Geopolitics

BRICS School: Brazil Needs Lessons From The China Model

The construction of the Shenzhen section of Guangzhou-Shenzhen-Hong Kong High-speed Railway in China.
The construction of the Shenzhen section of Guangzhou-Shenzhen-Hong Kong High-speed Railway in China.
Evandro Menezes De Carvalho

SÂO PAULO — The Chinese government is already making its first plans to celebrate the centenary of two momentous events in the country's history. Seven years from now, in 2021, the nation will mark the 100th anniversary of the founding of the Communist Party of China. Then in 2049, the country will celebrate the creation of the People's Republic of China in 1949 by Mao Zedong.

The two dates also help define the horizon of the reforms being implemented by the current government: the establishment of priority areas of development and free-trade zones, the end of the one-child policy, and the investments in the country's infrastructure and urbanization, as well as a series of administrative reforms.

Three aspects of the Chinese method to govern deserve notice by other leaders around the world. Firstly, the fact that government's initiatives are tested via pilot-projects before being implemented on a national scale. This allows Beijing to gain time and valuable experience in assessing the strong points and the shortcomings of a project.

Secondly, China focuses much of its energy in the country's research centers. Such a model of governance is at the root of the concept of scientific development that is ever more central in the public discourse by the country's leaders.

Finally, the reforms are carried out primarily with future generations in mind. "Each generation will reap what the former generation has sown," goes the Chinese saying. This explains why the successive political circles followed, to a certain extent, the *generational logic.

Some will say that the Chinese government is only efficient because it is a dictatorial regime, and thus takes decisions and executes them without any obstacle. Reality however is not that simple.

Democracy's risks

There always are obstacles. Corruption is the one that concerns the current government the most. Besides, China is not a dictatorship in the way that the democratic West usually pictures it. China is governed by a college of authorities, with alternations in power. The current rulers indeed are aiming to improve the judicial institutions as the population is seeing levels of development and openness unprecedented since the founding of the People's Republic.

In Brazil, the situation is quite different. True, we are a democracy, we have one of the world's biggest economies — and we are in an election year. The potential candidates for the Presidency speak of nothing else than improving the efficiency in the management of the country's affairs. And right they are. After all, planning and executing projects aimed at improving the living conditions of the population has hardly been Brazil's strongpoint.

In the debate on the administrations' management of state power, we would do well to learn from China: we could be more open to institutional experiments before implementing permanent changes across the whole territory, which would reduce the risks of wasting resources and having to rewrite bad legislation.

We could increase the participation of Brazilian research centers in the planning and monitoring of government policies, giving increased legitimacy to the decisions that are taken. And finally, we could take a real pledge to improve our citizens' future with long-term plans protected from the vicissitudes of politics.

But that would still not be enough. The massive demonstrations across Brazil last year sent an important alert to the entire political class, and tensions still vivid today. More efficiency in administration must come with more democracy, so that one favors the other.

An inefficient democracy could instead have the opposite effect, paving the way for authoritarian governments. Not even China is going in that direction anymore.

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Society

Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum

-Analysis-

SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.


It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

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