Category Archives: Current Affairs

What does the past tell about Vichy-Republicans

Every Republican primary is telling us that the party now belongs to Donald Trump. Mark Sanford is the latest casualty that explains why only retiring congressmen are denouncing the liar in chief. This is a common story in history. When a strongman takes over a party or a country, other politicians must fall in line to survive. Many do so willingly and with fervor. Many do so for economic benefit and some – when it is entirely unnecessary.

After the strongman has been discredited or thrown out of office the sympathizers must rewrite their biography. They create a narrative where they had no choice and were just following orders. If they can, they erase the records – something the internet won’t allow any more. Francois Mitterand’s participation in the Vichy government was (kept) murky until the mid- 90’s when he was retired. It was common knowledge that many ex-Nazis were allowed back into the government after the war. The US intelligence services recruited war criminals and many businesses that had prospered during Naziism carried on shamelessly after the war (Chanel, L’Oreal, Hugo Boss, Volkswagon/Porsche).

In five years time Trump will be gone and (I hope) so will be his doctrine of alternate truths, spin, and stupidity. The whole mess will look even worse in the rearview mirror than it does in the present. Yes, I’m assuming we will get a counter-reaction. The un-Trump will force those collaborators to act like former Quisling cabinet members. They will spin like Maurice (I had no choice) Papon. We will be told by Mitch McConnell that he had no choice or couldn’t have done anything anyway. Perhaps Devin Nunes will evaporate without repentance (like Oswald Mosely) but long-serving Senators and new candidates will need to pivot to be re-elected. They will selectively recall their un-Trump moments.

How does history judge loyalty as an excuse? 

History tells us that allegiance to a repugnant narcissist/ideologue is not easily forgiven. Usually, these collaborators must spend some time in the wilderness before their resurrection. Memories fade.  Paul Ryan bankrupted the state and accommodated the Trump agenda. He can see there will be fallout. Like a Nazi who saw that Germany was losing the war, it’s best to get out early, deny your complicity and stage a comeback later. If you wait long enough and hire a good publicist you might become a celebrity like Albert Speer. If possible align yourself with a new cause or a clean politician.

The Republican ticket for 2024 – Paul Ryan/Jeff Flake

How to Win a Trade War

I believe we have been in a trade war with China for 20 years. They have been fighting every day and gaining ground. We have been acting like Stalin at the beginning of Operation Barbarossa – mired in disbelief and incompetence. It was so much easier to think China was just giving us what we wanted (cheap consumer goods) without any cost to our own economy or security.

Thanks to Trump many more Americans and even economists are recognizing that we have been taken for a ride. There are confessionals everywhere; Few who now defend China in light of such public documents as Made in China 2025. This seems to have sent Trump and his team into a sort of frenzy, attacking every country as though it’s China. He even attacked a country that we have a trade surplus with (and there aren’t many of those) – Canada!

Memo to Trump: How to Conduct a Trade War

  1. Set an example by attacking the leader of global trade crime – China. (Let’s give a big shout out to Marco Rubio for this bill.)
  2. Clearly explain why it has been singled out so others know what the new rules are.
  3. Attack transhipping to prevent new tariffs against China from being circumvented.
  4. Pick a favorite country to use as an example of good conduct – one that has a deficit with us ideally and who we can trust under any situation to deliver needed goods in case we have a (military or trade) war. Canada or England will do. Celebrate their fairness.
  5. We must use tariffs and subsidies in case the spinoff effects of higher prices are too costly. Some combination of the two makes sense with steel, solar panels, and LCD screens.
  6. Make sure critical inputs like rare earth metals and pharmaceuticals are stockpiled or brought in only from friendly sources.
  7. Someone call up Peter Navarro and tell him you can’t win a war without allies.

Trump is right about one thing – every country in the world has been targetting debt-loving, consumption-crazy Americans. We have been in love with policies that favor consumers over producers/workers for thirty-five years.  It is a shock to wake up and be told that something you buy or use as an intermediate good in your business may go up in price. For every other country in the world, that’s a normal day. Everyone (except in America) pays extra for something, knowing they do so to grant a higher wage (or social service) to a neighbor. That’s why they accept higher tax rates and/or a VAT.

Surely Americans can see the absurd place this has gotten us – we have a (fake) unemployment rate of 3.8% and wages are barely keeping up with inflation. There are a ton of unfilled jobs out there – at Chinese wage rates! Corporate outsourcers have reset the price on domestic labor. Unless we break with the global trade parasite we shall continue to circle the drain with huge tax shortfalls and an opioid epidemic.  The war has begun and we must all be drafted to pay something for our safety, our sovereignty, and higher wages. We should accumulate allies to fight with us – sing along with me: Oh Canada (… or God Save the Queen).

Let’s not continue to act like Stalin in 1941.

Crossing Over into the Third World

In his 2nd volume of The History of the English Speaking Peoples, Winston Churchill made the claim that what separates his people from all the rest is the recognition that a leader has no authority unless he is supported by the rule of law. This is certainly a key part of what makes societies work. I would add another rule: To be civilized one must accept that we are obligated to conduct ourselves with restraint. We must all take the greater good into account before we … steal, murder, plunder, lie, cheat, extort etc.

The first world applies the law and a need for restraint differently depending on what you do.  What we deem to be ethical or appropriate is entirely different in the public sector compared to the private sector. There is an expectation that when you choose to become a public servant, you also choose to become (more) ethical. A worker in the private sector is expected to be driven by the profit motive and the materialistic demands of the conscience-free corporation.  We expect a company to pay a lobbyist to win a tax break for their business. We similarly expect a politician to resist such pressure unless it benefits his voters or the country.  We expect a CEO to make a fortune and fly in a private plane to Davos every year.  We are (rightly) outraged when a public servant gets paid a lot of money or receives unusual/excessive perks like flying around in AirForce 2.

When we elected a businessman with no sense of duty and a history of taking advantage of whatever angles he could find, we knew it would be unlikely he would pivot and become a public servant. Civic values are often established by the examples our public figures provide. We don’t look to Jeff Bezos or Mark Zuckerberg for ethical or political guidance any more than we looked to Rockefeller or Vanderbilt. We don’t just revere Lincoln, we need him as a guidepost to tell us what’s right and wrong. This was the function provided by Augustus Caesar, Henry IV, (France), Queen Victoria and Churchill.

The damage done to a democracy by putting such people as Maduro or Putin in power is no different than if we elected Martin Shkreli to be our president … or Donald Trump. It naturally causes everyone to question the ethics of the government at every level which leads to people dodging taxes, paying and accepting bribes, moral relativism in every facet of life. Trump fans arrive at the same conclusion because they believe his denunciations of the “deep state”. Do we want to live in Somalia? If we do we have found the fast lane.

Ethics survive by virtue of the archetypes we see in government. The entire society will follow their example. We’ll need a figure like Gandhi to offset the damage done by Trump in this regard.

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.