Friday, December 31, 2021

Hindsight Capital Again Made The Year’s Best Trades - btbirkett@gmail.com - Gmail

Hindsight Capital Again Made The Year’s Best Trades - btbirkett@gmail.com - Gmail

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The New Year is almost here, and it’s time once again to visit the offices of Hindsight Capital LLC. Regular readers will know that I have been interviewing the managers of this remarkable fund at the end of each year for over a decade. They use the one strategy that always beats all others, in all situations: hindsight. In other words, they can place trades at the beginning of the year in full knowledge of how things will result.

The returns to such omniscience are potentially limitless, so they have to follow a few rules. No leverage is allowed, and no betting on individual shares, bonds, or very small and illiquid markets (so, to Hindsight’s great annoyance, they were barred from investing in GameStop or in the year’s top performing stock market, which was Mongolia). The fund cannot trade during the year, and must explain how a sensible person could have seen the returns on a trade coming on Jan. 1. Spotting the returns coming as the result of an earthquake, for example, is verboten. They are, however, allowed to bet that prices will go down by selling short.

Armed with the ability to foresee the future, Hindsight Capital had another fantastic year, even if its ability to sell short was not as useful as usual, as almost everything seemed to go up. Like many hedge funds, it dabbled in private markets more than in the past. As the year opened, the fund had bought up a fleet of rental cars, and cornered a huge supply of used cars. It had also chartered several large container ships for the trans-Pacific routes. Those investments have more than doubled. They’ve been fantastic. But so have the investments in public markets. Here, then, are Hindsight Capital’s trades of 2021:

  • Move to Istanbul

This takes advantage of the collapse in the Turkish lira, which instantly made any trade denominated in lira look that much better. It was obvious as the year began that Turkish inflation was rising, and that President Recep Tayyip Erdogan was increasingly unwilling to leave monetary policy to the central bank. He has long made it known that he thinks higher interest rates lead to higher inflation. Thus, thoroughly predictably, Turkish monetary policy suffered a year of turmoil as Erdogan switched staff again and again. By the year’s end, inflation was more than 20%, the central bank had cut rates three times — and the lira had depreciated by more than 50% against the U.S. dollar. Money illusion insures that 100 Turkish lira invested in the S&P 500 could turn into 281 lira in December, before the government at last intervened. By the end of the year, the S&P was up 28% in dollars, and 126% in lira.

  • The Rise of Crypto

Long Ethereum/Short Silver

Cryptocurrency steadily established itself in 2021 as a lasting factor in the financial universe. New “coins” proliferated, but Hindsight saw that the greatest opportunity was in Ether, long the second-most widely held cryptocurrency after Bitcoin. Transactions in it embed smart contracts. As financiers looked to offer services with crypto, they often found Ether the easiest way to do it.

But while crypto seeks to provide a new means of exchange, it’s also attempting to be a new store of value, taking on a role that for centuries has been filled by precious metals. With inflation rising, the demand for hedges against it rose — and crypto increasingly displaced metals. Shorting silver futures (down 13% for the year) and putting the money into Ether (up 400% despite a selloff toward the end of the year) on Jan 1. produced a gain of 480%:

  • The Volatility Trade

Long MOVE/Short VIX 
Volatility was close to inevitable in 2021 as the world awaited evidence whether it had finally escaped the pandemic. What Hindsight Capital foresaw was the survival of “TINA” — There Is No Alternative. Bonds would grow ever more volatile as inflation increased, but equity volatility actually fell. The more concern there was about bonds, the argument went, the more reason to trust equities instead. The VIX index of equity volatility fell 25% as the MOVE index of bond volatility rose 60%. The rise was bumpy, but by the end of the year a trade of shorting the VIX and putting money into the MOVE had returned 112%. 

  • The Decline of China

Long Vietnam Ho Chi Minh Index/Short BNY Chinese ADR Index

China has long been trying to shift its economy away from a reliance on cheap labor and exports. Hindsight Capital sensibly bet on it to succeed, and saw that neighboring Vietnam, where wages are much lower, was perfectly placed to benefit. The gloriously named Ho Chi Minh index gained 35% for the year. Meanwhile, Chinese President Xi Jinping’s increasingly authoritarian and anti-capitalist rhetoric convinced the firm to take cover ahead of a looming private sector crackdown, which would damage Chinese stocks. By placing a short on Chinese companies’ American Depositary Receipts (down 48% by the end of the year), capturing the largest companies and their exposure to sentiment in the U.S. affected by deepening geopolitical discontent, Hindsight maximized its gains.  

  • The “I’m Not Dead Yet” Retail Trade

Long Mall REITs/Short Home Entertainment Stocks

Nothing matters more to the success of an investment than the price at which you buy it. By the end of 2020, home entertainment stocks were priced as though we would all spend the rest of our lives indoors, while retail malls’ price assumed that bricks-and-mortar retailing was dead. Both were exaggerated, and the economy began to open again. As a result, shorting the S&P 500 home entertainment sector (down 19%) and putting the proceeds into the Bloomberg regional mall index (up 83%) made Hindsight Capital a return of more than 120%. 

  • The Trouble with Clean Energy

Long Natural Gas Futures/Short Solar Energy Companies

As 2021 started, the age of clean energy had arrived — but it wasn’t at all obvious that the world was ready for it. Hindsight positioned for the transition to go wrong. New sources of clean energy proved unable to provide as much power as hoped, forcing energy suppliers to resort to natural gas instead. In Europe, this was exacerbated by geopolitical tension over the gas pipelines coming from Vladimir Putin’s Russia. That led to an extreme price squeeze. Shorting the Solactive solar power index (down 27%) and putting the proceeds into natural gas futures for the British market (up 275% for the year having been up 700% at one point in December) yielded a return of more than 400%. 

  • The Return of Oil

Long Oil Exploration Companies/Short Clean Energy Stocks

If anything, dirtiness was an advantage for energy sources in 2021. Oil prices surged, quite predictably, and Hindsight Capital positioned to capitalize on it as much as possible by buying the stocks of oil-drilling companies (which gained 85%). To finance this, the firm shorted the S&P Global Clean Energy index, which entered the year overpriced on a wave of enthusiasm for ESG investments. In 2021, it dropped 25%. The return: 148%.

  • The Great Real Estate Trade

Long U.S. Office Property/Short High-Yield Chinese Property Developer Debt

As 2020 ended, office property was priced on the assumption that the office was over. We would all spend the rest of our lives working from home. That was an overreaction. Meanwhile, Chinese authorities had started trying to rein in speculation in real estate that had boomed for years on the basis of freely available credit. Shorting the FTSE index of high-yield Chinese property developer bonds (down 43% in yuan terms), and putting the proceeds into the Bloomberg U.S. office property REIT index (up 17%), made 105%.

  • The Bottleneck Trade

Long Container Freight & U.S. Trucking Companies/Short World Airline Stocks

The sudden stop of 2020, followed by the sharp fall in demand, virtually guaranteed that the world trading system would come under pressure once it tried to resume. Continuing pandemic outbreaks at port cities in China, a country that was still attempting to maintain “Zero Covid” and reacted with sweeping lockdowns, made that even more of a certainty. Chinese container rates more than doubled. Hindsight Capital also put money into the S&P 500 trucking index (up 68%), paired with a short in airlines (down 5%); the attempt to transport cargo came back in full force, but the demand for passenger travel remained depressed. That trade made 80%. 

  • Pressures of Pandemic Life

Long Coffee Futures/Short Brewery Stocks

Those transport problems had effects on commodities. Demand for coffee increased in the miserable circumstances of 2021, only to meet limited supply. Demand for beer, a drink people usually prefer in social occasions, was weak. People still didn’t spend much time in bars. So Hindsight Capital shorted the S&P 500 brewers index (down 25%) and put the proceeds into coffee futures (up 77%). That made 140%.

  • Bonus Trade: Revenge of the Indexers

Long SPY/Short ARKK

In 2020, there was intense excitement over the ARK Innovation exchange-traded fund, managed by Cathie Wood, who took a place with previous luminaries like Bill Miller or Peter Lynch. Money poured in to ARK as the fund’s holdings of speculative tech stocks boomed. The internet was full of merch; if you wanted a Cathie Wood T-shirt, you could get one. These were all signs of a blatant peak; and the flow of money into the fund made it harder to make money, as it obliged ARK to take on bigger holdings. That had happened many times before when great performance prompted a flood into funds with limited capacity. Hindsight isn’t allowed to buy individual securities, but its managers confidently predicted that buying a passive ETF tracking the S&P 500 (up almost 30%) and shorting ARKK (down 21%) would pay off in a big way. It did, making 60%. 

Hindsight Capital, in case you hadn’t worked this out yet, doesn’t exist. And nobody could possibly take a series of risks like this without having some insurance for the possibility of being wrong. We can torture ourselves with the profits we could have made with hindsight, but there’s no way we would gain to the fullest. Hindsight Capital isn’t a fair benchmark.

Does this mean there’s no point in the exercise? No, not really. Having a clear grasp of the most likely macro scenarios is always a good idea, and all of Hindsight’s trades did appear to make a lot of sense at the beginning of the year. And it’s also noticeable that the big money came from reversals. In trade after trade, Hindsight made huge money from seeing that markets and investors had overshot, and betting on them to come to their senses.

Value investing, as pioneered by Benjamin Graham in the 1930s, has had a bad press recently. Value stocks, defined as those that look cheap compared to their fundamentals, continue to disappoint. But Graham’s basic approach is to zig when the market zags, or to assume that there is a paranoid individual called Mr. Market, who periodically gives you an opportunity to buy stuff for far less than it’s worth. It worked in the 1930s. And bold contrarianism also worked beautifully for Hindsight Capital in 2021. 

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Sunday, December 26, 2021

The Triumph and Terror of Wang Huning

The Triumph and Terror of Wang Huning

PALLADIUM

GOVERNANCE FUTURISM

The Triumph and Terror of Wang Huning

https://palladiummag.com/wp-content/uploads/2021/10/P062610PS-0524_4753651904-2-1024x682.jpg Official White House Photo/Wang Huning observes as Chinese President Hu Jintao speaks with U.S. President Barack Obama, Toronto

One day in August 2021, Zhao Wei disappeared. For one of China’s best-known actresses to physically vanish from public view would have been enough to cause a stir on its own. But Zhao’s disappearing act was far more thorough: overnight, she was erased from the internet. Her Weibo social media page, with its 86 million followers, went offline, as did fan sites dedicated to her. Searches for her many films and television shows returned no results on streaming sites. Zhao’s name was scrubbed from the credits of projects she had appeared in or directed, replaced with a blank space. Online discussions uttering her name were censored. Suddenly, little trace remained that the 45-year-old celebrity had ever existed.

She wasn’t alone. Other Chinese entertainers also began to vanish as Chinese government regulators announced a “heightened crackdown” intended to dispense with “vulgar internet celebrities” promoting lascivious lifestyles and to “resolve the problem of chaos” created by online fandom culture. Those imitating the effeminate or androgynous aesthetics of Korean boyband stars—colorfully referred to as xiao xian rou,” or “little fresh meat”—were next to go, with the government vowing to “resolutely put an end to sissy men” appearing on the screens of China’s impressionable youth.

Zhao and her unfortunate compatriots in the entertainment industry were caught up in something far larger than themselves: a sudden wave of new government policies that are currently upending Chinese life in what state media has characterized as a “profound transformation” of the country. Officially referred to as Chinese President Xi Jinping’s “Common Prosperity” campaign, this transformation is proceeding along two parallel lines: a vast regulatory crackdown roiling the private sector economy and a broader moralistic effort to reengineer Chinese culture from the top down.

But why is this “profound transformation” happening? And why now? Most analysis has focused on one man: Xi and his seemingly endless personal obsession with political control. The overlooked answer, however, is that this is indeed the culmination of decades of thinking and planning by a very powerful man—but that man is not Xi Jinping.

The Grey Eminence

Wang Huning much prefers the shadows to the limelight. An insomniac and workaholic, former friends and colleagues describe the bespectacled, soft-spoken political theorist as introverted and obsessively discreet. It took former Chinese leader Jiang Zemin’s repeated entreaties to convince the brilliant then-young academic—who spoke wistfully of following the traditional path of a Confucian scholar, aloof from politics—to give up academia in the early 1990s and join the Chinese Communist Party regime instead. When he finally did so, Wang cut off nearly all contact with his former connections, stopped publishing and speaking publicly, and implemented a strict policy of never speaking to foreigners at all. Behind this veil of carefully cultivated opacity, it’s unsurprising that so few people in the West know of Wang, let alone know him personally.

Yet Wang Huning is arguably the single most influential “public intellectual” alive today.

A member of the CCP’s seven-man Politburo Standing Committee, he is China’s top ideological theorist, quietly credited as being the “ideas man” behind each of Xi’s signature political concepts, including the “China Dream,” the anti-corruption campaign, the Belt and Road Initiative, a more assertive foreign policy, and even “Xi Jinping Thought.” Scrutinize any photograph of Xi on an important trip or at a key meeting and one is likely to spot Wang there in the background, never far from the leader’s side.

Wang has thus earned comparisons to famous figures of Chinese history like Zhuge Liang and Han Fei (historians dub the latter “China’s Machiavelli”) who similarly served behind the throne as powerful strategic advisers and consiglieres—a position referred to in Chinese literature as dishi: “Emperor’s Teacher.” Such a figure is just as readily recognizable in the West as an éminence grise (“grey eminence”), in the tradition of Tremblay, Talleyrand, Metternich, Kissinger, or Vladimir Putin adviser Vladislav Surkov.

But what is singularly remarkable about Wang is that he’s managed to serve in this role of court philosopher to not just one, but all three of China’s previous top leaders, including as the pen behind Jiang Zemin’s signature “Three Represents” policy and Hu Jintao’s “Harmonious Society.”

In the brutally cutthroat world of CCP factional politics, this is an unprecedented feat. Wang was recruited into the party by Jiang’s “Shanghai Gang,” a rival faction that Xi worked to ruthlessly purge after coming to power in 2012; many prominent members, like former security chief Zhou Yongkang and former vice security minister Sun Lijun, have ended up in prison. Meanwhile, Hu Jintao’s Communist Youth League Faction has also been heavily marginalized as Xi’s faction has consolidated control. Yet Wang Huning remains. More than any other, it is this fact that reveals the depth of his impeccable political cunning.

And the fingerprints of China’s Grey Eminence on the Common Prosperity campaign are unmistakable. While it’s hard to be certain what Wang really believes today inside his black box, he was once an immensely prolific author, publishing nearly 20 books along with numerous essays. And the obvious continuity between the thought in those works and what’s happening in China today says something fascinating about how Beijing has come to perceive the world through the eyes of Wang Huning.

Cultural Competence

While other Chinese teenagers spent the tumultuous years of the Cultural Revolution (1966-76) “sent down to the countryside” to dig ditches and work on farms, Wang Huning studied French at an elite foreign-language training school near his hometown of Shanghai, spending his days reading banned foreign literary classics secured for him by his teachers. Born in 1955 to a revolutionary family from Shandong, he was a sickly, bookish youth; this, along with his family’s connections, seems to have secured him a pass from hard labor.

When China’s shuttered universities reopened in 1978, following the commencement of “reform and opening” by Mao’s successor Deng Xiaoping, Wang was among the first to take the restored national university entrance exam, competing with millions for a chance to return to higher learning. He passed so spectacularly that Shanghai’s Fudan University, one of China’s top institutions, admitted him into its prestigious international politics master’s program despite having never completed a bachelor’s degree.

The thesis work he completed at Fudan, which would become his first book, traced the development of the Western concept of national sovereignty from antiquity to the present day—including from Gilgamesh through Socrates, Aristotle, Augustine, Machiavelli, Hobbes, Rousseau, Montesquieu, Hegel, and Marx—and contrasted it with Chinese conceptions of the idea. The work would become the foundation for many of his future theories of the nation-state and international relations.

But Wang was also beginning to pick up the strands of what would become another core thread of his life’s work: the necessary centrality of culture, tradition, and value structures to political stability.

Wang elaborated on these ideas in a 1988 essay, “The Structure of China’s Changing Political Culture,” which would become one of his most cited works. In it, he argued that the CCP must urgently consider how society’s “software” (culture, values, attitudes) shapes political destiny as much as its “hardware” (economics, systems, institutions). While seemingly a straightforward idea, this was notably a daring break from the materialism of orthodox Marxism.

Examining China in the midst of Deng’s rapid opening to the world, Wang perceived a country “in a state of transformation” from “an economy of production to an economy of consumption,” while evolving “from a spiritually oriented culture to a materially oriented culture,” and “from a collectivist culture to an individualistic culture.”

Meanwhile, he believed that the modernization of “Socialism with Chinese characteristics” was effectively leaving China without any real cultural direction at all. “There are no core values in China’s most recent structure,” he warned. This could serve only to dissolve societal and political cohesion.

That, he said, was untenable. Warning that “the components of the political culture shaped by the Cultural Revolution came to be divorced from the source that gave birth to this culture, as well as from social demands, social values, and social relations”—and thus “the results of the adoption of Marxism were not always positive”—he argued that, “Since 1949, we have criticized the core values of the classical and modern structures, but have not paid enough attention to shaping our own core values.” Therefore: “we must create core values.” Ideally, he concluded, “We must combine the flexibility of [China’s] traditional values with the modern spirit [both Western and Marxist].”

But at this point, like many during those heady years of reform and opening, he remained hopeful that liberalism could play a positive role in China, writing that his recommendations could allow “the components of the modern structure that embody the spirit of modern democracy and humanism [to] find the support they need to take root and grow.”

That would soon change.

A Dark Vision

Also in 1988, Wang—having risen with unprecedented speed to become Fudan’s youngest full professor at age 30—won a coveted scholarship (facilitated by the American Political Science Association) to spend six months in the United States as a visiting scholar. Profoundly curious about America, Wang took full advantage, wandering about the country like a sort of latter-day Chinese Alexis de Tocqueville, visiting more than 30 cities and nearly 20 universities.

What he found deeply disturbed him, permanently shifting his view of the West and the consequences of its ideas.

Wang recorded his observations in a memoir that would become his most famous work: the 1991 book America Against America. In it, he marvels at homeless encampments in the streets of Washington DC, out-of-control drug crime in poor black neighborhoods in New York and San Francisco, and corporations that seemed to have fused themselves to and taken over responsibilities of government. Eventually, he concludes that America faces an “unstoppable undercurrent of crisis” produced by its societal contradictions, including between rich and poor, white and black, democratic and oligarchic power, egalitarianism and class privilege, individual rights and collective responsibilities, cultural traditions and the solvent of liquid modernity.

But while Americans can, he says, perceive that they are faced with “intricate social and cultural problems,” they “tend to think of them as scientific and technological problems” to be solved separately. This gets them nowhere, he argues, because their problems are in fact all inextricably interlinked and have the same root cause: a radical, nihilistic individualism at the heart of modern American liberalism.

“The real cell of society in the United States is the individual,” he finds. This is so because the cell most foundational (per Aristotle) to society, “the family, has disintegrated.” Meanwhile, in the American system, “everything has a dual nature, and the glamour of high commodification abounds. Human flesh, sex, knowledge, politics, power, and law can all become the target of commodification.” This “commodification, in many ways, corrupts society and leads to a number of serious social problems.” In the end, “the American economic system has created human loneliness” as its foremost product, along with spectacular inequality. As a result, “nihilism has become the American way, which is a fatal shock to cultural development and the American spirit.”

Moreover, he says that the “American spirit is facing serious challenges” from new ideational competitors. Reflecting on the universities he visited and quoting approvingly from Allan Bloom’s The Closing of the American Mind, he notes a growing tension between Enlightenment liberal rationalism and a “younger generation [that] is ignorant of traditional Western values” and actively rejects its cultural inheritance. “If the value system collapses,” he wonders, “how can the social system be sustained?”

Ultimately, he argues, when faced with critical social issues like drug addiction, America’s atomized, deracinated, and dispirited society has found itself with “an insurmountable problem” because it no longer has any coherent conceptual grounds from which to mount any resistance.

Once idealistic about America, at the start of 1989 the young Wang returned to China and, promoted to Dean of Fudan’s International Politics Department, became a leading opponent of liberalization.

He began to argue that China had to resist global liberal influence and become a culturally unified and self-confident nation governed by a strong, centralized party-state. He would develop these ideas into what has become known as China’s “Neo-Authoritarian” movement—though Wang never used the term, identifying himself with China’s “Neo-Conservatives.” This reflected his desire to blend Marxist socialism with traditional Chinese Confucian values and Legalist political thought, maximalist Western ideas of state sovereignty and power, and nationalism in order to synthesize a new basis for long-term stability and growth immune to Western liberalism.

“He was most concerned with the question of how to manage China,” one former Fudan student recalls. “He was suggesting that a strong, centralized state is necessary to hold this society together. He spent every night in his office and didn’t do anything else.”

Wang’s timing couldn’t have been more auspicious. Only months after his return, China’s own emerging contradictions exploded into view in the form of student protests in Tiananmen Square. After PLA tanks crushed the dreams of liberal democracy sprouting in China, CCP leadership began searching desperately for a new political model on which to secure the regime. They soon turned to Wang Huning.

When Wang won national acclaim by leading a university debate team to victory in an international competition in Singapore in 1993, he caught the attention of Jiang Zemin, who had become party leader after Tiananmen. Wang, having defeated National Taiwan University by arguing that human nature is inherently evil, foreshadowed that, “While Western modern civilization can bring material prosperity, it doesn’t necessarily lead to improvement in character.” Jiang plucked him from the university and, at the age of 40, he was granted a leadership position in the CCP’s secretive Central Policy Research Office, putting him on an inside track into the highest echelons of power.

Wang Huning’s Nightmare

From the smug point of view of millions who now inhabit the Chinese internet, Wang’s dark vision of American dissolution was nothing less than prophetic. When they look to the U.S., they no longer see a beacon of liberal democracy standing as an admired symbol of a better future. That was the impression of those who created the famous “Goddess of Democracy,” with her paper-mâché torch held aloft before the Gate of Heavenly Peace.

Instead, they see Wang’s America: deindustrialization, rural decay, over-financialization, out of control asset prices, and the emergence of a self-perpetuating rentier elite; powerful tech monopolies able to crush any upstart competitors operating effectively beyond the scope of government; immense economic inequality, chronic unemployment, addiction, homelessness, and crime; cultural chaos, historical nihilism, family breakdown, and plunging fertility rates; societal despair, spiritual malaise, social isolation, and skyrocketing rates of mental health issues; a loss of national unity and purpose in the face of decadence and barely concealed self-loathing; vast internal divisions, racial tensions, riots, political violence, and a country that increasingly seems close to coming apart.

As a tumultuous 2020 roiled American politics, Chinese people began turning to Wang’s America Against America for answers. And when a mob stormed the U.S. Capitol building on January 6, 2021, the book flew off the shelves. Out-of-print copies began selling for as much as $2,500 on Chinese e-commerce sites.

But Wang is unlikely to be savoring the acclaim, because his worst fear has become reality: the “unstoppable undercurrent of crisis” he identified in America seems to have successfully jumped the Pacific. Despite all his and Xi’s success in draconian suppression of political liberalism, many of the same problems Wang observed in America have nonetheless emerged to ravage China over the last decade as the country progressively embraced a more neoliberal capitalist economic model.

“Socialism with Chinese Characteristics” has rapidly transformed China into one of the most economically unequal societies on earth. It now boasts a Gini Coefficient of, officially, around 0.47, worse than the U.S.’s 0.41. The wealthiest 1% of the population now holds around 31% of the country’s wealth (not far behind the 35% in the U.S.). But most people in China remain relatively poor: some 600 million still subsist on a monthly income of less than 1,000 yuan ($155) a month.

Meanwhile, Chinese tech giants have established monopoly positions even more robust than their U.S. counterparts, often with market shares nearing 90%. Corporate employment frequently features an exhausting “996” (9am to 9pm, 6 days a week) schedule. Others labor among struggling legions trapped by up-front debts in the vast system of modern-day indentured servitude that is the Chinese “gig economy.” Up to 400 million Chinese are forecast to enjoy the liberation of such “self-employment” by 2036, according to Alibaba.

The job market for China’s ever-expanding pool of university graduates is so competitive that “graduation equals unemployment” is a societal meme (the two words share a common Chinese character). And as young people have flocked to urban metropoles to search for employment, rural regions have been drained and left to decay, while centuries of communal extended family life have been upended in a generation, leaving the elderly to rely on the state for marginal care. In the cities, young people have been priced out of the property market by a red-hot asset bubble.

Meanwhile, contrary to trite Western assumptions of an inherently communal Chinese culture, the sense of atomization and low social trust in China has become so acute that it’s led to periodic bouts of anguished societal soul-searching after oddly regular instances in which injured individuals have been left to die on the street by passers-by habitually distrustful of being scammed.

Feeling alone and unable to get ahead in a ruthlessly consumerist society, Chinese youth increasingly describe existing in a state of nihilistic despair encapsulated by the online slang term neijuan (“involution”), which describes a “turning inward” by individuals and society due to a prevalent sense of being stuck in a draining rat race where everyone inevitably loses. This despair has manifested itself in a movement known as tangping, or “lying flat,” in which people attempt to escape that rat race by doing the absolute bare minimum amount of work required to live, becoming modern ascetics.

In this environment, China’s fertility rate has collapsed to 1.3 children per woman as of 2020—below Japan and above only South Korea as the lowest in the world—plunging its economic future into crisis. Ending family size limits and government attempts to persuade families to have more children have been met with incredulity and ridicule by Chinese young people as being “totally out of touch” with economic and social reality. “Do they not yet know that most young people are exhausted just supporting themselves?” asked one typically viral post on social media. It’s true that, given China’s cut-throat education system, raising even one child costs a huge sum: estimates range between $30,000 (about seven times the annual salary of the average citizen) and $115,000, depending on location.

But even those Chinese youth who could afford to have kids have found they enjoy a new lifestyle: the coveted DINK (“Double Income, No Kids”) life, in which well-educated young couples (married or not) spend all that extra cash on themselves. As one thoroughly liberated 27-year-old man with a vasectomy once explained to The New York Times: “For our generation, children aren’t a necessity…Now we can live without any burdens. So why not invest our spiritual and economic resources on our own lives?”

So while Americans have today given up the old dream of liberalizing China, they should maybe look a little closer. It’s true that China never remotely liberalizedif you consider liberalism to be all about democratic elections, a free press, and respect for human rights. But many political thinkers would argue there is more to a comprehensive definition of modern liberalism than that. Instead, they would identify liberalism’s essential telos as being the liberation of the individual from all limiting ties of place, tradition, religion, associations, and relationships, along with all the material limits of nature, in pursuit of the radical autonomy of the modern “consumer.”

From this perspective, China has been thoroughly liberalized, and the picture of what’s happening to Chinese society begins to look far more like Wang’s nightmare of a liberal culture consumed by nihilistic individualism and commodification.

The Grand Experiment

It is in this context that Wang Huning appears to have won a long-running debate within the Chinese system about what’s now required for the People’s Republic of China to endure. The era of tolerance for unfettered economic and cultural liberalism in China is over.

According to a leaked account by one of his old friends, Xi has found himself, like Wang, “repulsed by the all-encompassing commercialization of Chinese society, with its attendant nouveaux riches, official corruption, loss of values, dignity, and self-respect, and such ‘moral evils’ as drugs and prostitution.” Wang has now seemingly convinced Xi that they have no choice but to take drastic action to head off existential threats to social order being generated by Western-style economic and cultural liberal-capitalism—threats nearly identical to those that scourge the U.S.

This intervention has taken the form of the Common Prosperity campaign, with Xi declaring in January that “We absolutely must not allow the gap between rich and poor to get wider,” and warning that “achieving common prosperity is not only an economic issue, but also a major political issue related to the party’s governing foundations.”

This is why anti-monopoly investigations have hit China’s top technology firms with billions of dollars in fines and forced restructurings and strict new data rules have curtailed China’s internet and social media companies. It’s why record-breaking IPOs have been put on hold and corporations ordered to improve labor conditions, with “996” overtime requirements made illegal and pay raised for gig workers. It’s why the government killed off the private tutoring sector overnight and capped property rental price increases. It’s why the government has announced “excessively high incomes” are to be “adjusted.”

And it’s why celebrities like Zhao Wei have been disappearing, why Chinese minors have been banned from playing the “spiritual opium” of video games for more than three hours per week, why LGBT groups have been scrubbed from the internet, and why abortion restrictions have been significantly tightened. As one nationalist article promoted across state media explained, if the liberal West’s “tittytainment strategy” is allowed to succeed in causing China’s “young generation lose their toughness and virility then we will fall…just like the Soviet Union did.” The purpose of Xi’s “profound transformation” is to ensure that “the cultural market will no longer be a paradise for sissy stars, and news and public opinion will no longer be in a position of worshipping Western culture.”

In the end, the campaign represents Wang Huning’s triumph and his terror. It’s thirty years of his thought on culture made manifest in policy.

On one hand, it is worth viewing honestly the level of economic, technological, cultural, and political upheaval the West is currently experiencing and considering whether he may have accurately diagnosed a common undercurrent spreading through our globalized world. On the other, the odds that his gambit to engineer new societal values can succeed seems doubtful, considering the many failures of history’s other would-be “engineers of the soul.”

The best simple proxy to measure this effort in coming years is likely to be demographics. For reasons not entirely clear, many countries around the world now face the same challenge: fertility rates that have fallen below the replacement rate as they’ve developed into advanced economies. This has occurred across a diverse array of political systems, and shows little sign of moderating. Besides immigration, a wide range of policies have now been tried in attempts to raise birth rates, from increased public funding of childcare services to “pro-natal” tax credits for families with children. None have been consistently successful, sparking anguished debate in some quarters on whether losing the will to survive and reproduce is simply a fundamental factor of modernity. But if any country can succeed in reversing this trend, no matter the brute-force effort required, it is likely to be China.

Either way, our world is witnessing a grand experiment that’s now underway: China and the West, facing very similar societal problems, have now, thanks to Wang Huning, embarked on radically different approaches to addressing them. And with China increasingly challenging the United States for a position of global geopolitical and ideological leadership, the conclusion of this experiment could very well shape the global future of governance for the century ahead.

N.S. Lyons is an analyst and writer living and working in Washington, D.C. He is the author of The Upheaval.



Thursday, December 23, 2021

Lovely Traditional Townhouse With Sea View From Roof Terrace

Lovely Traditional Townhouse With Sea View From Roof Terrace

Making Green, Disposable Face Masks That Won’t Become Ocean Plastic - Bloomberg

Making Green, Disposable Face Masks That Won’t Become Ocean Plastic - Bloomberg

 

The Quest for a Disposable Mask That Won’t Pollute

 

Companies experiment with ways to make the plastic used in most face coverings biodegradable, so it won’t threaten marine life.

By 

K Oanh Ha

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December 22, 2021, 9:00 PM GMT

relates to The Quest for a Disposable Mask That Won’t Pollute

ILLUSTRATION: DEREK ABELLA FOR BLOOMBERG BUSINESSWEEK

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Since the beginning of the pandemic two years ago, global production of face masks has rocketed to 129 billion a month from just an estimated 8 billion in all of 2019. While they’ve helped protect humans from Covid-19, the masks—which today are mostly made from plastic fibers that can take hundreds of years to disintegrate—are a threat for creatures that dwell in streams, rivers, and oceans. Almost 1.6 billion of the face coverings likely ended up in the seas in 2020, based on a conservative assumption by the marine conservation nonprofit OceansAsia, which estimates about 3% of masks made that year ended up as litter. Out in the open, their fibers break up into microplastics that are impossible to collect far more quickly than plastic bags, making them a bigger threat than plastic bags, according to a University of Southern Denmark study.

 “Plastic pollution was already one of the greatest threats to our planet before the coronavirus outbreak,” United Nations official Pamela Coke-Hamilton said in a report from the organization’s Conference on Trade and Development. “The sudden boom in the daily use of certain products to keep people safe and stop the disease is making things much worse.”

To address that problem, dozens of manufacturers around the world are working on biodegradable masks. Some are made from new plastics said to self-destruct in a few months. Others use a plastic substitute made from corn starch, sugar cane, and other sugars. And a few are even embedded with seeds that germinate into meadow flowers.

“Biodegradable masks will be a big market with a lot of demand from governments who are seeing what a big problem mask pollution is becoming,” says Francois Dalibard, chief executive officer of Groupe Lemoine, a French company that manufactured 500 million face masks this year. “The first ones to offer it will have a big advantage.”

U.K. startup Polymateria Ltd. has patented a formula that uses about a dozen chemicals—rubbers, oils, desiccants—added to plastics during manufacturing. The mix can be adjusted to create soft plastic fibers used in masks, thin films for food packaging, or more rigid materials used to make cups or drink pouches. The products can be customized to self-destruct after a certain time, with the additives helping turn the plastic into a wax that’s fully digested by natural bacteria and fungi in about a year.

 

“The sudden boom in the daily use of certain products to keep people safe and stop the disease is making things much worse”

 

Polymateria worked with BSI, the U.K.’s national standards body, to create what it says are the industry’s first standards for measuring the biodegradability of the most littered type of plastic, polyolefins. Plastic products can be certified as meeting the standard by laboratories around the world by measuring how much plastic has been reduced to a harmless wax and testing to make sure no hazardous substances are left behind.

Although several companies offer certification for biodegradable plastics, verifying claims that a plastic material is biodegradable is difficult. “Biodegradation of plastics is a complex process that depends on both the material itself and the conditions of the environment in which it takes place,” says Nicole Grobert, chair of the Group of Chief Scientific Advisors to the European Commission. To assess whether a polymer is biodegradable, it’s important to develop “coherent standards for testing and certification, assessing the biodegradation of plastic products in specific environments. Currently such standards for testing and certification do not exist.”

That hasn’t stopped companies from trying. Thai petrochemical company Indorama Ventures PCL has licensed Polymateria’s technology and is planning to use it in fibers it’s designing for mask makers. The company says it’s in discussions with Group Lemoine and mask makers in India and Malaysia to supply the new biodegradable material for those manufacturers’ face coverings. “We’ve looked for a long time for a solution like this that doesn’t leave any microplastics,” says Prashant Desai, Indorama’s fibers chief innovation officer. The company says it’s testing the biodegradable masks against the U.K.’s BSI guidelines for biodegradability, and initial tests of the material have passed the standard.

The Canadian Shield in Waterloo, which manufactures millions of units of personal protective equipment weekly and contracts with the Canadian government to supply face shields, is having trouble keeping up with demand for its BioMask. The biodegradable mask incorporates an additive that allows for microbes and enzymes to “eat away at the treated plastic” once in the landfill. The company says its certified mask, excluding the ear loops and nosebridge, biodegrades 6.5% in 45 days and was tested under conditions similar to a landfill setting. The masks from Canadian Shield don’t turn into a digestible wax and aren’t tested for biodegradability in an open-air situation where masks might be littered.

While disposable medical masks can cost less than 5¢, the cheapest biodegradable masks run about 30¢ each and are often much more expensive. The makers of planet-friendly masks say they need higher demand to help bring down costs. In Hong Kong, mask retailer ReMatter is selling more than 1 million medical masks monthly and has introduced a certified biodegradable mask that will decompose completely after five years in a landfill. At 55¢ each, they’re priced 80% higher than the company’s other premium masks, which feature Disney characters or stylish colors aimed at fashionistas. ReMatter, which sells online and at its specialty shops in Hong Kong, is marketing the coverings to corporations and schoolkids. “We’d like to bring down the price a bit more so more people are willing to try it,” says ReMatter founder Alex Lee. “A big part of that is education. We want to make people aware of their choice and how it affects the environment. We are doing talks at schools and teaching children why this is important.”

Critics say pitching masks and other plastics as biodegradable is an irresponsible marketing tactic that could encourage littering. And even with additives to make them biodegradable, masks can still produce microplastics if they simply break down into small pieces but stick around, says David Newman, managing director of the Bio-based and Biodegradable Industries Association, a U.K. industry lobbying group.

Those concerns haven’t stopped entrepreneurs worldwide from trying new ideas, including finding solutions for masks that might end up as litter. A Dutch company called Marie Bee Bloom sells rice paper masks with hundreds of flower seeds pressed between the layers. If they end up in a park or a flower pot, the paper soon disintegrates, allowing the seeds to sprout. Marie Bee Bloom’s staff of 30 has made about 70,000 masks this year—by hand—which are sold for about €2.6 ($3) each across Europe. Although the masks don’t have medical certification, that’s in the works, says Marianne de Groot-Pons, the graphic artist who started the company. “Nobody wanted to wear masks, they were being littered on the streets, and I wanted to change the story and message around masks,” she says. “The masks we have to wear can turn into something beautiful that’s good for the planet.”

Indian startups have also adopted the idea, putting seeds of tomatoes, okra, and other vegetables into face coverings made from recycled cloth—though some critics say there’s a risk of seeding invasive species if the masks hitch a ride on an airplane. De Groot-Pons insists her seeds aren’t invasive, just ordinary blooms such as poppies, corn flowers, and petunias.

In Vietnam, ShoeX, a footwear manufacturer-turned-mask maker, sells what it bills as the world’s first face covering made from coffee. The mask features woven coffee yarn for its outer layer and a biodegradable filter made with coffee beans and silver nanotechnology. In Florida, Elo Industries Inc. sells a disposable mask it says is made from bioplastics including corn and cassava. And in the U.K., the Pure Option website carries masks made from corn-based plastic and sustainable paper.

“We need masks to be reusable where possible, but many of us will still use and prefer disposable ones,” says Yeen Seen Ng, founder of think tank Centre for Research, Advisory and Technology, which advises Southeast Asian governments on sustainability plans. “We need biodegradable mask innovation and technologies to tackle the pollution challenge.”

 

BOTTOM LINE - An estimated 1.6 billion disposable masks ended up in the world’s seas in 2020. So the face coverings could join plastic bags and bottles as major global waste threats.