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Tuesday, October 16, 2012

Deception: Pakistan, the United States, and the Secret Trade in Nuclear Weapons

by Adrian Levy and Catherine Scott-Clark
Walker and Company, 608 pages, $28.95
January/February 2008

Reviewed by Samanth Subramanian

The full title of Adrian Levy and Catherine Scott-Clark's book sounds, at first, too alarmist, as if it had been written for the next Jason Bourne movie. But this is a story that needs very little embellishment. With classically straightforward journalism, Deception covers the creation and proliferation of a rogue nuclear program, the campaign to mask it from international vision and the side effect formation of potent Islamic terror networks. An alternate edition of the book includes the word "conspiracy" in its subtitle; considering the levels of collusion that Mr. Levy and Ms. Scott-Clark pick apart, that word is well chosen.

The dominant motif in Deception is essentially one of control–intelligence and military control of the executive branch in Pakistan, and in the United States, executive control of intelligence and the military. Both are highly relevant threads, because, more than 30 years after the start of the events documented in Deception, those processes of control and their effects still operate vigorously in Pakistan and the U.S.

Pakistan's nuclear aspirations began, ironically enough, at the executive level. In the early 1970s, then Prime Minister Zulfikar Ali Bhutto, smarting from a military loss to India, initiated a project of nuclearization that was saved from ambitious overreach only by the arrival of Abdul Qadeer Khan. Having worked in European uranium enrichment labs, Mr. Khan was able to smuggle technical designs, establish a sourcing network for components and build cascades of enrichment centrifuges at Kahuta, a village 40 miles from Islamabad. The rapid development and efficiency of the Pakistani nuclear project owed much to Mr. Khan's megalomania and his desire to be seen as the father of this nationalist achievement.

Gradually, the nuclear project began to slip away from executive control. Bhutto, overthrown in a coup and then hanged, was replaced by Gen. Muhammad Zia-ul-Haq, who brought Kahuta under the informal control of the army and Pakistan's Inter-Services Intelligence. Khan began reselling Kahuta's designs, components and enriched uranium to countries such as North Korea, Iran and Libya, and military generals and isi chiefs facilitated the proliferation. When Benazir Bhutto, elected prime minister in 1988, demanded to know about and control Kahuta's operations, she was roughly brushed aside. In an interview in 2006, Bhutto remembered a conversation with then President Ghulam Ishaq Khan. "I said, 'I need to know about the aid money that will come in this year. How is it being spent?' He said, 'I am not telling you. It's a nuclear issue. You need to know nothing.'"

By the early 1980s, Pakistan had also become the U.S.'s most important strategic ally in the struggle against the Soviets in Afghanistan. Successive U.S. administrations, and most notably Ronald Reagan's, went to astonishing lengths to keep it that way, using measures that, in the cold light of Iraq, sound uncomfortably familiar. In the face of an overarching agenda, dissenting intelligence was suppressed or bowdlerized, promising careers were lopped off at their roots and Congress was kept on a diet of lies. Mr. Reagan not only hid Pakistan's nuclear capabilities, he also encouraged them. During his presidency, the U.S. dispensed billions of dollars in military and economic aid, aid that was intended for Pakistan-backed Mujahideen in Afghanistan but that routinely and openly found its way into Kahuta's scheme of activities.

Deception tracks these events minutely, almost as if Mr. Levy and Ms. Scott-Clark were present, at every turn, at the elbows of Mr. Khan, Gen. Zia or Bhutto; describing, in one instance, an interrogation of Mr. Khan, the book does not forget to mention that it occurred in "his red-carpeted living room." The authors build the conviction of their case through the steady accretive power of these details. Deception may reveal few new arguments, but it marshals its facts into the most thorough dossier yet on the Pakistani nuclear program.

For both countries, the most severe indictment of their policies lies in the monsters they have unwittingly nourished. In the late 1980s, as the Soviet misadventure in Afghanistan ended and Pakistan was still not reprimanded for its nuclear activities, "the CIA forecast that Afghanistan, abandoned by Washington, was likely, with Pakistan's interference, to turn against the West and become a staging post 'for terrorism in the region and beyond.'" As per schedule, Islamic militant outfits, armed to the teeth and protected by the religious elements within Pakistan's ISI, have lashed out against their American progenitor.

Mr. Khan's state-abetted proliferation, under the willfully blind eye of the U.S., seeded unsupervised nuclear programs in Asia and Africa. In Pakistan, the empowerment of the Islamic and military factions has come at the expense of even a pretense at democracy. Bhutto's terms in power are exonerated perhaps a little too easily; Deception methodically counts the odds stacked against her and concludes that she was often nearly helpless, manipulated and coerced beyond her powers. Prophetically, though, she told the authors: "These military guys have the capacity to kill. I cannot believe that the international community still thinks I am crazy when I say it."

Worse still, none of the lessons of history, even the history as recent as that of Deception, seem to be shaping current policy in any way. The U.S. has fallen back on its disastrous tactic of the 1980s by supporting an Iranian opposition group that figures on its own list of terrorist organizations, the Mujahideen-e-Khalq. The American executive overrode intelligence in the case of Iraq, and as a recent National Intelligence Estimate shows, wishes to do so again in the case of Iran. In Pervez Musharraf, the U.S. supported a military dictatorship to achieve its objectives in Afghanistan–exactly as it did with Gen. Zia. It is difficult to imagine results to these policies that can be qualitatively different from those described in Deception, and as the assassination of Bhutto shows, the legacies of this line of strategic thought have by no means exhausted themselves yet.

Samanth Subramanian is a free-lance journalist based in New York.

Operation China: From Strategy to Execution
by Jimmy Hexter and Jonathan Woetzel
Harvard Business School Press, 288 pages, $29.95

Reviewed by Jack Perkowski

China is booming, and the country is finally delivering on its potential to provide those one billion new consumers to the global marketplace. Already the fourth largest economy in the world, China will certainly unseat Germany as the third largest sometime in 2008–if, that is, it has not already done so once the final numbers for 2007 are tallied. Powered by the country's double digit domestic growth rates, eight of the 25 most valuable companies in the world as measured by stock-market value are now Chinese companies.

But how are the champions of the post-World War II period, the highly successful multinational corporations, the household names in the United States, Europe and Japan, faring in the Middle Kingdom? What are they learning? Are they winning or losing? Does it matter? McKinsey & Company directors Jimmy Hexter and Jonathan Woetzel address these questions and more.

Operation China contains insights that are invaluable to any company doing business in China. However, as Messrs. Hexter and Woetzel state at the outset, the book is directed primarily at MNC executives in the home office and the region. Based upon their own extensive experience in country, as well as painstaking research, including in-depth interviews with the executives responsible for China operations at over 40 MNCs, 6,000 interviews conducted by McKinsey's staff with individuals in 30 cities throughout China and careful analysis of McKinsey surveys and studies, the authors deliver three key observations:

China is changing and is now "turning the corner from an emerging market, where local context drives most of the strategic and operating decisions managers make, to a maturing one, where top-quality execution is a cornerstone for success."
Despite the tens of thousands of foreign and multinational companies already in China, MNCs are there in varying degrees. Some are committed and positioning themselves to be market leaders; others are only beginning to make China a significant part of their global operations; and still others only have a "toe in the water" and are waiting to see how things go.
It's time for MNCs to get off the fence and get serious about integrating China into their global operations. The risks of not doing so are enormous. "We believe global companies that cannot succeed in China will cease to be global companies at all," Messrs. Hexter and Woetzel warn.

To make their point regarding execution, the authors review the experiences and best practices of numerous successful companies in China in the areas of marketing, product development, manufacturing, sourcing, distribution and talent management. A wealth of information is provided, and it is impossible to mention all of the important takeaways here.

My favorite, though, is the story of how Jorgen Clausen, CEO of Danfoss, a Denmark based manufacturer of valves, compressors and motion control devices, discovered the true size of the China market for his company's products. While traveling with his wife in 2004 along the Old Silk Road in Xinjiang province, Mr. Clausen was amazed by the economic prosperity he saw in this far northwestern corner of China. Along with the expensive dresses and $100 ties that he saw on sale, a refrigerator with inverters that control the speed of the motor and thus save energy particularly caught his eye. According to Mr. Clausen, that was a luxury category that couldn't be found even in a large Danish town.

Mr. Clausen's conclusion: Despite unusually fast, 35% annual sales growth rates, Danfoss was only skimming China's vast market. None of the company's inverters were used in that refrigerator he saw in Xinjiang. Danfoss products addressed the high end of the market and certain of its middle segments, but did not cover low-end applications in China, a segment the company didn't even know existed. These observations led to a revamping of the Danfoss product line to include product designs that could meet the lower price points of this segment.

CEOs are often in the best position to see opportunities where others in the company do not. But, the question remains: Why did it take the CEO to discover this fundamental fact about the China market when the company has a team in China? This is the type of failure in execution which Messrs. Hexter and Woetzel believe will prove fatal in an increasingly competitive China market.

The chapter on sourcing provides further examples of how MNCs set their sights much too low in China, according to the authors. The sourcing of auto parts, a sector of particular interest to me, is cited as one example. Despite China's position as the third largest automobile producer in the world, the authors note that China-made auto parts account for just 2% of the U.S. parts sector. Although global auto makers are already reducing costs through China sourcing, they are leaving money on the table by not sourcing more.

Does success in China really matter? The authors use the chilling story of Galanz, a Chinese company that is now the world's largest maker of microwave ovens, as an example of what can happen and of just how critical success in China is for today's market leaders. Attracted by the large potential for microwave ovens in China, Galanz entered the market in 1991. It soon matched the foreign brands on performance, but then began hammering them on price. By 1998, Galanz held over 61.4% of the China market. The inevitable next stop was the vast overseas market. By 2002, Galanz had slashed prices by 80%, and the company held a 40% share of the global market. In 10 years, Galanz had gone from a new entry in the China market to the global leader, defeating its foreign competitors in China as well as in their home markets in the process.

Examples and lessons like these abound in Operation China, which is the reason it is a must read for any executive doing business in China. My only real point of difference with the authors is that I am not as optimistic as they on the role that mergers and acquisitions might play in helping MNCs acquire serious market shares in China. The China government's recent reluctance to approve the sale of a majority ownership interest in any significant Chinese company to a foreign party, combined with the high valuations available in the A-share market, have made strategic acquisitions almost impossible to achieve in China.

Nonetheless, with its large and fast growing markets, China remains the single best country in the world to establish and build future global leaders. The problem is that everyone in the world and in China now know this, making the China market also the world's most competitive. In this environment, good execution will make the difference, and that is why Operation China is a book for the times.

Mr. Perkowski is founder and CEO of ASIMCO, a Chinese automotive parts conglomerate, and the author of Managing the Dragon due out in March from Crown Business. His blog is

Taiwan's Statesman: Lee Teng-hui and Democracy in Asia
by Richard C. Kagan
Naval Institute Press, 240 pages, $30

Reviewed by Lucien Crowder

For reviewers of biography, hagiography makes a handy slur–an arrow that slips so fluidly from the quiver of criticism that one must hesitate to use it. But if it's the right arrow for the job, it must be drawn.

Richard C. Kagan, author of Taiwan's Statesman: Lee Teng-hui and Democracy in Asia, presents his life of the former Taiwanese president as "Plutarchian biography," a study of character. His primary method for considering Mr. Lee's character is to examine the man's engagement over the years with a bundle of philosophies–Zen Buddhism, Christianity, the romanticism of Goethe and the transcendentalism of Thomas Carlyle, to name a few. Added to this mix are influences such as the colonial education that the young Mr. Lee received under Japanese rule and the example of American democracy as Mr. Lee observed it at Cornell University in the 1960s.

All this makes a rather unpalatable stew, as if the contents of a dormitory refrigerator had gotten dumped in a single pot. Indeed, Mr. Lee the thinker sometimes emerges in Mr. Kagan's portrayal as frankly dopey. But for Mr. Kagan, Mr. Lee's cavalier comfort with incoherence–language as ephemeral, identity as myth–is a visionary, liberating virtue. It accounts almost solely for the man's paradoxical career, his constantly surprising life course.

In Mr. Kagan's defense, mangled philosophy may explain this inexplicable man as well as anything can. Mr. Lee has at various times been a loyal colonial subject, a dabbler in communism, a serious scholar, an agricultural technocrat, a collaborator with authoritarianism, a close-calculating head of state, the democratizer of a nation and now a pie-in-the-sky dreamer who traffics in rubbish such as promoting Taiwan as an "exemplary maritime nation." A record so contradictory would tax the explanatory talents of even the ablest biographer.

For Mr. Kagan, it is a tax too high, and he seeks shelter in this sort of nonsense: "Lee's spiritual journeys into Zen and evangelical Christian texts pushed him outside the boundaries of historical explanations. He adheres strongly to an ahistorical view of history." It is nearly gratuitous to observe that this statement describes the biographer as much as it does his subject.

But here is the point that Mr. Kagan misses most wildly: That an amorphous, contradictory philosophy is precisely compatible with high-level political calculation, insofar as such a philosophy never interferes with ambition. Nothing suggests that Mr. Lee is insincere about the philosophy he asserts. But at the same time, a neater explanation for Mr. Lee's life of contradictions is that he, like all master politicians, keeps his eye out for the main chance–and when he sees such a chance, he acts as strongly as circumstances allow.

Everything Mr. Lee has done since he entered the public arena is in line with that truth. In comparison, all the Zen and Carlyle on the planet amount to so much humbug.
When Mr. Kagan sticks to historical narrative his hand becomes surer. As he narrates Mr. Lee's maneuvers during the early years of his presidency, when the success of reform and democratization remained very much in doubt, Mr. Kagan comes across as a clear-minded historian in command of the facts. This Mr. Kagan is a very different animal from the one who elsewhere grabs wildly at the wisps of vision that emanate from Mr. Lee.

Also in Mr. Kagan's defense, the book contains a few passages–a very few–that take a critical view of his subject. He mentions that while mayor of Taipei, Mr. Lee kept dossiers on city council members, and Mr. Kagan seems genuinely uncomfortable with this. Elsewhere he describes Mr. Lee's belief in himself as "almost narcissistic." And Mr. Kagan allows the possibility that Mr. Lee could bear some responsibility for the military-procurement scandals that occurred on his watch. Yet if Mr. Lee has other faults, they are not evident in Mr. Kagan's book.

Mr. Lee's inconsistencies and opaqueness, his dubious accommodation with the authoritarian Kuomintang, his sudden willingness as ex-president to embrace points of view he never dared express while in power–all these for Mr. Kagan are yet more evidence of the great man's sterling character. By the time we reach the book's final chapter, whose embarrassingly tendentious title is "Why Is Lee a Statesman?", we find Mr. Kagan suggesting the United States award him the Medal of Freedom. This scarcely seems the author's duty.

The book's writing style, like its content, oscillates wildly depending on whether the author is standing on the firm historical record or on the shifting ground of Mr. Lee's insights. The following is typical of Mr. Kagan's voice when he can find no footing on fact: "Lee firmly believes that one must look into one's own nature in order to find direction and self-confidence." My goodness–Mr. Lee doesn't just believe this self-evident drivel, but firmly believes it! Moreover, what could Mr. Kagan possibly mean when he writes that "The identity of an island is based on the ethics of soul-making"?

The book's biggest failure is that it never illuminates the central mysteries of the man. Was Mr. Lee all along a wolf in sheep's clothing, watching for a moment to democratize his country? Did he merely conceive of himself as doing good by stealth until the accident of Chiang Ching-kuo's patronage elevated him to a position he could hardly have imagined for himself when he first decided to join the KMT? Any politician worth a hoot has learned the art of making others see in him whatever they wish to see. Certainly Mr. Lee performed this trick on Chiang, and on many others besides. One fears that Mr. Kagan has also fallen into the trap.

Mr. Crowder is associate editor of the international-affairs publication Current History.

Journey Into Islam: The Crisis of Globalization
by Akbar Ahmed
Brookings Institution Press,323 pages, $28.95

Reviewed by Sadanand Dhume

At a time when a British teacher in Sudan barely escaped a prison term for allowing seven-year-olds to name a teddy bear Muhammad; a Saudi Arabian rape victim needed a royal pardon to evade the prospect of 200 lashes for the crime of being alone with an unrelated man; and Islamists from Gaza to Waziristan step up their war against video stores and barber shops, a book that seeks to explain what exactly is roiling the Muslim world is more than welcome. On the face of it, few people are better qualified to write it than Akbar Ahmed, a Pakistani professor of Islamic studies at American University in Washington, D.C., and, since 9/11, a familiar face on television.

In Journey Into Islam, Mr. Ahmed, accompanied by a clutch of students, travels across much of the Muslim world. In Damascus he dines with mystic sheikhs. In Lahore he rubs shoulders with politicians beneath portraits of Mughal emperors. In Kuala Lumpur he chats with female professionals. In Jakarta he consorts with besieged moderates and militant students. Everywhere he and his students hand out questionnaires to gauge the attitudes and aspirations of the proverbial street. But, unusually for a book of this kind, it is in India that the narrative dwells the longest, and India that provides the analytical prism through which Mr. Ahmed views present-day Islam.

For Mr. Ahmed, three towns in north India–Ajmer in Rajasthan, and Deoband and Aligarh in Uttar Pradesh–capture the range of Muslim responses to globalization and the West. Ajmer, which houses a shrine to the 12th century Sufi saint Moinuddin Chishti, represents a retreat toward a mystical union with the divine. Deoband, birthplace of an ultra orthodox brand of Islam that is the subcontinent's version of Wahhabism, symbolizes an attempt to defend the faith by adhering strictly to Islam's core texts. Aligarh, home since 1875 to the famous Mohammedan Anglo-Indian College (now Aligarh Muslim University), stands for the attempt to engage Western ideas while preserving Islamic belief and practice.

Each of these models can claim its share of famous adherents. For the Sufis, there's the Persian poet Rumi and the female Arab saint Rabia. The modernizers dominate the first half of the 20th century, among them the founder of Pakistan, Mohammed Ali Jinnah and former Iranian Shah Reza Pahlavi. In the literalist Deoband tradition, Mr. Ahmed includes not just the Wahhabis but also such founders of modern Islamism–the drive to impose Shariah law on peoples and governments–as Abul Ala Maududi of the subcontinent's Jamaat-e-Islami and the Muslim Brotherhood ideologue Sayyid Qutb.

Not surprisingly, Mr. Ahmed finds the Sufis on the defensive, the modernizers in disarray and the Islamists, though he prefers not to use the term, on the ascendant. A popular Deoband writer in India announces that the Taliban and Osama bin Laden are the true champions of Islam. In Indonesia, one in four people surveyed calls bin Laden a role model. In Malaysia the majority profess admiration for such Islamist icons as Qutb and Maududi.

This book makes several important points. It stresses that the Islamic world is not monolithic, and that most Muslims are not on some kind of crazed jihad against the West. It explains that many Muslim women–including many of an Islamist bent–hold responsible jobs and are animated by ideas. It elegantly collapses the crux of Muslim anger into the so-called Taj Syndrome–the Islamic world's glittering past juxtaposed against its wretched present. It identifies the inherent tension between the American emphasis on individualism and traditional Muslim attitudes that place greater emphasis on family and community. Mr. Ahmed also deserves to be commended for wearing his erudition lightly; you don't need to be an expert on Islam or Islamism to grasp his arguments.

And yet, on the whole this is a disappointing book. Nobody expects Mr. Ahmed to be unsympathetic to his faith, but his habit of simply dismissing any Muslim actions he disagrees with as "un-Islamic" is puzzling.

Thus attacks on (Christian and Buddhist) ethnic Chinese in Indonesia are "quite alien to the Islamic values of justice and compassion." The death sentence (by stoning) handed down by a Shariah court to a Nigerian woman who had a child out of wedlock has "more to do with tribal honor codes and response to globalization than with Islam itself." The doctrine of armed jihad is defined away as merely "defense of one's family and community in the face of attack."

Unwilling or unable to take a hard look at Islam, Mr. Ahmed, predictably enough, turns to America and the West. The usual parade of villains soon surfaces: vengeful American foreign-policy hawks, insensitive Danish cartoonists, chief executive officers of multinational corporations, Christian creators of violent video games and a media "always on the lookout for some controversial issues surrounding Islam."

Globalization, we are informed with lofty certainty, lacks a moral core. Muslims hope to redeem their "honor and dignity" by turning to Mr. bin Laden. Of course, Mr. Ahmed quickly reassures us that this is not quite as alarming as it appears. He has somehow deduced that "many Muslims who sympathize with bin Laden in a broad and general sense would by no means support his more murderous or violent activity."

When it comes to those who approach Islam and Islamism differently from him, Mr. Ahmed chooses to veil his attacks. Thus it is "scholars of Islam" who consider the distinguished Princeton historian Bernard Lewis to be "the quintessential 'Orientalist.'" And it falls on unnamed critics to make the somewhat inflammatory allegation that the attacks of 9/11 "would almost be welcome" to Paul Wolfowitz, Dick Cheney and Donald Rumsfeld because they "would give a new momentum to their neocon worldview." In a similar vein, Ayaan Hirsi Ali, Irshad Manji and Asra Nomani, three of the most outspoken critics of Islam's treatment of women, are dismissed as appearing "deliberately provocative" to ordinary Muslims.

This failure to grapple with uncomfortable ideas precludes a deeper analysis of what has gone so profoundly wrong. After all, Muslims, as any Vietnamese or Korean can tell you, can hardly claim a monopoly on recent suffering. Nor are they the only people whose past appears superior to their present. Many Indians and Chinese share similar sentiments. And all societies are struggling in their own way with the rapid change, for good and for ill, wrought by the closer integration of peoples and markets.

The trouble, then, is not globalization as such, but that an organized and tenacious minority of Muslims (the Islamists), believes that the cure for economic and political backwardness lies in embracing barbarism. To these true believers, the palpable failure of their project in Iran, Sudan and Taliban-era Afghanistan offers little discouragement.
To suggest, as Mr. Ahmed does, that Islamists must be engaged, rather than unflinchingly opposed, reveals a curious blindness to this fact. For proof he need not look further than his native Pakistan where, as the assassination of Benazir Bhutto shows, an unchecked Islamist movement now threatens the state itself.

Mr. Ahmed believes that reform–though he prefers the term renaissance–must come from within an Islamic framework, and that it must be introduced by those considered credible by fellow Muslims. This appears plausible enough on the face of it. In practice, however, those calling for meaningful change–for the Islamic world to embrace minority rights, women's rights, freedom of conscience and freedom of inquiry–seem to immediately lose credibility, and those who have credibility appear more interested in obfuscation and apologetics than in change. Unfortunately, unless Muslims can find a way to solve this conundrum, the odds of any kind of renaissance will remain exceedingly slim.

Mr. Dhume is a Washington, D.C. based writer and journalist, and a fellow at the Asia Society. My Friend the Fanatic, his book about the rise of radical Islam in Indonesia, will be published in May in Australia.

Inside the Red Mansion: On the Trail of China's Most Wanted Man
by Oliver August
Houghton Mifflin, 288 pages, $26

Reviewed by Jonathan Mirsky

Oliver August, born in Germany and educated at Oxford, confesses that he knew nothing about China in 1999 when he was hired, age 27, by the Times of London to be the paper's Beijing bureau chief. "I had never been to Asia, and probably never thought about it." By the end of his tour in 2005 he knew a lot. He had found out that he could roller-skate "miles and miles" through Beijing's Great Hall of the People, one of the most secure buildings in the country, and astonish the official press by his audacity.

Mr. August became a part-time resident of Xiamen, one of the most money-crazed cities in south China, without having a residence permit. "But then," he writes, "neither did half the population." Then he started down the track of a crook immensely bent even by Chinese standards. He discovered a world of universal corruption that most of those who work in China know little or nothing about. Mr. August's prey was Lai Changxing, who had become the most wanted man in China. He eventually tracked Mr. Lai down to his not-so-hidden hiding place in Canada where Mr. August attended Mr. Lai's extradition hearing and became slightly friendly with the megacrook.

How big was Mr. Lai's crime? He was accused of smuggling into China $6.4 billion worth of cars, oil and cigarettes, and evading $3.6 million in taxes, as well as bribing hundreds of cronies and officials. His M.O. was simple: He would visit the offices of those who could help him, carrying a briefcase stuffed with cash. After explaining what he needed "he would depart, leaving behind his briefcase as if he had forgotten it."

Mr. Lai built himself in Xiamen, writes Mr. August, "a replica of the Forbidden City, the imperial residence in Beijing, copying the red walls, the moat, the vast courtyards." For this 40-year-old, "trusting, awkward, toothy" and illiterate, everything was signed xo (after the Hennessy cognac he preferred, at $1,000 per bottle). Mr. Lai was distinguished by his "xo suit, with his xo limousine waiting outside, and xo aftershave in the air."
When the roof fell in on Mr. Lai's empire in 1999, Mr. August writes, hundreds were arrested and tortured and 14 were executed. Even the famously incorruptible Premier Zhu Rongji was rumored to have visited Mr. Lai in Xiamen and offered him a deal: Pay the taxes, stop smuggling "and that will be the end of the matter."

Mr. August knew this was a good story. Men like Mr. Lai, he contends, "were testing the limits and breaking them while the outlaw entrepreneurs were converting China to no-holds-barred capitalism." While Mr. August was pursuing Mr. Lai–to tell the truth Mr. Lai remains off stage throughout most of this book–he acquainted himself with the brandy-swilling, girl-hiring, cheating, embezzling, each-against-all, underbelly of southern China and he admits, "I liked it." For $20 he acquired doctoral degree.

Like all the cities of China, everything in Xiamen was being knocked flat and rebuilt, with skyscrapers and shopping malls "erected in just weeks. Over the years, I felt I never saw the same city twice." Xiamen was filled with the "uprooted as good as naked everyday they came by the thousands, every one a potential Lai Changxing. To know Lai I had to understand them."

Eventually, Mr. August followed Mr. Lai to Vancouver. There was a big problem for Canada. Hundreds of officials had gone abroad, including two Bank of China managers who had stolen $500 million and a vice mayor who had accepted $30 million in bribes. A yet bigger problem was that Beijing had informed the Canadians that if they wanted better trade relations Mr. Lai would have to be handed over. In the extradition hearing Mr. Lai was defended by Canada's most famous human-rights lawyer. His case was that Mr. Lai would admit nothing and that if he were deported to China he would be a dead man.

The Canadian government retained Jerome Cohen, a famous American expert on Chinese law, who said he was sure the Chinese would not shoot Mr. Lai. The defense called the more famous Wei Jingsheng, a long-time political prisoner in China, who said, "through a new set of front teeth" that there could be no fair trial for Mr. Lai. Mr. Lai himself assured the tribunal that he had merely loaned money to anyone who asked, and all he ever wanted was his money back.

Mr. August thinks the case was simple: Mr. Lai was guilty. "But the crime scene was the political environment in which Lai had to work, where rule-breaking was the rule, where only men like him could truly prosper." When Mr. Lai left Xiamen, Mr. August notes, its economic growth rate dropped from 20% per year to zero. In 2006, just as Mr. Lai was about to be deported, the Canadian government changed its mind and declared he would be in peril if he were returned to China.

This book is an entertaining, well-observed introduction to Chinese corruption. But Mr. August's publishers have been slipshod. The text is littered with barbarisms that a real editor would have corrected. Canadian Mounties, for example, don't wear "red frocks." Women don't "lull around." Additionally, Mr. August scatters Chinese transliterations throughout his book. Why say hua when you have just said "flowers" or xiaobian, when it just means "to pee?" China is odd enough without making its language sound peculiar.

Mr. Mirsky is a London-based journalist.

Asia in the Pacific Islands:  Replacing the West
by Ron Crocombe
Institute of Pacific Studies Publications, 644 pages, $49

Reviewed by Bertil Lintner

A spectacular transition is underway in the Pacific Islands, New Zealand academic Ron Crocombe writes in this excellent and very detailed study of recent economic, geopolitical and demographic changes in the tiny nations of the vast ocean between Asia and American continents. While the original settlers of this maritime region came from Asia, for most of the past two centuries almost every island was a colony of a Western power. But that old Western influence, or some would say dominance, is changing as Asians have begun to play a bigger role in all aspects of life on the Pacific Islands. And that process is irreversible, Mr. Crocombe argues.

Hawaii, Guam, the Northern Marianas and American Samoa are still United States possessions while the French are holding out in New Caledonia, French Polynesia, and Wallis and Futuna–and tiny Pitcairn, home of descendants of the famous 1789 mutiny on the Bounty, is one of the United Kingdom's few remaining colonies. The Cook Islands and Niue are self-governing territories in free association with New Zealand, and the Tokelaus are a New Zealand overseas territory that has rejected "free association status" in a recent referendum. But these territories–except Hawaii, which is a U.S. state–are rapidly becoming anachronistic remnants of former empires.

In a way, Asia could be said to be reclaiming the Pacific from the Western powers. The first wave of migrants to the region came thousands of years ago from the arc of islands that line Asia's Pacific coast, from Taiwan to the Philippines and eastern Indonesia. They were either Papuans or Austronesians, related to today's Filipinos, Indonesians, Malays and indigenous Taiwanese.

In the second wave, which lasted from around 1800 to the end of World War II, many Asians arrived in the Pacific as well–but then in tow of the European colonial powers. The British brought Indians to work in the sugar fields in Fiji, and Vietnamese settled as laborers and traders in the French colonies. Small–and some rather large–communities of Chinese, mostly traders, emerged on most islands across the Pacific during the colonial era.

But the third wave is very different. The past 40 or so years have seen four new patterns of Asian immigration, Mr. Crocombe states. The first consists of low-skill, low-cost workers for factories, hotels, restaurants, logging camps and fisheries. Others are Asian professionals, mostly from countries where income is low such as the Philippines, India and even Burma. Entrepreneurs have come mainly from Taiwan and Southeast Asia, but increasingly also from mainland China.

The fourth group is perhaps the least welcome: organized criminals who are taking advantage of weak policing and corrupt governments. "The numbers of all four categories are likely to grow," according to Mr. Crocombe. No exact numbers of migrants are known as many have entered the region "informally," i.e., without residence papers, or with passports bought in the countries where they have settled. But anecdotal evidence suggests that migrants from mainland China are the most numerous. They have made their presence felt in most Pacific territories–which Beijing should be pleased about as many of them remain loyal to the country of their birth. Timber and minerals from Papua New Guinea, and fish from all over the Pacific are coveted exports, and the Chinese, like migrants from any other nation elsewhere in the world, prefer to deal with local entrepreneurs and middlemen from their own country.

But the Pacific is important to Beijing also for several strategic reasons. One is that Taiwan, or, as it is officially called, the Republic of China, has long endeavored to win diplomatic recognition from the impoverished nations of the Pacific–and Beijing has striven hard to deny Taipei claims to international legitimacy.

Taiwan's efforts in the Pacific have always come with generous offers of aid, something that many of the resource-starved island states desperately need. As a result, the Marshall Islands, the Solomon Islands, Tuvalu, Kiribati, Nauru and Palau recognize Taiwan, not China. Beijing has more recently taken a page from Taipei's check-book diplomacy by providing funds for government buildings and sports stadiums in Vanuatu, Samoa, Fiji, Papua New Guinea and even the not-quite-so-independent Cook Islands. According to Mr. Crocombe:

China is now the most solicitous at massaging egos and giving politically targeted aid. When governments change, China is the first with congratulatory messages. Those visiting China are treated to the utmost opulence and luxury heads of state have a Boeing 737 set aside for their personal use. Comparative figures are not available, but informed sources believe China invites more politicians, officials and other influential Islanders than any other country.

But there are bigger geopolitical stakes in the Pacific. China's inroads into a region that has long been regarded as America's sphere of influence could lead to a new Cold War, in which the U.S. and China compete for strategic advantage. But, as Mr. Crocombe also writes, "China may not pose an active military challenge to the USA and its current allies for some decades. It learned from Japan's pre-World War II experience not to expand militarily before it has the power to hold its gains. China is more likely to build economic, political and military capacity while persuading the Islanders to shift their primary allegiance."

Most studies of Pacific Island affairs may be of little interest outside a relatively narrow circle of anthropologists, historians and marine biologists–but this book is definitely an exception. It deals with fundamental changes in a strategically important region that have gone almost unnoticed in the rest of the world. And no one could have outlined and analyzed those changes better than Mr. Crocombe. Now in his late 70s, he has spent most of his life on various Pacific islands, and has lived for many years in Rarotonga, the most populous of the Cook Islands. He is considered the doyen of Pacific studies and has written numerous books and articles on all aspects of life and society in the region. But this megastudy is more than a book about island life. No one concerned with the geopolitics of the entire Asia-Pacific can neglect this work.

Mr. Lintner is a journalist based in Thailand.

Sukarno and the Indonesian Coup: The Untold Story
by Helen-Louise Hunter
Praeger Security International, 216 pages, $75

Reviewed by Simon Montlake

For the first five decades after it gained independence in 1945, Indonesia knew only two presidents. The constraints of Javanese nomenclature blessed them with single names that vary by just two letters–Sukarno, Suharto–to the bewilderment of casual students of Indonesia. But the vast gulf between Sukarno, the first president, and Suharto, the army general who replaced him, lessens the burden. Sukarno was a fiery ideologue who championed Third World comradeship. Mr. Suharto was a pro-United States pragmatist who invited foreign investors to share the spoils of Indonesia's oil and mineral wealth. One was an extroverted womanizer, the other a calculating tactician.

How Sukarno ceded power to Mr. Suharto is the pivot around which modern Indonesia has turned, even after Mr. Suharto's downfall in 1998 allowed for a tentative reappraisal of the official history. The central fact–a scarcity in Indonesian history, as we will see–was a failed 1965 putsch by midlevel military officers that was quickly suppressed by Gen. Suharto, the commander of the army's reserves. Six army generals were shot or stabbed to death. The plotters said they were acting to stop the generals from staging their own coup against Sukarno, whose leftist politics had antagonized the army. Sukarno wasn't detained during the putsch, though.

Ultimate blame was pinned on the Communist Party of Indonesia (PKI), which had swelled to three million members during Sukarno's presidency and was a rival of the army. What followed was a nationwide army-led purge of communists that became a bloodletting on a par with the worst atrocities of the 20th century. Perhaps half a million Indonesians died over several months of killing, often at the hands of their neighbors. More than one million were sent to prison camps. Communism was outlawed, Chinese diplomats were sent packing and Mr. Suharto was appointed president in 1967.

Beyond these bare facts is a murky pool of misinformation. The official line is that PKI leaders organized the Sept. 30 movement–or G30S in military speak–that launched its abortive coup on that night in 1965. The PKI's alleged goal was to neutralize the army and prepare to seize power after Sukarno left office. That would have brought Indonesia, the largest country in Southeast Asia, into the communist bloc at time when the U.S. was becoming increasingly committed to ensuring Vietnam would not. After the massacres, Mr. Suharto's regime staged military trials for those accused of involvement in the coup. Naturally, their confessions were fed into the army's propaganda machine that framed what little debate was allowed. Any dissenting voices ran the risk of being tagged as PKI sympathizers, a fate that nobody wished to embrace.

Forty years on, that murky pool is still being stirred by scholars trying to get to the bottom of G30S. Since most of the principal actors in the drama are dead or unwilling to talk, it can be a frustrating and inconclusive task. Sukarno and the Indonesian Coup is a particularly feeble effort that disappoints and dissembles in equal measures. Author Helen-Louise Hunter is a former Central Intelligence Agency analyst who rose to become assistant national intelligence officer for the Far East from 1979-81, before switching to a legal career. Her 23 years working for the CIA may lead some readers to hope they will be made privy to hitherto undisclosed information, perhaps mothballed at Langley until the dramatis personae have left the stage. Sadly, however, not a whiff of new evidence appears in this book.

Ms. Hunter relies overwhelmingly on official Indonesian army interrogation documents to draw up an exhaustive chronology of who did what and where they did it. From here, unbroken by footnotes, flows her analysis of how the PKI's secret operatives conspired to decapitate the anticommunist army. That they failed and communism was wiped out in Indonesia was "nothing less than an upset of the world balance of power. In ways that could never have been foreseen at the time, the Indonesian Coup was the upset surprise of the century."

Hindsight is a useful analytical tool. What Ms. Hunter fails to mention is that she reached the same conclusions in 1968 when she authored a CIA report entitled Indonesia–1965: The Coup That Backfired that was declassified in 1976 and given to the U.S. Congress. Indeed her new book is almost identical to the CIA report, according to John Roosa, an assistant professor of history at the University of British Colombia and author of Pretext for Mass Murder, another book on G30S. That would explain why Ms. Hunter calls Indonesia's capital Djakarta, not Jakarta, and foregoes the now-accepted pinyin romanization for Chinese names. Since the declassified CIA report can be downloaded for free, surely it's not unreasonable to expect a rehashed version to have acquired a contemporary sheen?

As proclaimed in the book title, Ms. Hunter tries to put Sukarno in the G30S loop. She claims that Sukarno approved the coup in meetings with Dipa Aidit, the PKI leader and cabinet minister, and Omar Dani, the air force chief, as he was convinced that army commanders were plotting to remove him. That may be the case, but Ms. Hunter's evidence is circumstantial. She presents a purported Sept. 30 conversation between Sukarno and Army Gen. Sughandhi that is supposed to be the clincher. Having learned from PKI leaders of the plot, Gen. Sughandhi goes to warn Sukarno, only to be told not to meddle. "Shut up, or I will slap you till you faint," says Sukarno. Damning words, but Ms. Hunter provides no source. Moreover, Mr. Roosa points out that Gen. Sughandhi was an unlikely confidant for Indonesia's communists as he was the army's director of information and a key player in the propaganda war against the PKI.

Given the prevailing Cold War tensions in Asia, some scholars have seen the hand of Western governments in Sukarno's fall and Mr. Suharto's rise. A botched coup was the perfect pretext to crush communism and end Sukarno's confrontational politics. It wouldn't be the first such meddling: CIA and British agents had armed separatist rebels in the 1950s.

Any definitive account of the events of 1965 must wrestle with the puzzle of exactly why the coup was launched. The PKI was the largest communist party outside the communist bloc and the parliamentary path to power appeared to be open. Why risk an armed takeover? Ms. Hunter posits, as others have done, that its leaders feared an army crackdown once the ailing Sukarno was gone. But when the massacres began, the party went like lambs to the slaughter, its leaders passively taken away and shot–hardly a sign of a battle-ready movement.

Alternatively, if the mutiny was an internal army affair, and the PKI a peripheral player, why was the coup so poorly executed on the night? The disparate plotters fumbled as soon as they began, failing to capture Gen. Nasution, the defense minister (his daughter was shot in the crossfire). Nor did they invoke Sukarno's prestige to legitimize their power play.

Unfortunately such questions may be beyond the realm of current scholarship. The one man who could shed real light on this pivotal event is Mr. Suharto. But now he too is slipping away into history.

Mr. Montlake is a free-lance writer based in Bangkok and a former foreign correspondent in Jakarta.

Will China fail? The Limits and Contradictions of Market Socialism
by John Lee
Center for Independent Studies,180 pages, $24.95

Reviewed by Gordon G. Chang

Will china fail? In these days of general optimism about Beijing's trajectory, the question seems out of place. Three decades of continuous economic growth has produced a new model for national development–the so-called Beijing Consensus–and led to notions of the "inevitable rise of China." If we should be asking any question at this moment, perhaps it is the one that Der Spiegel recently posed: "Does Communism work after all?"

John Lee supplies an answer that many will find disagreeable. He is a skeptic about the rise of the modern Chinese state, and in this slim volume goes about making "the case for pessimism." Mr. Lee, a China analyst in Australia, starts his argument where every doubter begins: Beijing's authoritarian political system. For him, the Communist Party of China is not presiding over a gradual transition to a more open government. On the contrary, it is trying to cling to power in a dynamic society.

From this premise, more assumed than argued, he goes on to examine the dynamics of change in China. It is not true, as Timothy Garton Ash has asserted, that "everyone does capitalism," and Beijing is not following the successful model blazed by Taiwan, Japan, Korea and Singapore. The country's leadership, in Mr. Lee's view, is pursing "a therapeutic strategy" to preserve socialism and retain its grip on power, not "a transformative strategy" to move the country forward. "Genuine economic liberalization–needed to propel China toward sustainable prosperity–would seriously threaten the Party's hold on, and ability to monopolize, power," Mr. Lee writes.

He finds support for his views where the flaws in the political-economic model are most evident: the reform of state-owned enterprises, the reform of the state banks and the reform of the system for allocation of capital. This survey, the heart of the book, contains astonishing statistics highlighting the structural problems in the Chinese economy. For instance, China's government still directs 70% of all investment spending in the country.

Capital investment, about $1.3 trillion, is going up and will soon exceed half of gross domestic product. Chinese banks have, through aggressive lending at the behest of officials, created a new batch of unreported nonperforming loans amounting to about $225 billion. Figures like these have led Mr. Lee to the following conclusion: "China's 'market socialism' in its modern form is a predatory, dysfunctional and grossly inefficient system that is enormously wasteful and unsustainable." In short, he does not agree that the Chinese have come up with a "new physics of power and development," as Joshua Ramo, the former Time staffer who coined the term "Beijing Consensus," once stated.

Mr. Lee believes that China's leaders have not been able to "grow out of the plan" because their gradualist policies have led them to a "reform dilemma" or "authoritarian trap." Although the Communist Party is dependent on continued structural economic change–its legitimacy is based on constant growth or, as Mr. Lee puts it, on "inefficiently using resources to fuel a bubble economy"–there are strong political, economic and social forces that are now preventing further reform. This is not surprising because, as Milton Friedman noted, "political collectivism" is incompatible with "economic freedom." In the contest between politics and economics, the former will win in China because growth of the economy is not an objective for its leaders; it is merely a means to the goal of regime preservation.

Despite problems–social unrest, corruption and income disparity, for example–the Communist Party still has the upper hand, Mr. Lee believes. China has not passed the point of no return where free markets will transform the country, whether the Communist Party likes it or not. All this leads to the astute conclusion that the system is subject to complete failure, even if there is only just a "modest slowdown." In any event, his overall assessment is a simple one: "China is a country in a profound mess."

Yet Mr. Lee thinks that the state's structural problems are not just the concern of the Chinese people. China is not Nazi Germany or the Soviet Union, yet he paints it as dangerous nonetheless. The transition to authoritarianism is a sign that the regime is losing its totalitarian grip, and as the system breaks down, decision making, which is not institutionalized now, becomes even more unpredictable. Beijing's leaders, who have adopted "victim narratives," are already playing the "nationalism card." The Chinese state is the only major power that nurses ambitions to grab territory currently in the hands of others and fears the "loss" of land that it does not actually control.

So will China become a responsible power as its leaders contend? By quoting Robert Kagan at length, Mr. Lee makes the case that it will not. It is possible that the country does not want to be integrated into a security system that it had no part in shaping and which does not conform to its national goals. After all, it is likely that China, like many rising powers before it, will want to make the world safe for its own form of government. As Mr. Kagan notes, "Yes, the Chinese want the prosperity that comes from integration in the global economy, but might they believe, as the Japanese did a century ago, that the purpose of getting rich is not to join the international system but to change it?"

So as Mr. Lee writes, " 'Peaceful rise' is a strategy, not an end game." Ominously, he quotes China watcher Willy Lam for the proposition that in 2006 Chinese leaders decided to make a break with Deng Xiaoping's "bide time" strategy and assert themselves more aggressively. "The economics and politics behind the Chinese model are flawed, unsustainable, dangerously unstable and unlikely if not incapable of providing a foundation for the continuation of China's 'peaceful rise' or 'peaceful development,' " Mr. Lee writes as he brings the book to a close.

You don't have to read to the end to identify the main shortcoming in this ambitious work, because Will China Fail? is one book that can be judged by its cover. It is apparent from the description on the back that it is simply not possible to do justice to all the promised topics within the allotted pages.

China is so big, noisy and diverse so one can make virtually any argument based on available facts and observable trends. The trick is to put facts and trends into context and show why other interpretations are not correct. Mr. Lee, by adopting a short format and trying to cover so much ground, has given himself an impossible mission. I believe that he portrays the modern Chinese state accurately and perceptively but the book should have been twice as long so he could back up and defend all the insightful comments he makes.

And if he had adopted a longer format, Mr. Lee could have accomplished one other important task, providing a fuller answer to the question posed by his provocative title. Will China Fail? does not actually say whether the Chinese nation will fall apart. Mr. Lee, citing the Ottoman and Hapsburg empires and the Soviet Union, notes that decrepit regimes can last a long time. That's true, but he nonetheless needs to provide more thoughtful analysis.

Mr. Lee does at one point mention the triggers that can cause state failure. Given all that he has provided, it appears that the Communist Party will indeed fail soon, but we need to hear more from Mr. Lee on the central question in his title.

Mr. Chang is the author of The Coming Collapse of China (Random House, 2001).

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