Bye-Bye 'Olympics Excuse'

by Amir Taheri

For a decade, whenever faced with a difficult decision, China’s leaders have used a convenient way out: Let’s wait until after the Olympics.

To ensure it would win the right to host the Games, China developed what its leaders have labeled a “no enemies” foreign policy. In practice, this meant treating every tin-pot dictator as an equal and keeping every Third World corrupt regime sweet with aid, subsidies and bribes. When it came to relations with the major democracies, the policy meant the creation of an equilibrium mostly based on false promises. The Olympics excuse has kept China’s traditional rivalry problems with a range of countries—including Russia, India, Japan and South Korea—on hold.

The Olympics excuse has also been used on domestic issues. At least two Communist Party Congresses, where national strategy is debated and fixed, have danced around the major issues for the past decade. The full legitimization of private property, the redefinition of the role of the Communist Party, the development of a credible system of social protection, and the much-talked-of decentralization have all been touched upon but left for “after the Olympics.” The long promised review of the controversial one-child policy would also have to be tackled, especially as it is impact on China’s demographic composition can no longer be ignored.

Other issues left untouched thanks to the Olympics excuse include the modernization and reorganization of the Chinese army, a vast and highly costly but inefficient machine, the streamlining of a bloated and corrupt bureaucracy and a rejuvenation of the leadership at middle and lower levels.

Finally, the Olympics excuse was used to justify lack of action on such explosive issues as ethnic unrest and religious grievances, examples of which sprung up all over China before the Games, with at least one demonstration in the tens of thousands and insurrections and bombings among the Muslim ethnic minority in Xinjiang.

The Olympics were supposed to finalize China’s return to the mainstream of international life, opening the way for its assumption of a leadership role in the global arena in an uncertain era.

Waiting for the Olympics was also used by the outside world to justify what amounts to a policy gap on China. Optimists hoped that the Olympics would persuade the Chinese leaders to open the country further and adopt more moderate policies at home and abroad. The idea was to do nothing to upset what was supposed to be China's long march toward reform democratization. Pessimists, on the other hand, believed that there was nothing that the outside world could do to influence developments inside a still hermetic political system.

So, what is going to happen when the Games are over and the Olympics excuse is gone? Will China cast a fresh glance at a foreign policy that has made it the mainstay of several despotic and terror-sponsoring regimes? Or will Beijing decide to make the final break with an autocratic system that still uses Communism as a label?

The Games revealed China as a new nation with a great deal of positive energy. They also added a major element to the treasury of common memories that ultimately constitute every nation. It is no longer the Long March led by Mao Zedong that constitutes the central theme of modern China's national memory. At the same time the nightmare of the Great Proletarian Cultural Revolution is fading behind the joyful fireworks of he Olympics. At the time of this writing, terrorists had not succeeded in disrupting the Games, and even the most ardent dissidents decided to put their grievances on the back burner until after the event.

And after the Games, for China, the really hard work begins. Will the giant clam try to shut itself again when it no longer needs the goodwill of the outside world? Or will it feel more self confident as a result and decide to open itself further.

The conventional wisdom at this time is that China’s adoption of a modified form of capitalism and the pluralism that it will eventually generate is now irreversible. Conventional wisdom, however, is not always right. The Chinese ruling elite is divided between reformists and supporters of the status quo ante. Portraits of the Great Helmsman may have disappeared from public view for the duration of the Games. But a good chunk of the elite, still drunk on the heady wine of Maoism, is biding it time. The final purge, both in terms of policy and personnel, has not yet taken place.

For a decade, China has lived in what amounted to an historic parenthesis. Now that parenthesis is closing, we must all wonder what is going to happen during the next decade. The truth is that the international system needs a positive input from China. A policy of nay-saying and prevarication cannot deal with dangers, such as nuclear proliferation spearheaded by North Korea and Iran, that could ultimately affect China's own security. Domestically, no amount of nationalistic rhetoric could satisfy demands for greater ethnic, cultural and religious freedoms. The growing urban middle class will not remain content with Guizot-style get-rich-and-shut-up politics. The 300 million or so poverty stricken roaming seasonal workers could emerge as a veritable human tsunami, destroying all that China has built since the reforms introduced by Deng Xiaoping a generation ago.

Just as the world needs China, China also needs the world. However, before China is able to punch at its own weight in the international arena, it needs to decide what kind of society it wants to be. The Beijing Games are coming to a close, let the debate begin.

How Freedom Turned Talent Into Olympic Gold

By GEORGE L. PRIEST and MINOR MYERS III

Citizens throughout the world were enthralled by the extraordinary athletic achievements at the 29th Olympiad. In event after event, world records were broken -- human accomplishment extended -- by men and women faster, stronger and more skilled than their predecessors.

In total medals, the U.S. won the most with 110. China was second with 100 and Russia a distant third with 72; then came Great Britain (47), Australia (46), Germany (41) and France (40). But it is misleading to say that these medal rankings measure national athletic superiority.

First, many countries direct their athletes to specialize in particular events to increase the medal count. For example, of the 51 gold medals won by China, 65% were in the five sports of gymnastics, weightlifting, diving, table tennis and badminton. In contrast, of the 36 gold medals won by the U.S., two were in gymnastics; none in the other four sports. Swimming and track accounted for 53% of the gold medals won by the U.S. China earned one gold in swimming; none in track.

Of course, domination of a sport should not be disparaged. Specialization and the exploitation of comparative advantage are at the heart of the advance of human achievement. But the second, more important reason nation-against-nation ranking is deceptive is because the achievements of athletes seldom derive purely internally from within a single nation.

In our globalized world, sports, like all other market activities, seeks the advantage of beneficial opportunities wherever available.

Gymnast Nastia Liukin, who won a gold and three silver medals for the U.S., was born in Moscow. Her parents were champion Soviet gymnasts, but immigrated to the U.S. when Nastia was two. U.S. gold-medalist wrestler Henry Cejudo was raised by a mother who was an illegal immigrant from Mexico. All three members of the U.S. women's table tennis team are from China.

There are many other examples of athletes immigrating to improve their opportunities. Milorad Cavic, who lost to Michael Phelps by 1/100th of a second in the dramatic 100 meter butterfly, won his silver medal as a Serbian. Mr. Cavic was born in Anaheim, Calif., (to former Yugoslavian immigrants) and swam in college for Berkeley. U.S.-born Becky Hammon was granted Russian citizenship to play for the Russian women's basketball team.

More obviously taking advantage of global market opportunities are athletes from one country who train in another country possessing superior athletic facilities and coaching. Zimbabwe's four medals -- one gold and three silvers -- were won by Kirsty Coventry, who swam at Auburn University and currently trains in Austin, Texas. Sara Nordenstam, bronze medalist for Norway in the 200 meter breaststroke, was born in Sweden, and was a collegiate swimmer at Southern Methodist University. Irving Saladino, gold-medalist in the long jump for Panama, lives and trains in São Paulo, Brazil.

Globalization affects the market for Olympic coaches. In men's basketball, Iran's coach is from Serbia; Russia's from the U.S.; and China's from Lithuania. The coach of the U.S. women's volleyball team is Lang Ping, a gold medalist for China in the 1984 Olympics.

What accounts for this extraordinary international cross-pollination? The desire for excellence and achievement. In sports, as perhaps in no other productive activity, success in competition is defined immediately and broadcast widely. The sports market is not entirely free. Athletes must submit to immigration limitations, visa restrictions and the like. But it is freer than most labor markets, and the opportunities for substantial gains are obvious.

These many Olympic achievements are evidence of the benefits of globalization. When citizens are allowed to make the most of resources that will improve their skills -- coaching, training, competition -- human achievement advances.

Mr. Priest teaches a course entitled Capitalism at Yale Law School. Mr. Myers is a visiting assistant professor at Brooklyn Law School.

The Democrats Field a Liberal Dream Team

By FRED BARNES

Democratic Sen. Joe Biden, Barack Obama's choice as his vice presidential running mate, may be the most well-liked person in Washington. He's affable and gregarious and nice to everybody, including the press and Republicans. When conservative Sen. Jesse Helms retired from Congress in 2002, the featured speaker at a luncheon honoring him was none other than Mr. Biden.

Brit Hume, the Fox News anchor, tells the story of having been asked by Mr. Biden why he put the Delaware senator in his TV reports from Capitol Hill so infrequently. "Senator, you're a windbag," Mr. Hume told him. Several years later, Mr. Biden approached Mr. Hume again and said he'd been right in his assessment. It's hard not to like a major politician who admits a fault, sincerely or not.

Mr. Biden's popularity in the Washington political community -- home to most of the pundit class -- helps explain why his selection by Mr. Obama received such favorable reviews. True, some Republicans declared Mr. Biden a bad choice because he's verbose, bombastic and gaffe-prone. And indeed those are flaws, but hardly fatal ones. The Obama-leaning media is quite capable of ignoring them.

The real reason why an Obama-Biden ticket is a vulnerable one is that it plays into one of the few strengths that Republicans and John McCain have in the 2008 election. A weak economy, a surge in Democratic voter registration, an unpopular Republican president, a sour public mood, a desire for political change -- all those favor Mr. Obama and Democrats.

But what Mr. Obama has done is create an all-liberal ticket -- a very, very liberal one, at that -- in a nation whose electorate is still center-right. The political mood may be a bit more centrist today than it was in 2004, but it's still far more conservative than liberal. And liberal Democratic presidential tickets usually lose, as John Kerry did with John Edwards as his running mate in 2004.

Democrats win the White House when they offer voters at least a small measure of ideological balance. Jimmy Carter, running as a centrist with conservative tendencies in 1976, picked liberal Walter Mondale as his vice president, and won. In 1992, Bill Clinton campaigned as a moderate and chose Al Gore, only slightly more liberal than Mr. Clinton at the time, and captured the White House. Mr. Gore won the popular vote in 2000 (but not the election) when he ran as a populist with a national security hawk, Joe Lieberman, as his running mate.

There's a pattern here, one Mr. Obama decided not to repeat, though he could have. Some Democrats suggested former Georgia Sen. Sam Nunn, a moderate with strong credentials on defense and military issues, as a wise choice. Even the three Democrats Mr. Obama considered but didn't pick -- Sen. Evan Bayh and Govs. Tim Kaine of Virginia and Kathleen Sebelius of Kansas -- would have lent more balance to the ticket.

One reason Mr. Obama balked at those three was their position on abortion, Major Garrett of Fox News reported. While hardly anti-abortion zealots, they are often referred to as pro-life in the media. Mr. Biden isn't, though he voted for a ban on partial birth abortion. He is unlikely to anger the overwhelmingly pro-abortion majority among delegates to the Democratic National Convention this week in Denver.

Once regarded as a centrist, Mr. Biden was rated by the National Journal in 2007 as the third most liberal member of the Senate. Mr. Obama was rated the most liberal. Neither has a record of bucking the wishes of liberal interest groups or promoting bipartisanship.

Messrs. Obama and Biden voted against confirmation of John Roberts and Sam Alito for the Supreme Court. They touted the Democratic talking point that remote Afghanistan was of more strategic importance than Iraq, located in the heart of the Middle East. They opposed the surge and refused to concede it worked in Iraq.

The immediate reaction to Mr. Biden by the Republican National Committee and the McCain campaign was to spotlight criticism Mr. Biden himself had of Mr. Obama during the Democratic presidential primaries. Mr. Biden said then that Mr. Obama was not ready to be president. But that tactic has only fleeting value, since the press will concentrate on what Mr. Biden is saying now. On Saturday, he said Mr. Obama is a leader "with judgment, intelligence and steel in his spine." Their differences, never large, have already vanished.

On the lone major issue Republicans have successfully exploited in 2008 -- gasoline prices and oil drilling -- Messrs. Obama and Biden have always been in sync. They oppose lifting the moratorium on offshore drilling. That, of course, is the liberal position, one the environmental lobby insists on. It's wildly unpopular with most Americans.

Mr. Biden was instantly credited with the ability to appeal to white working-class voters who voted for Hillary Clinton in the primaries but have balked at backing Mr. Obama. It's been nearly three months since Mr. Obama locked up the Democratic nomination, and those voters haven't budged.

I doubt if Mrs. Clinton could persuade many of them to vote for Mr. Obama even if she were the vice presidential candidate. But Mr. Biden, whose presidential candidacies in 1988 and 2008 attracted embarrassingly little support, won't have a chance. He's never demonstrated any ability to influence the presidential choice of voters.

Mr. Biden's tendency to exaggerate or embellish his accomplishments has gotten him into trouble in the past and may again. His presidential campaign took a nosedive in 1987 after he adopted part of the autobiography of British Labour Party leader Neil Kinnock as his own in speeches.

Things got worse when it was reported he'd claimed a string of academic achievements that turned out to be untrue, and had told a voter, "I have a much higher IQ than you do." He withdrew a few days after the story broke.

Yet Mr. Biden's political career has flourished since then, at least in the Senate. Presidential candidates often pick a rival for their party's nomination as their running mate. But they normally don't select an also-ran like Mr. Biden. No doubt his personal charm and graciousness had an ingratiating effect on Mr. Obama. And Mr. Biden's liberalism turned out to be no drawback at all.

Mr. Barnes is executive editor of The Weekly Standard and a Fox News Channel commentator.

The Denver Democrats

The Democrats arrive in Denver this week flush with confidence. And why not? Yes, their rookie Presidential candidate suddenly finds himself in a tight race with John McCain. The party itself, though, has reason to think its moment to govern has arrived again after a generation of divided government or Republican rule.

By most standard measures, the country has soured on the Republicans and the GOP President. Thanks to retirements and the election cycle, Republicans in the Senate must defend 23 seats this year against the Democrats' 12, and there are also more GOP open seats in the House. The economy is dragging.

These are conditions that can produce solid majorities in Congress for a resurgent party. There is no guarantee that will happen. We are in an election cycle with a surprise around every corner. But if the Democrats are on the brink of victory, the country is entitled to ask: How would they govern? To what purpose would the Democrats use their power?

* * *

Two historical years offer clues: 1993 and 1977. These are especially apt as indicators, insofar as many of the most powerful Democrats in the House today have held their seats across three or four decades, a fact that gives a uniquely ironic meaning to the party running on "change."

In 1977 a moderate President, Jimmy Carter, arrived as an outsider from Georgia promising change to lead a Congress controlled by Democratic liberals. Recall that his budget director, the economic centrist Bert Lance, was quickly run out of town. The President's veto of a water projects bill was overturned by his fellow Democrats. Ted Kennedy in 1980 attempted a nomination challenge to Mr. Carter from the unhappy left. In 1981, the Reagan era began.

In 1993, Congress held both houses with another Democratic President named Bill Clinton, who also promised change. Mr. Clinton had campaigned as a moderate New Democrat. The Democratic majorities in Congress promptly rolled the young President to the left, increasing spending and taxes, resisting welfare reform, and pushing such hobby horses as gun control and motor voter laws. Some in the House even fought HillaryCare as insufficiently liberal. In 1994, the Gingrich Republicans swept into power as Americans rejected liberal governance.

Have the Democrats learned anything from this experience? Among the current House committee chairmen who've been riding the Democratic waves through this period are Henry Waxman, John Dingell, John Conyers, David Obey, George Miller, Barney Frank and James Oberstar. Presumably, this should be an ocean of collective wisdom.

Instead, the Democrats of the past several years have shown themselves to be less a party of ideas than a vessel for special interests. Exhibit A: the Colombia Free Trade Agreement.

Privately, Congressional Democrats know this deal is in the nation's interests. Colombia is a primary ally in a rough neighborhood, and the agreement is a win for both sides. Colombia's goods can already enter the U.S. duty free because of the Andean trade preferences act. The AFL-CIO, however, has commanded that no vote can occur on Colombia, and so Democrats have obeyed and the trade deal languishes, frustrating and perhaps embittering a foreign friend of the U.S.

The fight over offshore drilling is playing to the same script. Despite solid public majorities showing a sharp turn in favor of exploiting the nation's oil reserves, a Democratic Congress chained to carbon-phobic environmental groups has refused to allow even a vote on drilling. This fiasco has given House Democrats a black eye. No matter. The party's special interests have the last word. The first word from these interests -- Big Labor, the teachers unions, environmentalists or the trial lawyers -- is: Do our bidding or we will make you pay at the polls.

This is the crowd that will be dancing in Denver. The Congressional Democrats have moved left on taxes and left on trade; they propose a significant federalization of health insurance and propose to resurrect the regulatory state that Jimmy Carter helped bury. On foreign policy, they are to the left of where Bill Clinton was on Kosovo and Bosnia.

The difficulty with interest-group politics, as we saw with the "dinosaurs" of Mexico's PRI party until they were finally run out of power, is that it can become incapable of thinking about national interests. The lockdown on the Colombia deal shows that.

Do the Democrats really believe that the American pubic is ready for this kind of narrow governance? So it appears. Nancy Pelosi has outlined a path to Democratic dominance for a generation. The party builds its majority this year, she argues, wins more seats through redistricting after the 2010 census, and then achieves long-term dominance in 2012.

* * *

For all this optimism about the party's prospects (some might call it arrogance), we think the reality is that the party in large part has been slipstreaming in George Bush's unpopularity. Their agenda in 2006 was de minimis beyond opposition to Iraq and Mr. Bush. It is hard to see real evidence that what the nation wants is a Democratic revival of 1974, the Great Society or even, in the fever swamps of the blogosphere left, the New Deal.

A Pew Research poll recently discovered that, for the first time, more than 50% of Americans know that the Democrats control Congress, no doubt from the publicity in the debate over drilling. Mr. Obama's recent struggles would seem to show that the more voters get to know what the Denver Democrats believe, the more cautious they are about handing them complete control of the government. If the Democrats win big in November, everyone will know which party controls the whole government.

We don't expect any of this reality to intrude on the merriment of the Denver Democrats this week. Their electoral optimism is justified. Their blind ideological optimism could cost them dearly.

Market.view

An arable parable

Is farmland overvalued?

WITH many financial assets in the doldrums and markets spooked by the twin spectres of economic weakness and rising inflation, is it time to head for the hills? Barton Biggs, an investment guru, famously suggested that those wishing to preserve their wealth in times of turmoil should consider buying an “unostentatious farm”. And rural land has long been seen as a good inflation hedge.

But now may not be the most opportune time for investors to swap their wingtips for wellies. After more than two decades in the mire, the value of farmland has soared over the past few years on the back of strong prices for agricultural commodities, low interest rates and urban sprawl. It has become so fashionable that some wonder if it is a bubble waiting to burst.

Bulls (of the figurative kind) point to the biofuels boom and strong demand from developing countries, particularly in Asia, as billions of new consumers adopt more protein-rich diets. This pushes up demand for crops and livestock: farm animals consume a lot of grain-based feed. Though food prices have fallen back lately, thanks to supply strengthening as more grain is planted as well as a general easing of commodity values, they remain high. Stocks of some crops are at their lowest level for many years.

To improve their food security, importing countries have been snatching up farmland overseas—a trend the United Nations’ top agriculture official has likened to 19th-century colonialism. Hedge funds have become more active too, seeking agrarian alpha. And finance is flowing: a recent survey by the Federal Reserve found banks still willing to back agricultural investments in America, despite capital woes.

To some, farmland values have now reached scary levels. The average price of an acre in America has almost doubled since 2004. In Britain, the value went up by 25% in 2007 and by a staggering 47% year-on-year in the first half of 2008. Many poor countries have seen similarly dizzying increases.

Tobias Levkovich, an equity strategist with Citigroup, thinks investors have been seduced by the bulls’ “everyone’s got to eat” mantra and are ignoring the warning signs, just as they did with the housing market in 2005-06. In an uncomfortable echo of that boom-turned-bust, land prices in America have deviated dramatically from their long-term growth rate (see chart). In relation to farm cash flows, they are now much higher even that they were in the late 1970s, the last golden age for ploughmen. The ratio of prices to cash-rent rates—the farming equivalent of the price-earnings multiple on stockmarkets—looks frothy too. In farm-riddled Iowa, it is closing in on the 1979 high of 22 times rent, according to Farmland Investor Letter, a periodical devoted to land-valuation trends.

None of this makes a crash inevitable. Many still believe that the commodities boom has fundamentally changed the economics of farming. But the recent cooling-off has sown doubt, and a sharp correction would hurt.

Some investors have borrowed heavily to bet on the bucolic—as have some farmers, whose loan-repayment rates are starting to slip, according to the Fed survey. Worryingly, property accounts for a very high share of total farming wealth: around 90% in America, compared with 20% for households—though of course a farm, unlike a house, is a producing asset.

This is of consequence to investors in the agribusiness firms that have ridden the crest of the commodities wave, such as Potash Corp, CF Industries and Mosaic. Their shares are either reasonably valued or horrendously expensive, depending on your view of the boom’s sustainability. Their boosters point out that their shares have come off their highs in the past few months and now trade at a modest seven to 11 times earnings.

But that is no comfort if they turn out to be cyclical stocks, after all, and not the beneficiaries of a “new paradigm”, argues Mr Levkovich. Homebuilders were said to be good value in 2006 when they were trading on similar multiples, and look what happened to them.

Even taking into account their recent share-price falls, moreover, the “dotcorns” have gained more as a group in the past five years than internet stocks did in the giddy second half of the 1990s. So it is still a very long way down, should they really lose their footing. That, combined with the lofty price of pasture, offers plenty of food for thought.