19 October, 2017

Princelings And Nepotism

By Charitha Ratwatte –

Charitha Ratwatte

Charitha Ratwatte

In the context of the recently-concluded Commonwealth Heads of Government Meeting in Colombo, for which delegates from Britain and her former British colonies were in town, it is a good time as any to look at important issues on succession to power and the route to economic development.

Princeling is a word which emerged out of China, the Middle Kingdom. During the time of the Emperor, senior courtiers close to the Forbidden City’s Palace often lobbied directly with the Emperor, the Empress, senior concubines and eunuchs for their relatives to be appointed to high positions in the Imperial Bureaucracy. This was to consolidate their power and influence.

It was said that the leading powerful courtier families sought to sustain their power and influence over the Imperial Court by ensuring that family members were well distributed among the Emperor’s concubines, bodyguards, military commanders and the officials who carried out priestly duties for the Emperor, at the holy shrines. In this way they thought they could cover all bases and have multiple points through these Princelings, which they would use to influence the Emperor and his immediate circle.

Although some of these ‘agents’ managed to keep a low profile, as was sensible, so that their connections would not be disclosed to other officials, many of them were unable to hide their influence and were perceived to be arrogant and undeserving of the important positions they held or the fortune their influence gave them access to. They made the mistake of trying to place themselves above the law and foster a culture of corruption and invincible immunity, thinking that they were untouchable.

China

In today’s Communist China too, such Princelings exist, the relatives and descendants of prominent and influential senior Communist officials of the People’s Republic of China’s Communist Party. Many of these Princelings hold high-level political, official and business positions in the upper echelons of China’s Communist party, the bureaucracy and State-Owned Enterprises.

The term Princeling came into open usage in China in the early 20th century referring to the son of Yuan Shikai, a self-declared Emperor, and his cronies. It was later used to describe the relatives of top four Nationalist families in pre-Communist China, Chiang Kai-shek’s relatives, Soon May-ling’s relatives, Chen Lifu’s relatives and Kong Xiang Xi’s relatives.

After the 1950s, when the Nationalists were driven out of mainland China on to Taiwan by the Communists, the term was used to describe Chiang Kai-shek’s son, Chiang Ching-ku and his cronies in Taiwan. In today’s Communist People’s Republic of China, the current ‘Princelings’ are mostly the children of Mao’s close associates, the ‘Eight Elders’ of the Communist Party, and other recent national and provincial leaders.

They include the present General Secretary of the Communist Party, the President and head of the People’s Liberation Army , Xi Jinping, son of deceased elder Xi Zhongxun, Deng Xiaoping’s eldest son Deng Pufang, recently-purged Provincial Governor of Chongqing Bo Xilai, son of elder Bo Yibo, and Yu Zhengsheng, son of Huan Jing, former Mayor of Tianjin, to name a few.

These Princelings cooperate and try to coordinate their activities to ensure that it is rarely that a new blood comes into the Communist Party’s hierarchy; they also see to it that anyone among them who gets too ambitious and uppity is disposed of. This was the case with Bo Xilai who was seen to be dangerously playing around with Maoist hard left wing ideology to promote himself as being opposed to the ‘capitalism with Chinese characteristics’ which has helped to pull millions of Chinese out of poverty.

Bo was also a charismatic leader who was seen as too uppity and not willing to await his turn in the queue, and was purged on corruption charges and the complicity of his wife in the murder of an Englishman. One way the Princelings consolidate their hold on power is through nepotism. Nepotism is patronage bestowed or favouritism shown on the basis of family relationship, in business politics, sport or whatever.

Home-grown dynasties

Among the Commonwealth Heads of Government and the delegations in Colombo, there were significant numbers of Princelings and persons who owed their presence to nepotism. The gold standard for this is the infamous jocular question the Syrians asked themselves, when one dictator Hafez al Assad was succeeded by his son, Bashar al Assad: ‘What’s similar between the Presidency of Syria and HIV Aids?’ The answer: “They are both sexually transmitted!”

This is nothing new to us. We have and have had our own home-grown dynasties – in ancient Anuradhapura, Polonnaruwa and Senkadagala Kande Mahanuwara and also the more recent Senanayake, the Bandaranaike and the Rajapaksa dynasties. India has the Nehru/Gandhi dynasty. Pakistan, the Bhuttos.

Cynics point out that when General Ayub Khan took over power in Pakistan and declared himself a Field Marshal, vowing to find a system of government which suited the ‘genius’ of the Pakistani people, the main legacy he left behind was that during his time the Pakistani economy was controlled by 12 families, after him, there were 13 – the addition was his own family!
Nepal had its hereditary Kings, the Shah royalty and also a hereditary Prime Minster lineage – the Rana family – until the recent ouster of the monarchy. The Maldives had President Gayoom and his half brother, who contested the current elections. Bangladesh has the two Begums, a widow and a daughter of former Presidents.

Some of these dynasties are democratically perpetuated and call themselves elected popular dynasties! Like the presidency of the United States, the recent Bush dynasty. It looks as if there is going to be a Clinton husband-and-wife dynasty too. Britain had Prime Ministers, the Elder Pitt and the Younger Pitt. Singapore has the Lee dynasty. South Korea, the Park dynasty. Malaysia, the Razak dynasty. The Gulf States have their Emirs.

Perverting the system

What is more interesting is the dynamics on how Princelings and nepotism pervert the system and the economy. A case in point is when the American securities firm Bear Stearns opened an office in Hong Kong in the early 1990s. At this time China had just discovered the capitalist practice of publicly listing shares to raise capital and the Shenzhen and Shanghai stock markets were developing.

There was fierce competition to get at contracts to sell shares of Chinese State-owned companies on these markets. Bear Sterns was looking for a Princeling to recruit to access this business. They found Margaret Ren – daughter of a senior Communist party official in Guangdong Province and daughter-in-law of former Prime Minister of the People’s Republic Zhao Zhiyang – who was working at Kidder Peabody’s New York office.

Ren was hired by Bear Sterns on a fixed salary plus commissions for business generated. Although Rens’ father-in-law former PM Zhao was under house arrest following the Tiananmen Square massacre, Bear Sterns found that she had access to Chinese officialdom due to the officials wanting to show sympathy to Zhao!

Ren was the pathfinder for other Princelings who were recruited by companies such as Bank of America, Merrill Lynch, Citigroup, Goldman Sachs, Morgan Stanley, JP Morgan, Credit Suisse and Lehman Brothers. These include children and grandchildren of former President Jiang Zemin, Premiers Wen Jiabao and Zhu Rongji.

However the Princeling era may have waned, after the US Securities and Exchange Commission began an investigation into JP Morgan recruiting two well-connected Princelings. A person familiar with the inquiry says: “Most of the people with a mainland background who were employed by these banks are very well connected, that’s clearly an element in why these people were hired.”

A spokesperson for HSBC, which did not hire Princelings, said: “It was never part of our culture. But the fact that we didn’t engage in such practices definitively put HSBC at a disadvantage in attracting Chinese Government business.”

After Ren joined Bear Sterns, the firm won assignments such as listing of the Shenzhen-Guangzhou Railway and the task of raising a share of capital for China Telecom. The Salomon Brothers unit of Citigroup noticed the success of Ren getting work for Bear Sterns and hired her in 2001. A former Salomon executive said: “Chinese officials push business to their relatives. It is critically important part of hiring in China to hire people with the right connections.” Ren moved rapidly from Salomon Brothers to Merrill Lynch, to BNP Paribas and returned to Merrill in October 2012.

Impact on the economy

Princelings and nepotism can cripple an economy by the crucial positions in a nation being held not on the basis of merit or performance but on connections.

For example, a certain website on the World Wide Web lists out the positions held in a certain country by members of a dynasty. They range from, in reverse order of importance: captaincy of national sports teams, deputy chief of mission in an embassy, pilot in the air force, chairman of the national airline, ambassador posts, positions on corporate boards in which the state has a stake , positions on regulatory authorities, chairmanship and membership of statutory boards, minister posts, leadership positions in the legislative arm of government, private secretaries and coordinating officers to ministers, special advisor posts to ministers, provincial chief ministers, cabinet minister posts, deputy ministers, secretaries to ministries, and the chief executive of the country.

The Princeling system in a one Party state can be criticised for promoting the lack of transparency, corruption and crony capitalism. The system in China has been criticised for being operationally rigid, politically closeted and morally illegitimate. However, there are analysts who argue that after 60 plus years of Communist rule, China has developed into the world’s second largest economy. It has pulled a larger percentage of people out of poverty than any other nation at any time in human history. The proportion of Chinese who today are no longer poor and are economically strong is truly astounding.

Capitalism with Chinese characteristics

‘Capitalism with Chinese characteristics’ espoused by the Communist Party of China has been praised by its defenders for its adaptability, for it being a meritocracy and for its legitimacy among the people.
Consider the issue of adaptability, within these 64 years China has undergone periods of radical collectivisation, the disastrous Great

Leap Forward, privatisation of farm land and dissolution of the collectives, the more disastrous Cultural Revolution, Tiananmen Square Massacre, Deng Hsiao Pang’s Market economy reforms and President Jiang’s initiative to open up membership of the Communist Party to successful entrepreneurs, the ‘Red Capitalists’. Would any other system, even the much-vaunted so-called democratic ‘electo-cracies’ have faced up to so many challenges and come out successfully?

On the question of operational rigidity, the Chinese Communist Party has actually been able to implement a system of term limits, at a time when the tendency of autocrats even in electo-cracies, claiming to be democracies, the world over, are going in the other direction.
Lifetime rule is no longer allowed in China, Politburo members have a mandatory retirement age between 68 and 70 years. Of course they may continue to live in the party leader’s compound and try to mentor their protégés, but they have to step down from their official positions. Communist China has been actually hailed by some as a meritocracy. Consider that out of the 25 member Politburo of the Communist Party, only five are Princelings. The 300-member Central Committee has few elites.

The upward mobility that the Communist system has created for China’s people is in many ways a model. The only limitation is mandatory membership of the Communist party. But this today includes Red Capitalist entrepreneurs – Karl Marx must be rolling in his grave! The recent decision of the Third Plenum of the Chinese Communist Party’s 18th Central Committee meeting in Beijing to ‘give a decisive role to markets’ in China’s economic policy in the future, analysts say, has the potential to usher in another round of explosive economic growth, according to analysts.

What is China’s secret?

What is China’s secret? The Communist party of China has a little known agency called the ‘Organisation Department,’ which works like a Human Resources Department of any large business corporation. It recruits young Chinese graduates after a competitive examination for three types of enterprises – the civil service, state-owned enterprises and social organisations like universities and community organisations.

The university graduates proceed through four levels of advancement through these institutions. This is a pyramidal structure. At the base at grade 1 there are 900,000 recruits. The next level grade 2 consists of 600,000 officials. Grade 3 is 40,000 officials; Grade 5 is the Central Committee of the Communist Party, consisting of 300 persons. Admittedly there is a certain amount of patronage and mentoring in the system. But in which Human Resource Department are those aspects absent? In India, both in the IAS and the IFS, we hear of a Kerala Mafia, which ensures the upward mobility of Keralites! Indeed, it is alleged that President Xi heads a Shanghai faction in the Central Committee!

The committee appointed to drive China’s reforms is said to consist of a majority of Shanghai faction members. The Organisation Department of the Communist Party conducts intensive reviews of the performance of these people by interviewing peers, supervisors and subordinates exhaustively. Their performance is constantly evaluated and reported on. By the time the recruits reach the Central Committee or the Politburo, they have put 30 solid years of performance, running SOEs, running provinces or managing institutions such as universities or research institutes.

For example, the present President of the People’s Republic President Xi has over 30 years advanced from the manager of a village unit to running a province and also being ‘re-educated’ during the Cultural Revolution.

China is a case study on how a Princeling system has evolved into a meritocracy, according to some analysts. Public opinion is clear; a recent PEW survey in China showed that 85% of those interviewed were ‘satisfied’ with the Chinese system. The London Financial Times surveyed Chinese youth and found that 93% were ‘optimistic’ about their future. How many so called democratic electo-cracies will have such favourable numbers? Democratic electo-cracies are fast becoming ‘elect, regret and reject at the next election’ systems.
On the corruption issue, the facts are telling. On Transparency International’s Corruption Index, China hovers between 70 and 80 places out of 170 nations. It is moving up year by year. On the other hand India is at 94th position and dropping. Many democracies fare worse.

China has been able to alleviate a rigid orthodox Communist system by blending it with their Confucian tradition of a meritocratic Mandarin autonomous administrative system, albeit tied to membership of the Communist Party, combined with term limits for the leadership.

‘Responsible Authoritarianism’

Author Francis Fukuyama has described the system operational in the People’s Republic of China as ‘Responsible Authoritarianism’. If Princelings are appointed on the basis of merit and performance evaluation to high posts, then the system may deliver. But intrinsically if connections are the key to eligibility, then there is hardly an opportunity for a meritocracy to develop in the style of the Chinese Mandarin administrative culture. This is the great paradox which bedevils democracies which are in fact mere electo-cracies.

Merely by having elections of one sort or the other, one cannot guarantee the implementation of a sustainable development process. The management and implementation of national policies must be in capable, competent, unbiased hands. The nation’s managers and administrators must be person holding office on merit, whose past record must be one of competence. Managers who are mere

Princelings or who hold high office based on connections simply cannot deliver.

The Chinese have shown that even in an autocracy, competent meritocratic managers can still usher in an era of development. How long will it take the rulers of democratic electo-cracies to realise that they must depoliticise the administration and have a competent, autonomous, national management cadre and not mere political hacks or incompetent Princelings in key administrative and management positions?

The path to sustainable development lies in the hands of a meritocratic autonomous, management cadre governed by financial and administrative rules accountable to the law. The lesson to be drawn is that yes men, acolytes, incompetent relatives, political hacks, bootlickers, sycophants and other sundry types of ‘ass liquors’ holding critical posts, cannot ever deliver economic or social progress, whatever benefits there may be to corrupt dynastic wealth creation. The stories currently circulating about the Principal of the Sri Lanka Law College of the Council of Legal Education is a case in point!

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    “The path to sustainable development lies in the hands of a meritocratic autonomous, management cadre governed by financial and administrative rules accountable to the law. The lesson to be drawn is that yes men, acolytes, incompetent relatives, political hacks, bootlickers, sycophants and other sundry types of ‘ass liquors’ holding critical posts, cannot ever deliver economic or social progress, whatever benefits there may be to corrupt dynastic wealth creation. The stories currently circulating about the Principal of the Sri Lanka Law College of the Council of Legal Education is a case in point!”

    The final paragraph describes people like Malinda SeneviRotten, Rajpal AbeyKnickers and scores of other laptop journalists, Buth packet patriots, Jim Softy’s, T.Sumanasekeras, Max Silva’s, Fathima Fukushima’s and a few others not forgetting Chris Nonis (brother of Chuck Norris) who is very eloquent but lies through his teeth. :D

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    Didn’t the Ratwattes and their Relos did exactly what you are winging about?.

    Middle Income Nation, in just 4 years since the departure of your mates.

    One Billion Dollars worth of investments just in the last couple of months, from Crown Melbourne and Alliance Capital.

    Per Capital Income is already USD 3000.

    Last Quater growth still steaming ahead at 7.8 %.

    Just imagine the growth over the next few years with all these Private Equity being invested in bricks and mortar, which not only provide capital growth but ever increasing tourist Dollars.

    Can your mates do better ?.

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      K.A. Sumanasekera:
      Would you please send CT your mailing address so that some charitable soul can send you a dictionary. Then we’ll be able to understand even a tiny fraction of the bilge you keep vomiting.

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