Streetwise Professor

December 27, 2019

China Syndrome–Or Socialism Syndrome?

Filed under: China,Climate Change,Economics,Politics — cpirrong @ 2:20 pm

China’s economy exhibits numerous symptoms of severe weakness that even its most world-class product–economic statistic manipulation–cannot conceal. One indicator of this is an increasing number of bond defaults (more on this in a bit). But there are others. Such as imposing the death penalty on the CEO of a large bank, pour encourager les autres, presumably.

Perhaps the best indicator is the palpable indication of nervousness at the highest echelons of the political (i.e., CCP) leadership. For example:

As China struggles to deal with the slowdown of the world’s second-largest economy, it has embarked on a new strategy of placing financial experts in provinces to manage risks and rebuild regional economies.

Since 2018, President Xi Jinping has put 12 former executives at state-run financial institutions or regulators in top posts across China’s 31 provinces,regions and municipalities, including some who have grappled with banking and debt difficulties that have raised fears of financial meltdown.

Only two top provincial officials had such financial background before the last big leadership reshuffle in 2012, according to Reuters research.

This is utterly futile. Although it reflects a realization by Xi and his minions that there is a problem, it also reflects that they have no idea what the cause of the problem is. Indeed, it shows that they are completely captured by their worldview, which believes that China will achieve wealth–and world domination–via the wise guidance of the Party and its enlightened leadership. (This worldview is not limited to Chinese Party cadres–the likes of Tom Friedman and Naomi Oreskes* and numerous other bon savants in the West share it.)

Their solution is a symptom of the problem. China’s current incipient crisis is a direct result of its economic model, which relies on state-directed investment to meet growth targets. No, there is not a granular, proscriptive investment program a la Stalin’s USSR. But provinces and local governments face strong incentives to meet growth targets that are most readily met via massive investment in infrastructure and housing: that these kinds of projects create corruption opportunities is just part of the incentive structure. Further, the financial system, with its repression of consumption and flip-side of subsidized credit, has provided further incentives to indulge the edifice complex.

This has resulted in massive malinvestment. The financial straits of these government entities, and the financial entities that have funded them, are merely a manifestation of the malinvestment: the investments have not generated returns sufficient to cover the costs of financing them. This is pretty amazing, given the magnitude of the direct and indirect subsidies.

Appointing managers with more “expertise” to exercise control at the sub-national level is not going to fix the fundamental fault in the system. The fundamental fault inheres in the socialist, centralized, Party-dominated, investment/credit-driven model.

The USSR showed that a centrally planned system can generate glittering results in terms of official statistics. For a while. But this largely reflects the flaws in national income accounting, especially in highly state-centric economies. Investment is a cost–a use of resources–but counts as contribution to national income. Pile up the costs at an insane rate for years, and you can show totally awesome GDP growth rates!

But eventually, the chickens come home to roost. If the investments are ill-advised, they do not generate a stream of consumption (and remember that consumption is the point of production, and investment) than can recoup the costs. Honest accounting would require writing down of these “investments,” causing a drop in measured national income. But this is never done.

The Soviet Union went through this “yeah we have problems but we just need better managers” phase. And it was a phase. The next phase was a slide into economic collapse. The phase after that was . . . outright economic collapse.

The Chinese and Soviet systems are not the same. But they share essential similarities, the most notable being that they are/were investment-driven and centrally directed, and horribly misprice credit. The means of direction are quite different, but the ultimate trajectories are quite similar. Investment-driven models that focus on achieving national income growth targets are prone to eventual collapse because of massively perverse incentives that lead to horrible misallocations of resources.

This has interesting short-run and long-run implications for the US (and the West generally). (“Interesting” being the most fraught word in the English language.) In the short run, it provides the US with considerable leverage over China with regards to trade: serendipitous developments, such as Asian swine flu increase this leverage. In the longer run, the fundamental flaws in the socialist model with Chinese characteristics will sharply reduce the Chinese geopolitical threat.

The problem is the interval between the short-run and the long-run. Big powers facing decline or economic crisis are inherently a source of instability. This problem is exacerbated in China, where the personalized, de-institutionalized nature of government under Xi also creates internal sources of instability. Xi is mortal, and has grandiose ambitions: as he sees the time to achieve those ambitions shrink, his incentive to take risk increases. Further, such systems are inherently unstable when the leader dies or becomes incapacitated because of succession crises–crises that are exacerbated by the fact that the ruler has a strong incentive to crush potential successors, rather than cultivate them.

Thus, there is likely to be a period of substantial internal turbulence in China, and this could have dire implications for the US and the world, especially given the changes that Xi has wrought in recent years.

In sum, China is entering the “we need better managers” phase of its development. This is a symptom of socialism, and a sign on the road to severe economic decline. A socialism syndrome, if you will. As an avowedly socialist country, China is not immune. Indeed, methinks it is particularly susceptible, especially given the neo-Maoism of Xi. This bodes well for no one.

*Oreskes is a Harvard “historian of science” who is primarily responsible for manufacturing the factoid (or should I say fiction?) that 97 percent of scientists believe in the threat of anthropomorphic climate change. Per the linked article: Oreskes believes in “change, owing perhaps to a sensible program of environmental regulation under Communism, and vindicating ‘the necessity of centralized government.'”

Sensible environmental regulation under Communism. LMFAO. Every Communist country is an environmental nightmare. I remember reading the official English-language Chinese paper when I was in China in the mid-2000s. It was a litany of environmental catastrophes. I truly shuddered when I thought that this was probably the sanitized view.

And has Naomi been to Beijing in January?

These are our better thans, people. FFS.

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December 23, 2019

At the Russians’ Feet and Trump’s Throat: Germany’s Nordstream 2 Hypocrisy

Filed under: China,Energy,Politics,Russia — cpirrong @ 1:46 pm

Last week, Trump signed into law a bill authorizing sanctions against any company involved with the construction of the Nordstream 2 gas pipeline. Almost immediately thereafter, Ted Cruz sent a letter to Swiss company Allseas, which is laying pipe, stating that they were at risk of sanctions unless they ceased these operations. Almost immediately after that, Allseas announced that it was suspending work.

And almost immediately after that, Angela Merkel lost her shit:

“We are against extraterritorial sanctions, and not just since this decision yesterday — we also have this problem with a view to Iran,” Merkel told German lawmakers, referring to the Trump administration’s withdrawal from a deal between world powers and Iran meant to curb concerns over Tehran’s nuclear program and the imposition of new sanctions.

“I see no alternative to conducting talks, though very firm talks, (to show that) we do not approve of this practice,” Merkel said during a regular question-and-answer session in parliament. “We will see how things go with Nord Stream.”

You want talks, Angie baby? Talk to the hand.

I liked the part about Iran especially. Maybe she’s miffed because the secondary sanctions make it harder for Germany to help Iran finish the job the Germans started.

There has been a lot of bleating about how this American policy is intended to advance American economic interests, specifically US natural gas producers and LNG exporters. Maybe so, but any such criticism from Germany is an extreme case of projection, given its obsession with promoting German exports, including at the expense of the Greeks, etc.

There has also been a lot of bleating about how this is an attack on an American ally, and Nato. Well, as I’ve written ad nauseum, Germany is a pretty horrible ally of the US, and has been the biggest deadbeat in Nato for years. It spends chump change on defense, and as a result has an air force with few operational aircraft, a navy with few operational ships (and at times no operational submarines), and an army that trains with broomsticks.

Indeed, it is Germany’s persistent failure to pull its weight–hell, to pull Belgium’s weight–in Nato that no doubt makes Trump relish sticking it to them.

Payback is a bitch, Angela.

Further, the bleating about this being an attack on Europe, and Nato, is a particularly bad joke, given that large swathes of Europe and Nato detest Nordstream 2, and view it as Germany selling them out to the Russians. Poland is particularly outspoken on the issue:

“Despite the involvement in the Nord Stream 2 project of companies from some EU countries, this pipeline has never been a European or EU project,” said Polish Deputy Foreign Minister Pawel Jablonski, quoted by the PAP news agency.

“Instead, it remains an instrument for the realisation of Russian economic and, potentially, military policy.”

And it also undercuts Ukraine. You know, the country that Trump allegedly screwed for political gain, and for which Merkel constantly sheds crocodile tears.

That is, the Germans are even more two-faced than usual when it comes to alliances. Their idea of an ideal ally is someone who does what they want and lets them do what they want. Everyone else is an enemy.

The Russian (and Ukrainian) aspect of the story requires Merkel and other Trump critics to give Fitzgeraldian demonstrations of first-rate intelligence, i.e., holding two opposing thoughts in mind while retaining the ability to functoin These people tell us that Trump is in Putin’s thrall. But rather than acknowledging that he has implemented an avowedly anti-Russian policy (and the US has constantly harped on this aspect of Nordstream 2) by sanctioning the pipeline, the Germans and other euroweenies pivot to criticizing Trump for daring to trample on their sovereignty and harming European businesses.

As Churchill said, the hun is either at your feet or at your throat. Here, Germany is at the Russians’ feet, and at Trump’s throat–for having the audacity for going for a Russian economic jugular.

And they are singularly clueless in their failure to recognize that this duplicity is exactly why Trump DGAF about their objections to his policy.

It’s interesting to note that this dispute echoes one of the few serious disagreements between Thatcher and Reagan. In 1982, the Reagan administration was adamantly opposed to the construction of pipelines to export gas from Siberia to western Europe. (Ironically, these pipes are now the ones that are the source of chronic friction between Ukraine and Russia.) Despite her stalwart anti-Soviet policies, Margaret Thatcher supported the pipeline, on purely economic grounds: a UK firm located in economically depressed Scotland was a supplier to the pipeline, and almost two thousand jobs would be lost if they pulled out.

Reagan disagreed on broader geopolitical grounds. But back then, secondary sanctions were not an arrow in the American quiver–and Reagan probably would have shrunk from imposing them on the US’s closest ally. So the pipeline went forward.

Though not without Reagan getting a measure of revenge. The Soviets wanted US software to operate the pipeline, and of course they couldn’t obtain it through legitimate channels. So they tried to steal it, like they had stolen a lot of US technology before. The Reagan CIA was onto this, however, so they allowed the Soviets to steal software that turned out to be a Trojan horse. After a few months of operation, the Trojan kicked in, and completely disrupted the operation of the pipeline–and indeed caused an explosion on the pipeline in Siberia. The explosion was so large it could be seen from space, in what was supposedly the largest non-nuclear human-caused explosion ever.

Now I doubt that Trump would give a go-ahead to blow up Nordstream 2, given that the catastrophe would be in the Baltic, rather than the Siberian wastes.

But I am sure that there are days when he is tempted, given Merkel’s hypocrisy.

Which brings a thought to mind. Another source of bitter contention between the US and Germany is Huawei, which Merkel stubbornly insists on allowing to participate in Germany’s 5G rollout despite the extreme security risks that it poses. If Germany indeed flouts the US’s objections, and there is a subsequent failure in the German 5G system, it would be quite reasonable to collude that this wasn’t an accident, comrade.

Remember, Angela. You reap what you sow.

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November 30, 2019

The Invasion of the Control Freaks

Filed under: China,Climate Change,Economics,Politics,Regulation — cpirrong @ 11:47 am

It’s impossible to turn around these days without being beset by control freaks.

Exhibit 1. Michael Bloomberg, who is running for president. Bloomberg is infamous for his desire to control everything, from what you eat to what you drive to how you defend yourself. Bloomberg thinks taxing “sugary drinks” (among other things) is a great thing, despite the regressivity of this tax, because it’s good for the poor:

And if you buy a gun do defend yourself, you’re pretty stupid–so he will take them away:

Pretty sure his security detail is heavily armed. But that’s the credo of his ilk: for me, but not for thee.

Bloomberg also sucks up to the world’s leading control freaks, the Chinese Communist Party. When (amazingly) confronted about this by (amazingly) a PBS interviewer, Mikey totally flacked for them:

And behold the stunning dishonesty here–the lengths to which he goes to avoid criticizing the CCP. Bloomberg wants to control the entire energy system in order to reduce the emissions of global greenhouse gases (GHG). The Chinese are building coal plants at a frenzied pace, yet when confronted on this, Bloomberg treats the Chinese coal plants as merely an issue of local particulate pollution in places like Beijing.

As an aside on this issue: the silence of the Davos Douches (control freaks all) who sucked up to Xi on this issue, and so many others involving China, is deafening.

Exhibit 2. Elizabeth Warren, reprising her “you didn’t earn that” bullshit:

What pretzel logic. Because you might have benefited from some public goods, you are obligated to let Lizzie decide what she will take from you in order to pay for all the non-public goods that she wants.

I have a better idea: I’ll gladly pay taxes for public goods that earn a return in excess of the cost of capital, and Lizzie can STFU.

Exhibit 3. Angela Merkel. Zere vill be NO free speech for you!:

Nice hand gestures there. Wonder where she picked those up?

Such a good little Ostie, ain’t she?

Exhibit 4: “Scientists”:

The irony of this is that those so wise in the ways of science

are obviously lecturing the developed world, which in their wisdom they apparently haven’t recognized is depopulating. Population growth is overwhelmingly concentrated in very low income Africa, the Middle East, Asia, and the Subcontinent, whose peoples (a) will never hear what these scientists are demanding, and (b) would ignore it in any event.

So what are these scientists proposing? What coercive powers will they deploy against brown people in order to achieve their vision?

No doubt Bloomberg has the answer: if they don’t submit voluntarily, kill them. You know, for their own good.

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November 29, 2019

More Flagrant Chinese IP Theft

Filed under: China,History,Politics — cpirrong @ 6:43 pm

Communist China is notorious for IP theft. It’s gotten so bad, that maybe even the KGB should sue them.

Back in the day, the standard Soviet response to American criticism of the USSR’s human rights record was to say something along the lines of “well in the US you lynch negroes.” Supposedly this originated with Russian Minister of the Interior Vyacheslav von Plehve who “The Russian peasants were driven to frenzy. Excited by race and religious hatred, and under the influence of alcohol, they were worse than the people of the Southern States of America when they lynch negroes.” Variants on this were standard fare over the years up to 1991.

Today the CCP is freaking out over Western, and particularly American, criticism of treatment of Uighurs and its handling of Hong Kong. So, how to respond? By stealing a page from gospodin Pelhve’s playbook (or maybe from Matthew 7:5).

Lijian Zhao, “Deputy Director General, Information Department, Ministry of Foreign Affairs, China. Try my best to tell the story of China & spread the voice of China” (according to his Twitter bio) replied thus to Trump’s signing of the (entirely symbolic) act criticizing the CCP’s handling of Hong Kong

It goes on. Check out his T/L, which provides numerous variations on the theme. All totally unoriginal, and a rather lame imitation of the Soviet original.

But maybe Mr. Zhao has a future. I hear there are openings on the Democratic Party platform drafting committee. He’d fit right in.

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November 17, 2019

Died of a Theory, Energiewende Edition

Filed under: China,Climate Change,Economics,Energy,Politics — cpirrong @ 8:49 pm

Germany, under Angela Merkel, has pursued with monomaniacal fervor an agenda of “decarbonizing” the German economy. This has been driven by a monocausal view of what constitutes “green” policies, one that begins and ends with greenhouse gasses.

In pursuit of this objective, Germany has embarked on a hugely expensive endeavor–“Energiewende“–that looks to replace virtually all fossil-fuel generation with renewables, notably wind and solar. The foolishness of this campaign was evident from the onset (as I wrote about some years ago), but Merkel and the German ruling class ignored it: but now reality is rearing its ugly head.

Where to begin?

For one thing, for those who do not have a view of environmentalism that begins and ends with carbon, many in Germany are finding wind power in particular to be visual pollution, sonic pollution, a major threat to bird and insect life, and a threat to some of the few remaining forested parts of the country. As a result, expansion of windpower is facing increased opposition on environmental grounds.

Expansion of offshore wind is sharply limited by the need for vastly expanded transmission capacity (to bring power from the windy northern coast to the central and southern regions of the country that consume the power). This is expensive, and also faces substantial local opposition on environmental grounds.

In a truly amazing fit of stupidity, Germany decided to terminate a large and reliable–and carbon free–source of electricity when Merkel ordered the shutdown of the country’s nuclear plants post-Fukushima. Let’s see: a coastal nuclear plant is hit by a tsunami, so let’s close down all nuclear plants in a seismically stable country with no zero risk of a tsunami. Yeah, that makes sense.

Now Germany is planning to decommission all its coal plants, because global warming. It is not intending to replace them with gas-fueled ones, despite their lower carbon emissions. Because global warming.

So . . . no nukes, no coal, no gas to replace them, severe constraints on increased renewables output. Which leads to . . . looming shortages of power. Which means that Germany’s already incredibly expensive power will become even more expensive. Hardly great for German consumers, or German industry.

But no worries, Germany will just export less!

Germany is counting on its status as a net exporter of power to help it brace it for potential shortfalls as nuclear and coal power wind down in stages. It transmitted about 53 terawatt-hours of power to its European partners in the nine months through September, compared with 31 terrawatt-hours of imports, monitoring group AG Energiebilanzen reported Monday.

Screw the neighbors! How German of them! La plus ça change, plus c’est la même chose.

Er, that’s not very “European” of them, is it? “European partners.” Ha!

How any European can listen to Merkel’s lectures about “more Europe” without vomiting is beyond my comprehension.

It also demonstrates the failure to think through the effects of their actions. If the Germans export less, will those who currently import from them say: “Well OK then! We’ll just sit in the dark and freeze!”? As if. They will build generating capacity. And it won’t be largely renewable. Meaning that Germany closing coal plants will not lead to an equivalent reduction in the number of coal plants, but a displacement of those plants to other countries, or the building of gas plants outside Germany. So the amount of global emissions reduction will be a fraction of the amount of German emissions reduction.

The virtue signaling aspect of this is also absurd. For all of the contortions and coercion that Merkel will employ to reach her decarbonization goal, the reduction in CO2 emissions will be a drop in the bucket, given that China is opening a coal plant per week, and Chinese and Indian emissions already dwarf those of the US, let alone Germany. So the impact of this on CO2 emissions, and on temperature, will be de minimis.

Germany is a great example of the fallacy of composition. It has an incredibly intelligent and well-educated population. Arguably the most intelligent and well-educated population in the world. Yet, Germans collectively have a history of making the worst decisions of any nation on earth.

Perhaps this reflects their obsession with grand theories (as opposed to say, the more practically minded British and Americans). As a result, they tend to embark on grandiose missions that end in disaster. (Adam Smith’s remark about “the man of system” comes to mind. So does Adenauer’s remark about Prussians being Belgians with megalomania.)

In the past, tens of millions have died of German theories–most of them non-Germans. Not many will likely die of Energiewende, so in that way it is not comparable to the great debacles of German history. But it is a debacle nonetheless, and one with its roots in a grand theory, and which will produce virtually no environmental gain despite imposing a massive cost on Germans (and other Europeans who consume German electricity).

How very German.

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September 17, 2019

Fentanyl: The Real Trade War

Filed under: China,History,Politics — cpirrong @ 5:21 pm

The Sino-American “trade war” narrative is one of the most idiotic ones in recent memory, and given that it has to compete with things like “Russian collusion” that’s saying a lot. This narrative is appealing to superficial, lazy journalists, is tailor made for governments and companies looking to excuse poor results, and fits right in with the relentless anti-Trump media drumbeat.

Trade is just one weapon in a deeper geopolitical/geostrategic contest between the United States and China. This contest pits an established status quo power with an emergent, revanchist, revisionist one. These powers have fundamentally different visions for the operation of the global system.

The struggle is being waged in myriad dimensions, and often in a quite asymmetric way. One of China’s most deadly–literally–asymmetric weapons is fentanyl. And anyone who thinks that China’s shipping of massive quantities of this extremely dangerous drug to the US is not an intentional asymmetric warfare tactic is delusional.

Consider this story about the “rise and fall of an Eagle Scout’s Fentanyl Empire.” Consider this line in particular:

The case against Shamo detailed how white powder up to 100 times stronger than morphine was bought online from a laboratory in China and arrived in Utah via international mail (emphasis added).

China is the most intrusive security state in the history of the planet. In particular, its surveillance and censorship of the Internet is beyond intense. Nothing happens on the Internet in China without the security establishment/Party knowing about it, and allowing it.

Further, China is the most ruthlessly repressive state in the world, and has absolutely no compunction about summarily executing those who cross it. They will even go one better, and sell the organs of those they execute. If it wanted to crack down on the fentanyl trade, it could do it. With extreme prejudice.

So if it is possible for an American to buy massive quantities of fentanyl online in China, it is because the Chinese government wants to sell massive quantities of fentanyl to Americans.

That is the real trade war that is going on. The trade in fentanyl is a deliberate tactic by China to kill Americans and weaken American society.

China is playing for keeps. Yet a large portion of the American establishment has been corrupted and co-opted by China, and/or is so blinded by Trump hatred that they turn a blind eye to this conduct, when they are not bewailing any attempt to confront China.

Yes, the opioid crisis–which should really be called the fentanyl crisis, because prescription opioids are not the big killer–reflects serious problems in American society. But it is necessary to recognize that China is exploiting those problems in a most cynical way. By all means attempt to address the demand issue, but do not ignore the supply issue. And in particular do not ignore the fact that the supply issue is only one aspect of a struggle between the United States and the worlds most repressive and most totalitarian power.

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August 31, 2019

Americans’ Realistic Response to a Fight For Freedom in Hong Kong

Filed under: China,History,Military,Politics,Russia — cpirrong @ 6:22 pm

Hong Kong has been convulsed by anti-government protests for weeks. Protestors have numbered in the hundreds of thousands, and are facing increasing violence from Chinese authorities. The atmosphere is heavy with fears of a fierce crackdown by Beijing, along the lines of Tiananmen Square, a little more than 30 years ago.

Hong Kong protestors are literally wrapping themselves in American flags (redolent of the replica of the Statue of Liberty in Tiananmen). Some are even donning MAGA hats and pleading for the US to come to their aid.

But Americans’ responses to all this are decidedly muted, and many appear to be paying little attention to the truly historic events in Hong Kong. This has led many to wonder why. Tyler Cowen hypothesizes that Americans are too obsessed with their own inter-tribal political wars to pay attention:

Sadly, the most likely hypothesis is that Americans and many others around the world simply do not care so much anymore about international struggles for liberty. It is no longer the 18th or 19th century, when one democratic revolution provided the impetus for another, and such struggles were self-consciously viewed in international terms (a tradition that was also adopted by communism). The 1960s, which saw the spread of left-wing movements around the world, embodied that spirit. So did the anti-Communist movements of the 1980s, such as Solidarity, which overcame apparently insuperable odds to help liberate Poland and indeed many other parts of Eastern Europe.
In contrast, I hear no talk today about how the Hong Kong protesters might inspire broader movements for liberty.
Instead, Americans are preoccupied with fighting each other over political correctness, gun violence, Trump and the Democratic candidates for president. To be sure, those issues deserve plenty of attention. But they are soaking up far too much emotional energy, distracting attention from the all-important struggles for liberty around the world.
It’s 2019, and the land of the American Revolution, a country whose presidents gave stirring speeches about liberty and freedom in Berlin during the Cold War, remains in a complacent slumber. It really is time to Make America Great Again — if only we could remember what that means.

With all due respect to Tyler, I think the answer is far different: Americans are far more realistic than he is.

This realism is the bitter fruit of the idealism of the post-Cold War world, and in particular, attempts to advance liberty around the world.

Let’s look at the record. And a dismal record it is.

Start with the collapse of the Soviet Union, which led to a burst of euphoria and a belief that this would cause liberty to spread to the lands behind the Iron Curtain. The result was far more gloomy.

There were a few successes. The Czech Republic, Poland, Hungary. Not coincidentally, the successes and quasi-successes occurred in places that had been part of the Catholic and Protestant west. Outside of that, the states of the FSU and other Warsaw Pact states lapsed back into authoritarianism, usually after a spasm of chaos. (Ukraine went from authoritarianism to chaos to authoritarianism and then to a rather corrupt semi-chaos.)

In particular, the bright hopes for Russia faded rapidly, and after a decade of chaotic kleptocracy that country has settled into nearly two decades of authoritarian kleptocracy. Moreover, Americans (and westerners generally) soon wore out their welcome, in part because of their condescension in dealing with a reeling and demoralized yet proud society, in part because of their complicity in corruption (and yes, I’m looking at you, Harvard), and in part because their advice is firmly associated in Russian minds with the calamity of the 1998 economic collapse. Yes, you can quibble over whether that blame is justified, but that’s irrelevant: it is a reality.

Countries where Color Revolutions occurred (e.g., Georgia) also spurred western and American optimism and support. But hopes were soon dashed as these countries too slipped back into the mire, rather than emerging as beacons of liberty.

I could go on, but you get the point.

Let’s move forward a decade, to Afghanistan and Iraq. In both places, there was another burst of euphoria after brutal regimes were toppled. Remember purple fingers? They were a thing, once, what seems a lifetime ago.

Again, hopes that freedom would bloom were soon dashed, and both countries descended into horrific violence that vast amounts of American treasure and manpower were barely able to subdue. And again, especially in Iraq, the liberators were soon widely hated.

The lesson of Iraq is particularly instructive. The overthrown government was based on a party organization with a cell structure that was able to organize a fierce and bloody resistance against the Americans and their allies. The attitudes of the population meant far less than the determination and bloody-mindedness of a few hard, ruthless men.

Let’s move forward another decade, to the Arab Spring. The best outcome is probably Egypt, which went from an authoritarian government rooted in the military to a militant Muslim Brotherhood government and back to military authoritarianism. In other words, the best was a return to the status quo ante. The road back was not a happy one, and the country would have been better without the post-Spring detour into Islamism.

Elsewhere? Humanitarian catastrophes, like Libya and Syria, that make Game of Thrones and Mad Max look like frolics. Enough said.

Given this litany of gloomy failures, who can blame Americans for extreme reluctance to engage mentally or emotionally with what is transpiring in Hong Kong? They are only being realistic in concluding it is unlikely to end well, and that the US has little power to engineer a happy ending.

And what is the US supposed to do, exactly? The country is already employing myriad non-military instruments of national power in a strategic contest with China. Again, the “trade war” is not a war about trade: trade is a weapon in a far broader contest.

Military means are obviously out of the question. And let’s say that, by some miracle, the Chinese Communist Party collapses, and the US military, government agencies, and NGOs did indeed attempt to help secure the country. How would that work out? Badly, I’m sure.

The country is less culturally intelligible to Americans than Russia, or even the Middle East, and not just because of the language barrier, but because of vastly different worldviews. China is physically immense and has the largest population in the world. Chinese are extraordinarily nationalist, and it is not hyperbole to say that the Han in particular are racial supremacists. Years of CCP propaganda have instilled a deep hostility towards the US in particular, and many (and arguably a large majority of) Chinese blame the west and latterly the US of inflicting centuries of humiliation on China. A collapsed CCP would not disappear: it would almost certainly call on its revolutionary tradition and launch a fierce and bloody resistance. People in Hong Kong may be flying American flags now, but I guarantee that in a post-Communist China, there would be tremendous animosity towards Americans.

When you can’t do anything, the best thing to do is nothing. Some of the greatest fiascos in history have been the result of demands to do something, when nothing constructive could be done.

The American diffidence that Tyler Cowen laments reflects an intuitive grasp of that, where the intuition was formed by bitter experience.

I despise the CCP. It is, without a doubt, the greatest threat to liberty in the world today. It is murderous, and led by thugs. I completely understand the desire of those with at least some comprehension of a different kind of government, and a different way of life, to be rid of it. I am deeply touched by their admiration for American freedom–something that has become increasingly rare, and increasingly besieged, in America itself.

But there ain’t a damn thing I, or even the entire US, can do to make that happen.

Ironically, I guarantee any American involvement in a putative post-CCP China would only contribute to internecine political warfare in the US.

The situation is analogous to that in 1946, when George Kennan wrote the Long Telegram. Confronting (prudently) and containing China is the only realistic policy. After years of delusional policies that mirror imaged China, the Trump administration is finally moving in that direction, and has achieved considerable success in creating a consensus around that policy (the deranged Democratic presidential candidates and those corrupted by Chinese money excepted, both of whom are siding with China at present, because Bad Orange Man and moolah).

But even there we have to be realistic. For even after containment achieved its strategic objective, and the USSR collapsed, it did not result in a new birth of liberty east of the Niemen and the Dneiper. Nor should we expect that to happen on the Yangtze or the Yellow if containment consigns the CCP to the dustbin of history.

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August 21, 2019

Crazy Like an (Arctic) Fox?

Filed under: China,Energy,Military,Politics,Russia — cpirrong @ 5:38 pm

Donald Trump recently unleashed yet another tsunami of ridicule by suggesting that the US should buy Greenland, a Danish possession. There he goes again! The idiot! The fool! What a ridiculous idea!

Trump responded by pointing out that Greenland is a strategic place. And he’s right.

And you know who thinks it’s incredibly strategic?: Vladimir Putin, and the Russian defense establishment. Under Putin, Russia has poured extensive resources into an attempt to dominate the Arctic. It has been building bases in the region at a fevered pace, and is imposing restrictions on ships using the northern sea route. It is attempting to grab as much of the Arctic seabed as possible, because of the potential energy resources it contains. Putin himself has said the Arctic “the most important region that will provide for the future of Russia.” Putin wants to turn the Arctic into a Russian lake.

Further, the strategic importance of this region is greater, the more you believe in climate change, or the stronger you believe it will be. Considerable warming would turn the Arctic into one of the dominant shipping routes in the world.

So by expressing an interest in Greenland, Trump is making a move that poses a direct, and serious, threat to Russian interests. Replacing a geopolitical pipsqueak (Denmark) that has a seat at the table in all negotiations in the Arctic, and which cannot utilize Greenland for any military purpose, with Putin’s bugbear–the US–would be a real blow to him. In Soviet lingo, it would dramatically shift the correlation of forces in the Arctic. That’s a big deal. For Putin especially.

Greenland is also a potential source of rare earths, currently a Chinese near-monopoly (and one of their most powerful “trade war” weapons), so US control would be antithetical to Chinese interests as well.

The irony is just too, too much. I guarantee that those who are ridiculing Trump most intensely also believe absolutely that he is Putin’s puppet, and are also fervent believers in the existential threat of anthropomorphic climate change. Yet they are so blinded by their prejudices and obsessions that they cannot see that the latest object of their ridicule proves how unhinged they are.

I am sure Putin does not think Trump’s gambit is the least bit amusing. But I am equally sure that he takes great solace in the fact that–yet again–he can rely upon a cavalcade of useful idiots who will act in his interest by attacking Trump all the while believing that they are actually fighting against Putin.

The US military has been raising concerns about Russian initiatives in the Arctic for some time. Trump apparently has been listening, and has come up with an out-of-the-box, color-outside-the-lines idea that of course appears ludicrous to the dreary, narrow, conventional minds that inhabit the media, political, and government establishments.

If this indicates that Trump is crazy, all I can say is that we need more crazy. And now.

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August 6, 2019

Do What I Say or I’ll Blow the Yuan’s Brains All Over This Town: Not a Credible Threat

Filed under: China,Economics,Politics — cpirrong @ 6:14 pm

The recent market tumult was precipitated by Trump’s announcement of new tariffs on China. But the effect of Trump’s action on the markets paled in comparison to the response to China’s retort: allowing the yuan to breach 7/USD. Today the market recovered some, because the yuan appreciated.

A couple of points. First of all, the yuan’s do-si-do demonstrates that it is a managed/controlled currency. Whether you call it a manipulated currency is a matter of semantics. It is not primarily moving in response to market forces, but instead to the dictates of the (laughably mis-named) People’s Bank of China, and hence to the whims of the CCP and Xi.

Second, and more importantly, although the move past 7 was clearly a threat by China to wage a currency war in response to Trump’s tariff gambits (and the market took it as such), this threat is not credible. It reminds me of this classic, but no doubt politically incorrect, scene from Blazing Saddles: “Drop it, or I’ll blow the yuan’s brains all over this town.”*

The threat is not credible, because like Cleavon Little’s cranium in Blazing Saddles, China would be hurt most if it carried through on the threat. Yes, a depreciating yuan would favor Chinese exports and offset (for a while, anyways) the effect of tariffs. But a weak yuan would wreak havoc on many Chinese firms that have borrowed in dollars. Given the dodgy state of the Chinese banking system, this could readily metastasize into a full-blown financial and/or currency crisis. It would also spark inflation and totally undermine the stated (but largely unrealized) goal of moving China towards a consumer-driven economy.

There are no doubt many (perhaps even a majority) in the US (and the West generally) who will be as stupid as the townspeople of Rock Ridge. I doubt Trump is one of them. Or if he is, I doubt he would lay down his guns: he’d be happy to see Xi pull the trigger. So I expect him to call the bluff.

One last thing. Framing the US-Chinese relationship in terms of “trade war” is stupidity befitting Governor Le Petomane. Trade is just one front in a far broader great power contest between a revisionist power and the status quo power. After decades of complacency, interrupted by spasms of romanticism, the US recognizes China as its primary strategic competitor and threat. The contest is being joined on many fronts, analogous to the Cold War. The main distinctions are that China is not nearly the same nuclear threat that the USSR was back in the day, but China is far more formidable economically than the USSR ever was. Hence there is an economic dimension to this competition that was largely lacking 1945-1991.

Trade is not the war. Trade is a weapon in a larger war.

*In fact, most of Blazing Saddles is beyond the pale today. There is no way it could be made in 2019. This is a sad testament on the utter inability of our alleged elite to see past the superficialities in order to grasp the true message of Brooks’ classic film. As a result, IDGAF if anyone gets the vapors over my reference to the most politically incorrect scene in a very politically incorrect–but brilliant–movie.

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July 27, 2019

It’s Not “The Squad”: It’s the New Gang of Four

Filed under: China,Politics — cpirrong @ 5:31 pm

Someone (@jgibbons74) responding to one of my tweets regarding @AOC’s most recent demonstration of fatuity said that she reminded him of Madam Mao, Jiang Qing. This comparison is very apt. And it set off a series of connections in my mind. Jiang was the leader of the Gang of Four, the hard-core communists who were the driving force behind the insane and evil Cultural Revolution in China. AOC is part of a group of four hard core leftists who aspire at nothing less than a social and cultural revolution in the United States. (Fortunately, I can still use lower case letters.) They call themselves “The Squad,” but given their very real ambitions (about which they are quite explicit), and the historical antecedent in China, this appellation is far too benign and non-descriptive.

No. They really should be called The New Gang of Four.

And here’s the scary thing: I wouldn’t be surprised if they consider that a compliment.

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