When Bureaucracy Gets Politicized

September 25th, 2008

There has been a lot of concern about the tainted milk scandal in China, and with each passing day, the scope of the scandal gets bigger. How did this happen, why was it covered up, and what needs to be done about it?

My answer is simple: this is the kind of thing which happens when the bureaucracy becomes politicized, and government appointments are made for political instead of professional reasons.

For more than 2,000 years, when China was ruled by an imperial bureaucracy, China had a complex system of imperial exams to insure that anyone who passed could enter the government bureaucracy. This bureaucracy was largely apolitical, except for the most senior appointments in the imperial court or on the provincial level. Most were just professional officials, and would serve their masters, whoever they were.

With the overthrow of the Qing dynasty, and with the foundation of new China in 1949, the party organization affected all levels of the bureaucracy. Endless political movements until 1978 politicized the whole society, not just the bureaucracy. Appointments were made for political reasons instead of professional capabilities. Sometimes, professional qualifications were completely ignored.

The tainted milk scandal is an example of what happens when political considerations override business, health and even ethical concerns. This is what happens when government officials are judged by how much investment they attract and how many jobs they create. Then there is a natural tendency to cover up any information which draws a conflicting picture. What should be a health and ethical issue instead becomes a political issue.

The problem now in China is that there is a severe shortage of people who are apolitical professionals, not politicians. How do they fit in, even survive, in a completely politicized bureaucracy? Does the government have the energy and will to depoliticize the bureaucracy, and create a professional bureaucracy which will fulfill the needs of modern Chinese society?

That is the question for the next stage of Chinese reforms.

Chinese Government’s CSRC To Fund Managers: No Bad News

July 29th, 2008

The Chinese government’s watchdog for equities, the CSRC (China Securities Regulatory Commission) has issued an edict to local fund managers that they are not to issue any pessimistic reports about equities during the Olympics in Beijing.

My question is “Why bother?”

The Shanghai market has been down 50% in the first half of the year, and what started out as a subprime mortgage problem in the US has now morphed into a banking problem with more US banks at risk.

In the meantime, Pony Ma, CEO of Tencent has joined in the chorus with Alibaba’s Jack Ma to talk about hard times ahead. The Chinese government has signaled that the rise of the yuan against the dollar will slow down, with a very public discussion in the People’s Daily. The signs of economic deceleration are everywhere.

When there is so much public discussion about upcoming economic challenges in the Chinese and western media, what good could possibly come from telling local fund managers not to say anything bad which might upset the Chinese equities markets? While many western observers of China see this as a sign of an authoritarian regime, for many Chinese, it looks more like desperation. Instead of allaying fears, it makes those who are still in the market fear the worst, and think that the government is trying to suppress even worse news, which in turn will fuel the rumor mill and make the market even more volatile.

In short, this looks more like a desperation move than a well-thought policy move. Instead of helping the market, it’s likely to make things worse.

This is what happens when politics interfere in the markets.

Let’s Get Past the China Monolith Narrative

April 18th, 2008

In the past month, there has been much discussion about how the Chinese government’s policy to Tibet has been intransigent and shows that China has not changed and reformed and become a more open society. Either deliberately or by implication, there is this myth that China is one big country with an authoritarian government which has a great plan to gobble up the world and take away the world’s natural resources, only to turn them into cheap products exported all over the world.

And China will not change, or make any effort to accommodate the rest of the world.

Many in the western media have not only failed to take into account changes in Chinese society, they persist in putting forth this outdated myth which many unknowing observers in the west continue to believe. One favorite is when speaking about China to always put it in the context of events of 1989. News images in the west routinely use an image of a man standing defiantly in front of a tank. The subtext of the message is simple: this is a government which does not care about rights and is not open. The result is that western audiences’ image of China is frozen in the past, and does not update to reflect current realities, and that is the reality of what China is today.

This would be as wrong, unbalanced and irrelevant as showing an image of a shackled African slave to show how racist American society is. Yes, there are injustices in society, but selecting extreme examples and implicitly citing them as fact do not contribute to the conversation. In fact, they make it much more difficult to reach some kind of understanding which can traverse cultural and linguistic boundaries.

In fact, Chinese society in 2008 is vastly different from 1989. For the most part, people have more freedoms than they did in 1989: they are free to choose their jobs, buy their own homes, where they live, who they marry and even to travel (with some restrictions) outside of China. Politics has taken a back seat, and most care more about their grocery bills (which have been rising precipitously) than what is going on in Tibet and adjacent regions.

Are there injustices? Yes, just as there are in any society which is undergoing rapid change. Just as there is no child who can learn to walk without taking some falls, there are sometimes setbacks. But let’s put things in context. The general trend is forward and to more openness, to a society which more closely resembles any modern society, warts and all.

Now there is another side to the recent Tibet events. If the Chinese government is indeed so powerful and all-knowing, why were they so taken off-guard by the events of March 14, and the other events which took place inside and outside China in the days and weeks after?

Does this sound like a government which knows everything about its citizens? I don’t think so.

My experience is that governments are incapable of performing very smart, or even halfway intelligent, acts. On an operational level, nineteen hijackers successfully pulled off the 9/11 terrorist attacks which killed 3,000 people, caused lasting damage to the American economy measuring more than 100 billion dollars, not to mention the American psyche. This was all done by nineteen highly-motivated individuals who were willing to die in the process of causing lasting damage to America. There was no government involvement of any kind.

Then contrast this with the current US administration’s decision to invade Iraq and remove Saddam Hussein from power. So far, this war has cost more than 4,000 American lives, thousands of Iraqi lives, and according to Joseph Stiglitz, has cost more than three trillion US dollars (most of it borrowed money; this is probably the first war in world history where the expense was put on the tab to be paid off by future generations) without any end in sight.

Who was smarter? Who is dumber?

This is the trouble with government conspiracy theories. They imply a level of secrecy, coordination, cooperation and intelligence which are almost impossible to find in any government.

The Chinese government is no exception to this rule.

How to Give Advice

March 21st, 2008

With all the different political and business agendas fighting to get heard, it is often difficult to lose sight of what the truth is. This is true of China with the rest of the world, and also very true of the business world. When this happens, it’s very difficult to step back from the respective agendas, take a deep breath and a fresh look without becoming angry or cynical.

Giving advice and insights are a sometimes difficult skill to learn, but they are very important. I firmly believe that the world would be a better place if people knew how to give advice better. For many people, it’s very difficult to learn this important and under-utilized skill.

Giving advice is especially difficult within large organizations, where the truth may be readily apparent but where the management or leadership does not want to listen. Communications is a two-way street; someone has to speak and someone has to listen.

So what can you do to insure your chances of success and being listened to?

  • Pick the right time. Speak only when that person is ready to listen. Often, that means when that person’s idea has failed, sometimes miserably.
  • Don’t gloat over the mistake they just made, or say something like “I told you so!” That is a sure way to make sure that your message doesn’t get heard; you will not last in the organization, even though your message may be right.
  • Don’t personalize the mistake they made, even though it may have resulted in millions in losses or damage. This doesn’t help either.
  • Offer your suggestion in the form of a solution which you have given deep thought to. However, don’t go into detail to explain it unless you are asked to.
  • Keep it short. Get to the point, say it in as few words as possible, and unless you are asked to stay, walk away. Senior and executive management have little time to think about things on their own, so leave them alone so that they can think. If your suggestion is a good one, then it will stand up to scrutiny.
  • Choose a time when they are alone with you. Never bring up the advice in front of other people; if you do you run the risk of making them appear silly in front of a large group of people, which is never a good thing.
  • Don’t bring up advice in meetings; most meetings are not a good place for discussion. Too many groups have competing agendas.
  • Learn to write well. One of the most under-utilized tools in an office is the memo. Discuss the situation, lay out your case, and send it to the right people for review and discussion. The goal of a good memo is to start an intelligent discussion; keep that in mind.
  • Don’t give advice anonymously. If you believe in your advice and that it has value, stand by it and let everyone know it is yours, and that you are willing to go up or down with it.
  • Keep emotion out of it and keep the tone neutral. Use logic to make your point.
  • Keep it open-ended so that the listener can offer his/her point of view if they want to. If they do, you may have a conversation, which is a good thing.
  • Always be diplomatic.

What other ideas do you have about giving advice?