Paulson's Mind-boggling Hackery On China Shows He Doesn't Have A Clue

The Age

Thursday August 21, 2008

David Hirst

There is some important economic data the US Treasury Secretary should be reading, writes David Hirst.

WHO lost China? The last time anyone noticed was in the early 1950s when the Republicans accused the Democrats of losing the place. Before that, the Democrats had mislaid it by their failure to use the nuclear bomb and deal with Mao. Nixon and Kissinger found it again. But, somehow, it seemed to get lost until US capital rediscovered the place and cried as one: "These dudes will work for nothing and you can feed them an egg."

Wall Street immediately exported the nation's industries to the lost ... er ... continent and so the marriage grew. Now both nations are entwined to the point where one seems to have got lost.

Reading US Treasury Secretary Henry Paulson's explanation of things, the US is lost somewhere in China's lower bowel. How it got there is for you to decide.

But here is the farce of the thinking of Paulson, still of the US Treasury and, as he suggests in his article, soon to be moved on. Back, no doubt, to Goldman Sachs. And it can have him, and his advice.

If he looks like getting a job washing bottles, sell Goldman at all costs. Actually, I'd be doing that anyway, but I might have trouble with US financials, especially when I read a rare rendition of what Paulson thinks, or doesn't, as provided by yesterday's Australian Financial Review.

Paulson opens with the scintillating suggestion that Americans should try to see China "as it actually is - not as many Americans imagine it to be". Well, so they should. But Paulson remembers that the nation was lost for a long period.

Having established that Americans should try to see China as it is - a bit of a call - he spends the rest of his column telling us, and I suppose the Chinese, about SED - you remember it, don't you? The Strategic Economic Dialogue agreement of 2006.

Well some of us might not know. I have to confess to being in ignorance of SED, yet I spend what seems to be an inordinate amount of time talking, reading and thinking about China. Recently, I had a long conversation with a relative of Deng Xiaoping and he didn't mention SED.

I have friends who travel to China at the drop of someone else's hat and I quiz them in great detail. As of my last effort a few days ago, none mentioned SED. But, according to Paulson, SED is the road to the future, a Great March on which the "new" president will be guided. As will the Chinese.

My only concern is that I doubt whether the Chinese have a copy of SED. These things can get lost and the chinwag was back in 2006, and no one has mentioned it since. I am sure they have a copy somewhere, the Chinese are good like that.

My favourite moment in Paulson's historically horrendous hackery is when he expresses his concern about the "opaque" and "restrictive" regulations of the Chinese.

Perhaps Paulson could tell the world a little more about the "opaque" nature of the US banking system, for that is a matter of universal alarm, far more than China's relatively comprehensible cronyism. While Paulson presides over super-secret financial shenanigans, he has the effrontery to get stuck into the Chinese. Imagine the bewilderment with which Paulson's article was read amid the Olympics by the Communist Party, all of whose major players are in Beijing.

But what is stunning about this document is that it shows absolutely no understanding of the nature of the current financial crisis. Paulson hasn't got a clue. The entire article is pre-digested pap, but with sideswipes such as "China is frequently cited as an example of the ills of globalisation".

Really, I thought it was frequently cited as the entire purpose of globalisation, exporting jobs and pollution for a free ride while it buys our debt. I think the Chinese had come to imagine that was the deal.

But no. Well, yes. It is. But through SED, we can, sorry, the "new US president", address - Paulson loves that word - the questions and serve "the interests of the Chinese and American people".

But what is truly mind-boggling about this performance is its breathtaking inability to "address" the fact that people are looking for immediate action and that can only begin with Paulson and his understanding of the depth and breadth of this crisis.

That would be a start, a few sentences that suggest, not just to the Chinese - for this article was written as much for internal digestion, and we are still trying to digest this work - that we have a problem here and SED is not the problem nor the solution.

But not a sentence or a single idea, or thought or approximation, of same appears. It is important reading for that alone.

Meanwhile, Henry, there is some important economic data you should be reading.

David Hirst is a journalist, documentary maker, financial consultant and investor. Planet Wall Street is syndicated by News Bites, a Melbourne-based sharemarket and business news publisher.

© 2008 The Age

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