Ravengate
Partners - Stock market, economic and political commentary by Patricia Chadwick

Paris is arguably the most sensually appealing city in the world, and that’s probably damning it with faint praise. Walking the streets of the Left Bank is like being treated to an afternoon massage. All the tension evaporates from one’s shoulders and neck.

Entering a restaurant — fancy or simple — puts a smile on one’s face. And enjoying the meal that has been prepared with exquisite attention to both flavor and presentation slows the pulse and lowers the blood pressure. Foie gras, steak tartar, escargot — in Paris they enhance good health rather than clog the arteries.

The pace of life in Paris is conducive to longevity, even though smoking is rampant. There seem to be far more cigarettes than cell phones. Cigarettes are the symbol of pleasure; cell phones of pressure.

Paris is art — its bridges, gardens, shops and ateliers; its architecture, designed to allow the sun to grace the sidewalks along its wide boulevards all day long. And, of course, its myriad museums — best enjoyed in small doses and unrushed. Support for the arts is manifest everywhere, paid for by a steep tax rate that doesn’t seem to ruffle French feathers.

That’s the glorious side of Paris, a cultural paradise — a heaven on earth that makes one want never to leave.

But there’s another Paris, and it’s a puzzling one, so seemingly incongruous in the atmosphere of elegance and sophistication that defines the city and makes you breathe deeply and say, “Oui, this is what life is all about.”

The other Paris is the city that says, “Non!”

“Non”, we will not serve you and your friends at the café until the last person in your party of twelve has arrived.

“Non”, you may not check your coat in the cloakroom at the museum, even though I am on duty and being paid, the museum is open and the coat closet is empty.

“Non”, you may not evict the stranger who has broken into your apartment while you were away and is now living there as a squatter. What? Isn’t one’s home sacrosanct from invaders? “Non”, not in Paris.

As a visitor, I find myself at a loss to understand this paradox. I wonder about its origin, since this attitude seems to have been a part of the city for ages. Could it date as far back as the French Revolution? Is this the way an oppressed people rose up and showed that they too could have a voice?

Interestingly, the Paris of “Non” is unaffected by the political party in power; it is neither left-wing or right-wing; it’s beyond politics.

When one discusses this puzzling anomaly with Parisian friends, they simply shake their heads and groan. They too experience it; it’s not reserved for foreigners.

Fortunately, experiencing the elegance and sophistication of the Paris of “Oui” is such a delight that the Paris of “Non” acts like a mere footnote. As it should be.

Since returning a day ago from a trip to Prague and Krakow, I have been pondering the stark contrasts between our country and the countries in Europe. The differences say everything about the drivers of our respective economies. I admit that I am oversimplifying the case, but I am trying to provide a little food for thought.

In Continental Europe there seems often to be a grand sense of calm, as though a higher being is overseeing and managing the place. (Of course this excludes all those strikes and demonstrations we have witnessed of late against the Governments. But I told you I was oversimplifying the case, so bear with me, please.) Europe is rule bound. There is order. The trolleys run on time; you can count on them to show up at exactly 11:05 and then at 11:11 and then at 11:17. The electronic clock on the trolley tells the exact time as the mechanical clock in the square. In Prague, the Astronomical Clock in the Old Town Square which dates back to 1410 strikes the months, days, hours and minutes to perfection.
Prague is an overwhelmingly secular city of 1.2 million people, more than 75% of whom say they are atheists. However, there is no hue and cry over the fact that a giant Christmas scene is erected on Government property. Political correctness doesn’t seem to be an issue. Tradition is important. It provides security. Change is not a good thing.

In Krakow, the streets are immaculately clean. There are people whose full time job it is to keep them that way. It gives one a sense of security to walk around in a tidy place. The Christmas market hums with hundreds of vendors selling everything from Italian gloves to kielbasa. The weather is frigid but no one is shivering for lack of warm clothes. Vendors sell their wares in a quiet and peaceful atmosphere; it is impolite to insult them by trying to bargain. The prices are reasonable and the experience is hassle free. There are a few beggars, but they are far outnumbered by street musicians whose talents are a pleasure to support.

Coal is still the fuel of preference in the countryside of Poland. It’s far cheaper than electricity. Despite the frigid weather while I was in the country, there was no sign of air pollution from the coal.

The invisible hand in all this calm and order is the Government. It is the overlord. And how does it achieve this apparent state of perpetual calm and equanimity? By taxing its citizens and redistributing that money into services for the benefit of all.

It sounds so wonderful. So what is the downside, one might ask. There is a downside and it is economic growth. The larger the Government’s piece of the economic pie (i.e. GDP) the less there is for the private sector. That is an economic truism. In the Czech Republic, the tax burden (i.e. Government’s share of the economic pie) is 36% of GDP and in Poland it is 35%. Contrast that with the U.S. where it is 27%. That is a vast difference.
Which brings me to the contrasting part of my rambling. When I landed at Newark Airport, I headed out into the balmy evening. As I waited for the WALK light to come on, I had to laugh as I observed that the two lights providing the countdown to zero for the WALK light were not even in synch. One was three seconds ahead of the other.

That’s the way it is in America. Our country is a messy place (at least compared to Europe). Americans chafe at too many rules. We are still young as a country – at least by European standards. The entrepreneurial spirit is the driving economic force in this country. That’s why high unemployment is such a loathsome blight. People want to be working. They don’t want Government support. They tolerate Government only to the extent needed because too much Government gets in the way of achieving their dreams.

And there is a price to be paid for living in the land of opportunity. The price is the uneven distribution of wealth. There are the very rich, the rich, the not rich and the poor. And the differences are vast. But before castigating the system, it is worth observing that Americans themselves are engaged in redistributing their own wealth. Of all the major countries in the world, the people in this country are by far the most generous. They give back without Government redistribution. Last year, charitable donations in this country reached $300 billion. That’s not a misprint – it’s $300 BILLION! And of that amount, more than 75% came from individuals. They supported their places of worship, hospitals, the arts, the poor, education.

The system is not perfect. No economic system is perfect. No political system is perfect. But for all the faults in our own economic system, its strengths seem to outweigh its weaknesses. That is why so many people want to emigrate from their own countries and live here.

Postscript: I was in Prague when the news came of the death of Vaclav Havel. It was evident how much the people of the Czech Republic revered him. And in Krakow, my hotel was directly across the street from the house where Pope John Paul II lived for a number of years. I felt close to two very great people.

Returning this past weekend to JFK airport and emerging from customs after two weeks in China, my teenage son turned to me and said, “Mom, this airport feels like a third world country.” The stark comparison between airports in Beijing, Shanghai and even the western city of Lijiang in China and those around New York City brought home the reality of that venerated corporate adage: Cash is king. China today is a cash-rich nation, while the U.S. is cash starved.
China is building roads, airports, hotels, high rise apartments and commercial buildings at a rate never seen on this planet. Not even our most massive infrastructure triumph, the construction of the interstate highway system following World War II, is on this scale. And hugely impressive as China’s changing skyline is, the building process is far from complete. Standing in the middle of Shanghai, among 3000 skyscrapers, one wonders if the growth in commerce across China will justify all this office space.
Many Chinese complain that already apartments are becoming unaffordable. Unlike here in the U.S., the standard down payment on an apartment is 30%. And outside the major cities nearly all transactions, including home buying, are made in cash. Many young professionals, college-educated men and women in their late twenties, all of whom seem to have flips or cell phones or some electronic contraption as a permanent appendage, look to their more frugal parents to help them with the down payment. One wonders if the culture of saving which has been the survival ethic of parents and grandparents will be lost on the new, young, professional generation. English is the second language in China today; students start English lessons in primary school where their teacher selects an “American/English” name for each child. We had guides with the names of Bill, Tony, Java, Rocky, Peggy, Danny and Martin. Colleges and universities are abundant; however, higher education is not free.
Admittedly, Facebook is inaccessible (for the time being, at any rate) and in Beijing internet access is less than ideal. And as an aside, I was astounded to discover that young, educated Chinese have never heard of the Tiananmen Square incident of 1989. Most of them were small children at the time and the event is unrecorded in their history books nor ever mentioned by their news media. The reason for my surprise is that these English speaking Chinese professionals have an air of Western-ness about them. There is a sense of openness, of freedom, of complete mobility (unless, that is, they want to come to the United States). They speak their minds about their leaders. Capitalism is rampant, in fact it is the operating credo of the entire society and it has an American flavor. Young people talk about doing better than their parents, and in doing so, making them proud.
To the older generation, Mao Zedong is virtually a god. To the younger generation, it is Deng Xiaoping they most admire. He carries the title of Leader of Modern China, and with good reason. One supposes that given his near deity status as the re-creator of China’s great rebirth, in the minds of his devotees, Deng could not have ordered the slaughter of 1989. Or if he gave an order to impose calm, China’s ubiquitous and despised party functionaries must have distorted Deng’s intent. Regardless, China has arisen to reclaim its rightful place of greatness, thanks largely to Deng.
So what is the source of the Chinese government’s seemingly endless stream of cash? Despite its system of government, a significant portion of China’s economy – approaching 40% of industry – is in private hands; export revenues do not automatically flow into the coffers of the government. Income taxes are not exorbitant. However, there is one valuable card that the Government holds and is using as a gargantuan source of capital: it owns all the land in China. It has developed a sophisticated profit system as the national landlord, reaping cash flow from a long term asset while not relinquishing its ownership. As buildings go up all over China, the Government is the beneficiary of the ‘sale’ of the underlying land (in fact, it is a seventy year lease, at the end of which ownership reverts to the government.) Talk about a capitalist/monopolist government!
China has an abundance of land and people. And as long as there are people anxious and willing to move from the countryside to the cities (more than 65 percent of China’s 1.3 billion souls still live in the countryside), and if the gleaming metro areas continue thrumming with opportunity for the young and adventurous, I venture there will be demand by the private sector for more land on which to build the apartments and residences of tomorrow. Assuming the country solves its very real water shortage problems in north and central China, that will help keep China supplied with an exogenous source of capital for infrastructure building for many years to come.
However, at some point in time (maybe decades away) as China’s population ages and the ratio of old to young surges, (the result of an entire generation of one child families) the demand for development land will diminish sharply and with it the flow of capital to the state. But today, that source of capital is a bonanza for the government’s ambitious development program and will allow it to exceed the U.S. in its investment in vital infrastructure. At the same time, the U.S. finds itself struggling to maintain an increasingly dilapidated network of roads, bridges, subways, tunnels and buildings. Sadly, there is no easy solution to our public sector infrastructure problem. The U.S. government is like an aging company, losing competitiveness to a more nimble, dynamic newcomer on the scene. Without a giant cash infusion, there is little we can do to fix the problem. China, by buying our Government debt, is at least providing some of that necessary cash infusion. Fortunately, the state of the U.S. private sector, which comprises 75% of our national output, is dynamic, strong and competitive.
Postscript: There is an interesting paradox of history in a comparison between the approaches taken by the U.S. and China in promoting national economic development. In 1862, in an effort to spur settlement and cultivation of the west, President Abraham Lincoln signed into law the Homestead Act. Over the next one hundred years, 420,000 square miles of this country were privatized (10% of the contiguous US landmass) through simple, physical occupation of the land, not through sale by the Government to the homesteaders nor by settler purchase from Native Americans. It was a giveaway, hardly a capitalist concept. In China today, as the people move from the countryside to the cities, the Chinese Government is capitalizing on the demand for land through lucrative sales, hardly a communist concept.
What is clear is that the final test of which country is better off will come in the degree to which the people choose their own future and choose it well. Emerging from JFK airport, I admit to momentary doubt… but only momentary.

“They’re calling it ‘the storm of the century’”, said the Clarion Hotel van driver as I boarded the vehicle at 5:15 this morning heading back to Milwaukee’s General Mitchell airport, “but funny thing is, it’s the third one in twelve years.” He chuckled.
Being stranded in ‘the storm of the century’ in Milwaukee was a novel experience for me, but not because I had never experienced such a storm or been stranded before. It was that I had just never been in Milwaukee for such an experience. And what a far cry from all my other ‘strandings’. So as not to disparage any person, airline or city, let me simply say that if you ever have to go through the hassle and frustration of a combination tornado watch/thunderstorm/flood which culminates in shutting down the airport twice in the course of two hours, make sure you are in Milwaukee.
Over my decades of travel, I have had some wild and woolly ‘airport’ experiences, but never have they been as “pleasant” as the one I am maneuvering at the moment.
From the attendant who came aboard the airplane last night to tell us in her charmingly mellifluous voice (I paraphrase) “Ladies and gentlemen, we need to evacuate the plane because there is a tornado watch. Please don’t panic and don’t run. I don’t want anyone to get hurt”, to the flight attendants on AirTran 514 who offered a continuous update on the status of the flight, the runway and the airport, they were the most pleasant, empathetic and stress-relieving travel professionals I have ever dealt with. When I was tempted to ‘abandon ship’, the flight attendant told me to hold off, because there was “one small window to get out”, and when that window was closed by a deluge of rain and a non-stop barrage of lightning, he told me we had lost “our window” and he helped me to get off the plane because I had rebooked for the morning.
As I write, the airport floor is lined with sleeping bodies, each with a pillow and a blanket in various shades of grey, blue or burgundy. The atmosphere is calm; those not sleeping are smiling, some standing in line to get breakfast, others sitting on the floor with their laptops. Wall plugs are few and far between, but there is no one complaining.
A loudspeaker has just announced, “All flights are cancelled until noon, because the airport is still officially closed. The runways are flooded no planes can land or take off.” The response from the hundreds (maybe thousands?) of people here has been silence. I am imagining what the response would be were this announcement to have been made in a New York airport. I am so pleased to be getting this dreadful news sitting in the Milwaukee Airport.
“Midwestern friendliness” has often seemed to me to be a platitude that was meant to contrast Midwesterners from New Yorkers and other East Coast “type A” personalities. But to witness the ease with which both professionals and passengers dealt with the stresses of the last 16 hours is to gain a new appreciation for what it means to be “Midwestern”. It is the opposite of the “ugly American”.

Patricia W Chadwick, President
Ravengate Partners LLC
July 23, 2010

For Americans traveling in Israel at Thanksgiving time, as I am this year, they are in for a special treat, because hotels and restaurants offer turkey dinner with all the fixings, something that happens in few other foreign cities. And the Israelis really know how to cook turkey American style!

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