The price of Covid and war


In July 1958, top leaders were already clear about the failures of the Great Leap Forward and the suffering of the common people. Marshall Peng Dehuai, a personal friend of Mao Zedong since almost childhood, denounced their grief. He pleaded with the chairman to stop the faulty plans at a famous conference in Lushan. But Mao rejected the criticism and turned down and demoted Peng, denying the famine that was already setting in.

In the following two years, despite the hunger in the Chinese countryside, Beijing carried on exporting grain to the Soviet Union. Only in January 1962 were the policies reversed. Mao was demoted. The day-to-day business was transferred to Liu Shaoqi, who then became chairman of the state, whereas Mao remained chairman of the party.

There may be deep lessons to draw from those events 60 years ago, when confronted with the present choices against Covid in China. China managed to overcome the first wave of the epidemic by enforcing strict rules of behavior on the population, and the people, trusting the government, followed those rules.

The result was that by the summer of 2020, Covid, which had started in China, was spreading wildly worldwide, whereas it was being brought under control in China. Western countries and media, which had hastily portrayed the outbreak of Covid as a Chernobyl[1] moment for China, were soon being mocked by the Chinese counter-propaganda. It claimed that Beijing was proving its mettle and, in fact, the fight against the disease was evidence that the Chinese system was better than the chaotic democratic Western system. However, two years later, the virus has mutated: it is less dangerous but also more infectious.

Moreover, American and European research labs invented effective vaccines able to stem the tide of the disease. Plus, the disorderly social response in Western countries enabled societies to create some kind of herd immunity and got people used to living with the virus and not being totally safe from it. The epidemic in the West became endemic; therefore, worldwide, Covid is no longer a significant issue.

The 1958 legacy

At the same time, however, China didn’t develop an effective vaccine, its population was not immune, and most importantly, Chinese people were not used to living with Covid. The result is that, in reality, China is presently more subject to the disease, and it could have a higher mortality rate if strict rules were suddenly relaxed. Moreover, the economy is coming to a halt and the country is becoming more isolated from the rest of the world, with massive consequences.

This proved that the disorderly social response of the West and its outstanding performance in science allowed it to better overcome the epidemic. At this stage, China should change its policies and decide to live with Covid, start a massive vaccination campaign, and get people used to the idea of living to some extent with the disease.

However, like in 1958, perhaps the political leadership is not ready to admit a mistake that would have grave consequences. Mao decided to carry on rather than acknowledging that the Great Leap Forward was starving millions of people to death. This decision eventually led to the largest man-made famine globally, dispatching between 20 to 60 million people on a population of some 500 million. It was a death toll extremely tragic in a time of war, beyond the pale of imagination in a time of peace.

Now, of course, we are far from that situation, but the toll that the zero Covid policy is inflicting on the Chinese economy is mind-blowing. Statistics show that transportation of goods is halved within China in the first half of the year. People in Shanghai, China’s wealthiest city, don’t have enough food, die at home because they cannot be moved to the hospital, get sick in quarantine quarters, and the savings of ordinary people are taking a dip.

Joerg Wuttke, president of the European Chamber of Commerce and usual a vocal advocate of the Chinese economy was extremely alarmed because of the situation.[2]

However, the Chinese leadership seems unfazed by these basic facts. It carries on with this zero Covid policy, simply ignoring reality and the suffering of the common people, thinking that a change of approach could be harsh for people to accept and harsher politically to digest.

The reality is that as the virus has mutated, the zero Covid policy is impossible to maintain, and sooner or later, China must accept the reality and necessity of living with Covid and not forcing its mental constraint on reality.

However, the refusal to come to grips with this basic fact seems to have to do with a common thread linking the Communist Party from the time of the Lushan conference in 1958 to the present times.

Over the 64 years, the emphasis has been that the problem is not the policy but the implementation of the policy; it is not the idea but the application of the concept and the people responsible for applying it. The shifting of blame that makes it possible for unsustainable policies to be carried on seems to be in the genes of the Chinese political system, preferring ideas to reality. This is the DNA of mistakes.

Three options

The mistake can be faced in three ways: ignoring facts and carrying on with this faulty policy, inflicting damage unfathomable to ordinary Chinese people and the Chinese economy. Another solution would be what happened in 1960, when China blamed Mao for wrong decisions, demoting him and replacing him with someone else. However, this would leave in place the system that enabled the bad decision to be made.

The third solution would be recognizing the root element linking those two facts 64 years apart. That is, the system is at fault; the system allowed Mao to carry on policies that didn’t work. This system allowed a zero Covid policy to become an ideological political issue rather than a policy issue: What is best for the country, first and foremost? What are the chances that this issue will be tackled, and how will it be tackled in the near future?

There is no sign whatsoever that the top leadership is stepping back from its zero Covid policy. It is trying to sort out nimbler ways to apply its lockdown, but all applications are short of delivering an actual result.

People may wish that the zero Covid disaster could bring down President Xi Jinping; however, this seems at the moment unlikely because, as the Great Leap Forward proved, Chinese people have considerable tolerance for suffering and Chinese leaders have an even greater resilience.

Now, of course, Chinese people will not endure starvation, and the lockdown is certainly more tolerable. Furthermore, there is an actual problem that was not there at the time of the Great Leap Forward. The problem now is that all of a sudden allowing the Chinese population to live with Covid would take a toll. Although the Omicron variant is less deadly than the first Delta variant, it can still be fatal, especially for elderly people.

The third choice would be to change the system.

In this situation, changing the system could be highly destabilizing. Just replacing Xi Jinping with someone else without changing the system wouldn’t address the root of the disaster; this would start to address the source.

However, changing the system and changing the leadership could destabilize China and the world. Then one solution could be perhaps to change the system but paradoxically not change the leader and to have him as a keystone in the passage of systems.

This is a theoretical possibility. However, it is unclear looking at things in China from Rome how likely this could be. It’s also unclear how the system would react to being blamed for something, when its first reaction is to blame the leader.

Still, in this predicament, it could be helpful to look at the Japanese transformation. During the 19th century Meiji restoration in Japan changed the whole system without changing the emperor; this was the same approach the Americans used in the 1950s in Japan. They changed the entire structure without changing its linchpin, the emperor. The man was definitely at fault to some degree for World War II; however, his responsibilities were whitewashed for Japan’s stability. This is perhaps roughly the same situation; the system must be changed in China while providing some stability.

What is necessary are massive, long overdue political reforms.

At the end of the Cultural Revolution, the Chinese Communist Party recognized that a forced modernization was needed: democracy. The hesitation in the crackdown of the Wall of Democracy in Beijing at the end of the 1970s mirrored a fierce internal Party debate on the need to move forward with democracy.

Despite the crackdown on the democratic movement, democracy was still in the air in the ’80s until the crackdown on the Tiananmen movement in 1989.

In the following months, the Communist Party drew the wrong lessons from the fall of the Soviet Union; that is, reforms should never have been started.

However, thirty years after, coping with twin challenges of the zero Covid policy and the Ukrainian war, Russia, which harbored the idea that reforms should never have started, proved just the opposite; reforms in Russia were never deep enough, and in fact, stilted reforms brought about the present failures in Ukraine.

Ukrainian stalemate

When it came to the Korean War in 1950, an obvious ideological fight between communism and anticommunism had already been open for some time. That fight had begun some thirty years earlier with the success of the Bolshevik revolution in Moscow.

The fight was so important that the Nazi fascists, until the beginning of the Second World War, thought that in the end, the liberal democracies would choose to support anti-communist Germany and Italy against the communist USSR and not vice versa.

Also, at the time of the Korean War, the economies of the two systems, the one under communism and the liberal democracies, were separate.

Finally, the countries in the conflict were at the same time prepared for war because they had just come out of the world conflict. And they were also worried about a new large war because of their recent experience, and did not want an uncontrolled escalation. All these elements are missing today in the war in Ukraine.

There is a war, but there is no clear accepted ideological division within the countries in conflict. In fact, a not insignificant part of public opinion in the West and Europe would like to remain neutral, or even support Moscow. There is no previous psychological, social, cultural, and deep-seated preparation like the communism-anticommunism battle to face the clash.

The economic systems are integrated, so it is now challenging to make them work at full capacity and simultaneously face the conflict. Even thinking of economic blackmail, such as cutting gas supplies, is a burden on both sides and should work to bend the will of others.

Finally, there is no preparation for war.

Europe has forgotten the reality of war for eighty years. It is, therefore, at the same time, extremely frightened by this eventuality and also very superficial about it because it does not understand what can or cannot create a military escalation.

In this situation, then, there are specific and precise difficulties for various European countries, starting with Germany, the heart of Europe in many senses.

Germany is dependent on Russian imports for some 60% of its gas. At the same time, it understands that the return of Russia closer to its eastern border brings back geopolitical ghosts. One of them is the lebensraum, the living space that has haunted Germans for centuries, in the center of Europe and without precise natural borders.

Thus Berlin, for example, has increased its defense budget to 2% of GDP but at the same time has not yet been highly active supplying arms to Ukraine. On the other hand, the UK, together with Ukraine, Poland, and other former Soviet countries, perhaps does not want a compromise with Moscow but is asking for a clear victory, because they do not trust Russia.

Therefore, the situation is highly fluid, while America, which has become the political beacon of the European continent again, seems distracted, at least partly. Looking at the American newspapers, it does not seem that the war in Ukraine is a vital issue as it was the Cold War, or as it is for all European countries.

Washington appears from Europe, an essential leader but partially inattentive, which could bring back a distance between the two sides of the Atlantic. On the other hand, the US maybe wary of getting too involved in the conflict and thus feed the Russian propaganda claiming that it is just a proxy war.

Russia and Ukraine both seem today to want a clear success, and no compromise. Thus, they do not understand the risks they face in this general context of unpreparedness for a long and sustained conflict.

In 1950, the North Koreans invaded the South, and the Americans were unprepared. Washington intervened and drove the communists back almost to the border of China. Then it looked as if the US was about to invade China, where the communists had seized power only a few months earlier. In that moment the Americans and their allies were surprised when Chinese troops entered the conflict and again pushed the Americans back to a truce line.

First, the Russians, who supported the North Korean communists, then the countries following the United States, underestimated the others’ determination not to lose. When both parties realized that they came to a truce.

Perhaps this clear perception is missing in Ukraine today.

The Russians need some minimal results. Otherwise, there may be escalations. On the other hand, NATO also cannot afford an apparent defeat in Ukraine, which would give a political green light to the aggressiveness of Moscow or others. There rumors that Moscow could call for a general mobilization on May 9th. If that happens NATO could also mobilize and send troops into Ukraine. It then would be an entirely different ball game then.

So, we have already reached a point of no return; a compromise is needed because continuing the conflict could become harder and harder to sustain for both parties.

China’s money

If that comes, it will not improve China’s plight over a consequence of war: the US freeze of Russian foreign assets. In case of a clash, America could also check part or all of its massive foreign assets and reserves. China thought it could be safe and sound with three trillion in funds. They could cushion whatever sanctions America would impose.

It is clear that these assets belong to a global circuit vastly controlled by the US in reality. Then Beijing is cornered: either it accepts international rules of behavior, or its assets could be frozen or even seized in case of war.

It is apparently becoming clear to China there is no real alternative to the dollar, other major currencies (euro, yen, pound sterling, et cetera) and even gold and other commodities are also linked to the dollar. The RMB is not fully convertible and allowing to be widely used abroad in the past years created different exchange rates between domestic and foreign RMB, something that was spinning out of control and that Beijing doesn’t want to repeat.

China’s central bank reportedly held a meeting last week on coping with this risk, but it came out without any solution, as keen observer of China’s economy Michael Pettis argued. There are no clever solutions. In the middle of Covid, China can devise strategies to keep its factories running and exporting, thus earning precious foreign currency to keep its economy afloat. At the same time, domestically, people do not spend and consume.

Yet ultimately, this money belongs to China only as long as Beijing doesn’t run against globally accepted norms. This is not just about China and an evil masterminding America. It is about unbridled global markets. America, for instance, in 2008 went through a massive financial crisis; that is, global finance hit even its American “master.”

After over 40 years of reforms, China thought it could shirk any economic downturn, thanks to its double standard system, which is relatively open outside and relatively closed inside. Yet the western sanctions against Russia prove that this is impossible.

Take this, plus Covid, plus the future fallout of Russian political defeat in Ukraine, and then what is left for China to do? Wait for America to fall apart first? Possible, yet presently not likely. Blame Xi and replace him with someone else? The issue is not the emperor, it’s the imperial system. The problem is not Faust selling his soul, it is the Devil that wants to buy it.

[1] See and and


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  1. F. Tuijn 6 maggio 2022

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