The Rabid Independent, Nonpartisan solutions, independent policy ideas

A Moron with a Flashlight


The United States just ended its first session of trade talks with China. In theory, this is supposed to be a negotiation where China confesses to voluminous trade crime and the United States walks away with big concessions. No confessions or concessions will ever be made. So what’s the point?

Simply having these talks opens up the subject within the United States. Free trading globalists who consider themselves to be more moral than protectionists are forced to answer reasonable questions like:

  • Does China steal American intellectual property?
  • Does China require all American companies to set up partnerships with Chinese companies if they want to produce goods for the Chinese market?
  • Does China block Google, Facebook, and Microsoft from their market or are these companies simply unable to compete locally?
  •  What is the “Made in China 2025“ initiative?

It is virtually impossible to respond to these questions without conceding that China is engaged in rampant protectionist behavior.   The question then changes: Are we OK with trading with China on their/these terms? This is big progress.  For the past 20 years trade with China has been called “free“.   American presidents going back to Bill Clinton have sought popularity by facilitating unlimited imports of opium (cheap consumer goods) from China. We have been in a consumption stupor, unable or unwilling to see the costs.

My sense is that even the most liberal media outlets who want to denounce all Trump initiatives are really struggling with the narrative surrounding these talks.  They have changed their argument [weakened it] to excoriating steel tariffs but they know that such denouncements don’t address the greater problem. Fine, steel tariffs have a poor return, so how (else) do we fight back against dumping?

This situation is so outrageous that even Donald Trump can’t soil it by association. He still may screw it up with inappropriate policy but the genie is out. It’s hard for me to see politicians coming out in favor of globalism and its embedded free trade beliefs ever again. They may eschew populism as pandering to xenophobes but they see the merit of this trade fight. Authors like Ian Bremmer and Robert Kuttner are on the circuit offering intellectual support. Even The World is Flat – guy – Tom Friedman issued a sort of mea culpa last week! Up to now such voices were mute.

The hard part is still ahead of us – applying good policies that may raise the price of that 4K TV you wanted. We need to swing the pendulum back toward workers and away from consumers or else we will continue to see zero (real) wage growth forever (regardless of how low the fake unemployment rate goes.).

The Impotence of Millennials

Historically the norm was for people to have more children than was needed just to replace themselves. Maybe they were always over-estimating the risks of infant mortality and disease. Having many children was a sort of luxury or a way to find happiness in a wretched world. A somewhat irregular cycle developed where some generations produced huge baby booms and others produced baby busts but in general more younger people was normal.

When there are more young energized people they feel the power of their number. They push for economic and cultural change that suits them. They object to their elders lining their own pockets at the expense of future prosperity. They object to meaningless wars that they, the young, are sent to fight. They rebel against traditional superstition and backwardness. They promote new technologies and science because they find it all easier to learn and accept than their parents. It’s Rob Reiner versus Archie Bunker.

In spite of their low numbers, we hear from millennials through modern media. We know they favor science over religion and equal rights for gay people and minorities. Young people don’t question evolution and climate change. But a crowd seems to sense when it has the necessary numbers. It’s also aware of its own demographic impotence. They retreat to Instagram instead of running for office. Voting is a pain. Social media has become an opiate but it wouldn’t be if they had power in numbers.

In the early 60s university students were utterly quiescent. They were almost completely absent from the civil rights fight of Martin Luther King. That fight was made by African-Americans and was advanced by the new generation’s parents. Can you imagine the riots and demonstrations that would have been put on by the boomers of the late 60s if they had watched George Wallace block black students from gaining entry into the University of Alabama? Would the Berkeley university students of 1971 completely ignore the inexplicable worthless invasion of Iraq? There was no reason to protest against the Vietnam war in France but that didn’t stop the students from rioting in Paris in 1968.

For society to progress it needs the citizens who care most about the future to speak up. If they don’t then the donor class will steal and loot from the treasury. Government debt will grow to the sky. Jobs will all be sent to China. Shamelessness and lying will become the norm. The wealthy and politically powerful will act with impunity since they know that the pathetic millennials will do absolutely nothing.

Letting in immigrants to make up for our shortage of babies does nothing to solve this problem because these people have no political franchise. In fact, their desire is to not be heard at all (other than on immigration issues).

Donald Trump is just another example of the looting of the system by the aged.  Congress is full of ancient baby boomers and people who are old before their time.  Paul Ryan‘s counterpart is a Columbia University student in 1970 with hair shorter than was the style in 1955, who feels that rock ‘n’ roll music is the product of the devil.

He betrays his own generation and the future of the country, to get a pat on the back from Archie Bunker.

Democracy Loses Popularity

There are a lot of new polls that show that people [especially millennials]  don’t seem to be as committed to democracy as their parents or grandparents. This is logical since the end of the Cold War means we don’t have a nemesis who favors the alternative, totalitarianism.  China is the other reason:

Our current greatest economic competitor is China and it seems to be winning some of the hearts and minds of our people. Even though it is nothing more than a global economic parasite it preduces a tremendous amount of propaganda devoted to celebrating its burgeoning economic success. It publishes  spectacular growth statistics and suppresses all dissenting voices.  It manufactures most of the consumer goods we buy every day. How can such a bad place with bad people make all the toys and clothes we love?  Apparently their version of totalitarianism seems to work quite well.

On the other hand we have perfect proof that democracy is failing because we have elected a brainless narcissist to be our president. This juxtaposition naturally supports the thesis that a competent  dictator is better than an elected  idiot.  Democrats revere China while Republicans revere Russia.  Consumerism has defeated economic nationalism in such a way that people look to Apple Computer for guidance rather than their political leaders.  FIfty years ago Dell Computer would never have considered Cuba or the Soviet union as places to locate offshore production to take advantage of lower wages. They would’ve been pilloried both for offshoring and for being pro-communist. (Their goods would have been stopped at our border.)

Yes, the cold war is over so such fear and paranoia would be misplaced in today’s world. But we have a new adversary – one that is utterly ethnocentric and unpredictable. They suck our blood, suppress free speech, block our exports and we love them because iPhones are cheap.

If their products are so good, how bad can their political system be?  Or to put it the other way, if we seem to be economic losers then maybe our political system needs to be reworked a la Hungary or Poland?  Nationalists are Nazis now so  sovereignty is bad and globalism must be good. Manichaeism works.  Ironically, the countries whose political systems we revere are completely nationalist in nature. You can’t hate the alt right and be indifferent towards democracy, just like Germans couldn’t embrace Hitler and free speech.

The problem we have is that Chinese totalitarianism and highly controlled economy is succeeding with regard to its primary goal – catching up to us. Yes they have a terrible maldistribution of income but so do we. Our economists detest government ownership of industry but when it comes to China they’re OK with it. Young people see these mixed signals. We can’t pronounce our love of freedom and congratulate Putin on his election victories. We can’t abhor protecting our own steel industry while looking the other way when China protects all its industries.

Every new American college graduate should be made to spend a week wearing a gas mask in Shanghai – then we should hear less about their indifference towards democracy.

Horizontal Demonstrations

When a march is organized through an internet app like Facebook or Twitter many people hear about it and approve. Many may actually go a city center and walk around with clever placards. At the end (whatever that means) they normally disperse and nothing tangible is achieved. There may be some speakers at the end or the beginning who one might recognize, but usually, it’s not about the speakers. It’s a form of passive/aggressive self-expression. This is called horizontal organization.

In the past, (before social media) there would be a particular leader or group of leaders who would announce they were going to make an address to fellow believers at a convenient urban location Think- Martin Luther King (I have a Dream speech in Washingon), Tom Hayden’s anti Vietnam war speeches or Gandhi’s salt march. After the people dispersed the leaders carried on with the cause, meeting with lawmakers and appearing on TV or getting arrested. They pushed for new legislation and they sought out ways to expand their following. Such gatherings are considered examples of vertical organization.

The results of the former are mixed at best. Take for example the Arab Spring. These were almost always horizontally organized and in the end, they achieved nothing. There were no anointed leaders to stand up to take on the existing corrupt governments after the crowds dispersed. There was no plan because crowds can’t plan.

Try to imagine a different march in Washington against guns. Instead of it being a sort of mass wandering, it was to stage a speech by Barack Obama to raise money for a new lobby group called Americans Against Guns. He would speak at the Washington Mall and follow up with crowdsourced funding a la Billy Graham. What a show it would be! Then Barack could fly to Chicago and Los Angeles and do it again. There would be huge crowds to hear his soaring oratory. The money would pour in and it would be used to defeat NRA supported candidates and bills.

Instead we have a few well intentioned high school students tweeting about the college admission results. Does anyone think this  works? It’s time to go old school vertical. Twitter and Facebook will never get the job done on their own.

And our best player is sitting on the bench.

The Best Word in any Language

What’s the one word that is indisputably good? 

 Free 

We love free association, freedom to travel and freedom to work anywhere in any profession. We love free information on the web and free love. We all look for promotions that offer free goods. As consumers, we like free competition. Freedom and liberty are almost synonymous in a consumer society. If we put the word in front of anything it makes it better. That’s how we got the term free trade.  

The question at hand is: Is anything ever free? 

We have been trained to be skeptical of the term on TV but gullibly optimistic at the same time. We click on internet ads to see if their free offerings are true. We know not to believe car salesmen and promotions which only require your email address. This cynicism matches our disbelief in big corporations. Few of us think they are working with the greater good in mind. It’s all about the stock price. 

Why then do we shed this skepticism when it comes to trade. Every journalist is willing to accept the idea that all global trade relationships are fair and honest. Even when we trade with global pariahs and communist countries, they seem sure that it’s all pure perfect competition. They cite Adam Smith and David Ricardo as though they were two of Jesus’s disciples. And they love to use the term free. They are daring opponents to say that free is not good. In this case, to be free there must be no barriers or tariffs on imports and exports. It’s easy to see that we don’t tax or block imports so everyone presumes that our trading partners do the same. They don’t. 

Yes, I think Donald Trump is a corrupt moron but on this issue, he is absolutely correct. Who knows why people glom onto certain subjects (see below)? There is a huge risk that his advocacy will stain the cause but I must stick to my principles. Yes, huge importers will hate tariffs on Chinese imports but they are not our friends. They don’t reward society by paying workers more when their profits rise. The more they make, the harder they work to avoid taxes. If there are tariffs applied to their Chinese made goods they will seek to evade them.  

The stock market will be similarly irritated. It loves companies who dodge taxes and put all their production offshore. It’s also good with hidden pollution and price collusion. If most Twitter followers are fake – great, as long as total measured traffic rises. The market is fine with Facebook selling everyone’s data to Russian bots, as long as they get a good price. Taking comfort in your position by looking to Wall Street for corroboration is a very naïve practice. 

Trade crime is a thing just like corporate crime. Every other country seeks to protect its own interests and we are blind to it. Try signing up a car dealership in Japan that will market your US made brand. How easy is it to buy Excel in China? (Hint: it’s the same as buying meth.) Why are Americans so willing to be scammed? Has no one figured out the trade-off between jobs and cheap TV’s?  China certainly has. 

So why is Trump on board? Perhaps a man who has run a variety of business scams such as selling steaks and university degrees knows a dishonest scheme when he sees one. And so do we. Deep down everyone knows when they buy a dirt cheap electronic gadget or shirt, there is a cost in American jobs. Everyone knows that when an illegal immigrant sneaks into the country and works for you for far less than a US citizen, they’re getting away with something. Every low wage worker is a casualty. That’s why globalism is under pressure in most of the developed world.

We are all to blame.

 

Open Borders and Cheap Imports

In order to make a credible  argument in favor of granting all illegal immigrants green cards, you must also have a plan to control and limit future immigration. Otherwise you are simply saying you don’t believe in countries, sovereignty and the rule of law. Similarly, before you defend cheap imports you must explain where you draw the line between illegal trade practices (such as dumping and foreign subsidies) and the free and fair global trade system. It’s easy for anyone to argue that cheap foreign stuff saves consumers money.  Why should we stop China from giving us steel for free?  Locally produced car companies would be very happy and there are many more jobs making cars than there are making steel [in the United States] . We could extend this argument to everything – solar panels, computers, clothes, toys, furniture. Even if China is subsidizing all those exports to gain market share and/or bankrupt first world producers- so what. This is modern economic Darwinism -right?

Why should I start a business knowing that at any moment China et al could target my product group? What happens to manufacturing employees after they are casualties of dumping?  Pass them some opioids along with a python textbook. Those whining car companies are next on China’s target list. I suppose the New York Times will then defend China saying consumers should be able to buy cheaper cars made in China. And so on until the only business is debt issuance so people can buy foreign goods. Comparative Advantage is a quaint anachronism in this world of parasitic mercantilism.

Quite simply – If you want to sustain a strong American economy you must draw a line somewhere regarding trade cheaters. You must then penalize them. That doesn’t mean putting tariffs on all steel importers – just putting them on the cheaters. Punishing Canada for the crimes of China is shockingly stupid. [China is number 11 on the list of exporters of steel and aluminum to the United States but it is the sole perpetrator.)

The problem here is not that Trump is trying to punish cheaters, rather it is that such punishments have been applied so infrequently in the past.  We have allowed trade crime to run rampant so that now when we act it seems unfair – like ticketing a particular car for speeding after allowing fifty other speeding cars to go by. The broken windows crime prevention theory tells us we should be putting up trade barriers quickly and often. (That’s exactly what China and Japan do.)

If the press and economists in general are so outraged by the economic inefficiency of tariffs then why did they not yell and complain when China completely blocked Google, Facebook and Microsoft from doing business in China? They seem far more willing to defend foreign producers of goods than American companies. Maybe they’re just in love with rampant debt crazed consumerism. Whatever is best for consumers is always the way to go… we buy everything from everyone and ultimately sell nothing. Is that a path to prosperity? These economists frequently revere the recent economic success of China – but it has exactly the opposite model(?!)

Keep calm, there will be no trade war since we hold all the cards. The stock market won’t be happy but it is a corrupt entity in this regard – it would prefer if all Americans worked at Walmart, hopelessly indebted – buying only marked up foreign-made goods. That way profit margins are maximized. The S&P 500 will worry about the debt later, besides it’s good business for banks. Sovereignty and domestic solvency are the enemies of the stock market. (That’s why Trump’s corporate tax cut was received so well.) so please stop using stock market declines as proof of the validity of your anti-tariff position.

I’m tired of hearing about white nationalists, I want to know why we have no economic nationalists. What happened to those anti-WTO protestors? America loves its military but it is the least patriotic country in the world. Let’s not oppose tariffs because Trump is for them.

A broken clock is right twice a day.

Our Post Industrial Economy

Economics professors have always agreed about what comes after an industrial economy: a knowledge-based economy. Service industries would rise up to push around the money we made, inventing and utilizing new technologies. Workers would be data crunchers. They would be accountants, economists, health care workers and computer scientists. Great – no problem we all said. Just stay ahead of the (education) curve and don’t expect to get rich as a steel or car plant worker.

There is, however, another path. What if our remaining industrial base becomes so denuded that it (virtually) no longer produces goods. We won’t need as many engineers to improve productivity or to build robots to replace workers. We won’t need accountants or investment professionals to manage the wealth created by these industries. We won’t need scientists to do R&D since that always takes place near the production facility. (Why do R&D anyway in a world of rampant global IP theft?)

China has replaced us as the new industrial behemoth. They need raw materials for their factories and food for their army of peasant labor. Yes, they need services too but those markets are completely closed to foreign providers. (Just ask Google and Microsoft). Who shall feed the beast?

The Future: Our industrial capacity is shrinking towards irrelevance and our service sector is stalled out. We are the global consumer and without any trade barriers, everyone is just chewing on our flesh. We can still buy their goods but it’s all paid for with borrowed money. So now we are to go back to what we used to do – before the 2nd industrial revolution. We will produce food, minerals, and fuel and sell them to China and Japan just like Africa, Australia, and the Middle East. There are no import barriers on oil or wheat. This is economic development in reverse. It is, of course, a path to poverty and massive income inequality. The whole idea behind trade barriers was to protect young industries (and countries) until they have improved efficiency and become innovative. We have been doing the opposite for 20 years and it’s killing us.

Am I  being too cynical? Let’s look at the data. In 2017 6/10 of the top exports (by category) to China were commodity goods. Only three of the top ten were commodity sectors in 2007. ” In 2007, the U.S. manufacturing trade deficit … accounted for 76.99 percent of the overall merchandise deficit on a Census basis. The 2017 figure? 116.50 percent.”

The race to the bottom that began when China got MFN status is in its final stages. To sustain 2.5% growth we are bankrupting the state.  We have manufactured the illusion of increased wealth by virtue of massive debt increases. The robotics wave will have a greater effect on Chinese and German productivity since that is where global manufacturing now resides. We must get it back. Mercantilism can save us just like it made us in the 19th century but we’ll need a new mindset and new leadership.

Let’s dig up Alexander Hamilton.

 

Why do you hate the idea of a wall?

Let me guess your answer – “… because I can’t stand Donald Trump so I want to deny him anything he asks for.” If he wants something, it must be for some malevolent reason – right?. There is some merit to the argument but it frequently goes along with an effort to justify the anti-Trump position with a legitimate reason. That has lead us back to identity politics. Suddenly a wall is bad because all illegal aliens coming from Mexico and Central America are flawless perfect immigrants who just happen to be “undocumented“. In fact, it’s better for us to get these people (“who do all those horrible jobs we won’t do”) than it is to get migrants from anywhere else – even educated ones that speak English.

This leads directly to an open borders position. If you can’t articulate how you’re going to keep out some people then you must be in favor of letting everyone in.

Let the deluge begin.

This would be fairer to those unfortunates born in s(*&hole countries but then we must set a new rule. You are never allowed to whine about lousy income distribution. Your open borders policy will guarantee the suffering of our ever increasing underclass. You can never lament the poor economic position of the African American community or those less educated souls who failed to get a CS degree. There is pure Darwinian hell at the very bottom of the labor force and open borders guarantee its survival. (Let’s say it together class – Opioid Crisis)

Maybe you prefer feudalism…

I am not a heartless person – really. I do understand the luck of being born in the west and (in my case) getting entry to America legally. I don’t want to break up families or condemn teenagers to gang warfare in Central America. For that matter, I’m sure we could find an infinite number of Senegalese, Syrians, and Ivory Coasters who just want safety and justice. The problem is a simple one of supply and demand. A limitless number of destitute workers will (is) suppress wages for the unskilled. There’s a reason “no one will do those jobs” – the pay is terrible. What do you call a country with no borders?

So get on with it Chuck – get protection for DACA people and let’s build a southern border wall. Do the deal. And please, NPR and all the writers at the NewYorker,  stop interviewing members of the huddled masses who are either here illegally or sitting offshore waiting for plane-fare. You must tell me how you would stop the deluge before you make an argument in favor of letting in every person you profile.

Personalizing policy is the worst way to make it.

Is Trump an exception or a new paradigm?

We could argue that new media and its omnipresence have produced a new celebrity-rules condition. People don’t necessarily believe that politicians are ineffectual, they’re just bored by them. Why not make politics more exciting? No one can tell the difference between real policy ideas and absurd demagoguery anyway. Does history tell us anything? We have gone this way in the past – three times:

  • Andrew Jackson was not a politician- he was a former general who had a little bit of crazy in him. He shut down the US central bank and produced a 12-year recession. The country moved on quickly and went straight back to “normal “ cowardly politicians.
  • In 1904 the country (re-)elected a charismatic iconoclast (TR) who had become a great public celebrity. He spoke to huge crowds and produced policy that both liberals and conservatives could (and can) champion. After he left we saw a list of dullards – Taft, Wilson, Coolidge, and Hoover.
  • In 1964 the Republicans nominated Barry Goldwater – an iconoclast from the libertarian wing of the party. Was it a breakthrough for right-wing populism? Hardly, but at least they sort of stuck to the theme by later picking an actor but they also chose Nixon and GHW Bush – yawn.

None of these temporary excursions represented a significant change in voter preference. Everyone likes a change now and then but the majority of candidate offerings seem to mean-revert, back to a selection of Senators and ex-governors. Such men are rarely exciting or unconventional. Even though there are more ways today to enter the fray, there are fewer reasons to do so. The stalemate in Washington means you won’t get anything done unless you throw in your lot with one party or the other, in which case you are no different from the other mainstream choices. Oprah would be owned by the Democrats just like Mark Cuban would be controlled by Mitch McConnel et al.

We are left to ask from a policy point of view- would a Mike Pence administration be any different than the current one? Can Trump get substantive immigration and trade reform through Congress? If the answer is no then there will be little reason to champion another rogue candidate. It will be evident (again) that parties rule so you might as well go along with one of the mainstream dullards. Most Americans see the Trump choice as a disaster and that will set back any argument to choose another celebrity.

Even if he weren’t, history implies he is probably just a one-off.

The Union Gets a Win.

The American confederacy was an agrarian economy trying to survive during the industrial revolution.  The only way for it to compete with the north and raise living standards was to enhance productivity by the use of free labor. Agrarian economies tend to be more traditional culturally since their lifestyle is the same as it was generations ago. Cows are cows and wheat is wheat. Eventually that culture gets out off sync with industrial competitors and neighbors. A rift grows and such rifts are not easily repaired.

To some extent the animus produced by cultural difference is exacerbated by  inferior economic performance. A hundred and fifty years after the war the rift still exists for the same reasons it did in 1858. The  animosity tends to expand into other spheres such as science and religiosity.

This national bifurcation has been around a long time and the party of the south (and the rural west) has always had to strike a balance or a tolerance between its two factions. FDR had to look the other way  in the face of the KKK and southern lynching because he needed southern Democrats to vote for his new deal programs. Truman and Kennedy  made similar compromises. Johnson blew up the party and handed the south to the the Republicans when he pushed through new civil rights laws. Now the balancing act must be done in that party.

The Repubs used to have a hard core group of free market driven Northeastern intellectuals led by William F. Buckley who had nothing in common with southern racist (James Birk Society)  southerners. Each side served to offset the other so they delivered compromise candidates who could still win a national plurality.

Coastal intellectuals have uniformly rejected Trump’s malevolent narcissism so he must now cow to the southern racist wing of the party. A narcissist must find adoration. Of course he/they favor no estate taxes just like English land barons of the 19th century). Social services for the poor (healthcare) are absurd if you rule over a plantation. Don’t tread on Jesus and Robert E. Lee.

Congress is now ruled by southern Senators with southern Confederate agendas. There is no balance of northeastern or Californian senators who believe in evolution, climate change or balanced budgets. In fact there is little populism in their policies since the south has always been ruled by plutocrats just as it was in medieval times in Europe. Tax cuts for corporate donors – of course!

The structure of the US Senate and the Electoral College were supposed to ensure regional balance and fairness. All they do now is sustain the Confederacy’s malevolent influence. We are condemned to a life or death struggle against the likes of Roy Moore and Mike Pence – living anachronisms, ascendant in the era of Elon Musk.

Today we can celebrate our win and next week Congress will pass a new tax plan that will destroy the federal budget.

Fair and Unbalanced

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