Streetwise Professor

August 27, 2023

Prigozhin F’d Up: He Trusted Putin.

Filed under: History,Military,Politics,Russia — cpirrong @ 6:26 pm

Last week Russian warlord/PMC impresario Yevgeny Prizoghin met his demise, as his plane plummeted from the skies near Tver, killing him and several other high ranking Wagner personnel.

Two theories of the cause of the takedown of his aircraft (it is not a crash, per se) are in play: (1) his Embraer corporate jet was taken down by SAMs, or (2) a bomb was planted on the plane and detonated in flight.

The second theory has been pushed by Russian sources, which is reason enough to discard it. When the theory was first advanced, skeptics pointed out that the plane fell with the fuselage intact but minus a wing, whereas a bomb in the passenger or cargo compartments would have seriously damaged the fuselage. The Russian sources then pivoted to say the bomb had been planted in the wheel well, located in the wing, which would explain its loss. Subsequent photos of the detached wing show it to be intact, however,and crucially, the landing gear and tire are pristine and bear no signs of fire or explosion.

Support for the first theory comes from (1) the observation of smoke or vapor trails pointing skyward in videos of the plane’s descent, and (2) photographs of plane pieces with many small holes, characteristic of the shrapnel jettisoned with the explosion of a SAM warhead. (FWIW, there are rumors that the corpses of the victims also contained shrapnel wounds.). It should also be noted that the takedown occurred close to a military base at Tver where SAMs are stationed.

So I’m strongly leaning towards the shoot down theory.

So whodunit, and why? Well, of course the near lock primary suspect is Putin. Prigozhin’s/Wagner’s Kornilov moment exactly two months before Yevgeny et al bit the dust was a threat to Putin, and worse, an insult (despite Progozhin’s protests he wasn’t targeting Putin) led virtually everyone to believe he was a dead man walking. The only question was how? Tea that would break a Geiger Counter? A window? “Suicide”?

Indeed, the most confusing thing about the entire episode is that not only did Prigozhin live so long, he was apparently traveling to, from, and within Russia with impunity. This led some to hypothesize that the entire June “coup” was some sort of scheme drawn up by Putin and Prigozhin, others to conjecture that Putin was too intimidated to move against him.

Or more likely, Putin figured revenge is a dish best served cold. And further, he needed to destroy not one man, but to decapitate Wagner altogether–and Prigozhin and his confederates did not provide the opportunity to do so until they boarded the plane this week.

One can only consider Prigozhin as a fool. He fucked up–he trusted Putin.

He was also a fool because he forgot the old adage–if you strike at the king, you must kill him. By recoiling at the last minute, he sealed his fate.

Now of course we’ll never know if Putin gave an explicit order. Perhaps it was a hint, hint, nudge, nudge will no one rid me of this turbulent boyar kind of thing. But it’s extremely unlikely that this happened without Putin’s approval.

Of course, like Murder on the Orient Express, many had a motive to kill Prigozhin. Most notably the Defense Minister Shoigu and the Armed Forces Commander Gerasimov, both of whom Prigozhin had attacked furiously and whose removal he demanded. But I seriously doubt they have the stones to do something like this on their own hook. Indeed, their sad-sackiness is exactly what drove Prigozhin nuts and which endears them to Putin.

What now? The hardcore nationalist factions in Russia are furious, and Wagner rank-and-file could pose a threat. But they are leaderless, and no doubt the FSB and GRU are sweeping up and eliminating the most dangerous of them. No doubt some hardcore elements will survive, perhaps fleeing to Africa, and attempt to move against Putin a la how French paratrooper veterans of Algeria tried to snuff De Gaulle. But the very public De Gaulle represented a much easier target than the reclusive Putin, and even then the disgruntled French soldiers failed in their attempts.

Presumably the event has also scared straight anybody else thinking of mounting a challenge against Putin. Indeed, the very extravagance of the killing–much more lurid than a mere fall from a high place–puts an exclamation point on the assassination, and sends a very strong message.

But it’s not immaterial that Putin felt it necessary to engage in such extravagance and send such a message. A confident leader, like Caesar in many instances, can show mercy. A shaky or fearful one cannot. And perhaps it was the lesson of Caesar that convinced Putin that longtime colleagues can be extremely dangerous. “Et tu Yevgeny” were not words Putin was going to utter, if he could help it. And he could.

The Service Academies: Either Toughen Them Back Up or Close Them Down

Filed under: Military — cpirrong @ 5:15 pm

As someone who experienced Plebe Summer and Plebe Year at the Naval Academy, and the close relative of someone who did 18 years earlier when both were much tougher, I can say with confidence that those currently in charge of evaluating it, and the programs of the other service academies, are clueless idiots. Why? Consider this:

“The training environment and overall climate at the academies are undermining their ability to prevent harmful behavior,” Elizabeth Foster, executive director of the Pentagon’s Office of Force Resiliency, said Thursday. “Unless some of these more structural and foundational issues are addressed within the training environment, these problems are going to persist.”

What are the “structural and foundational issues”? This:

Each of the service academies uses some form of a “Fourth Class System” where second- or third-year cadets or midshipmen are the primary trainers for incoming freshmen, sometimes referred to as “new cadets” or plebes. But the Pentagon researchers said the older students don’t have the maturity or experience to act as suitable mentors.

And this:

“The peer leadership structure is actually creating unhealthy power dynamics that lead to hazing that further exacerbates this risk,” said Andra Tharp, senior prevention adviser for the Defense Department’s Office of Force Resiliency.

The active-duty military officers assigned to the individual cadet or midshipmen units were often seen more as disciplinarians than mentors, the Pentagon researchers said.

“They didn’t know when or how to prioritize a cadet or midshipman’s well-being over discipline,” Ms. Tharp said

Talk about people unclear on the concept. The system at the academies has nothing to do with “mentorship.” It is about training officers and leaders. The system is set up for learning-by-doing. When you are a plebe, you are learning to take orders, to observe military discipline, and to structure your life in a military environment that is completely alien to the environment in which you grew up. You are also learning to lead by watching others–and in many cases, learning from their mistakes.

And the “hazing”–which is a shadow now of what it was 46 years ago which was already a shadow of what it had been in my uncle’s day–also has a purpose. Several purposes. It helps identify who really wants to be there. It melts the snowflakes who can’t hack it. It provides a jarring separation from your civilian life–which is essential. It tests and develops your ability to think and act under pressure. It reveals and develops your toughness–especially mental toughness.

When you enter the 3rd class (a “Youngster” at Navy, sophomore in the civilian world) you get very modest leadership responsibilities over some plebes. 2d Class, a little more leadership responsibility. 1st Class, a lot more; and among the 1st Class mids/cadets, there is a hierarchy with ranks, with those holding higher ranks having more leadership responsibility. The 1st Class Mids assigned to Plebe Summer duty have a lot of responsibility and influence.

But it is very much learning by doing. And yes, there are good leaders and bad. There are assholes and sadists. There are also some very good ones. And they get to learn and practice leadership before being thrown into active duty where they will have much greater responsibilities. Some learn from their mistakes and get better. Some don’t.

As an extreme example of bad leaders–and bad humans with rank and responsibility–my bête noire in my 2 years at Navy was a guy named Scott Pickles. Yes–real name. He was always trying to bust my balls. I emphasize “trying” because I was repeatedly able to evade his traps, like the time he thought he had caught me red handed wearing civvies in Annapolis, and I pointed him to the reg saying that those with a leave address inside the 7 mile limit (measured from the Chapel Dome) could wear civvies, and telling him to look at my leave chit–which indicated a leave address at St. John’s College across the street from the Academy (where a high school friend attended and in whose room I crashed).

But he evidently had some complex about me, and a few of my buddies, and was always trying to screw with us. (I have theories why.) He was a failure as a leader, and the system at Navy gave him an opportunity to learn and overcome, but he didn’t.

His failure wasn’t due to the system. It was him. His personality. I always thought he was a werido and indeed a sicko, and years later I thought it was a tragedy that my roommate didn’t carry through on his threat to throw Pickles out our 4th story window when the latter threw a tantrum when inspecting our room. Why a tragedy? Because he killed his wife and 3 kids in their sleep after failing as a lawyer. (His outrageous and disgusting acts are why I do not hesitate calling him out by name.)

So yeah. A sicko. If the system failed, it was for not recognizing that he was a sicko.

And that’s the flaw I see in the system. Once you get past 3rd class year, if you keep up your grades and don’t get demerits, they turn you loose on the fleet (or the Army or AF) even if you’ve proved to be a bad human being with toxic leadership traits. Conditioning commissioning on a realistic appraisal of leadership performance, rather than rubber stamping a Scott Pickles with a 2.5 GPA, would turn the alleged liabilities of the system into an asset. You can’t pass “Wires”–you’re gone. The same should hold for demonstrated unfitness for leadership–which the system gives every opportunity to demonstrate.

That would turn the alleged flaws identified by the Pentagon minders into a real strength.

I would also say that being exposed to bad leaders at an academy is valuable training in itself. You will come across bad leaders as an officer. Knowing how to identify them and deal with them is a skill in itself.

And yes, company officers (the commissioned officers referred to in the last quoted paragraph) are in charge of discipline. You can’t realistically “mentor” 100+ mids/cadets, let alone be their therapist and ensure their “well-being.” And again, in the force, your superiors are not going to be your caretaker either: you have to learn a lot of self-reliance, and it’s far better to do that at an academy than when you have a billet that could require sending people to die. Further, the commissioned officers are not supposed to pre-empt the learning-by-doing leadership system.

The very fact that the Pentagon has an Office of Force Resiliency fretting about plebes getting yelled at tells you a lot about today’s US military.

The ostensible reason for these criticisms of the academies is “a ‘disturbing and unacceptable’ recent rise in reported sexual attacks and sexual harassment at the nation’s leading service academies.” The Pentagon fretters claim that this is due to the nature of the training system.

I will definitely not minimize the severity of sexual assault. But I have to say that this assertion of a causal link is almost wholly unsubstantiated, at least based on this article. Women have been at the academies since 1976-7. If anything, the environment was more “toxic” (by the fretters’ definition) then than now–as I can personally attest. So how could the system cause a “recent rise” in such (reported) incidents? When a background condition remains the same or gets better, it is not plausible to attribute changes in other variables to it.

I therefore think that the fretters have totally misdiagnosed the problem, and hence are recommending a quack cure.

I am also curious about how recent is recent. Like, did it coincide with COVID, when life at the academies was much more restrictive, mids/cadets were in much more constant contact than before, normal stress relieving activities–and fun activities–were almost eliminated, and life in general (for everyone, not just academy students) was highly stressful?

Also, what is the control group here? I recollect that there are also claims of increasing rates of reported sexual assault and harassment at civilian colleges and universities, which could reflect a higher incidence, or a greater willingness to report, or both. Are the academies outliers relative to these? Or is this reflective of broader social trends, unrelated to venerable academy training regimens?

Look. I obviously didn’t find a career as a naval officer attractive–I punched out of the Academy after my 3rd class year, despite the attempt of the Superintendent (a 3 star admiral and Medal of Honor winner, William P. Lawrence) to talk me out of it. I put up with the Mickey Mouse, but I understood the point. I learned from it. The Office of Force Resiliency, not so much.

I actually think the choice is binary. Either retain the existing system (and even revert to the way it was years ago, rather than softening it more than it has been softened already), or closing the academies altogether. I think a strong case can be made for the latter option. That case is all the stronger if the fretters get their way. The system they envisage is basically ROTC with uniforms 24/7, at a vastly higher cost. What’s the point of that?

August 19, 2023

The Sorcerer’s Apprentices of the Ruling Classes

Filed under: History,Politics — cpirrong @ 4:27 pm

A current topic of debate by allegedly serious people in Germany is whether to ban Alternative for Germany (AfD), a nationalist political party which has been surging in opinion polls. Surging to such an extent that it currently out-polls the ruling Social Democrats and is in shouting range of the Christian Democrats. Those mooting the ban include Thomas Haldenwang, the head of the Federal Office for the Protection of the Constitution and German president Frank-Walter Steinmeier. These elite worthies label the AfD as extremist, enemies of the constitution, and threats to democracy.

The utter moral panic is palpable.

The irony of banning a political party in the name of “democracy” is beyond obvious.

Midwits defending a ban make arguments like, well, the Nazis came to power by democratic means, so it is necessary to protect democracy against the new Nazis–which they obviously believe the AfD to be.

This is historical idiocy. For one thing, the Nazis were declining in popularity when Hitler was invited by German President Paul von Hindenburg to become Chancellor, at the behest of Franz von Papen. Von Papen was a member of the conservative elite, which despaired of defeating the left without the Nazi base. He came up with the brilliant plan of bringing the Nazis into the government on the theory that the conservative elite would dominate Hitler and use him: “We’ve hired him” von Papen told Hindenberg.

Yeah, that worked out great!

Moreover, Hindenburg had to exercise his emergency powers under the Weimar Constitution to install Hitler as Chancellor since the Nazis did not have a majority or a majority coalition in the Reichstag. Again, he did so under the theory that by doing so he would prevent the left from obtaining power and install a puppet that his minority faction could control.

So no, the Nazis did not take power by democratic means. They had a considerable voting bloc, yes, but it was the arrogant and blundering machinations of a faction of the German elite that put them in power.

Soon thereafter, Hitler ran roughshod over those who thought he was their hireling. One of his first acts, in the aftermath of the Reichstag Fire, was to persuade Hindenburg to issue the Reichstag Fire Decree which suspended most civil liberties. This was followed by the passage of the Enabling Act that effectively allowed Hitler to rule by decree, and which ultimately resulted in . . . the effective banning of all political parties other than the Nazis.

More irony for you.

Other historical facts fundamentally differentiate the AfD from the Nazis. The Nazis had a vast paramilitary organization (the SA, and the SS, which was much smaller when Hitler took power) that could intimidate opponents and carry out violence against those that posed a political threat to the Party: the AfD does not. The Nazis obviously had a mesmerizing and messianic leader who attracted a mass personal following. The AfD does not.

The AfD are not my cup of tea, in large part because they are anti-American, although I can understand and sympathize with some of the positions that have made them a political force, namely their anti-EU stance, and their anger over the immigration policies that Merkel and the German political elite forced on the country.

But that’s neither here nor there. What’s particularly fascinating about this to me is how it validates something I pointed out before the 2016 election in the United States, namely, the utter inability of the western “elite” to comprehend–or even consider the possibility–that they created the thing that now terrifies them to the point of wanting to ban it.

AfD’s popularity is due completely to the failure of the German ruling class of all parties–SPD, CDU, Greens. Or maybe not its failure, but it’s Borat-like success of imposing its will despite popular opposition, and its demonization and cancelation of those who express their dissatisfaction.

In other words, the German establishment is reaping what it has sown, and doesn’t like it one bit. But instead of stepping back and asking why supposed Nazis have re-emerged in modern Germany, and considering whether maybe, just maybe, the enemy is them, and that they are primarily responsible for this malign development, they presume their righteousness and react by attempting to demonize and crush what they have created, Sorcerer’s Apprentice-like.

And again, this is not a phenomenon unique to Germany. It is ubiquitous in the west, where populist fires lit by the ruling classes are burning, and the ruling classes cannot even countenance the thought they they are the arsonists.

The Trump phenomenon in the US is one example. Brexit in the UK. (Both of these were prominent in my 2016 post.) But not just them. Look at France (Le Pen) or the Netherlands (Farmers’ Party) or Meloni in Italy.

Or Melei in Argentina. This clip is wildly entertaining, but not just for Melei’s volcanic rant or his Austin-Powers-Meets-the-Late Elvis hairdo: the look on the interviewer’s face is priceless:

A smaller example is the freak out over “Oliver Anthony” (real name Christopher Anthony Lunsford), whose “Rich Men North of Richmond” dominates iTunes –along with several of his other songs. Anthony’s (who would be a spitting image of me at his age if he was about 15 lbs. lighter–I mean, a near doppelgänger) success has caused a moral meltdown among the establishment. Yes, the left in particular, but also the elitist right (e.g., National Review).

Again, the Other frightens these people no end, but they cannot come to grips with the fact that the Other is a reaction to them, 10000 percent.

In a typically supercilious and condescending way, New York Times columnist David Brooks (whom I have a vague recollection of encountering a few times during our shared time at the University of Chicago) tiptoed up to the precipice and looked over. But in the end he chooses to be a “card-carrying member of his class” (his words).

The populist forces shaking virtually the entire west will not abate until the ruling classes engage in self-reflection, self-criticism, and humility. But that is not in their nature. They KNOW they are better than you, and if you disagree with them that’s because you are the unwashed reprobate who doesn’t know his/her place. Which means that the populist backlash will not abate. Especially in Jacksonian America.

And when it does not abate, authoritarian responses are inevitable. Germany’s serious consideration of banning the AfD is just the harbinger of such responses. And that will look mild compared to what is brewing in the United States. The Sorcerer’s Apprentices of our ruling classes have unleashed forces that they cannot control, and are indeed redoubling their spells. Chaos is inevitable.

August 15, 2023

Why China is Shtupped: A Synthesis

Filed under: China,Economics,Politics — cpirrong @ 6:00 pm

Something of a kerfuffle has broken out over the issue of China’s economic angst. On one side is Adam Posen, who in a Foreign Affairs article attributes China’s current predicament to the reluctance of private firms to invest, which he in turn attributes to their fears that an authoritarian regime like Xi’s will not respect their property rights and may expropriate them. On the other side, Adam Tooze (on Substack) and Michael Pettis (on X or Twitter or whatever it identifies as these days) claim no, China’s problems are the consequences of fundamental structural imbalances dating back years, and rooted in pre-Xi economic policies.

All of them are right in parts, and wrong in parts. I assert my post of the other day synthesizes the right parts 😉

It’s perhaps convenient to boil things down thus:

  • What mess does China find itself in?
  • How did it get into this mess?
  • What prospects does it have to get out of this mess?

Pettis and Tooze (and others, including me and not just the other day) attribute China’s current mess as the result of huge imbalances (over-investment, underconsumption) and secular demographic problems compounded by a very weak social safety net.

It got into this mess as the result of a development model and associated policies that heavily favored fixed investment (especially in infrastructure and housing financed by debt) and exports, and punished private consumption. The policies involved are myriad, but they can be summarized as central planning without complete government ownership. That is, the direction of even private enterprise was substantially guided by government policies that caused prices to encourage the types of economic activity that the government favored. The hand of the state was very visible indeed in China–something which fanboyz such as Thomas Friedman and too many western CEOs to count waxed rhapsodic about. (To which I should add the incentives faced by government employees at all levels who were rewarded for meeting certain aggregate growth targets that were most easily achieved by borrowing to make fixed investments–high powered incentives can be dangerous, my friends.).

But that model is played out, and was in fact always unsustainable: what’s amazing to me is how long they sustained it. But as Herb Stein said, if something can’t go on forever, it will stop. And that model couldn’t go on forever. It’s stopping time is about now. Hence China’s current distress.

So how to get out? The hydraulic economists who rely primarily on accounting identities (for all my admiration for Pettis’ diagnosis of structural imbalances, he fits that description to a large degree), the answer is: Correct the imbalances! Shift China from an investment focus to a consumption focus!

Well, how, exactly? And that’s where Posen’s critique of Xi-o-nomics–and mine–comes in. Achieving a new balance would require the CCP and the state to reduce their control over the economy. But the authoritarian Xi is hell-bent on increasing the Party’s–and his–control. For the reasons that Posen sets out, and many more besides, Xi’s kontrolle uber alles mentality is inimical to a fundamental structural shift in China’s economy, and especially a shift driven by private enterprise and private consumers, that is, a shift driven from below not from above. And below is the only place it can possibly come from.

So I would say that Pettis and Tooze prevail on the “how did China get into this mess?” issue, Posen on the “how does China get out of this mess (or not)?” issue, and all are largely in agreement in describing the just what the mess is.

The upshot of this synthesis is that China is shtupped. And the concern for those outside of China should be how a shtupped autocrat responds.

Want to Mess With a Warmist’s Head?

Filed under: Climate Change — cpirrong @ 12:04 pm

Ask him/her (but please inquire about pronouns first!) whether the Hunga Tonga eruption accounts for a significant proportion of this summer’s supposedly historically high temperatures. This puts the warmist on the horns of a dilemma a la the famous meme:

The likely answer you’ll get is no, because the warmist desperately wants to attribute this year’s weather to anthropogenic causes. (NB: weather is climate when it advances their narrative, but isn’t when it doesn’t.). Suggesting a natural driver of warm temperatures this year would undercut that narrative.

But! Unlike terrestrial volcanoes which have an often powerful cooling effect (due to their release of sun reflecting aerosols, especially H2SO4), Hunga Tonga is an undersea volcano: its eruption resulted in the release of substantial quantities of water vapor into the atmosphere. Water vapor is a powerful greenhouse gas.

Therefore, denying the impact of Hunga Tonga on 2023 summer temperatures is. . . wait for it . . . CLIMATE DENIAL! Because this would entail denying that greenhouse gasses materially impact global temperatures.

So if they say “No!” then point at them like Donald Sutherland in Invasion of the Body Snatchers and scream “DENIER!”

On a more serious note, Hunga Tonga does seem to provide a fairly clean natural experiment to measure the climate sensitivity coefficient empirically in a way that does take into account feedbacks. If the amount of water vapor released into the atmosphere can be measured with some accuracy, the forcing can be calculated. Combining this with the measured temperature anomaly is an empirical measure of sensitivity that does not require a layer cake of modeling assumptions about feedback.

But that’s a job for scientists. In the meantime, you can entertain yourself by putting warmists on the hot seat.

August 10, 2023

Breaking China

Filed under: China,Economics,Politics — cpirrong @ 10:59 am

Evidence abounds that the Chinese economy is in the midst of a fundamental structural crisis. To which I respond: “It’s about time!”

I say this because I have written for over a decade that the Chinese development model is fundamentally flawed, and that signs of its distress have been emerging for years. My main surprise is that it has taken so long.

Signs abound of fundamental structural defects that cannot be addressed using the means that the CCP has used to extend and pretend for the past decade or so. The Chinese economy did not rebound robustly from the lockdown. Indeed, “flaccid” is a good descriptor of the economic performance in the last year. Despite reported growth estimates of 5 pct annually, it is virtually impossible to reconcile these official figures with more granular measures of economic performance (many of which are less subject to manipulation than top line growth numbers). For example, imports and exports have fallen–a troubling development for a trade-heavy economy.

Other indicators include widespread youth unemployment–especially among urban, educated young adults. A real estate collapse, with property development firms falling like dominoes and property turnover approaching zero. Accelerating debt-to-GDP ratios. Reduced marginal productivity of investment, as proxied by increasing debt per unit of GDP growth. Financial distress among local governments. This is another symptom of the real estate problem, as local revenues are significantly dependent on land sales. The local government troubles really represent a national fiscal crisis because local governments account for a disproportionate share of total government expenditure (and debt) in China. Banks are increasingly shaky due to a deterioration of the credit quality of their loan portfolios.

In the past China has responded to growth recessions with increased stimulus. But the government apparently increasingly realizes that the issues are structural, and that if anything increased stimulus will exacerbate rather than mitigate these problems.

Inside and outside China, there is a growing realization of the deep structural imbalances within China–something that has been obvious (and which I have written about for years) but which are now receiving attention. In particular, the investment intensity of Chinese economic activity, and the concomitant enervation of private consumption is the focus of most post-COVID analyses of the Chinese economy.

These diagnoses are fine as far as they go, but all too often those offering cures for the disease are slaves to economic aggregates and the hydraulic model of how economies work. Aggregate investment too high? Aggregate consumption too low? Well, just shut this valve and open that one and the economic shmoo will flow from investment to consumption. Problem solved! Easy peasy!

No, actually. The imbalances in the Chinese economy are the product of its very structure and most importantly its policy and political infrastructure. There are no valves to open or close, no dials to twiddle, that can alter these imbalances. Change would require a fundamental reordering of the entire Chinese system. Moreover, any fundamental adjustment in the allocation of resources would entail substantial adjustment costs, including the junking of much existing capital and widespread unemployment as people lose jobs in contracting sectors before they can find employment in new ones–not to mention that the human capital accumulated in the present structure is likely to be less than ideally suited for employment in the new consumer sector.

Low consumption and investment intensity are built into the existing system by design, and many of the problems that are metastasizing now are manifestations of this structure. The near absence of a social safety net encourages high savings and low consumption–a phenomenon that is deepened by the since discarded but still relevant One Child Policy that deprived the elderly of their traditional support, namely their children. Moreover, myriad policies have distorted relative prices to favor investment in infrastructure and state-owned enterprises (SOEs).

A salient example is “financial repression” which reduces returns to savings–and interest costs to borrowers, especially capital intensive industries, thereby channeling wealth to them. So what is a middle-aged Chinese person to do when he or she wants to save for old age, but can’t achieve high returns through traditional investments? Well, buy real estate for one–the massive overbuilding of apartments in China (illustrated by the many “ghost cities”) is emblematic of this malinvestment. The periodic proliferation of “wealth management” products offered by banks and other financial intermediaries desperate to secure funding for dodgy loan portfolios is another. I could go on.

These various policies are deeply embedded. They cannot be changed at a whim. And perhaps most crucially, they have created powerful political constituencies who are dependent upon their continuation: think of how many businesses (banks most notably) that would collapse during a fundamental rebalancing. And news flash: individual Chinese citizens/consumers are not a powerful political constituency.

Which brings us to the biggest bull in the China shop: supreme leader Xi Jinping. Xi is a devoted communist ideologue with a cult of personality. Basically Mao with a better haberdasher and hairline.

Xi’s overriding–not to say obsessive–ambition is extending, deepening, and strengthening the control of the CCP over every aspect of Chinese society. A fundamental reordering of the Chinese economy to correct the increasingly unsustainable structural imbalances would require massive decentralization, and a grant of considerable autonomy to Chinese individuals as consumers, investors, and entrepreneurs.

And that is an anathema to Xi.

Add to this Xi’s reading of the history of the Soviet Union. He–not wrongly–attributes the collapse of the USSR to Gorbachev’s attempt to loosen the grip of the state and the party over the economy. Xi is hell-bent on avoiding the same mistake. As a result he is consciously adopting an anti-Gorbachev strategy, and increasing centralization, and the power of the party over the economy. And since he has basically declared le Parti, c’est moi, increasing his power over the economy (not to mention virtually every other aspect of Chinese social life).

This foreshadows a fundamental conflict between economic and political realities. Xi’s political agenda will only exacerbate China’s current structural problems. His “solution” is a version-on-steroids of the source of the problems.

Unlike those who screech “OMG China’s slowdown will reduce world GDP growth,” in some respects (economic respects in particular) I don’t care much one way or the other: I don’t consume Chinese GDP growth (and especially not the official statistics on that growth), and the indirect effects on the US economy don’t trouble me that much.

The reason that I do care is the nexus between the Chinese economy and its foreign policy. I can see this cutting in at least a couple of ways.

On the one had, an economically hobbled and distracted China could turn inward and be more focused on foreign domestic issues than foreign adventurism and dreams of reordering the world to be subservient to Chinese domination and a desire to take revenge on centuries of alleged humiliation by foreigners.

On the other hand, intractable domestic problems can lead a personalist system–and China is clearly that now, in contrast to the more collectivist leadership of the post-Mao, pre-Xi era–to ramp up the foreign adventurism. This is particularly true when the personalist person is a seventy-something guy who wants to cement his place in history by, say, “liberating” Taiwan.

Prudence and an objective reading of Xi leads me to place greater weight on the latter possibility. Prudence, because it is the alternative that poses the greatest threat to the United States. Objective reading because of the Xi-as-anti-Gorbachev phenomenon discussed above. Gorbachev’s rapprochement to the United States was driven in large part by his recognition of the strategic and geopolitical ramifications of the USSR’s deep structural economic problems. A player of the Gorbachev Opposite Game–a fair characterization of Xi–would ramp up tension, rather than attempt to ameliorate it.

Xi is clearly ascendent in China now, but there are palimpsests that suggest discontent beneath the propaganda facade. What does an autocrat facing internal opposition do? He removes them. Note that the recently appointed Chinese foreign minister disappeared–and had much of the evidence of his existence erased: perhaps he’s exploring exciting new opportunities in organ donation! Further, commanders of the People Liberation Army’s strategic rocket forces were also recently replaced. Thus, these moves by Xi could be evidence of a dark star of opposition to Xi’s sun.

Intra-CCP politics were always highly factionalized. Xi has apparently triumphed over all of these factions. But short of Stalinist methods–which Xi has not employed–oppressed factions do not disappear, but take cover and can reemerge given the opportunity.

Alas, Chinese is the riddle, mystery, enigma on steroids–it puts even Russia in the shade in this regard. The United States, and the West generally, have very little insight on what is going on in China. Meaning that economic dislocation in a personalist system ruled by a Han exceptionalist, communism with Chinese characteristics autocrat creates extreme risks for the US and the rest of the non-Chinese world. But to compound the angst, the governing “elite” in the US and its allies is clearly not up to the challenge–and indeed may not even recognize its existence, and/or may be personally compromised in their ability to respond.

Meaning that economic tumult in the Middle Kingdom is fraught with risk for you and me. But China is where it is, and the tumult is inevitable.

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