather than liquidity. Fiscal policy is now well constrained. Whatever central bankers do, they cannot resolve problems best fixed by politicians such as the United States’ incoherent deficit politics or Europe’s fractured institutions and crucially, its lack of political will to act firmly.

Eventually, papering over solvency problems and reform issues will give way to more painful and disorderly restructurings, including exit from the euro. History teaches that financial crises are followed by years of weakness and stress. But some of the pain is self-inflected. Clarity on eurozone’s future needs strong political leadership. There is really no excuse for the United States’ fiscal paralysis as politicians bicker and dawdle. Indeed, even deeper austerity is quite unnecessary; it brings a vicious circle of decline, squeezing demand and raising unemployment, thereby hurting revenues, sustaining large deficits and draining away confidence.

Lessons from Japan

Japan has been experiencing the West’s current woes for 20 years. Will Europe and United States suffer a similar “Japanese” future? There are important lessons.

First, get out of denial: admit past mistakes and take-on new challenges for the future. Japan had refused to admit its economic model has since failed. Similarly, Europeans are not ready to give up their welfare safety net even though already buried in huge debt. The United States, in preserving “free markets”, wouldn’t build badly needed infrastructure because of aversion to state intervention. Let’s face it: new realities need new ideas.

Second, recognise problems are really structural. Japanese politicians continue to rely on orthodox pump priming in the face of excessive regulations (which stymied competition) and belief its high savings will finance it. All it did was to pile up more debt up to 200% of GDP. The United States and Europe are now in a similar boat. Continuing Fed stimuli missed tackling underlying problems need smarter approaches to resolve the mortgage quagmire, and to extensively re-train misfit unemployed. Euro-zone needs reforms for a more integrated Europe to spur growth. Instead, governments bury their heads in the sand of Tobin taxes (a small financial transactions tax to discourage speculation) and other such diversions.

Third, embrace globalisation which Japan has yet to seriously acknowledge, while the rest of Asia had become more integrated. The United States is still “fighting” globalisation harbours an anti-trade mentality in the face of deficit politics. Similarly, Europe indulges too intensely in intra-regional trade; needs to build a competitive multilateral non-European network.

Finally, firm political leadership is critical. Psychologist and Nobel laureate Danial Kahneman pointed to behavioural economics showing people are “influenced by all sorts of superficial things in decision making” and so they procrastinate. Japan personifies procrastination. Likewise, political gridlock gripping United States and Europe led to more “kicking the can down the road,” instead of seriously changing national policy. Japan’s history teaches political will as vital in instigating change without it, the West will likely turn “Japanese.” Ignore it and history may well repeat itself.

Middle class on the rise

The growing irrelevance and mistrust of politicians and governments are the result of massive economic slowdown and wasteful public spending. Emerging markets in contrast, have kept growth consistently going while keeping fiscal affairs well under control.

The political woes in China and India and even Malaysia (and possibly in Brazil and Indonesia) reflect, in my view, the early stirrings of political demands by the growing emerging middle class.

The World Bank estimated the middle class (people earning between US$60 and US$400 a month) trebled to 1.5 billion between 1990 and 2005 in developing Asia, and by one-third to 362 million in Latin America. Estimates by Asian and African Development Banks showed similar trends in Africa, Latin America and China in 2008.

As Marx said: “Historically, the bourgeoisie played a most revolutionary part” in Europe. As I see it, in emerging markets, that same but softer revolution is now on hand. Middle-class values are distinctive.

Surveys showed the middle classes consistently are concerned with free speech and fair elections; with opportunities and corruption. Success of Hazare’s campaign against graft in India, and of street protests in Dalian and Xiamen in China over environmental abuses and the crash by high speed trains are some cases in point. Unlike unrest in Middle-east, middle class activism in India, China, Brazil and Chile is not aimed at bringing governments down. Rather, an attempt to reform government, not to replace it so far, at least, aimed against unaccountable, untransparent and undemocratic politics.

What to do?

Recession made plain the need for smarter government and highlighted weaknesses in designing policy to address issues on fairness and burden sharing. There are lots to learn and much to put right. I see an extraordinarily uncomfortable year ahead, with a wide range of possible outcomes, many unpleasant.

The euro-zone casts the darkest shadow. The US outlook is darkened by political uncertainty. The West is now being challenged to deliver not just growth (while necessary, is insufficient given high unemployment, and income and wealth inequalities) but “inclusive growth” for greater social justice. There is a deep sense that capitalism has become unfair. Calls for a fairer system will not go away. As Marx would insist, they will spread and grow louder.

Ironically, unlike emerging economies, the West is not equipped to deal with structural and secular changes after all, their recent history has been predominantly cyclical. Grasping the ways in which Marx was right marks the first step towards making things acceptable. The longer they fail to adjust, the higher the risks. So expect more volatility, unusual strains and even odd outcomes. But looking at the cup as half-full, the global paradigm shifts when they do come, will also present opportunities, not just risks. That can help ease the agony. But it won’t make up for politicians’ mistakes. Welcome to 2012!

Former banker, Dr Lin is a Harvard educated economist and a British Chartered Scientist who now spends time writing, teaching & promoting the public interest. Feedback is most welcome;

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