CHINA, INC.
While we are at it, why don't we look at China and begin to try and count the cartels and monopolies. I don't see much opening in the finance sector or other economic sectors that the government of China doesn't ultimately have its finger in. Worse still, the government of China is more defensive of criticism from anyone-not just the west-who may cry foul to any of its labor, financing, or market regulatory practices.
I recall how China Inc. moved in and out of a the small town of Vernon, Texas a few years ago. The Chinese wheelers and dealers bought land and received all kinds of subsidized benefits and a limited tax free-status to build helicopters in the town just west of Wichita Falls where I used to teach at university. They promised the local people jobs for years. Within less than 5-years, the Chinese firm had learned to build helicopters from their American partners.
The Chinese firm then picked up the whole helicopter manufacturing plant and shipped everything back to China, the land that free marketers raise up as the future for the world.
Vernon, Texas ended up with nothing. This is what happens when free market without some sort of social commitment locally is not practiced. This is why China will pass the USA in less than 5 to 10 years in green house gas creation. China Inc. is, in some of its manifestation, a greater threat to the world than Japan ever was or the Arab world will ever be to the rest of the planet.
What is amazing is that China is not getting taken to the WTO courts on an hourly basis! Until proper pressure is put on China from investors, governments, and people concerned with the rights of labor or human rights, the problems of cartelism will remain tiny in contrast to the Chinese century we are facing if China is not forced to play by some common rules that are good for all in all of its sectors-from environmental sector, to safety & foods as well as in financing, China could do a lot better than it is.
In any case, China is stealing so many ideas from so many corners of the globe currently that it would take a fool not implement what the so-called Chinese miracle leaders have claimed to do or have been hyped in doing over the past twenty years.
GULF ARAB INC.
"Monopolies are natural phenomena in the Arab Gulf. Most of the region's economies are dominated by state-owned monopolies in the energy and telecommunications sector. As these economies develop and engage more with the rest of the global economy, they have come under pressure to liberalize." Etheridge adds, "But economic reform often masks the creation of a cartel."
For example, in Kuwait the state-owned Mobile Telecommunications Company (MTC) dominated the nation for 24 years. Finally, in the name of liberalization, a new competitor was created about a decade ago. Alas, this single competitor is almost wholly owned by the children and relatives of the ruling family, the Al-Sabahs. Now, a decade after Kuwait entered the WTO, Kuwait has no competitors for these two companies, and Kuwait residents pay for this expensive cartel out-their-ears. Furthermore, this cartel adversely affects the development of the internet and other related sectors across the state.
Similarly, hotel rates, the prices of automobiles and prices in many restaurant chains are fixed high. These are all examples of supposedly informal cartels sealed with a handshake, but this leads then to massive earnings for the elite and far too little trickle down to the others in the land of 3.4 million people. For example, at our local Chile's Restaurant on Gulf Road-which is the Chile's that year-after-year is the highest earner of all Chile's restaurants on the entire planet-the average wage for a 48 or more hour work week is under 600 dollars and sometimes as low as 400 dollars a month.
Etheridge explains, "The cartels begin as patronage from the government. The merchant elite often then hammer out 'gentlemen's agreements' to control the market and maintain prices. The gentlemen's agreement can take many forms but the basic plan is the same: control prices and access to products and services, limit potential newcomers the ability to enter the market and reap as high as profit as possible."
In short, this model of development in some ways is more extreme and anti-developmental (in the long term for the region) than the post-WW2 economic model that Japan showed the world.
It is more like the earlier models of cartelism which led to WW1 and ensure that an extremely imbalanced class system is maintained among the Kuwaiti population, i.e. in a way similar to how Bismarck and his successors ran the supposedly modern unified Germany from 1870 through 1918. Moreover, this cartel model has already created a population of about 2.4 million foreigners (67% of the population) in a land where racism in pay and treatment is already rampant, i.e. similar to some of the worst racism found in the USA or Europe at the beginning of the 20th Century.
ARE CARTELS SOUND?
Strangely, in an otherwise impeccable article, Etheridge claims, "Cartels might not be good for the economy but the politics of cartels are sound." She says this because ruling families in the Gulf, like the al-Sauds in Arabia or the al-Sabahs in Kuwait, are doing a marvelous job of balancing "demands for greater political participation with economic favoritism." Etheridge explains that this is why there is surprisingly stable support for the regimes in the Gulf Arab states, especially among each state's nationals.
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