The Xi personality cult is a danger to China

A one-party state, combined with ritual veneration of the leader, is a recipe for misrule

Gideon Rachman

© James Ferguson

Chinese children as young as 10 will soon be required to take lessons in Xi Jinping thought. 

Before they reach their teenage years, pupils will be expected to learn stories about the Chinese leader’s life and to understand that “Grandpa Xi Jinping has always cared for us.”

This should be an alarm bell for modern China. 

The state-led veneration of Xi has echoes of the personality cult around Mao Zedong — and with it, of the famines and terror unleashed by Mao during the Great Leap Forward and the Cultural Revolution. 

From Stalin’s Russia to Ceausescu’s Romania to Kim’s North Korea and Castro’s Cuba, the combination of a personality cult and Communist Party rule is usually a recipe for poverty and brutality.

These comparisons may seem far-fetched, given the wealth and sophistication of modern China. 

The country’s economic transformation in recent decades has been remarkable — leading Beijing to promote a “China model” from which the world can learn.

But it is important to make a distinction between the “China model” and the “Xi model”. 

The China model of reform and opening, put in place by Deng Xiaoping, was based on a rejection of the cult of personality. 

Deng urged officials to “seek truth from facts”. 

Policy should be guided by a pragmatic observation of what works, rather than the grandiose statements of Chairman Mao.

To allow officials to experiment with new economic policies, it was crucial to break with the fear and dogma associated with an all-powerful leader. 

Term limits for the Chinese presidency were introduced in 1982, restricting any leader to two five-year terms. 

In the post-Deng years, China has managed two orderly leadership transitions — from Jiang Zemin to Hu Jintao, and from Hu to Xi in 2012.

Term limits were also intended to solve the succession problem that often plagues one-party states. 

Henceforth, the party’s collective leadership would matter more than the charismatic leadership of a single man.

But, in the Xi era, the Chinese Communist party has once again embraced a personality cult. 

It incorporated Xi Jinping thought into its constitution at a congress in 2017. 

This was an honour previously granted only to one other leader, while still in power — Mao. 

In 2018, the Deng-era term limits for the Chinese presidency were abolished — setting the stage for Xi to rule for decades, if not for life.

The current intensification of the Xi cult, looks like preparation for next year’s party congress — at which the Chinese leader’s desire to stay on in power indefinitely, will have to be rubber-stamped by the party he controls.

Xi is almost certain to get his way. His supporters and organised sycophants will hail the move. 

How could they not? 

The Chinese leader is meant to be a “good emperor” — a wise leader, who is making all the right moves to modernise the country.

It is certainly possible to make a case for Xi’s signature policies — such as a crackdown on corruption and a more assertive foreign policy. 

The current campaigns to reduce inequality, and to control the power of the big technology companies, can also be justified.

But all of these policies could also easily go wrong. 

Intimidating Taiwan could lead to a needless confrontation with the US. Cracking down on big tech could frighten entrepreneurs and hobble the private sector.

The real difficulty is that if things do go wrong, it will be very hard for anybody to say so openly. 

All personality cults are based on the idea that the great leader is wiser than everyone who surrounds him. 

He cannot be acknowledged to have made mistakes. 

Chinese critics of Xi’s handling of the Covid-19 pandemic have been sent to prison. 

There will be no public inquiries or parliamentary hearings into the pandemic in Xi’s China.

The Xi cult is also intrinsically humiliating for China’s educated middle-class and senior officials — who have to study Xi thought daily on a special app. 

They are expected to express reverence for the leader’s musings and to parrot his favourite phrases, such as “green mountains and clear water are equal to mountains of gold and silver”. 

Anybody who finds this ritual objectionable or laughable, would be wise to keep their thoughts to themselves. 

The Xi cult means that insincerity and fear are now baked into the Chinese system.

Extending Xi’s leadership long into the future is also a recipe for a future succession crisis. 

The Chinese leader is 68 years old. 

At some point, he will no longer be fit to govern. 

But how will he be removed?

Xi’s creation of a cult of personality and his moves to become, in effect, “ruler for life” are part of a disturbing global pattern. 

In Russia, Vladimir Putin is also pushing through constitutional changes that will allow him to remain as president well into his eighties. 

Donald Trump used to “joke” enviously that the US should emulate China’s abolition of presidential term limits.

But the US has checks and balances, which have so far managed to thwart Trump’s worst instincts. 

In a country such as China — without independent courts, elections or a free media — there are no real constraints on a leadership cult. 

That is why Xi is now a danger to his own country.

Federal Reserve Chair Jerome Powell Faces Reappointment Amid Tumult

Mr. Powell is facing down progressive pushback and an ethics scandal as the White House considers his future.

By Jeanna Smialek and Jim Tankersley

Jerome H. Powell, the chair of the Federal Reserve, appeared before the Senate Banking Committee last week.Credit...Stefani Reynolds for The New York Times

As Jerome H. Powell’s term as the chair of the Federal Reserve nears its expiration, President Biden’s decision over whether to keep him in the job has grown more complicated amid Senator Elizabeth Warren’s vocal opposition to his leadership and an ethics scandal that has engulfed his central bank.

Mr. Powell, whose four-year term as chair expires early next year, continues to have a good chance of being reappointed because he has earned respect within the White House for his aggressive use of the Fed’s tools in the wake of the pandemic recession, people familiar with the administration’s internal discussions said.

But the decision and the timing of an announcement remain subject to an unusually high level of uncertainty, even for a top economic appointment. 

The White House will most likely announce Mr. Biden’s choice in the coming weeks, but that, too, is tenuous.

The administration is preoccupied with other major priorities, including passing spending legislation and lifting the nation’s debt limit. 

But the uncertainty also reflects growing complications around Mr. Powell’s renomination. 

Ms. Warren, Democrat of Massachusetts, has blasted his track record on big bank regulation and last week called him a “dangerous man” to lead the central bank.

She has also taken aim at Mr. Powell for not preventing top Fed officials from trading securities in 2020, a year in which the central bank rescued markets, potentially giving the officials privileged information. 

Two regional presidents traded for their own profit in assets that the Fed’s actions could have influenced, according to recent disclosures. 

And Richard H. Clarida, the Fed’s vice chair, moved money from bond funds into stock funds in late February 2020, just before the Fed hinted that it would rescue markets and the economy.

“It is not clear why Chair Powell did not takes steps to prevent these activities,” Ms. Warren said during a Senate floor speech on Tuesday, after sending a letter on Monday calling for the Securities and Exchange Commission to investigate whether the transactions amounted to insider trading. 

“The responsibility to safeguard the integrity of the Federal Reserve rests squarely with him.”

Asked on Tuesday whether he had confidence in Mr. Powell, the president said he did but that he was still catching up on events.

The White House’s decision over Mr. Powell’s future is pending at a critical moment for the U.S. economy. 

Millions of jobs are still missing compared with before the pandemic, and inflation has jumped higher as strong demand clashes with supply chain disruptions, presenting dueling challenges for the Fed chair to navigate. 

The Fed’s next leader will also shape its involvement in climate finance policy, a possible central bank digital currency and the response to the central bank’s ethics dilemma.

“This is starting to feel like an incredibly consequential time for the Fed,” said Dennis Kelleher, the chief executive of Better Markets, a group that has been critical of the Fed’s deregulatory moves in recent years and has criticized it for insufficient ethical oversight.

The administration is under pressure to make a prompt decision, in part because the Fed’s seven-person Board of Governors in Washington will soon face a spate of openings. 

One governor role is already open. Mr. Clarida’s term ends early next year, leaving another vacancy, and Randal K. Quarles’s term as the board’s vice chair for supervision will expire next week, although his term as a governor runs through 2032.

By announcing key picks soon, the Biden administration could ensure that someone was ready to step into Mr. Quarles’s leadership role. 

And nominating several officials at once could give the president a chance to show that he is heeding the concerns of Democrats in Congress, who want to see more diversity at the Fed and officials who favor tougher bank regulation.

But the ethics scandal threatens to complicate the picks.

Recent financial disclosures showed that Robert S. Kaplan at the Federal Reserve Bank of Dallas traded millions of dollars in individual stocks last year, and that Eric S. Rosengren at the Federal Reserve Bank of Boston traded real estate-tied securities even as he warned publicly about problems in that sector. 

The trades have drawn criticism because they occurred during a year in which the Fed hugely influenced a wide range of financial markets.

Both men resigned from their roles as regional presidents amid the controversy, though Mr. Rosengren said he was leaving for health reasons.

Attention has now turned to Mr. Clarida. 

All of his trades were in broad funds, not individual securities, and have been public since May, but have drawn attention amid the current reckoning. 

He sold a stake in a bond fund totaling at least $1 million and moved that money into stock funds on Feb. 27, 2020. 

The transaction gave him more exposure to stocks shortly before the Fed rolled out policies that goosed such investments.

The Fed has said Mr. Clarida’s trades were part of a planned portfolio rebalancing, but declined to specify when the planning happened.

Mr. Powell kicked off an internal ethics review last month. 

A Fed spokesperson said on Monday that an independent government watchdog would carry out an investigation into whether senior officials broke relevant ethics rules or laws.

But some progressives have seized on the problems to bolster their case that Mr. Powell should not be reappointed. 

Jeff Hauser, the founder and executive director of the Revolving Door Project, which has urged Mr. Biden to keep corporate influence out of his administration, has pointed out that the Fed chair himself moved money around last year, listing 26 transactions, albeit all in broad-based funds. 

He also noted that Lael Brainard, a Fed governor and a longtime favorite to replace Mr. Powell if he is not reappointed, did not report any transactions year.

“If you’re trying to go above and beyond, and be beyond reproach, not trading is the better option,” Mr. Hauser said.

Senator Elizabeth Warren has called for the Securities and Exchange Commission to investigate whether top Fed officials engaged in insider trading in 2020.Credit...Stefani Reynolds for The New York Times

It is not clear how much the blowback will ultimately fall on Mr. Powell. 

During his testimony to a Senate committee last week, lawmakers asked him about the ethics issues without explicitly blaming him for them.

The trades were not historically abnormal. 

Mr. Kaplan transacted in stocks throughout his tenure, including when Mr. Powell’s predecessor, Treasury Secretary Janet L. Yellen, led the central bank. 

Ms. Yellen’s vice chair, Stanley Fischer, bought and sold individual stocks, his 2017 disclosures showed. 

Ms. Brainard herself has in the past made broad-based transactions. 

It was the Fed’s more expansive role in 2020 that spurred the backlash.

Agencies often need a “wake-up call” to notice evolving problems with their oversight rules, said Norman Eisen, a senior fellow at the Brookings Institution and an ethics adviser in President Barack Obama’s White House.

“My own view is that Chair Powell is pivoting briskly to address the weaknesses in the Fed’s ethics system,” he said.

Ms. Warren cited regulation, not ethics issues, upon first announcing that she would not support Mr. Powell. 

Democrats have raised concerns for years about the deregulatory approach that the Fed has embraced under Mr. Quarles’s leadership. 

Mr. Powell has largely deferred to his vice chair for supervision as the central bank made bank stress tests more transparent and enabled big banks to become more intertwined with venture capital.

Critics say reappointing Mr. Powell amounts to retaining that more hands-off regulatory approach. 

And some progressive groups suggest that if Mr. Powell stays in place, Mr. Quarles will feel emboldened to stick around: He has hinted that he might stay on as a Fed governor once his leadership term ends.

That would mean four of seven Fed Board officials — a majority — would remain Republican-appointed. 

Two other governors — Michelle W. Bowman and Christopher J. Waller — were nominated by President Donald J. Trump.

During Mr. Powell’s Senate testimony last week, Ms. Warren said renominating him as chair meant “gambling that, for the next five years, a Republican majority at the Federal Reserve, with a Republican chair who has regularly voted to deregulate Wall Street, won’t drive this economy over a financial cliff again.”

Even without Ms. Warren’s approval, Mr. Powell would most likely draw enough support to clear the Senate Banking Committee, the first step before the full Senate could vote on his nomination, because of his continued backing from the committee’s Republicans. 

But having a powerful Democratic opponent whose support the administration needs on other legislative priorities is not helpful.

The Fed chair does have some powerful allies in the administration, including Ms. Yellen, the Treasury secretary. But the decision rests with Mr. Biden.

“I know he will talk to many people and consider a wide range of evidence and opinions,” Ms. Yellen said on CNBC on Tuesday.

Jeanna Smialek writes about the Federal Reserve and the economy for The New York Times. She previously covered economics at Bloomberg News. 

Jim Tankersley is a White House correspondent with a focus on economic policy. He has written for more than a decade in Washington about the decline of opportunity for American workers, and is the author of "The Riches of This Land: The Untold, True Story of America's Middle Class." 

Financing a Sustainable Global Food System

The global food system must undergo a radical transformation to withstand climate change and provide affordable, healthy food for the whole world. Support from the financial sector is key to making this transition a success.

Simon Zadek

BEIJING – The global food system is unsustainable. 

While it is worth approximately $8 trillion annually, its negative impact is valued at roughly $12 trillion. 

And this is not the system’s only contradiction. 

Around the world, food systems are both affected by climate change (owing to disruptive weather and rising temperatures) and make significant contributions to it (through greenhouse-gas emissions and biodiversity destruction). 

The millions of jobs they provide are often low-quality and poorly paid. 

And, most significantly, they fail in their ultimate purpose of delivering affordable, healthy food to all.

Because the global food system is fundamentally unviable, change is inevitable. 

But the radical reforms needed to create an inclusive, sustainable sector that produces nourishing food for the world’s population may have devastating short-term consequences. 

If we take the wrong approach, incorporating the true costs of production into food systems could trigger widespread bankruptcy, devastate rural unemployment, drive up prices, and increase poverty.

The best way to achieve a rapid, fair, and safe transition to a sustainable global food system that can deliver affordable, healthy food for all is, however, a matter of heated debate. 

This is reflected in the strident and largely unproductive discussions taking place in the run-up to the United Nations Food Systems Summit, to be held during the UN General Assembly this month.

From a production standpoint, advocates of regenerative farming vehemently oppose a new generation of soilless food production, such as lab-grown “alternate protein” and vertical farming. 

But it is tough to scale regenerative farming rapidly. 

Soilless systems must be a major part of the solution, given their dramatically reduced carbon footprint and water use, minimal impact on biodiversity, and potential for rapidly delivering cheap, healthy food at scale.

The role of finance in this transition is no less controversial.

There is some merit to complaints about the undue influence of a limited number of private players on decisions that impact the entire global food system. 

Financialization – the drive to maximize risk-adjusted financial returns – is increasing across the global food system, and market concentration is growing. 

For example, just ten companies control half of the world’s seed market, and four agribusiness firms account for 90% of the global grain trade. Just 1% of agricultural firms own 65% of the available farmland.

Financialization reinforces the unequal distribution of economic returns, squeezing the incomes of small farmers and communities, while supporting business models that under-supply healthy, affordable food, and over-supply foods containing high levels of salt, sugar, fat, and carbohydrates. 

Moreover, financialization amplifies corporate lobbying that externalizes public-health costs, maintains perverse agricultural subsidies, and ensures that the costs to the climate and nature do not adversely affect financial bottom lines.

But private capital is absolutely necessary for financing the global food system’s transition. 

We need to harness the massive financial resources managed on our collective behalf by pension funds, banks, and private equity while mitigating the dangers of financialization.

In a recent report, Making Finance Work for Food: Financing the Transition to a Sustainable Food System, the Finance for Biodiversity initiative maps out the role global finance can play in the needed transition. 

The report, prepared in association with the Food System Economics Commission, describes four ways financial tools can be used to shape future food systems.

For starters, financial policies and regulation, reinforced by shareholder and public activism, must drive investors’ internalization of the costs to nature and climate in their financing decisions. 

This change would strand dirty assets, accelerate green-friendly investments, and trigger a shift toward more nutritious food production.

Second, financial innovations, including blended public and private solutions, are needed to accelerate investment in healthy food produced by climate- and nature-friendly forms of farming, thereby driving down costs. 

Such innovations could involve scalable instruments equivalent to the feed-in tariffs that have been used to great effect in catalyzing investment in renewable energy.

Third, policies and public finance are needed to protect and retrain those whose livelihoods are eroded during the transition. 

The goal should be to provide technology, skill development, and capital to enable them to own and operate commercially viable regenerative and soilless forms of food production.

Finally, we need to create opportunities to empower citizens, especially by harnessing the power of digitalization. 

As consumers, they can make an impact by adopting improved, sustainable diets. 

As investors, pension policy holders, and taxpayers, they can advocate for better uses of their money.

Delaying the transition to a more inclusive and sustainable global food system would jeopardize food security, destroy livelihoods, and prevent us from achieving environmental goals. 

We need to overcome the resistance not only of those who profit from today’s systems but also of those who seek to protect the vulnerable. 

Resetting global finance and harnessing its benefits is necessary to fund a rapid, sustainable, and equitable transition.

Simon Zadek is Chair of the Finance for Biodiversity Initiative.