The Late, Great Helmsman

The Daily Reckoning PRESENTS: Mao never cared about ideology. He murdered his keen communist followers as readily as capitalist roaders. He took money from Moscow…but he also turned his back on the Russians whenever he could get away with it. He might just as well have been a Republican. Read on…

THE LATE, GREAT HELMSMAN

Eagles soar up the long vault
Fish fly down the shallow riverbed
Under a sky of frost, ten thousand creatures vie to impose their will
Touched by this vastness,
I ask the boundless earth:
Who after all will be your master?

Mao Tse-tung

The more history you read, the less you learn from it. Not that it isn’t entertaining; to the contrary, history is nothing if not diverting. The trouble is, it is nothing more. In the end, all you take away is a gaping mouth and a mind pried so wide open it is ready to believe anything…and nothing.

We say that after reading a grand biography of Mao Tse-Tung, written by Jung Chang and Jon Halliday. The authors must have spent many years trawling through the official records, listening to oral histories, and reading the newspapers. What they have come up with is extraordinary. And what is most extraordinary about it is that it shows how man – and here we speak of the species, not the gender – can get away with almost anything.

In the 20th century, man got away with more than usual. Murder, robbery, torture, starvation were not uncommon. And the people who committed these crimes often found themselves the subjects of popular adoration. Their silhouettes were recorded on paper currency. Likenesses of themselves were chiseled out of granite and hoisted onto public squares. Their quips and sayings were printed up in little books, distributed to the masses like Christmas candies…and studied by callow scholars as if they were Gospel lessons.

In the 1960s, we spent some time in a center of higher learning in Paris. We recall that the most difficult choice a young European intellectual faced was whether to sign up with the Trotskyites, the Leninists, or the Maoists. Each had his own special style and doctrine. Students stayed up late into the night arguing the fine points of one or the other, none of them with a single clue about who these men really were or what their bloody creeds really meant.

Now, with the opening of archives and the closing of the lives of most of the principals, we get to find out more of what really went on…and what these great revolutionary heroes were really like. And what a ghastly show it is! Hegel meets Helter Skelter. Das Kapital meets Texas Chainsaw Massacre.

The Chinese are a smart people; just look at the names that make it to advanced science programs at America’s top universities. IQ aficionados tell us the Chinese and Japanese have an edge over the rest of us. But read the story of Mao; it makes you wonder: how could so many smart people do something so moronic…it would be flattery to call them stupid?

Who would have thought that one of the planets most ancient and refined civilizations would yield itself over to a lame-brained intellectual whose principle preoccupations were creating havoc…and making sure his own bowels moved? What went through the minds of his followers when they watched him order his trusted subordinates trussed up, tortured and murdered…? What did they think when their own general – faced with an implacable enemy who vowed to ‘annihilate’ all of them – set in motion a purge of his own forces that wiped out a third of his entire army…or dilly-dallied in hostile territory, against the orders of his superiors, and managed to lose 70,000 out of an original 80,000 of his long-suffering followers? What could they have thought when the man who claimed to be a champion of the poor starved, robbed, and tortured them without mercy…so ruthlessly that any peasants with the strength to escape ran off to the other side?

If they didn’t flee, they hung themselves or opened their veins. When Mao first got his hands on a little chunk of China he immediately turned the place into a prison. Armed guards patrolled the streets and borders – prevent people from escaping. People were encouraged to denounce each other…torture was barbaric…executions were everyday occurrences. Families were not allowed to visit each other…as the authorities worried that they might be up to something. A family found to have welcomed a visitor was to be killed. Not surprisingly, people found this proto-Maoist worker’s paradise rather depressing. Even top-ranking cadres began to take their own lives. “Suicides are the most shameful elements in the revolutionary ranks,” came the slogan designed to halt the trend.

What were the Chinese thinking, to let Mao get away with it? It was as if they didn’t think at all. During his career, Mao-Tse-Tung was responsible for more deaths – murder, starvation, torture…the usual ways of dying, plus a few novelties added by Mao and his thugs – than any other man in history. Seventy million is the sum given by Chang and Halliday. Even the entire Mongel reign of Genghis Khan and his whole line – who conquered three civilizations…Muslim, Chinese, and Hindu…and threatened to conquer
Christendom too…didn’t match Mao in killing people. You’d think one or other of the hundreds of millions of Chinese who suffered at his hands would have done something about it. Surely, millions must have realized what was up. It was obvious from the very get-go that Mao was a homicidal, incompetent tyrant. Why didn’t one of them whose wife had been tortured abominably…or whose sons had been killed wantonly… or whose family had been starved or bayoneted…do something to get even? In the early days, it would have been fairly easy to ambush Mao. Maybe that’s the trouble with the modern world; people don’t take the obligation of revenge seriously enough. Mao died of natural causes, many decades later.

It is a relief to many that Mao was a communist and that bolshevism no longer fires hearts and heavy artillery. But it is a counterfeit comfort. Mao never cared about ideology. He murdered his keen communist followers as readily as capitalist roaders. He took money from Moscow…but he also turned his back on the Russians whenever he could get away with it. He might just as well have been a Republican. He went with collectivism only because it was stirred the pot…and the faster it swirled, the more ruthless bits of slime came to the surface. It was necessary, he wrote, “to bring a reign of terror in every country.”

Practically everything about Mao Tse-Tung was a lie or a swindle. In that sense, he made a perfect leading man for a great public spectacle. And as it turned out, he was perfect for the role. He was all show…all humbug…all mountebank.

As a soldier, Mao was a disaster. He absented himself from the fight on every possible occasion…usually holing up in the biggest, safest, most luxurious house in the area…generally feasting and resting…while his gang of killers did their work. Ordered by the Marxist hierarchy to join the battle, he would take his army in the opposite direction…or just wait out the fight and then come in afterwards. Why the party leadership didn’t kill him is a mystery…an oversight that they later greatly regretted.

Very early in his career, he experienced the thrill of brutality. It gave him “a kind of ecstasy never experienced before…it is wonderful…it is wonderful…” he said. To say that he was hard-hearted was a bit like saying the Peking sewer is malodorous; it fails to capture the smell vividly enough. Mao would take part in torture sessions. He would condemn entire villages to starvation. He would waste his own soldiers in pointless battles and unnecessary suffering. Even on the famous ‘Long March’ he did little marching himself. His skinny soldiers had to carry him on a litter!

Military men are often blockheads, at least the best of them are, but Mao was in a class by himself. The Long March was so long partly because Mao wasn’t going anywhere. He marched his men uphill and down…hundreds of miles this way and that…with meager rations…and almost no medical attention, even to the wounded…just to avoid going to a rendezvous that might weaken his political grip. He was supposed to link up with another army boss, one just as ruthless as he was.

The communists’ main enemy at the time – almost everyone hated them – was Chiang Kai-Chek. But Chiang had already decided to let the Reds get away. Still, Mao managed to stir up fights that decimated his little army. At Tucheng, for example, Mao put his own troops in about the worst possible position – with their backs to the Red River – and faced the best of Chiang’s force. Naturally, the communists were nearly wiped out…while Mao watched from a nearby mountain. Of those red soldiers who weren’t killed in the fighting itself, many soon died of cold and wounds…or were killed by the local farmers who were getting even for way they communists had treated them. Wherever he went, Mao handled the locals with such naked brutality…he caused revolts – against the revolutionaries!

The whole Long March is nothing but a recitation of one Mao-caused calamity after another. But the gods must have had a sour sense of humor in the 1930s…they let Mao, Adolf and Josef rise to power anyway.

While Mao was a dud of a general, he was a bad joke of a political philosopher. Early in his life, he might have been a follower of Ayn Rand. “People like me only have a duty to ourselves, ” he wrote. We have no duty to other people.” Later, he dipped his fork into Marxism like a Western teenager sampling sushi. He was not too sure what was in it, and wasn’t too eager to find out. Instead, he took Emperor Qin Shihuangdi (221-206 BC) who founded imperial China as his model. Qin’s empire lasted nearly two thousand years. Not only did he build the Great Wall, he also killed Confucian scholars, burned classical books, and persecuted thousands – perhaps millions – of people.

It was his single-minded pursuit of power that made Mao so successful. His rivals actually believed the Marxist claptrap. They took their orders from the party hierarchy and earnestly tried to implement many silly and impossible programs. When Mao gained the support of Moscow, his Chinese contemporaries felt their hands were tied; they knew he was trouble, but they couldn’t get rid of him.

Mao operated under no such restriction. He eliminated enemies and friends – as it suited him. He listened to Moscow when he wanted to; when Moscow gave him directions he didn’t like, he ignored them. He was not a ‘good communist.’ He was hardly a communist at all.

“Communism is not love,” he said. “Communism is a hammer we use to crush the enemy.”

But it is in his relations with the fair sex, that the worst of Mao is visible. When it came to women, the Great Helmsman was more than a bungler… or a brute….he was a cad.

He married one woman…and then dismissed her. The next bore him two children. Scarcely 18 months later, he was conducting some atrocious campaign of murder…and brought his army up near where she lived. Mao could have and should have immediately gotten his wife out of harm’s way…but he didn’t. His enemies seized the poor woman and put her to death, hoping to strike a blow at Mao’s heart in that way. But the man seemed not even to notice. He had new paramour by then and had forgotten spouse number two.

The new girlfriend, Gui-yuan, then became his third wife and had a baby during the Long March. Again, Mao was nearby but did not come to see her. Thinking to save her baby from the appalling conditions prevailing, she gave it to a local farmer, along with a sum of money to pay for its care. It soon died.

Then, Gui-yuan herself nearly died when she was struck by one of Chiang’s bombs. Doctors said she only had a few hours to live and her pain was so great that she even begged her comrades to put her out of her misery. Once again, Mao, who was in a nearby village, said he was too ‘tired’ to come see her.

More to come…

Regards,

Bill Bonner
The Daily Reckoning
October 6, 2006

Editor’s Note: Bill Bonner is the founder and editor of The Daily Reckoning. He is also the author, with Addison Wiggin, of The Wall Street Journal best seller Financial Reckoning Day: Surviving the Soft Depression of the 21st Century (John Wiley & Sons).

In Bonner and Wiggin’s follow-up book, Empire of Debt: The Rise of an Epic Financial Crisis, they wield their sardonic brand of humor to expose the nation for what it really is – an empire built on delusions. Daily Reckoning readers can buy their copy of Empire of Debt at a discount – just click on the link below:

The Most Feared Book in Washington!

We are full of question marks this morning.

What do stock market investors see to celebrate in $60 oil? The last time the Dow was at this level – January 2000 – you could buy a barrel of Arab light oil for just $24. And there was no War on Terror…no war in Iraq…no war in Afghanistan…the trade deficit hit a record in 1999 of $269 billion (now over $800 billion)…the U.S. government ran a surplus (albeit fraudulent)…homeowners carried only half the amount of mortgage debt… and Bernie Ebbers was still a free man.

But investors are still buying…and have pushed the Dow up above its level of
six years ago…

What gives? What is it they expect? Higher earnings? Higher prices? The second coming?

There are only two reasons to buy a stock. Investors buy stocks for the dividends…for their share of the earnings. Speculators buy stocks because they think the stock price will go up. Currently, dividends yield an investor about about half the rate of inflation. So, stock buyers must be gambling that prices will go up.

Actually, even in general market declines; stock buyers often think they will be the exceptions. Bloomberg recently did a study of the performance of brokerage houses and research analysts. Looking at 350 of the top firms – companies with the brightest employees, with the plummiest salaries, the nattiest suits, the slickest educations – they found something extraordinary. Even the very best of them only got it right 34% of the time. Merrill Lynch was number one. And Merrill Lynch picked 200 stocks, of which only 68 turned out to be winners. These are full-time professional analysts, earning an average of about $600,000 per year. And behind Merrill Lynch were 349 firms with even worse performance.

If the pros do so badly picking stocks…imagine how the average investor is likely to do.

What makes them think they will beat the odds?

Here we draw a blank. We stare at our computer screen and wonder. Maybe a new flood of liquidity will float stocks…maybe that is what is keeping stocks high now. Flush with cash, speculators look for a place to put it. With housing slipping…commodities slouching…and emerging markets shaking, what’s left?

And, nowadays, at The Daily Reckoning, we can no longer even take pride that our skepticism is contrarian. It is practically the consensus among experts.

Even Ben Bernanke finally went to Congress on Wednesday and conceded two things:

First, housing really is going into a substantial slump, he admitted.

Second, baby boomers are going to bust the U.S. budget.

About the first point, we have written enough for this week. Dear readers know the score. Property prices are going down nationwide. In some places, they are falling sharply…some properties are even going ‘no bid.’

If the trend continues, it is bound to do severe damage to the U.S. economy…since so many people, in so many places and so many ways count on rising housing prices. Many owe their jobs to it. Many more owe their spending money to it. Without rising housing prices, spending must decline. And falling spending, in a consumer economy, has to cause an economic slump. In the year 2000, for example, homeowners took out exactly zero equity from their houses. By 2006 the amount had risen to nearly $300 billion. Without that money, the U.S. economy will be in trouble.

Yet, in the face of this simple logic, stock buyers keep buying. What is it that they could possibly expect?

Bernanke’s second point provides a more fundamental, structural reason why stocks are probably no longer a good buy. People have come to expect certain things…and have built their financial lives around these expectations…but they are probably soon going to find out they are as faulty as a California coastline.

Why? Because, in order for the typical baby boomer to receive the Medicare and Social Security wampum they have come to expect, the share of U.S. GDP taken up by the Federal government would have to increase from 18% to 24% by 2030. The two monster spending programs themselves would have to nearly double in size from 7% of GDP to 13%.

What this means is that spending currently going into other things will have to be redirected to the mammoth programs. Which means that, most likely, as the years pass, boomers will realize that they cannot depend either on their house prices or on the feds for their retirement financing. Instead, they will tighten up their own budgets and start laying in some reserves of their own. Almost certainly that will deliver a body blow to the U.S. consumer economy…

And that will be the coup-de-grace to the stock market.

No, dear reader, this is not a time to buy stocks… it is precisely the time to sell them.

More news, from our team at The Sleuth:

————–

James Boric, reporting from the (very rainy) City That Reads…

“…Despite the general weakness in copper (and, really, in all commodities) over the last couple of months, I wouldn’t panic. Let’s consider the facts…”

For the rest of this story, and for more market insights, see today’s issue of The Sleuth

————–

And more views:

*** Another bell rings. For the first time ever, houses are being offered for more than $100 million. Three houses in the U.S. are now listed at nine figures. Whether any will sell for nine figures, we don’t know.

Donald Trump bought his house in Palm Beach, Florida, for $41 million in 2004. For reasons still to be explained, he judges it worth $124 million today. That’s what he’s asking. If he gets it, it will be one of the great financial coups of all time. He will have enjoyed his oceanfront estate for two years…and earned a profit of $83 million for doing so. Good work if you can get it.

The New York Times carried a photo of the house. It looks hideous in the picture, like a Las Vegas motel. Why would anyone buy it? Trump must be counting on some poor sad sack tycoon who wants to get rid of his money in a particularly gaudy way. Maybe he’ll get lucky; who knows?

*** India is booming.

We’ve been turning an eye to India for some time now. And, in December, we’ll take our first trip to the subcontinent to have a look for ourselves. But the news we’re hearing is breathtaking.

The Indian stock market has tripled its capitalization in the last three years. Now, there are 100 companies valued at more than $1 billion…and 10 to 12 at more than $10 billion.

One of the major, if not THE major, trends of our time is the shift of power and wealth from West to East. In the last ten years, real wages in India and China have soared. From the press reports, at least, people are earning more and more money…factories are booming…the economy is pulsating with growth and innovation. We have no way of knowing where this will go…but it seems reasonable to expect it to continue.

Looking at the long sweep of history, Indians were generally about as rich as westerners. According to Paul Bairoch, the difference in income between Europe and India (or China) was only 1.5/2:1 in the eighteenth century. And the country produced a massive financial surplus. The annual revenues of the Mogul emperor Aurangzeb (1659-1701) were around $450,000,000 – more than ten times those of his contemporary in France, Louis XIV. Some say the Mogul court had a treasure equivalent to one and a half billion dollars. India was the leading manufacturing country in the early eighteenth century, with 22.6% of the world’s GDP and 25% of the global trade in textiles. And why shouldn’t it have been so? And why shouldn’t it be again?

It is not as if only we in the west have had the internal combustion engine…or coal…or now, the Internet. Of course, politics and culture play big roles in economic growth, but their influence is not fixed…it evolves. Once, the culture and politics of the West fostered high rates of economic growth. Now, the politics and cultures of the East seem to be the ones allowing growth. Even still-communist China appears more receptive to capitalist investment, innovation, and growth than Europe or America. So productive and profitable is China, Inc., that she has become America’s biggest lender. Without her, U.S. standards of living would decline quickly.

Want to get rich in stocks? Sell Western stocks on rallies (such as now)…buy Asian stocks on dips.

“The trouble with these bums,” we complained to Maria the other day, “is that they’re not up at dawn…and they’re not very inventive or industrious.”

We were walking through the park…and noticed several recumbent figures. The tramps snooze in sleeping bags on benches…or on the ground. Some are neatly organized, with their things carefully stowed beneath their heads, like a pillow. Others leave trash scattered around…and sleep in a tattered heap.

We began by outlining what we would do if we were ever down and out. The first thing would be to get out of town. You can live well on nothing in Arkansas, maybe, but not in Paris or London.

But even in a major city, a bum could improve his lot. What we’d do, we said warming to our ideas, would be to rig up a hammock in one of the trees in the park. Using a system of pulleys, we would then be able to get in and out easily…and stash the whole affair in the daytime so that no one would bother it.

While we were explaining how our contraption worked, Maria had a novel thought:

“Dad, if bums were that industrious, they wouldn’t be bums, would they?”