Baiting The Dragon

Bear-baiting was a popular pastime in medieval England. A wild bear would be captured, brought to a public place and chained to a pole. A pack of dogs would then be let free to taunt and attack it. The bear would swipe back wildly, much to the amusement of the assembled throng. What the bear lacked in sophistication it made up for with brute force.

Today, the West is involved in a game of bear-baiting with China. China has been awarded the right to host the Olympic Games, about which it has worked itself into feverish excitement and so, correspondingly, the West is in the process of humiliating China, with the Tibet issue being the West's most effective stick. It is daring China to respond, knowing that China won't because it does not want to risk a boycott of the Games. China is like a tethered bear. Actually, more like a dragon, whose flames can reach much further than its claws.

Face is very important in Chinese culture and in the lead-up to the Games, the West is giving China no face at all. In the Western context, being publicly rebuked usually causes one to reflect on one's behaviour and wonder how one might improve. But humiliating China will simply make China angry. Protests aimed at the progression of the Olympic torch will not teach young Chinese in China that their Government is wrong on human rights. Instead, it is reinforcing their nationalism and hardening their attitudes against the West.

The Chinese don't see the pro-Tibet protests as well intentioned criticism. They regard them as a hypocritical denigration of China by a Western culture with a history of colonialism and genocide, which condones armed intervention in places like Iraq or Chechnya and practises waterboarding, while preaching about human rights.

Last week, protesters in China called for a boycott of local outlets of French retailer Carrefour after protesters in France upset the Olympic torch relay. They also accused it of financing the Dalai Lama.

Of course China scores badly on human rights. We all know that. China knows that. When China's human rights performance is compared with the West you see how far China has to go. But compare it with its recent past and you see how far China has come.

Partly, Western activists and governments want to punish China for the sins of its past such as the killings in and around Tiananmen Square in 1989. But it is arguable whether a Tiananmen-style crackdown is even possible today. It is certainly far less likely. One reason is because many of the problems that caused the student protests then have been fixed. Students chanted for democracy but few understood what that meant. What they really wanted was better student allowances and student accommodation. They have this now. And so much more.

The other part is a little bit darker. I believe it is a combination of fear and envy.

China today is far richer than it has ever been. Its economy is now about eight times bigger in real terms today than it was in 1989. Real income per head has grown by seven times. Let me ask you this: In real terms, are you eight times wealthier than you were 20 years ago? Has your income grown in real terms by sevenfold? The comparisons can be a bit unsettling.

Economic freedom is an important aspect of the totality of freedom — just ask any ordinary Chinese. If human rights are measured in terms of not just the absence of tyranny but also the absence of poverty, then China's leadership has done more for human rights for a greater number of people than anyone in history. Contrast that with the number of so-called democratic countries whose people live in abject poverty and misery and fear for their lives everyday.

Media diversity has grown enormously. New laws are being drafted. Women, particularly, have benefited. They are at the forefront of the export revolution. Jobs in factories mean that no longer are they a husband away from poverty. No longer must they endure abusive marriages because they have no other means of support. Millions of women in China now earn a living in their own right. But much more must be done. The pragmatic approach would be to congratulate China on its spectacular progress and then point out ways for further progress.

Tibet is important but it should not be allowed to capture the human rights debate. For one, it is not obvious that human rights abuses are worse in Tibet than elsewhere in China. Is freedom of worship severely curtailed in Tibet? Not so, judging by the numbers of monks, and yet elsewhere in China, for example, Falun Gong has been all but wiped out. Human rights abuses are almost certainly worse among China's minority Uyghur population. Executions among the Uyghurs are believed to be higher than anywhere in China. But who cares? The Uyghurs are Muslims and aren't as quaint and non-threatening as Buddhists.

The Dalai Lama chose to flee Tibet. But other disenfranchised leaders choose to stay put. Aung San Suu Kyi is one example. While the Dalai Lama decamps from one Grand Hyatt to the next, Aung San Suu Kyi remains under house arrest in her dilapidated Rangoon house.

And who fled with the Dalai Lama? Certainly not ordinary Tibetans. The bulk of those who fled were members of the nobility and their wealthy sympathisers, those who had the most to lose from the advancing communists.

So do the remnants of the Tibetan aristocracy, who comprise the vocal part of the Tibetans in exile, really speak for ordinary Tibetans in Tibet? The truth is that two generations ago this feudal elite was oppressing Tibet's ordinary folk in the most appalling manner.

Their children have never lived in Tibet and many now have the same Hollywood fantasy rosy-eyed view of it that their Western supporters have. Perhaps their parents and grandparents when speaking of how wonderful life in the old country was for them, should also explain how that idyllic and elitist lifestyle was borne on the broken backs of their common people. Then again, maybe they have, and in comparison to the ordinary lives that they lead, much like the rest of us, the old privileges seem very appealing. To be an aristocrat once again--makes organizing a protest with misguided followers seem like a very small price to pay.

I don't think anyone in their right mind would want a country to turn back the clock 700 years and suffer those living conditions and hierarchical social structures -- nor would they tolerate the proposal to install a religious-based monarchy that by its own ideology would preclude democracy. Or would they?

What's Wrong With YOUR Mutual Funds' Performance?

Mutual funds are a hot commodity with individual investors and financial institutions. In fact, there are more mutual funds in existence than there are individual stocks -– that's almost 10,000 funds, for those of you taking notes. That amounts to more than $9 trillion invested in these things, just in North America alone.

With so much money riding on the success of mutual funds, how is it that 80% of them under-perform the stock market?

The answer is simple. A mutual fund is simply a collection of stocks and/or bonds. Mutual funds are financial intermediaries -- they are set up to receive your money and then make investments with the money. Most mutual funds are "actively managed," meaning the mutual fund shareholders, through a yearly fee, pay a mutual fund manager to actively buy and sell stocks or bonds within the fund. When you buy mutual fund shares, you are a shareholder -- an owner -- of that mutual fund, with voting rights in proportion to your ownership of the fund.

Though you would think that mutual funds provide benefits to shareholders by hiring "expert" stock pickers, the sad truth of the matter is that over time, the vast majority –- approximately 80% -- of mutual funds under-perform the average return of the stock market.

Why the underperformance? Are these MBAs in dapper suits the world's worst stock pickers or what? Did someone forget to carry a decimal? No and no.

Quite simply, the majority of mutual funds fall short because of the fees they charge you to be a shareholder. You pay for the privilege of active management. You pay for a fund's sales force, slick marketing, television ads, trading costs, and the fund manager's cloth-napkin business lunch and weekend cottage by the lake or the condo in Maui.

The costs of being in the average actively managed mutual fund over time are, put simply, very, very severe. The average actively managed stock mutual fund returns approximately 2% less per year to its shareholders than the stock market returns in general. That means that before your dollar even gets to the fund manager to invest, his company has already taken two cents off the top. And we won’t even speak about the poor performers.

Although 2% may not sound like that big of a deal when the market is returning roughly 20% per year as it did from 1995 through 1998, the standard returns for the stock market historically are closer to 10%.

Consider whether this is severe enough for you: over 50 years, a $10,000 investment will compound to $1,170,000 at 10% returns per year, but to only $470,000 at 8% per year. At 11% annual growth, $1 surrendered in year one is over $23 less for your retirement in thirty years. Add those dollars up, and you've handed over a lot of cash.

Most recently, the markets have had a lot of difficulty simply breaking even and with the subprime meltdown spreading its contagion globally, the extent and duration is still proving to be greater than anyone has envisioned.

An extended global market slowdown makes reducing costs during this period of static or negative returns even more important. Consider switching to funds with lower management expense ratios (MERs), such as index funds and exchange traded funds. These investments can be used to diversify and rebalance your investment holdings.