Alexander Zotin Senior Researcher Vt. I'll get off at a distant sanction. Life under sanctions
If the economy continues on its current path, we may be headed for super-capitalism with super-inequality. The share of labor income will tend to zero, and the share of capital income, on the contrary, will approach 100%. Robots will do all the work, and most people will have to be on welfare.
ALEXANDER ZOTIN, senior researcher at VAVT
Humanity has more or less figured out what capitalism is. One option is an economy in which a significant share of income comes from capital (equity dividends, bond coupons, rental income, etc.), as opposed to income from labor (wages). What then is supercapitalism? This is an economy in which capital generates all the income, and labor generates almost none; it is practically not needed at all.
The classics of Marxism did not reach such a theoretical structure in their works: as is known, for Lenin the highest degree of capitalism was imperialism, for Kautsky - ultra-imperialism.
Meanwhile, the future, quite possibly, lies precisely in supercapitalism, a technological dystopia in which the exploitation of man by man will be abolished not because of the victory of the oppressed classes, but simply because of the uselessness of labor as such.
Difficult share
Labor is gradually becoming less and less in demand. American economists Lucas Karabarbounis and Brent Neumann, in the NBER study “The Global Decline of the Labor Share,” traced the evolution of labor’s share of income from 1975 to 2013. This share has been gradually but steadily declining around the world - in 1975 it was about 57%, and in 2013 it dropped to 52%.
The decline in the share of labor income in developed countries is partly due to outsourcing to countries with cheaper labor. Closed some refrigerator manufacturing plant in Illinois and moved it to Mexico or China - the savings on wages for relatively expensive American workers are immediately reflected as a decrease in the share of labor in income and an increase in the share of capital, which is now employed by less fastidious Mexicans or Chinese.
Another factor in favor of capital: the remaining workforce in developed countries is receiving less support from trade unions due to the fact that in the new conditions they have few bargaining chips: “Do you want higher wages? Then we will close you and transfer the enterprise to China (Mexico, Indonesia, Vietnam, Cambodia - underline as appropriate).”
However, even in developing countries the share of labor is also decreasing, which does not fit well with classical theory international trade (the development of trade should, in theory, reduce the share of labor in countries with excess capital and increase it in countries with excess labor).
The explanation most likely lies in labor-saving technological breakthroughs in certain industries. And sectoral changes are translated into changes at the country level (the exception is China, where the dynamics are explained by the relocation of labor from the labor-intensive agricultural sector to the industrial sector). In addition to this sophisticated explanation, there is a simpler one: in China, in accordance with the policy of internal colonization, migrant workers from rural regions are squeezed out of everything that can be squeezed out. Although their earnings are growing, their share of income is decreasing.
Brazil and Russia are among the few exceptions: in these countries, the share of labor has increased slightly against the global trend, but has increased.
IMF economists suggest that in some developing countries the lack of a decline in the share of labor is explained by the insufficient use of labor-saving technologies: initially there is little routine labor in industry - there is nothing to automate. Although for Russia, with its historically distorted labor market (a mass of low-paid and ineffective jobs, in fact, “hidden unemployment”), this can hardly serve as the only explanation.
Skinny middle class
What does the macroeconomic abstraction of a decrease in the share of labor mean for a specific person? A higher chance of falling out of the middle class into poverty: the importance of his work is gradually devalued, and for the middle class, salary is the basis of everything (in high-income groups everything is not so bad). A particularly strong drop in the share of labor in income is observed for low- and semi-skilled personnel; among highly paid professions, on the contrary, there is an increase in both developed and developing economies. According to IMF data for 1995-2009, the total share of labor income decreased by 7 percentage points, while the share of highly paid labor income increased by 5 percentage points.
The middle class is slowly but surely disappearing.
A recent IMF study, “Income Polarization in the United States,” notes that from 1970 to 2014, the share of households with average incomes (50-150% of the median: half less, half more) decreased by 11 percentage points ( from 58% to 47%) of total US households. Polarization is taking place, that is, the middle class is being washed out with a transition to low- and high-income groups.
So, maybe the middle class is shrinking due to its enrichment and transition to the upper class? No. From 1970 to 2000, polarization was even - almost the same number of “middle peasants” rose to the upper class and fell to the lower (in terms of income). But since 2000, the trend has reversed - the middle class is rapidly falling into the low-income group.
Income polarization and the erosion of the middle class are poorly reflected in inequality statistics, which are accustomed to operating with the Gini coefficient. When Gini is equal to 0, all households have the same income; when Gini is equal to 1, one household receives all income. The polarization index is zero when all households have the same income. It rises as the incomes of more households approach the two extremes of the income distribution, and reaches 1 when some households have no income and the rest have the same income (not zero). That is, two poles without a middle between them. An “hourglass” with a small upper cup instead of the typical welfare-state “pear” (a thick, or rather numerous, middle between the few rich and poor).
While the Gini coefficient in the United States increased quite smoothly from 1970 to 2014 (from 0.35 to 0.44), the polarization index simply soared (from 0.24 to 0.5), which indicates a powerful erosion of the middle class. A similar picture is observed in other developed economies, although not so obvious.
Automate it
The reasons for the erosion of the middle class are similar to the reasons for the fall in the share of labor in income: the transfer of industry to countries with cheaper labor. However, outsourcing is largely history. A new trend is robotization.
Recent examples. At the end of July, the Taiwanese company Foxconn (Apple's main supplier) announced plans to invest $10 billion in a factory for the production of LCD panels in the US state of Wisconsin. The economist will be struck by one detail here - despite the colossal volume of declared investments, only 3 thousand people will be employed at the factory (albeit with the prospect of expansion, since the state authorities insist on creating as many jobs as possible).
For life on a star
For life on a star
Foxconn is one of the pioneers of the current wave of robotization. The company is the largest employer in China, employing more than 1 million workers in its factories. Since 2007, the company began producing Foxbots robots, capable of performing up to 20 production functions and replacing workers. Foxconn plans to increase the level of robotization to 30% by 2020. The longer-term plan is for fully autonomous individual factories.
Another example. The Austrian steel company Voestalpine AG recently invested €100 million in the construction of a steel wire plant in Donawitz with a production capacity of 500 thousand tons per year.
The company's previous production facility with the same output, built in the 1960s, employed about 1,000 workers, but now there are... 14 workers.
In total, according to the World Steel Association, from 2008 to 2015, the number of jobs in the steel industry in Europe fell by almost 20%.
Investment in modern manufacturing is likely to become less and less parallel to job creation (and blue-collar jobs will become rare). The given examples, where $3-7 million of investments are used to create one workplace, contrast sharply with figures from the late 20th century (for example, a database of foreign direct investment in the north-east of Great Britain from 1985 to 1998 shows an average of nine jobs per £1 million of investment).
Completely autonomous factories (lights out factories) are still exotic, although some companies are already operating production facilities with zero labor (Phillips, Fanuc). However, the general trend is clear: in some enterprises, and then, perhaps, in entire industries, the share of labor income will decline even more rapidly than it has declined over the past two decades. Industrial workers not only have no future, but in many ways they no longer have a present.
Impoverished, but still employed
Kicked out of industry, the ex-middle class is forced to adapt. At the very least, he finds a new job, which is confirmed by the current low unemployment rate, especially in the United States. But with rare exceptions, this work is with lower income and in low-productivity sectors of the economy (unskilled medical care, social security, HoReCa, fast food, retail, security, cleaning, etc.) and usually does not require serious education.
As MIT economist David Outa notes in the article “Polanyi’s Paradox and the Shape of Employment Growth,” the dynamics of the labor market in developed countries in recent decades is a manifestation of “Polanyi’s paradox.” The famous economist Michael Polanyi pointed out back in the 1960s that a lot of human activity is based on “tacit knowledge,” that is, poorly described by algorithms (visual and auditory recognition, bodily skills like riding a bicycle, riding a car, the ability to do a hairstyle, etc.). P.). These are areas of activity that require “simple” skills from a human perspective, but are difficult for traditional 20th century artificial intelligence.
Top 10 Occupations with the Most Projected Job Growth in the US (2014-2024)
Growth for 2014-2024, thousand people Growth for 2014-2024, % Median annual salary (2016), $
All professions 9779 6.5 37040
Nurse 458 25.9 21920*
Registered nurse 439 16 68450**
Home nurse 348 38.1 22600*
Waiter 343 10.9 19440*
Seller 314 6.8 22680*
Nurse assistant 262 17.6 26590*
Customer service specialist 253 9.8 32300*
Cook 159 14.3 24140*
Production manager 151 7.1 99310**
Construction worker 147 12.7 33430*
It is into such areas of employment that the ex-middle class, released from industry, headed (which partly explains the paradox of the slow growth of labor productivity in the United States and other developed economies).
Eight of the top 10 fastest-growing professions in the United States over the past few years are low-paid, poorly regulated manual labor (nurses, nannies, waiters, cooks, cleaners, truck drivers, etc.).
However, now the “Polanyi paradox” has apparently been resolved. Robotics based on machine learning cope with previously unsolvable tasks (the basis of which is visual and auditory recognition, complex motor skills), so pressure on the middle class should continue, and employment growth in the mentioned areas may be temporary. Polarization and a further decline in labor's share of income are also likely to continue.
Numbers don't help
But maybe the middle class will save new economy? “In the next 50-60 years, 60 million small and medium-sized businesses will emerge that will operate via the Internet, and the leading position in world trade will pass to them. Everyone who has mobile phone and their own ideas, will be able to create their own business - such a prediction was recently made by the president of the Chinese online trading leader Alibaba Group, Michael Evans, at the World Festival of Youth and Students in Sochi. - This is how we see the future: every small company and business will participate in the global trade."
Alibaba owner Jack Ma was also optimistic at the Open Innovation forum in Skolkovo: “There is no need to worry about robots replacing people. This problem will resolve itself. People worry about the future because they are insecure and lack imagination. We don’t have these solutions now, but we will have them in the future.” True, Ma noted that people are already losing to artificial intelligence: “You cannot compete with machines in intelligence - they will still be smarter than us. It's like racing cars."
Evans did not bother to confirm his prediction with any calculations. Are smartphones really mobile applications and various other information technologies promise us such a wonderful future, already achieved by Evans and Ma? Maybe. And you probably shouldn’t worry about robots replacing anyone, either, if your fortune is estimated at $39 billion and a lot of these robots belong and will belong to you.
But for others it makes sense to think about it. An analysis of how mobile applications and Internet technologies actually work and what impact they have on the labor market suggests a somewhat less rosy picture of the future. In China, despite the dominance of Alibaba’s B2B applications, inequality is still growing, and it is becoming increasingly difficult for small private companies to break through under state capitalism under the supervision of the CCP. But, if you believe the reporting figures (the key word here is “if”), Alibaba has taken over almost all online commerce in China.
In any case, Alibaba is not a democratizer or an incubator of future millionaires, but rather an example of winner-take-all companies in the new digital winner-take-all economy.
Or take another pioneer of the new economy: Uber, the app that revolutionized the taxi industry. The advantages of Uber are obvious (especially from the point of view of customers), and there is no point in listing them.
Uber has several thousand employees, and about 2 million drivers worldwide work under contracts for the company. The few employees of Uber receive good salaries, although their wealth is incomparable with the owners of the company, whose capitalization is approaching $70 billion (the structure is non-public and does not disclose the exact number of employees or their salaries, and capitalization is estimated by offers of shares in the property to private investors). But 2 million drivers have, according to Earnest, a median income of just over $150 per month. Uber does not consider drivers its employees and does not provide them with any social package: it simply takes a 25-40% commission for the driver’s contact with the client.
Development of another model
Uber is already a classic example of “winner takes all” companies in the new “winner takes all” economy (the richest companies in the digital economy, the so-called FANGs - Facebook, Amazon, Netflix, Google - are the same). But Uber is not going to stop there: the goal is to completely get rid of the weak link, 2 million drivers. Undoubtedly, cars without drivers will be a thing of the next few years, and Uber shareholders will not need people at all: they will have capital that is quite enough to replace a person.
The latest IEA report, The Future of Trucks, assesses the potential of autonomous road freight transport. They will be the first to be automated. Transition to autonomous road transportation cargo could free up up to 3.5 million jobs in the US alone. At the same time, truck drivers in the States are one of the few professions with a salary significantly above the median without requiring a university degree. But the new economy does not need them.
And then other professions that are traditionally considered creative and irreplaceable - engineers, lawyers, journalists, programmers, financial analysts - will no longer be needed. Neural networks are in no way inferior to humans in so-called creativity - they can paint a picture and compose music (in the specified style). Mastering fine motor skills by robots will kill surgeons (work in this direction is already underway: remember, for example, the semi-robot surgeon da Vinci), hairdressers, and cooks. The fate of athletes, showmen and politicians is interesting - technically their replacement by robots is possible, but the connection to the human in these areas seems quite strict.
The erosion of white-collar employment is not yet so noticeable, but it is already underway in a hidden form. Here's how Bloomberg columnist Matt Levin describes the work of Bridgewater, one of the world's largest hedge funds with $200 billion in assets under management: “Bridgewater co-founder Ray Dalio mostly writes books, or posts on Twitter, or gives interviews. 1,500 employees do not invest. They have a computer for all this! Bridgewater invests according to algorithms, and very few employees have any understanding of how those algorithms work. Employees are involved in the company's marketing, investor relations (IR), and, most importantly, criticism and evaluation of each other. The main problem of a computer in this model is to keep 1,500 people employed in a way that does not interfere with its hyper-rational operation.”
However, the new economy is definitely not a threat to truly highly paid white-collar workers. Sitting on the bloated board of directors of a large company often requires no physical or mental work at all (except perhaps the ability to scheme). However, being at the top of the hierarchy means that it is at this level that all or almost all personnel decisions are made, so the corporate and senior bureaucratic elite will not replace themselves with computers and robots. More precisely, he will replace him, but he will keep the position for himself and increase his salary. The elite, again, combine labor income with ever-increasing income from capital, so even the unlikely destruction of labor income would not particularly affect them.
Who will education save?
The American Pew Research Center published in May a detailed report on the future of education and work, “The Future of Jobs and Jobs Training.” The review methodology was a survey of 1,408 IT professionals, economists and representatives of innovative businesses, of which 684 provided detailed comments.
The main conclusions are pessimistic: the value of education will be devalued in the same way as the return on human labor - these are interrelated processes.
If a person is inferior in everything to artificial intelligence, then his education will cease to be of particular value. To understand this, a simple analogy once proposed by futurist Nick Bostrom, author of the book “Superintelligence” is enough. Let's assume that the smartest person on Earth is twice as smart as the stupidest (relatively speaking). And artificial intelligence will develop exponentially: now it is at the level of chimpanzees (again, conditionally), but in a few years it will surpass humans by thousands and then millions of times. At the level of this height, both today's genius and today's dullard will be equally insignificant.
What should education do in such a context, what should it prepare for? Workplaces? What other jobs? “After the artificial intelligence revolution has already started, it will be impossible to maintain the post-industrial level of employment. Worst-case scenario estimates call for 50 percent global unemployment within this century. This is not a problem of education - it is now easier than ever to educate yourself. This is an inevitable stage of human civilization, which must be dealt with through massive increases in government social security (for example, universal basic income),” the report notes.
Strategy for the hare V
Experts interviewed during the study point to the pointlessness of changes in training. “I doubt that people can be trained for the jobs of the future. It will be carried out by robots. The question is not about preparing people for jobs that won't exist, but about distributing wealth in a world in which jobs are no longer needed,” notes Nathaniel Borenstein, a research fellow at Mimecast.
Algorithms, automation and robotics will lead to the fact that capital will not need physical labor. Education will also be unnecessary (artificial intelligence is self-learning). Or, more precisely, it will lose that function of a social elevator, which, although very poorly, it still performed. As a rule, education only legitimized inequality along the chain - decent parents - decent neighborhoods - status schools - status universities - status job. Education can only survive as a marker of social status for capital owners. In this case, universities may turn into analogues of guards schools under monarchies before the twentieth century, but for the children of the elite of the new “owner of capital gets everything” economy. What regiment did you serve in?
From communism to the ghetto
Inequality in the world of super-capitalism will be incomparably higher than it is now. Huge returns from capital may be accompanied by zero returns from labor. How to prepare for such a future? Most likely, not at all, but perhaps this version of techno-utopia is a rather unexpected motivation to enter the stock market.
If income from labor gradually disappears, the only hope is income from capital: you can only stay in business in the world of super-capitalism by owning these same robots and artificial intelligence.
Financier Joshua Brown gives the example of an acquaintance who owns a small chain of grocery stores in New Jersey. A few years ago, he noticed that Amazon.com was beginning to squeeze small retailers out of business. The storekeeper began buying shares of Amazon.com. It was not a traditional investment for retirement—more like an insurance policy against complete ruin. After the ruin of his own network, the businessman at least compensated for his losses with the “winner takes all—company” shares that had grown exponentially.
The fate of those who do not have capital in the world of super-capitalism is unclear: everything will depend on the ethics of those who, on the contrary, have plenty of capital. This could be either a variation on the theme of communism for everyone in the best case (super-inequality will level itself out - the productive forces of society will be infinitely great); or a universal unconditional income in the average case (if the tax redistribution of excess income, which has been slowing down recently, works); or segregation and the creation of social ghetto reserves in the worst case scenario.
Reforms in China have led to impressive economic growth. And at the same time they planted several social bombs under it, ready to explode as soon as the economic situation worsened.
ALEXANDER ZOTIN, senior researcher at VAVT
Mao Zedong called for never forgetting the class struggle. Under Xi Jinping, who is often compared to Chairman Mao, the Chinese are embarrassed to use the word “class,” let alone “struggle.” That doesn’t stop them from assigning each other to classes. Anyone familiar with the Chinese Internet knows that people are divided, among other things, into diaosi (literally - men's pubic hair), that is, into men with a “triple lack” - without an apartment, a car and savings, and their opposite gao fu shuai (high , rich, handsome). The gap between these two groups is only widening.
Faithful Bukharinites
Almost 40 years of economic reforms in the PRC were accompanied by a powerful stratification of property. The equally poor society of “blue ants” in identical blue jackets and with identical bags began to change quickly. Almost everyone got rich, but some got rich much faster than others. Official estimates of the Gini coefficient (the higher it is, the greater the inequality) show an increase from approximately 0.3 in the 1970s (as in today's Scandinavia) to 0.47 in 2014 (as in Mexico; in Russia - 0. 42). However, numerous studies show that the real figure is higher than 0.5. However,
Even according to official data, China is one of the worst countries in the world in terms of inequality, very far from the “harmonious society” that Deng Xiaoping advocated.
This dynamic was not predetermined. As the Chinese economist Yasheng Huang (author of the fundamental study “Capitalism in Chinese: State and Business”) notes, at the first stage of economic reforms, from 1979 to 1988, inequality practically did not increase, despite very rapid GDP growth and even more dynamic growth income of the population.
The first stage of reforms was rural - political liberalization gave impetus to grassroots capitalism and the growth of township enterprises. Rural incomes grew almost twice as fast as urban incomes. However, after the events in Tiananmen Square in 1989, the development strategy reoriented from rural grassroots capitalism to state capitalism.
Yasheng calls the Chinese model after 1989 Bukharin state capitalism. That is, the state retains control over the “commanding heights” of the economy - heavy industry, financial system, transport, largest enterprises etc., giving everything smaller into private hands. It was precisely this version of the development of the USSR that was proposed by Nikolai Bukharin in his work “The New Course of Economic Policy” in 1921 (and it was implemented until 1929) and later, in 1928, in a dispute with collectivization supporter Joseph Stalin.
In fact, Yasheng interprets what happened in the PRC after 1989 as the Chinese version of the Soviet NEP, only not curtailed in 1929.
The extent to which the state now controls the Chinese economy is a debatable issue. The problem is the opaque ownership structure of enterprises and the lack of consensus on which companies are considered state-owned, which are private, and what is the share of companies with mixed ownership. A recent analysis by the Reserve Bank of Australia (Australia has become very dependent on China, hence its close attention to the Chinese economy), however, indicates the absolute dominance of the public sector among enterprises listed on the Shanghai and Shenzhen stock exchanges. The sample is not ideal, since only large companies have listings, but it is still indicative.
Poor people
Be that as it may, one of the effects of the change in course from grassroots rural capitalism to “post-Tiananmen” state capitalism is a sharp gap in income between city and countryside. In the 1980s, the average urban income was 190–220% of rural income, and in the mid-2000s it was already 360%.
Geographical inequalities have also grown significantly - for example, between coastal regions, which fit best into the export-oriented economy, and lagging inland provinces.
A class of migrant workers from rural regions has emerged, moving to work in cities. The number of migrant workers, according to statistics for 2014, reached 274 million (about 20% of the total population and 36% of the labor force), of which 168 million are long-distance migrants.
This is the largest labor migration in the world; migration from Mexico to the USA is a mere trickle compared to this flow, not to mention guest workers in Russia.
Migrant workers (in Chinese - nongmingong, literally - peasant-worker), as a rule, are disadvantaged in civil rights, the majority do not have city registration. The Hukou registration system excludes nongmingong from the most important social security networks that city residents use (primarily education, health care, social insurance, housing, pensions).
In fact, the lives of a large part of China's population are not much different from the lives of illegal migrants in other countries. For example, migrants usually cannot send their children to urban schools; China Labor Bulletin estimates that in 2010, 61 million children were forced to remain in villages without their parents and not see them for months. And it happens that for years.
Over the past 20 years, authorities have gradually relaxed the hukou system. However, most of the changes are still cosmetic.
The integration of migrant workers into urban social welfare networks has been slow. And the average salary of nongmingong is several times lower than the salaries of city residents: 2.5–3 thousand yuan versus 7–10 thousand. At the same time, migrants do not have city housing and are forced to pay half of their earnings to rent a room in a communal apartment.
The housing price bubble in China's 70 largest cities, which has inflated to grotesque proportions over the past few years (a 100-meter apartment an hour's drive from downtown Shanghai costs just under $1 million), makes it impossible for Nongmingong to even dream of buying an apartment and getting a city hukou.
Apartheid without racism
As a result, a huge underclass of disadvantaged and poor citizens was formed in the cities. While the Chinese Communist Party continues to talk about creating a harmonious society, the country has actually developed a rigid class system, which some researchers compare to apartheid in South Africa and castes in India.
Chinese society, according to David Goodman, author of Class in Contemporary China, is distinctly structured. The upper class is 3% of the population, almost all of these people are prominent members of the CCP and their relatives, businessmen.
Surprisingly, Goodman, based on his surveys, claims that
82–84% of today's upper class are direct descendants of the elite that existed before 1949, that is, before the establishment of the communist dictatorship on the mainland.
One explanation is the preservation of cultural and social capital by the former elite, as well as the diversification of life strategies (for example, marrying one daughter to a Kuomintang nationalist, the other to a communist).
The middle class is very small - 12%, these are primarily urban professionals. Well, the vast majority of the population are various subordinate classes, among which one of the most deprived is the mentioned nongmingong .
As Sydney University professor Wanning Song notes, Chinese intellectuals and public figures, unlike the Anglo-Saxon Goodman, prefer not to use the word “class” at all, replacing it with the more politically correct “suzhi” - “quality”. Nevertheless, social barriers do not disappear because of this. The Nongmingong are often portrayed as backward, uneducated people unable to escape their rural past. They live in cities, but are separated from other citizens by “invisible walls.”
Big things
Deng Xiaoping allowed some people to get rich first. But the majority of the population has not gotten rich yet
The CCP is replacing its historically traditional discourse of class struggle with the ideology of consumerism. Consumption gives hope and confirms a person's achievements in life: for some it is diaosi, and for others it is gao fu shuai. Moreover, the ideology of consumption makes it possible to focus on increasing the quality of life in the era of reforms, which is beneficial to the party.
The “three big things” (san da jian) of the 1960s - wristwatch, bicycle and sewing machine - were replaced in the 1980s by a new big triad: television, refrigerator, washing machine.
And now it’s a house, a car and a computer (in recent years, the computer has dropped out of this list: gadgets have become too cheap, and it has been replaced by jewelry savings).
However, the slogan of consumerism gives rise to social problems. As the American journalist and author of the bestseller “The Age of Ambition” writes. Wealth, truth and faith in the new China” Evan Oznos, a young man with a “triple disadvantage” (that is, without an apartment, a car and savings) - and most often he is a labor migrant from rural regions - has very little chance of starting a family.
Unavailable BMW girl
It is the young man who has little chance, not the girl. Among the group of socially stigmatized labor migrants, men are in the most unenviable position.
Since 1979, the PRC has been implementing the “one child per family” policy. One of its consequences is a sharp increase in the proportion of boys born. The natural biological level in the world is considered to be 105 boys per 100 girls, while in China the average level was 117/100.
This noticeable imbalance is explained by the fact that in traditional Chinese families, sons are more desirable (they must take care of the spirits of their ancestors, help their parents in old age, etc.).
As a result, in cases where ultrasound determined the female gender of the unborn baby (the only one in the family, according to birth control policies), many women had an abortion.
The one-child policy turned out to be a ticking time bomb for the country's social stability. According to the UN forecast, by 2020 the number of young men (from 15 to 44 years old) will exceed the number of women of the same age by more than 25 million. Actually, the current situation is almost the same.
So far, the consequences are clearly visible only in popular culture. Certain behavioral stereotypes of young Chinese can be identified in numerous shows on Chinese television. For example, “Feichang Wurao” (“Only if you’re the one”) is the most popular Chinese-language dating TV show on Jiangsu TV, according to CSM Media Research. A meme on social networks was the statement of one of the participants: “I’d rather cry in a BMW than smile on the back seat of a bicycle.” The “BMW girl” is far from the only person with high self-esteem; besides her, for example, the “200 thousand girl” participated in the show, who said that she would not allow anyone to touch her for less than 200 thousand yuan (about 1.7 million rubles), as well as “girl-big house”, etc.
The show began to receive criticism from the CCP for its vulgarity, and the producers decided to make a special politically correct program with pariah migrant workers. Alas, the episode was a failure. Opposite 24 Nongmingong girls, 24 guys of the same social status were seated, but none of the young ladies showed interest in them (but the young men were not at all against meeting them). Chinese intellectuals, notes Wanning Song, were indignant - they say, why did the organizers not give the girls the opportunity to meet more decent young men (fu er dai - the second generation of the rich or guan er dai - the second generation of officials, which, however, is often the same thing)?
Attack class
The lack of life prospects (including chances to start a family) for a significant part of society, especially its young part, is a hidden threat to social stability. The situation is somewhat reminiscent of the Arab Spring. The driver of the latter, as we know, was unemployed youth, outraged by the corruption of the existing regimes.
In China, however, corruption and inequality are perhaps even more grotesque.
The sexual aspect is no less important. As Orientalist Andrei Korotaev, a witness to the Egyptian revolution, notes, mainly unmarried men came out to Cairo’s Tahrir Square in early 2011. In recent decades, the age at marriage has been rising throughout the Arab world for both men and women. This is due to the fact that wedding rituals are becoming increasingly expensive. For a wedding and mahr (kalym) you need 10-15 monthly salaries, this is a lot even taking into account the help from parents and other relatives. As a result, in the modern Arab world the age of marriage for men is 32–33 years. Korotaev notes: “In this regard, Arab countries are similar to Scandinavia. But there is a detail: in Scandinavia there are no problems with premarital sex.”
In China the situation is somewhat different. There is no disproportionately high share of youth in the demographic structure (the so-called youth bump, which is now characteristic of Arab countries). However, the masses of class and sexually deprived rural male migrants in cities are quite significant. They are not unemployed - there are no economic prerequisites for political upheaval yet. “A rising tide lifts all boats,” albeit very unevenly.
But if growth slows, as is likely in the coming years, a class of would-be rebels will be ready to take action. At least under the leadership of intellectuals from the middle class, as usually happens during revolutions.
Iran has been living under sanctions for decades. And he achieved a certain perfection in bypassing them. However, even a lot of tricks do not help him completely protect the economy.
Iran came under American sanctions almost 40 years ago. After the Islamic Revolution was victorious in 1979, this country became a theocratic state under the leadership of Ayatollah Ruhollah Khomeini. The USA was declared the great Satan, and Israel was to be destroyed. The godless USSR also caused disapproval.
The impetus for the introduction of sanctions was the hostage taking of American embassy employees on November 4, 1979. The United States responded by freezing Iranian assets worth $11 billion. The sanctions included a complete ban on American citizens and companies doing business in Iran and conducting transactions with Iranian enterprises.
Sanctions for sanctions violators
Despite the sanctions, Khomeini stated that “isolation is one of our great blessings.” The Iran-Iraq War added to the breakdown in relations with the United States, and eventually by 1988 year of GDP per capita fell to $3.3 thousand, more than double the peak of 1976, reached under the Shah.
However, the isolation was incomplete. The fact is that the sanctions were imposed by the United States, and other countries supported them only to some extent.
American sanctions are extraterritorial. This, by the way, is the biggest problem for the citizens, companies and countries that fall under them.
What does it mean? The United States may impose sanctions on any non-U.S. company that trades or otherwise engages in transactions with a sanctioned entity. Lawyers call this design secondary sanctions or secondary embargo.
The Americans can introduce “secondary sanctions,” but they do not always do so. European and other US partners are often dissatisfied with the actions of the United States and call the extraterritoriality of sanctions a violation of sovereignty. Sometimes they try to protect themselves legally. In some cases, the Americans give in - they do not want to quarrel with their allies.
For example, in May 1998, the Canadian branch of an American retailer Wal-Mart found himself in a dilemma. US authorities demanded that he remove clothing made in Cuba from his sales floors in accordance with US sanctions. At the same time, Canadian authorities ordered Wal-Mart continue to sell Cuban goods as part of their counter-sanctions, and if traders do not do this, they threaten a fine of 1.5 million Canadian dollars. As a result, first Wal-Mart removed everything Cuban, then, considering that Canadian sanctions were more significant than American ones, two weeks later he returned the Cuban “sanctions” to stores.
The extraterritoriality of American sanctions gradually grew and expanded, but it reached its current scale, when almost everyone shies away from a company included in the sanctions list like a leper, relatively recently. In the same case with Wal-Mart extraterritoriality extended to the company only because Wal-Mart was the Canadian branch of the American structure. The idea of trying to punish any companies, even those that have nothing to do with the United States and American citizens, appeared only in the late 1990s and finally matured in the 2000s.
Iranian case
From the very beginning, American sanctions did not prevent European and other companies from trading with Iran, and most importantly, buying oil from it. The restrictions applied only to certain types of economic relations. For example, “secondary sanctions” were proposed for investments in the Iranian oil and gas complex.
However, even here the United States sometimes backed down. For example, in May 1998, President Bill Clinton, despite pressure from Congress, refused to impose sanctions against a French oil and gas company Total for investing $2 billion in the development of the Iranian gas super-field South Pars.
Which is understandable. Times were soft then—in 1997, moderate reformer Mohammad Khatami became president of Iran, holding office until 2005. At that time, relations between Iran and the United States warmed somewhat, and the latter preferred carrots to sticks. And the idea of extraterritoriality of sanctions was not yet as advanced as it is today. However, Khatami was replaced by the radical Mahmoud Ahmadinejad, who entered into a new conflict with the West.
From soft to hard
The West immediately disliked President Ahmadinejad for his extremist statements (like Holocaust denial). The formal reason for international sanctions was Tehran's nuclear research, which jeopardized the 1968 Nuclear Non-Proliferation Treaty. In December 2006, the UN Security Council adopted the first, and in March 2007, the second sanctions resolution. However, they were rather toothless - they limited the supply of materials and technologies for the nuclear program, and also affected the assets of individuals and legal entities associated with it.
Then the sanctions were consistently tightened. In 2010, after Iran reached a uranium enrichment level of 20%, a new UN Security Council resolution recommended “vigilance” when dealing with Iranian banks. The petrochemical industry has also begun to be targeted.
However, all these sanctions, both American and UN, although they had a negative impact, still slowed down domestic growth rather than actually stifling the economy. Everything changed when the US agreed with the EU to act as a united front against Iran.
In July 2012, the European Union, after much persuasion from Washington, finally joined the US embargo (since 1979) and refused to import Iranian oil, and also prohibited its companies from insuring tankers exporting oil from Iran. It was a real shock for the country.
In addition to oil sanctions, financial sanctions were also introduced. In March 2012, Iranian banks, many of which had fallen under American sanctions long before, were disconnected from the interbank transfer system SWIFT.
At the same time, the United States began to take the extraterritoriality of sanctions seriously. In 2014, the French bank BNP Paribas paid the United States a whopping $8.9 billion in fines for transactions with Iranian, Cuban and Myanmar companies under American sanctions. The number of European banks that got away with fines of up to a billion is about a dozen. All this discouraged European bankers from clients on the American sanctions list SDN (special designated nationals).
Life under sanctions
Countries that did not join the US and EU sanctions may have sympathized with Iran in the depths of their national souls, but they acted primarily in their own interests. The remaining large oil buyers (China, South Korea, India) took advantage of the situation and pushed Iran, demanding discounts. Although Iranian officials denied the discount, it was only by lowering prices that they were able to retain some of the remaining consumers. In particular, we are talking about Indians and Chinese. In June 2013, Indian Oil Minister Veerappa Moily stated that the main reason for the cooperation of his country's oil refining companies with Iran was discounts. The latter reached 10-15% of the market price.
Life under trade sanctions is almost unthinkable without smuggling. Of course, she flourished. The easiest way is to falsify accompanying documents, passing off Iranian oil as someone else's, often Iraqi. The second method is the use of shell companies registered in third countries, whose tankers supposedly accidentally end up off the Iranian coast and, after several hours of sailing, return to their home port loaded with Iranian oil.
The third method is to reload oil on the open sea with navigational instruments turned off. It is no coincidence that in 2010-2014, the Iranians significantly increased their tanker fleet, building new ships and buying up old ones that were ready for scrapping. Tankers went to sea under the Iranian flag without declaring their destinations, drifted and, if an oil deal was concluded, turned off navigation GPS-transponders, and then proceeded to the meeting point with the buyer’s tanker.
The technology is not new; it was used back in the 1980s to circumvent the embargo on oil supplies to South Africa (which was then under sanctions due to apartheid policies).
One of the main intermediaries in circumventing sanctions was Dubai. The combination of geographic proximity to Iran, a liberal business climate with a minimum of regulations, as well as the presence of a huge seaport and a large Iranian diaspora with business connections at home made Dubai an Iranian Hong Kong. There are 100-400 thousand ethnic Iranians living in the UAE and about 8 thousand companies owned by them. Most ethnic Iranians in the UAE live in Dubai. On the Iranian side, transactions with the Dubai offshore were mainly handled by the local secret police - the Islamic Revolutionary Guard Corps.
Dubai became a hub for re-exports even during the period of softer sanctions (in Tehran you can safely buy many American goods that are formally prohibited for export to the country), so by the time of tougher sanctions the infrastructure for circumventing them was already ready.
In general, re-export is a classic problem in circumventing sanctions and trade restrictions. For example, after President Obama imposed anti-dumping duties on certain types of steel products from China, imports from neighboring Vietnam unexpectedly increased sharply.
Interestingly, business was not particularly hampered by political disputes between Iran and the UAE. Iran controls two modest islands in the Persian Gulf, the Greater and Lesser Tunb, which the UAE considers its own. But business comes first.
Other intermediaries in Iranian re-exports were Iraq, Singapore (the world's largest port) and neighboring Malaysia.
Traditional financial intermediaries from the same Dubai after 2012, under pressure from the United States, they were forced to curtail business. For example, in the UAE, banks have asked businesses with ties to Iran to close their accounts. But external transactions have not disappeared - simply the forms of payment have changed. For example, Türkiye paid for oil in gold and silver. This is indirectly confirmed by Turkish statistics: in 2013, the volume of external supplies of gold and precious stones amounted to $7 billion, in 2012 - $16.7 billion (the main export item). And in 2011 - before the shutdown SWIFT in Iran - only $3.7 billion. An entire industry has emerged in Turkey for melting scrap gold into bars; raw materials are bought both on the official and black markets in Greece, Portugal and Cyprus. India paid for Iranian oil with supplies of grain, tea and rice.
However, in some places financial isolation was successfully overcome. system POS, similar Visa And MasterCard, Iran developed and implemented independently, cards POS work quite reliably. Keep dollars or euros on deposits after disconnecting from SWIFT It became impossible, but the state did not limit the cash circulation of foreign currency and was even able to finally bring the official dollar exchange rate closer to the market one. The stability of the Iranian rial was hampered by high inflation - its peak (45% year-on-year) occurred in October 2012. The demand for gold coins (“Bahore Azadi” - “Spring of Freedom”) and products made of gold and silver has increased - there are few savings instruments left in sanctioned Iran.
But the medieval hawala, an informal Middle Eastern financial and settlement system based on the offset of claims and obligations, has come to life. If you want to transfer money to your grandfather in Iran, you need to contact the hawaladar, give him the money, and give your grandfather’s name and address. The broker will contact the companion in Iran and indicate who to transfer the money to. In return, he will be asked to transfer the money to someone in Russia. The volume of hawala transfers per year, according to some estimates, is about $20 billion, the main intermediary countries being Kuwait and Turkey.
The medieval institution of hawala, which successfully helped Iran circumvent financial sanctions, is being revived by the creators of cryptocurrencies on a new technological basis.
Nevertheless, after the anti-Iranian Donald Trump came to power in the United States, the issue of resuming sanctions became relevant again: Trump sharply criticized the agreement with Iran concluded by Obama and his European partners even during the election campaign. Within JCPOA The United States should periodically extend the regime of lifting sanctions against Iran. The last time such an extension was signed by Trump was on January 12, 2018 (with obvious displeasure and reservations).
Trump may not sign the next extension, scheduled for May 12 (perhaps under the influence of new “hawks” on the team - Secretary of State Mike Pompeo and National Security Advisor John Bolton), and American anti-Iranian sanctions will come into force again. However, this event is unlikely to have a significant impact on Iran’s oil exports and the oil market as a whole. A full-scale oil embargo requires the participation of the EU, and the Europeans are unlikely to fully support Trump; they will rather limit themselves to partial measures that are not so painful for Iran.
Meanwhile, the internal political situation in Iran is far from calm - the unrest in December 2017 - January 2018 was the largest since 2009. Apparently, they initially reflected an internal political struggle - the dissatisfaction of conservative mullahs with the actions of the “liberal” President Rouhani, but then developed into a rebellion that threatened the entire system. Now everything is relatively calm, but a new explosion is not excluded. The resumption of sanctions, at least partially, may well contribute to this.
Despite the lifting of sanctions and economic growth, the government cannot achieve macroeconomic stabilization. Inflation is still very high - about 10%. On April 9, the Central Bank of Iran announced the introduction of a new official exchange rate - 42 thousand rials per dollar. The one-time devaluation amounted to almost 10%. However, the official rate lags behind the black market rate - 60 thousand rials per dollar.
This spring, the problem of water resource shortages has also worsened, especially in Isfahan and Khuzestan. People are angry that water is being redistributed through corrupt schemes while farmers suffer from drought. This theme was heard during the protests, and it still sounds now. The civil war in Syria began with similar, largely everyday, problems.
