History Repeats Itself

April 23, 2010

The first time as labour, the second time as capital.

This is interesting. Back in the 19th century, when Southern Pacific and Central Pacific were building transcontinental railroads in the USA, they used Chinese labourers when they hit California. Here’s a very Web 1.0 page on the subject. Precis-ing it madly, the interesting bits are:

  • When Charles Crocker of the Central Pacific was asked how small and weak Chinamen would be up to the heavy physical labour of building railroads, he said “They built the Great Wall, didn’t they?”
  • Irish labourers were paid thirty dollars a month each and given free accommodation. The Chinese got a  dollar extra but no acco.
  • The railroad companies were excited about using Chinese labour because they did not practice slavery or peonage, but had a labour agency system. The Age of Gold, a book I read a few years ago, mentioned that the railroad owners were largely northerners and antislavery; and also that the question of granting statehood to California helped trigger the US Civil War.

The Wikipedia page on Chinese American History (badly needs cleanup) points out that things weren’t quite as rosy as that:

  • The labourers usually couldn’t afford passage to America and booked their ticket against future wages. Their wages were then withheld until the ticket was paid for. And you thought TDS was bad.
  • White labourers responded with fury and racism at this competition, and the Yellow Peril meme was born.

Eventually, the Chinese labourers also started working in fisheries and agriculture, and established a massive Chinatown in San Francisco.

Cut to today. China is now offering investment and technical expertise to build California’s high-speed rail line.

That New York Times article in the link has a full circle narrative, and saying that China is now bringing technology and money instead of labour; but given the way the Chinese operate, they’ll probably bring in the labour as well. (Alas, no citations to offer here except private emails about what’s going on at Mundra port and my own observation about the Huawei office in Mumbai)

The really interesting part is on Page 2 of the article:

China’s mostly state-controlled banks had few losses during the global financial crisis and are awash with cash now because of tight regulation and a fast-growing economy. The Chinese government is also becoming disenchanted with bonds and looking to diversify its $2.4 trillion in foreign reserves by investing in areas like natural resources and overseas rail projects.

“They’ve got a lot of capital, and they’re willing to provide a lot of capital” for a California high-speed rail system, Mr. Crane said.

I have a conspiracy theory that infrastructure is only the beginning, but more on that in a separate post.

Customer Financed Projects

October 3, 2009

In F Scott Fitzgerald’s Tender is the Night, the main characters are an American couple called the Divers who are Page 3 People in the 1920s. They live on a hillside Villa over the French Riviera, where they throw parties for American tourists and expats. Unfortunately up to the 1920s Riviera hotels were open only in the winters and there would be no tourists in the summer. So they convince one particular hotel owner to keep his hotel open in the summer as well, so that the stream of guests for their parties never dries up. Eventually the hotel starts getting so many guests that the owner doesn’t even need the support of the Divers to make the summer season profitable.

When I read this, I was reminded of what the Adanis have done while constructing the Mundra port. The Adani steel plant isn’t viable without the port, so the steel company has become a part investor in the port project and is financing the rail link between the port and the existing Indian Railways network. Once the rail link is completed, Adani steel will benefit of course, but so will everyone else who wants to use the port (and of course so does the port).

Project finance epiphanies aside, Tender is the Night is one of the most disturbing books about adultery and breaking down marriages I’ve ever read. Now if only it wasn’t so indulgent of its main characters.