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Political Evolution Choice

Two news appeared in Chinese newspapers yesterday. Both dealt with underground construction. Yes. Underground. As in concrete, brick & mortar below the ground level. And no. This is not a word play. They really are underground constructions. But what interests us is not the fact that they are underground nor the fact that they are constructions. What interest us is the communist mindset in China that the public reaction to them so reflects.

You can read both articles yourself. One is called "Asia's Largest Underground Railway Station to Open in Shenzhen, SE. China" and the other "Three-story illegal underground found in Beijing". Both published by the Peoples Daily - China newspaper.

THE RAILWAY

The first underground structure is a new subway system has been described as a marvel. A technological miracle to behold. Awesome. But…

Building underground railways is typically done only by governments and for a very good reason indeed. This type of urban transportation is the most expensive one barring none. Let's take for example the railway system this station is lined to.

It has five lines. These were their costs:

Line #1: 1 Billion USD

Line #2: 1 Billion USD

Line #3: 1 Billion USD

Line #4: 0.7 Billion USD

Line #5: 3 Billion USD

So, we have the entire network of about 177 kilometers built underground for the low, low price of only 6.7 Billion USD. Or about 38 million USD per Km. That's right. You read correctly. For the same amount of money for which you could buy 38 one-million USD houses or 72, 1/2 million USD dollar houses the Chinese got… drumroll please… one large hole in the ground extending for 1 Km. And we are not counting the Third Phase, the Mid-Term Plan the Long-Term Plan and the Extended Intercity Proposal.

OK. OK. But the new underground system is "for the greater good" right? It is OK for governments to go into debt because over the following decades the subway will continue to serve "the people" who will thus pay back the debt. Sound. Classic. And stupid. Why? Because it is false.

It so happens that the current cost of operating the network is about 0.7 USD per traveller while the ticket is in the order of 0.45 USD per user. And, their master strategy to develop real-estate underground and sell it off failed miserably. Hummmm… Let's see. Here is a math problem for you. How long will it take to repay a loan of 6.7 Billion USD if the system has a net loss of about 35% per year? Trick question? Nope. From a governmental perspective the answer does not matter. And do you know why? Because "the people" will continue to pay for the ever ballooning debt forever. Ahhh!!! But the Chinese in Shenzhen will be able to travel in style all over the city. That makes it all worth, don't you think?

Sure. Because you don't have to pay for it. You. Or do you? Well… yes. Yes? Yes. Even if you are not Chinese? Yes.

But how's that possible? Because the subway is being paid with funny money (i.e. printed colored papers or ones and zeroes in a computer). And so what? And so this means that China has inflation. And so what? Inflation means a hidden tax. And so what? Hidden taxes destroy capital. And so what? Capital destruction leads to lower productivity. And so what? Lower productivity means lower standards of living. Chinese and yours! Now do you get it?

Of course, this subway by itself won't have too much of an impact in your life. But how about the equivalent of 10 subways. Or 100. Or 1000? Or 10.000? At which point in money do we draw a line?

Look, this is just like smoking. One cigarette won't kill you. But will shorten your life. Two cigarettes won't kill you either. But will shorten your life. And so the question is, how shorter would you like your life to be? And, more importantly, how do you feel about other people making this decision for you?

THE UNDERGROUND PARKING LOT

And then we have the "other" underground building which was discovered in Beijing. It is three-story high and it was intended to be used as a parking lot. This undertaking was paid for in its entirety with private and personal funds. The entire risk of the enterprise was taken over by a person. And how was this described by Chinese comments? A few examples:

"it could serve as a protection during times of war. In such cases, some fines and legalization are in order"

These project should be "severely and seriously"…"punished or confiscation". "Just like discharging hazardous chemical waste… into… underground pipes… polluting the river and water system"

"Those involved should be arrested, jailed plus all their asset size!"

The first commenter thought that the owner should be fined. The second thought that the owner should be severely punished. This person had the guts to compare constructing a building with polluting the water supply! And the third one that the owner should be criminally declared guilty and then prosecuted!

Doesn't it sound just a little ridiculous to you? All for what? For constructing a building with their own, private funds?

WHERE IS THE CRIME?

This is an excellent question which we should all ask ourselves. In the case of the subway, the Chinese government spent enormous amounts of "peoples'" money without asking permission to anyone. This debt will hang over the shoulders of Chinese generations for ever, if the financial history of most subways throughout the world is of any education.

On the other hand, the owner of the subterraneous building built on his own land, used his own money to create his own enterprise. In the process, he hired and paid wages to employees and contractors thus feeding their families.

In the first case, money came out of taxes (direct or indirect) while in the second it came out of the owner's pocket.

See the difference?

In a world upside down, the case of the subway is to be praised while the case of the owner is to be loathed!!! So, stealing and wasting vast amounts of money from people for the foreseeable generations is OK. But using your own money to pursue an enterprise which is sustainable and will provide solutions to your clients is despicable. Got it!

A MATTER OF EVOLUTION

Chinese people are most definitively stuck in the Communist phase of their evolution behind everybody else. In the "advanced" West, should anyone would build an underground structure without a permit, this person would be fined, but nobody in their right mind would be talking about jail and asset seizure!

But, in the political "vanguard" that is Argentina, nobody gives a damn, not the least the government! Pretty much every average person living in there builds as they see fit and the sky does not fall! And what does the government do? The only thing they can; they tax the unlicensed construction at the same tax rate as any other real estate! See what we mean by political evolution?

CONCLUSION

The conclusion is simple. Political evolution happens but it is not visible unless we are looking for it and know what to look for. To take distance and look more objectively is not an art, is a learnable skill. It's call science. Give it try. We guarantee you will like it.

But then again, perhaps you prefer to live in the dark ages burning political witches so to speak. That's all right. It is most certainly your right to do so. Just one thing, when they come for you, don't look surprised!

Note: please see the Glossary if you are unfamiliar with certain words.

 

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