After the latest outrage of gun violence in Texas, the newspapers are full of articles about guns. However when people talk about Republicans and the gun lobby they tend to get things backwards. The gun lobby sounds like a rather limited thing, maybe financed by the manufacturers. It’s sort of odd the power they exercise over the Republican Party.
Not so odd. The reason guns are untouchable in this country is that guns are a potent identity issue used by the Kochs and the Mercers and the Thiels and the mainline Republicans to put money in their pockets. It’s core Republican money driving the gun lobby, not the other way around. That’s why there’s so much of it. The only legislative achievement of the Trump years was the monumental tax cut for the rich. Bought by guns.
Thirty years ago we didn’t have this problem with hysteria around gun ownership. It was recognized that there was a need for gun control, and there was no notion of evil liberals just looking for a chance to take away all your guns. The sense of grievance around guns was deliberately created as a means to a financial end with the active assistance Murdoch and Fox News. Why is the Supreme Court also supporting this stuff? Well all of the so-called conservatives on the Court come from the Federalist Society—which was created and managed by the Koch Organization (an indisputable fact).
Guns are money. That’s the only real story. It will continue as long as we let them get away with it. (As for what to do about it, there’s an old piece here that’s still relevant.)
Inflation is—by common agreement—the primary issue faced by American voters today. However when you ask people what’s causing inflation, things are quickly not so clear.
Republicans will say immediately say that it’s all due to overspending by the profligate Democrats. Democrats will talk about worldwide trends that are beyond the scope of what the Biden administration can control. In neither case do you turn the important issue of inflation into useful steps going forward. That needs to be done, and we give it a shot here. The result may be a little different than expected.
First of all inflation necessarily involves both supply and demand, and both are clearly in play here. The Democrats’ desire to keep people whole at the end of the pandemic did put extra money in the hands of consumers., and that extra money was chasing a limited supply of available products and services. But it also turned out that as the pandemic eased, we became conscious of all kinds of production bottlenecks that people hadn’t anticipated. Some of those bottlenecks have gotten a lot of press, integrated circuits required for production of new cars for example. Other bottlenecks involved consequences of Covid, such as the breakdown of daycare systems.
The Covid payments certainly had an initial effect. However at this late date, when any Covid benefits are long-gone, the continuing pervasiveness of bottlenecks has got to be viewed as the major issue. Car prices for example represent a third of measured inflation. What are we to make of bottlenecks persisting even now? (Gas and food prices are now directly tied to the Ukraine war, so they are their own story.)
The most prevalent reaction has been xenophobia. We’ve got problems because we’ve let ourselves get too dependent on the Chinese. Bring it all home and we’ll be fine. That sounds nice, and we certainly do have continuing problems with Chinese sources, because of their zero-Covid policies today.
But that conclusion is actually wrong. We give two examples. One example we’ve given before: the single worst problem during the first stage of the Covid crisis was a lack of testing equipment—because the American manufacturer with a CDC contract to produce the tests had decided they could make more money doing something else. The second example is active today—the baby formula crisis. Consolidation in the industry was such that a single vendor’s contaminated equipment led to a massive shortfall in supply. Without rules of fair play “our people” aren’t necessarily going to be so much better than the Chinese. Furthermore the idea that we are somehow going to deliver the best of everything available worldwide to our own businesses is manifestly false.
There are two simple facts to be acknowledged:
1. Unbridled capitalism is simply NOT robust. Consolidations, monopolies, and risk-blindness are private sector facts of life. Even Adam Smith understood that.
There is no substitute for solving both of these problems. We give examples for each:
1. The SEC has got to do a better job of making companies confront risk. Climate change is a good example where work is underway. Anti-trust activities are also clearly relevant. Then there is the need to limit the power of the consolidated financial sector over the companies they own. It is established fact that companies today invest less and return more of their profits to their investors—which directly affects robustness. What all of this comes down to is that today’s inflation is another example of the dangers of unfounded faith in a deregulated private sector.
2. The world needs a working system of international trade so that international corporations can be transparent and effective. The Biden administration’s work on international taxation is an important step. Turning todays moribund WTO into an effective organization is another necessary goal.
It is most important that we stop using inflation as just one more excuse to search for scapegoats. Even in the near term, we should be looking for more, not less, cooperation with China, as the bottlenecks hurt both countries. And in the longer term, there really are lessons from today’s inflation that can make the world a better place for us and everyone else.
At least half of these deaths were due to deliberate misinformation from political interests calling the whole pandemic a left-wing plot. For month after month the most popular story in the Wall Street Journal was the latest reason why there was really nothing going on: it was just like normal flu; it was worst in New York because it was only in disgusting cities full of disgusting people.
Everyone in the country suffered, including very many who bought into the party line because they thought the propagandists were on their side. Since vaccines were coming, deaths delayed could be deaths avoided. What’s worse, almost of half the people who died were unvaccinated when they could have been, convinced by the arguments of people like the Fox hosts-who were actually vaccinated for themselves.
This Covid story is unfortunately typical of what’s happening in this country. The “populists” are the Kochs and the Mercers and the Thiels—people with the money to fill newspapers with issues they don’t care about (abortion, guns) so they can ride them all the way to the bank. The only major piece of legislation passed in the Trump years was the monumental tax cut for the rich. As with Covid, the supporters drawn in with identity issues are the ones who will suffer—in jobs, healthcare, education, climate, you name it.
Taking this one step further, it is worth noting that the damage with Covid was not from action but from inaction. Most of the endless discussions of our fractured political system are missing the point. The country is ungovernable because they want it that way. If government can’t act, the powers that be are running things. As Steve Bannon put it, all we need to do is create chaos.
This story isn’t complicated, just lost in the cacophony of bought media.
It seems to me more important than ever that we think about real scenarios for dealing with climate change. There’s so much religion here that we can be missing the boat. I’m going to take an extreme position in this piece, both because I think it should be on the table and because I think it’s more likely than a lot of what is taken for granted.
I believe that fusion is going to work and be deployable in about the next ten years. We’re going to know quite soon where that stands. Both the Commonwealth Fusion people and Helion (among others) plan to generate net positive energy by 2025. There are also regularly new developments: more powerful magnets, longer plasma retension times, higher energies attained, even AI-based methods for controlling stability of reactor plasmas. Higher temperature superconductors have been game-changers. It is time to be serious about fusion.
The consequence is that we are entering (in the relatively near term) into an era not of energy scarcity but of energy abundance. That’s not just a matter of fusion—solar, wind, and better in-network storage also contribute—but fusion represents real abundance. That’s a different mindset with different conclusions than most of what gets discussed. I’ve argued earlier that it’s the proper mindset for the long-term, because it is the only serious way to address our worldwide problems. The difference is that progress in fusion has been such that we can move that indefinite future to the nearer term.
With that point of view, we can view the response to climate change as two distinct issues:
– Keeping things from getting too bad in the interim while the new energy sources get up to speed.
– Deploying abundant energy to combat climate change.
It’s important to look at the second issue first, because the first (assuming we can solve it) is temporary. The architecture for the second issue is relatively straightforward. We’re going to have generation stations of significant size with high-capacity interconnection for distribution to users. Electricity will be the basic form in which energy is delivered, but we’re going to have to deal with significant applications (industrial processes, air travel) where electricity itself is not the answer. For such applications we’ll need ways to convert electricity to other forms of energy. That may involve using electricity to make hydrogen or using electricity to achieve climate neutrality by pulling carbon dioxide out of the atmosphere for synthetic fuels. (It’s interesting that carbon capture has value even without large-scale CO2 storage.)
The most important conclusion is straightforward: we’re going to have to vastly increase and improve the facilities to generate and distribute electricity! That is job number one and the most essential thing to be spending money on. Existing technology will contribute to but not solve that problem. We also need to figure out how to move everything that isn’t currently electric onto that network. Note that ultimately it is much less important how efficiently we use electricity than that electricity is what’s used. We’re not getting rid of air conditioners, and we’re not making sure that every electric hot water heater has a heat pump.
As to how we’re going to survive until then, the most important message is that survival means focusing on heavy hitters. It is not the case that every little bit helps. I’ve given this chart before for energy use in the US:
The key sectors are transportation, industrial, and electric power—not residential. Electric cars are clearly an important contributing technology, but even they are only an infrastructure investment until the underlying power plants are converted.
For the rest of the world, the corresponding charts can be quite different, often tilted toward industrial uses. Focusing exclusively on the US distorts the issue. We have to get world CO2 emissions down overall, regardless of where it comes from. This is not a question of “every country needs to do its part”. It’s a question of the most effective way to get the CO2 total down fast.
We have to think about where all the sources are and how to get at them. Carbon pricing schemes such as CCL are particularly helpful because of their wide impact. In this country a simple calculation tells you that the current annual subsidy to fossil fuel interests is about a trillion dollars, so we’re a long way from a rational economy. Putting solar panels on suburban roof tops—however useful—is not commensurate with the problem. Furthermore, as the following chart indicates, we rich countries need to get used to the idea of helping the others in a big way or the job will never get done!
As the latest IPCC report (2/28/2022) put it: “Rich governments must quickly and dramatically scale up the level of adaptation finance for low-income countries.”
Or else—there’s no getting around it—we’ll end up stuck with geoengineering and hope for the best. Simply stated (for those who haven’t heard) geoengineering delays global warming by filling the atmosphere with chemicals that put the whole world in shade. That can stop most (but not all) aspects of climate change, but with many known and unknown risks.
It’s hard to come to a proper judgment of geoengineering. On one hand, it’s exceedingly scary to start messing with the whole world’s atmosphere, but on the other hand we don’t yet have all the technologies we need and we’ve been slow to deploy the ones we do have, so we may well need to be buying time. One can argue that geoengineering reduces the motivation for alternative energy progress, but that work today seems to have its own motivation. So in the end there is nothing immoral about geoengineering, and we may have to use it. But given the risks and the fact that all that extra CO2 has to come out before we can quit, we had better do as little of it as possible. (These systems require regular replenishing, so turning them off isn’t a big issue; getting rid of the extra carbon dioxide is.)
You might wonder at this point why we brought up geoenginerring instead of the much-discussed topic of carbon capture? There’s a good reason. Despite all of the publicity around it, there’s no near-term silver bullet with carbon capture. For the yearly CO2 production in the US we would need huge infrastructure of processing plants full of giant fans—a multi-trillion dollar project using enormous amounts of energy to build and run it. And that’s before you even start to talk about where to put the output. The main reason carbon capture has such prominence is that it plays to the fossil fuel companies’ delaying tactics—if we can get rid of the carbon dioxide later, why worry about creating it now? Carbon capture is a project of energy abundance, AFTER we have somehow managed to survive. Going forward, unburning everything you burn is only sensible in particular application areas (e.g. air travel) where there is nothing else to be done.
Climate change unavoidably means a huge, expensive project—which is why it is important to be clear about what we’re doing. As general principles, conservation for conservation’s sake is wrong, a focus on local issues is wrong, and an exclusive focus on current technology is wrong. What’s right is to recognize that the future requires an electrical infrastructure capable of driving everything and that in the near-term we have to avoid distractions and focus on heavy hitters—worldwide—to keep from going over the edge. Near-term and long-term projects are not necessarily the same. Finally we should realize that despite our current concerns, we are actually moving toward a period of abundant energy with enormous benefits for all—if we can stop fighting over the pieces of a pie that will become much bigger.
As an analogy I remember the early days of voice over IP networks, where the whole focus was how we would ever meet the realtime performance needs of speech. It wasn’t so many years later that those same networks were handling realtime video to hundreds of millions of people worldwide—and voice was an almost invisible blip. That’s the kind of transformation we’re talking about. Limitless clean energy will change the world.
The dangers in Ukraine are enough to make one wonder about the current world order. We’d like to believe that it’s beyond the pale for one country to invade and take over another on the flimsiest of pretexts. Despite some current rhetoric, Crimea was not that: it had been an essential part of the Russian military infrastructure for centuries. Ukraine is different—what does it mean?
Regardless of how the Ukraine affair ends, the change it signifies is enormous. In the wake of the horrors of World War II, the US as remaining unscathed power helped put together a system of rules and organizations aimed at preventing another one. The idea was to prevent economic collapse and to resolve conflicts before they became wars. We got a UN, an IMF, and rules to govern international trade. The result was an extended period of world prosperity. The communist bloc stood outside all of that, but even in the days of the Cold War overt seizures of other countries were avoided.
Over the intervening years much of that liberal economic system remained, even as the world became much more complicated. Standards for permitted behavior lived on. In some sense, the Paris climate agreement was a kind of last hurrah. There was no enforcement mechanism, but the idea was that unanimity would shame the cheaters into compliance.
Trump broke that idea in a way that only an American President could. He asserted that there was no reason to obey any of those (US-initiated) international rules, and he got away with it. Until Trump people cared about WTO trade rules, climate progress, and democracy worldwide. Now essentially all of that is off the table. And the powerlessness behind many international institutions has been laid bare. If Putin decides to invade Ukraine, we’re in a world where the only consequences are the ones we manufacture for the event. The UN is manifestly irrelevant. Shaming has no force. There are no rules, and your friends can cover for you. It’s just the way things are. Military threats can be the first not the last of options.
This is a problem generally and for us in particular. Under Trump we developed adversarial relationships with just about everyone, with the view that they were all against us, and we had to show who’s boss. That limits our power. Most serious is what happened with China. Xi may be a megalomaniac and an autocrat, but we empowered Chinese hardliners and contributed to his nationalistic program by delivering threats echoing the imperialist past. When Trump said he would destroy the Chinese economy they took it seriously. The newly-revived alliance with Russia—a thorn in our side for Ukraine—was at least in part our own doing.
We have replaced our successful efforts for peace and stability with a new world view where we need no one, and any constraint on our ability to act is unacceptable. It’s easy to say (and many do say) so much the better. Every country needs to stand up for itself, and all of that international stuff just gets in the way. That’s an appealing slogan. It wasn’t just Trump’s line; it was behind Brexit and all the populist movements of the both the left and the right. However we’re not the only ones playing that game. That “freedom” is a freedom for any country to do anything, and the Ukraine affair is an early indicator of where that goes. We seem to have forgotten World War II and the Depression, and that’s just for starters.
Our own history gives an excellent example of what happens. That ocurred after the American Revolution, under the so-called Articles of Confederation. It took only a few years for the American states that had fought the British together to be at each other’s throats, torpedoing economic progress for everyone. Things got so bad that the states had no choice but to give up power to a new Constitution and a national government. In Europe there were centuries of wars that only ended when cooperation became manditory in the post World War II recovery.
It’s a fact that the liberal economic system has gotten a bad name in this country—”Bill Clinton let China in the WTO and there was nothing we could do about the Chinese assault on American jobs”—but that universally-repeated story is false. (It’s one example of what you might call bipartisan revisionist history—the left and right united against the center!) The main issue raised with China’s behavior has always been currency manipulation, which was in no way permitted under WTO rules. And as the following job loss chart makes clear, the loss of American jobs was 100% a phenomenon of the George W. Bush presidency:
That’s no accident. The radical neocons had us preoccupied with fighting a $3T war, and the same deregulation mania that produced the 2008 crash had us actually encouraging outsourcing abroad. For the business-friendly Bush people cheap off shore labor was good. All subsequent efforts to help the people hurt by that process were blocked by Congressional Republicans bent on sowing dissatisfaction ahead of the 2016 election. The liberal order conspiracy is a convenent fiction for both the right (to cover its tracks) and the left (to attack the center).
If we’re going to avoid economic and even potentially military disaster, we’ve got to get past the electoral propaganda and understand what we’ve done right and wrong. In particular we’ve got to wean ourselves from the siren-call of nationalism. We’re not going to “win” the future, but we can certainly all lose it. The real challenge is getting internationalism right, so that everyone has a stake in the action. We built unprecedented peace and prosperity after World War II. That job needs to be done again before we give it all up—in a way that has happened many times before. Both prosperity and peace are in question.
One important lesson of history is that economics precedes politics. The EU, for all its imperfections, is a vast improvement over centuries of status quo. What got that going was a step-by-step economic union, long before there was anything political on the table. In that sense, strangely enough, you can argue that the WTO is more important than the UN. Getting the WTO back on track is going to take considerable doing, but it has to happen. And perhaps climate change can yield an appropriate model.
Climate change is an unusual situation in that practically every country has veto power of the result. We all share the same atmosphere, and the CO2 concentration is only controlled when everyone cooperates. So the solution has to get a buy-in from everyone, rich countries and poor. In fact it can only work when rich countries recognize that—like it or not—they’re going to have to help the poor ones. Everyone will have to get used to the idea of an international project where the focus is less on who gets the best deal than on whether it delivers the necessary benefit for all.
A functioning WTO is a similar balancing act. As starting point there is one basic reality to be acknowledged: self-sufficiency is not a desirable or realizable goal even for large countries. Despite all the discussion of the evil Chinese, we would be vastly worse off if they just went away. Just in general, we are not always going to be the best at making everything, and our own industry will be crippled if we can’t build on what’s best.
Furthermore discussions of self-sufficiency tend to include a strong dose of the always-dangerous delusion “my people aren’t like that.” In fact domestic manufacture does not guarantee availability, quality, price, or appropriate technology. The single worst problem during the first stage of the Covid crisis was a lack of testing equipment—because the American manufacturer with a CDC contract to produce the tests had decided they could make more money doing something else. Similarly, self-sufficiency can do little to guarantee the well-being of the national workforce, as there is no substitute for government dealing with all relevant labor issues. Trade is more like climate change than it seems—it’s something we’ve got to make work.
The balancing act is in the many factors that have to be taken into account for fair trade: labor conditions, environmental rules, government involvement, and so forth. Those are both impediments and opportunities—they make the negotiations harder, but they are also leverage opportunities for a better world. Elizabeth Warren in her Presidential campaign made a long list of items she wanted to make as preconditions for trade with the US. Her standards were very high—it was pointed out at the time that no country met them—but her list was an indication of potential opportunities. Also, it is important that these rules should apply to everyone—including to us.
What this comes down to is that globalization, despite the rhetoric, is only anti-labor if we make it so—which is precisely what happened under George Bush. Instead of using it to establish worldwide labor standards, we used it deliberately to undermine workers everywhere. In other words thus far we’ve had globalization exclusively for the rich. If we don’t step in to control it, it will stay that way—populist movements or not. And if we don’t start learning how to create a world order for the benefit of humanity, no amount of national chest-beating will save us.
The Ukraine affair is dangerous in its own right, but even more dangerous as a symbol of a world out of control. What the world needs now is neither uncontrolled chaos nor world government, but a set of mutually-agreed rules to forestall a fight to the bottom. As with climate change, there is no way out other than to acknowledge we are now one interconnected world, and we will all either stand or fall together.
There is nothing wrong in celebrating Elon Musk, who has achieved much of real value. There are even good messages to be drawn from those achievements. However there are also plenty of wrong conclusions that can and are being drawn about Musk. So it’s worth thinking about what’s wrong and what’s right.
Wrong message #1: We don’t need government involvement in the economy; the private sector can be counted on to get the job done.
Fact: Tesla was started with Obama-era seed money and Obama-era price subsidies for electric car sales. SpaceX got going with NASA contracts. Without government involvement we would have had neither. The major US automakers had to be dragged kicking and screaming to electric cars. The private sector is not good at supporting novel projects without a near-term payoff.
Wrong message #2: We can count on smart people like Musk to tell us what to do.
Fact: High achievers have their limitations and blinders just like everyone else. Musk’s statement that we don’t need “Build Back Better” because he himself never needed help from anyone is actually typical blindness of the class. I worked for a successful startup where the four principals fell out with each other almost immediately after we went public—because each was sure he was the reason for success!
Wrong message #3: In the end we can always count on American ingenuity.
Fact: Musk is one more example of the importance of immigrants and children of immigrants to the American economy. Same for Apple and Google.
Wrong message #4: A few big heroes are what makes for national success.
Fact: Musk was important as a technical visionary. No one else recognized that the technological basis existed for an electric car company. However he also fostered an environment where he could attract the best and brightest to his companies. The achievements of Tesla and Space X have that broader basis.
What’s more, the Person of the Year could equally well have been given to the many scientists and technologists who gave us the Covid vaccines. There are more than a few single heroes in our midst. Big achievements reflect individual contributions of many able people.
I’ll limit the right messages to two:
Right message #1: Technology matters, and things really can change
Both Tesla and SpaceX are fundamentally new businesses, rethought from the bottom up. In a very few years they have changed the US economy.
As contrast, a recent book about the Boeing 737 MAX shows what happens a company loses track of the reality of its business in a blind race for profit.
Right message #2: At all levels individuals can make a difference and should be rewarded accordingly
This is particularly important in technology-driven companies, but not only there. As noted, that was important not just for Musk himself but also within Musk’s companies. For contrast, my contacts at NASA and even JPL have described them as stiflingly bureaucratic. The difference between the SpaceX and the SLS project is undeniable.
Both companies and countries have a tendency to ossify into hierarchical structures that declare themselves to be meritocracies. Equality of opportunity—including opportunity for real success—is necessary both for individuals and for the success of the overall enterprise. For society as a whole, we need both a safety net and true opportunities for individuals to succeed.
That, not the pronouncements of Elon Musk, is what makes for success as a nation.
The Democratic Party owes black people a debt of gratitude for their organized commitment in the last election. Even if that weren’t true, the United States owes black people what it has never delivered—real, functional equality of opportunity. It’s worth restating what never made it into any textbook I ever had—slavery in this country didn’t end in 1863. With Black Laws and then Jim Crow, the substance of slavery in this country persisted well into the twentieth century. It’s no surprise that we live with a pervasive legacy of slavery.
What is owed here is progress—on everything that makes for personal and family prosperity and life satisfaction. A recent NY Times piece does a good job of getting at what that means. However it’s worth recognizing that this objective gets hijacked every day in favor of other more exciting agendas, as examples:
– Anticapitalism. This is a kind of knee-jerk on the left that gets applied to all issues (climate change is another one). Get rid of capitalism, let me and my morally-certified friends run everything, and racism will vanish in an instant. Otherwise there’s not a chance. Somehow the dictatorship of the proletariat (like trickle-down economics) survives in the face of all evidence.
– Violence. It’s amazing how attractive violence is for people who spend their lives far from it. That’s not just for the classic case of British Nazi intellectuals prior to World War II. Two very good books The Good Lord Bird and The Underground Railway end with ringing endorsements of violence as a necessary way to get things done. In context that’s not really a call to action, but it indicates a willingness to forgive violence as a tactic—a significant mistake supported only by rewriting history.
There’s not going to be a revolution on the left in this country, so we’ve got to work with the flawed political process we’ve got. Violence hardens opposition—end of story. If you want to get things done, there’s no greater mistake than believing you have powers you don’t have.
– Cultural superiority. This has many manifestations. The good guys are immune from racism, create better artistic productions, are more moral and humane to each other, etc.
If you get past all of that, objectives here are not so different from what we owe to everyone else—a fair chance to succeed and a viable safety net. What it takes to get there must be adapted to the history of anti-black racism, but adaptation is the rule for every other group also. Our task as a society is to get the job done for everyone.
It is hijacking the race issue to
– Use it as a justification for anti-democratic behavior.
– Use it as a reason to justify any departure from the rule of law. We are not doing anyone a favor by asking for an understanding of mob violence.
– Engage in ridiculous exercises of cultural superiority. That includes, in particular, anti-racism competitions. I’d even say everybody is racist; the important question is who is doing damage and how to stop it. Anti-racism crusades may feel good, but they are not progress. And if they lose elections they are nothing more than destructive vanity.
Even if you think this is an oversimplification, you have to admit that the objectives here–a fair chance to succeed and a viable safety net–are worth pursuing. You’d think they would be universally popular. After all, as many have pointed out, essentially any social program has more white than black beneficiaries. So why aren’t they universally popular? The reason goes all the way back to What’s The Matter with Kansas. Republicans have been convincing people for decades that all those measures are not for them. It’s just giving the country away to the shiftless blacks. People in Hillbilly Elegy and Strangers in their own Land are astonished that any of their own would waste time applying for such benefits.
Why are Republicans so successful? BECAUSE WE KEEP HELPING THEM. With all the discussion of white racists who just have to get used to giving up the advantages of white privilege (and deservedly take the hit), what else would you expect them to believe? We’re not spending our time saying we’re committed to what it takes to achieve equality of opportunity for everyone—with all the benefits that entails. Too often we’re playing the Republicans’ game.
You don’t have to agree with everything here, but one thing is indubitably true. Fighting racism is about results, not morality contests. It is about jobs, safety, and education for your kids. It is a pragmatic issue. Anything that doesn’t produce results is hijacking, regardless of how good it feels.
With China it’s unsettling enough that for the first time since the end of World War II our worldwide hegemony is under challenge. However that’s just the beginning. As we’ll see, that change is coupled with technological and economic factors that intensify both risks and upsides.
We need first to be clear that the challenge of China is real. We have had other challenges in the past, most notably from the USSR, but none have had the economic might to back them up. This time we’re talking about an economy that by some measures is already larger than ours. Those others look puny in retrospect, although the Russian collapse is dangerously seductive. According to Bob Woodward, the Trump people were convinced that China was just like Russia, and the trade wars would cause a complete collapse in the same way. When Xi said that the US is the barrier to Chinese national success, he was just restating Trump’s declaration that he would destroy the Chinese economy. That of course didn’t happen, and the result was a policy that ultimately produced nothing. Whether we like it or not, we simply don’t have that power. The Chinese are not going away as an economic, technological, and military force.
At the same time it is equally important not to get hysterical about Chinese competition. It’s strange how we periodically become obsessed with the idea that some centrally-organized economic system is going to leapfrog us by running things in a way that we can’t. That happened in the fifties with the USSR (hard to imagine now) and in the eighties with Japan. In reality the US economy succeeded by reinventing itself many times over, in a way that others did not. For China, it is historical fact that state-run enterprises have been corrupt disasters, and the current economic miracle got its impetus from an unintended burst of local free enterprise. Xi’s consolidation of control is no miracle cure. China is a competitor with strengths and weaknesses. As one recent paper put it, China is not ten feet tall.
If we play to our own strengths, the worry is not that we’re going to be outcompeted by the Chinese (or undermined by Chinese stealing our secrets). It’s that we won’t succeed in creating a workable framework for international competition, and we’ll all lose.
We begin with the most basic of risks. We’ve now had many years of Pax Americana, and people forget that history shows that world-power peace is the exception—not the rule.
The reason we’ve had peace is not human progress, international institutions, or even the rise of democracy. It’s the threat of mutually-assured destruction. And however much we may want to believe that all-out war is obsolete, that’s in fact a technology issue.
We can be specific. Much has been written recently about hypersonic missiles, that would fly low at many times the speed of sound and be virtually impossible to detect by radar. That sounds like a whole new arms race, but there’s actually no point to it so long as the balance of terror remains intact. That we’re talking about it at all means we’re not so sure. Reagan’s old “star wars” anti-missile shield was never more than an electoral fantasy, but now there’s plenty of current technology that’s relevant: networks of satellites for detection, AI for decision-making, precision targeting for lasers. China already has a nominally-defensive, satellite-linked system that enables ballistic missiles to be used against moving targets (e.g. US carriers in the South China Sea).
A missile shield would be enormously destabilizing—North Korea could defeat the US in minutes. (It’s interesting that as long as the system was going to be ours, we never thought seriously about what it meant!) Who knows when or if something similar could be real. However the world has been surprised many times by revolutionary changes in the technology of war (Vikings, Mongols, gunpowder, nuclear weapons).
We can’t assume peace; we can’t dictate the world order; we can’t wish away the image of a world trapped in a ruinous and deadly competition for dominance. An encouraging fact is that everyone is much better off not living in such a world. However for now we’ve chosen to divide the world into no-holds-barred competing camps. Avoiding that division requires an act of creation—establishing a workable framework for cooperation and competition. There are many examples of countries that failed such a challenge with disastrous consequences. That’s our challenge here.
The first step to progress is to recognize that just as the risks today are higher than one might think, the potential rewards are also. There’s actually quite a lot to say about the upside, although in the last decades it has been hard to see.
Why is that? To repeat the obvious, the working classes in the West have been hit by two simultaneous body blows: globalization and technology. The result was dramatic, as shown by the following chart:
Globalization has been going on forever, but China’s sudden economic development produced a major hit. For technology the effects have been not only dramatic but accelerating. Thomas Philippon’s recent book has a chart comparing highest valuation companies over the past six decades. For the decade of the 1970’s the five highest valuation companies collectively were responsible for 2.4% of total employment. For the decade of the 2010 the corresponding figure was down to .4%. The bedrock upwardly-mobile manufacturing jobs are going away, as we continue toward a world where highly-skilled product development is the issue, and production is not. That’s true for obvious software enterprises like Facebook, but also for pharmaceuticals, integrated circuits, and many other areas. And it’s getting worse. AI puts a whole new class of jobs at risk, and electric cars (for example) will be much simpler in both manufacturing and maintenance.
Thus far it has been convenient to blame everything on China, with the consequence that both political parties are promising to bring back the good old days once we stare down the evil Chinese. (On the left a 2018 paper by Susan Houseman is cited everywhere to support this position, though it’s actually about weakness in the US manufacturing sector!) That mindset is dangerous on two grounds: it’s a kind of scapegoating that gets in the way of rational action, and it obscures other serious problems that need to be addressed. To get past that we need to discuss national prosperity and population welfare as separate issues.
For prosperity the key point is that China has actually turned a corner in its effect on the rest of the world. Although in aggregate terms China remains a very poor country (number 108 in per capita income, far below Mexico for example), the country is so large that its new middle class now buys enough to be a positive driver for the rest of the world economy. Even with the current market access restrictions, China is the largest national market for Mercedes-Benz and a major market for film industries from everywhere. The balance of payments deficit was reduced by half under Obama. For the EU, more export-oriented than we are, the effect is even more pronounced. (Intellectual property theft was also down under Obama.)
What this means is that, as opposed to the situation in the past, China has the potential for transforming itself from a drain on the world economy—producing more than it consumes—to the opposite. Raising the living standards for a billion people is an enterprise with potentially many benefits for everyone concerned. Nothing says that’s going to happen, but the difference is real. The current situation is no longer dictated by the poverty of China, it is instead an expression of the relationship with China as it stands. How do we make things better? Well, if we want China to play by the rules, we need better rules. As for motivation, growth in the West means growth for them (and, whether we like it or not, success for the ruling party).
The precondition for progress is establishing appropriate conditions for trade, that is to say a notion of fair trade which is comprehensive and up-to-date. The comprehensive part means we need to cover many items that are not currently included, including labor conditions, environmental issues, international standards for taxation. There is the potential for trade policy to become a vehicle for raising living standards worldwide. Stated simply, we’ve had globalization for the rich; we need globalization for everyone else.
There are of course no guarantees. Some elements, such as environmental issues, may be clear areas of common interest. Labor conditions will be more difficult. Details of market access will need to be worked out. It’s important to have everything on the table. It is particularly important that these are not rules imposed by us on others but norms of behavior for everyone in a common enterprise.
That difference is important in any kind of negotiation, but it is of particular importance for China. We don’t talk much about it, but China experienced some of the worst of Western imperialism extending well into the 20th century. That shared history makes Xi’s nationalism easy. If we want to get what we want, the last thing we should be doing is pretending it’s still true.
What Trade Rules Won’t Fix
Just as China wasn’t responsible for all problems, fixing China (even in the best case) won’t fix everything. Two points in particular should be emphasized. First, the kind of national prosperity we’ve been discussing thus far says little about personal welfare. People are still going to lose jobs both from ever-accelerating technology changes as well as remaining international competition—regardless of fairness. We’ll still be stuck with the prevailing inequality in society. We’ll still have all of the dislocations that will result from the economic transformations with climate change. Those are our domestic problems to solve.
Blaming China has made it possible to ignore that reality. Until recently in fact the prevailing ideology was that there is no additional problem of population welfare—the private sector would do it all. So for loss of good jobs the only issue was globalization, and the only means to address it were tariffs and tax cuts. Four years of a deficit-funded bubble with huge tax cuts to business did almost nothing for real wages or upward mobility.
Currently there are outlines of a solution. Particularly with the transitions required by climate change, there is no shortage of work. With the increases in corporate profit margins and high-end incomes there is no shortage of money—but workable taxation is a big issue. The public sector needs to put all that together: to see that the necessary work gets done and the population is supported with a national infrastructure that includes education at all levels, healthcare, so forth. It’s a work in progress.
The second point to make is that we have tacitly assumed we will maintain our national competitiveness. While we can see what has been successful in the past, there is no guarantee it will continue in the future. That isn’t theory. We just spent four years fighting science, demonizing foreigners, and favoring existing companies over new entrants. All of that hurts. It’s our job to play to our strengths.
Parallels with Climate Change
With that we return to the first issue—national prosperity. For that we want to stress parallels with what’s happening for climate change.
With climate change we’re also presented with a very strong common interest, but a non-trivial task in breaking that down according to individual national interests. As a country we haven’t thought much about that, since the national dialog has been primarily about getting our own act together, with the assumption that all the others just have to do their jobs too. However the reality of the situation is that we in the US have twice the per capita CO2 production of any other major emitter in the world,
and we in the West are almost 100% responsible for the level of CO2 currently in the atmosphere. The vast portion of humanity is going to have to sacrifice for our benefit, and it’s non-trivial to define acceptable justice.
Nonetheless the Paris agreement shows that with good will it’s possible to make progress. It will require continuing work, with more commitment from the developed world, and also with a mechanism for follow-through on commitments (in the absence of any such system today). But thus far the strength of common interest seems motivation enough to keep it going. It’s worth noting that the Montreal Protocol to ban CFC’s (and preserve the Ozone Layer)—one of the most successful efforts at international cooperation ever—also proceeded as a series of successively more demanding steps:
So it’s no surprise—and no cause for panic—that the current Paris goals don’t yet get as far as we need to go.
The parallel with China is precise. To keep the world economy sane and growing, everyone needs a stake in the game. In practice it needs to be negotiated between the West and China with at least some account taken of the interests of the rest of the world. But the issue is less a resolution of differing national interests than a recognition of the magnitude of common interest. One can even argue that the climate discussions are a necessary prelude to the broader economic discussions that need to take place.
The WTO seems the appropriate vehicle for negotiations, although its capabilities need to be extended to deal with the broader definition of fair trade. Before Trump’s election all parties expected such discussions would begin—including of China’s continuing special status as a developing country. Instead we got a repudiation of all international rules, in favor of an imagined omnipotent USA. We’re now going back to the game with the doubled leverage of allies beside us, but with an adversary who views us (particularly after January 6) as weaker and less reliable. What’s more we’ve spent four years strengthening the militant anti-western side of the Chinese Communist Party. Certainly there’s a job to do.
It may seem strange to put such emphasis on the WTO since “Bill Clinton let China in the WTO and there was nothing we could do about the Chinese assault on American jobs.” That truism is actually an example (among others) of what you might call bipartisan revisionist history (the left and right united against the center). In fact the main issue raised with China’s behavior has always been currency manipulation, which was in no way permitted under WTO rules. And as the job loss chart (from earlier) makes clear, the loss of American jobs was a phenomenon of the George W. Bush presidency—when we were too busy with the Iraq war and the financial crisis to press our case about anything else. The WTO is what we make of it; the vast majority of US WTO cases have in fact succeeded. For now it’s the best game in town.
Issues for Today
As a last topic, we want to be clear that we are in no way minimizing the seriousness of the immediate issues that divide the US and China. One short list makes that clear:
– Hong Kong
– Islands in the South China Sea
– Regime-incited nationalism
The first point deserves special comment, because it shows how high the stakes can be. On one side it is a matter of Chinese national pride, instilled by state propaganda for every school child. On the other it is not only a matter of US national commitment, it’s also critically strategic. As one example, Taiwan is the home of TSMC—the worldwide leader in IC manufacturing technology. Every new iPhone has an TSMC processor. (This example also shows we can’t solve global supply chain issues by just assuming we’ll bring it all home!)
Other articles have talked about scenarios for de-escalating this complicated situation. We’re not going to go through those here, but it is nonetheless worth saying a few words about how each of the issues fits with the strategies we’ve just discussed.
The Uighurs and Hong Kong are issues that the Chinese view as internal matters. Outside of China we can attempt to exert pressure by economic threats, but we’re in no position to change that point of view. Four years’ worth of dictates have instead made it worse–a matter of sovereignty versus capitulation. Ideally by bringing China into a broader realm of international standards for behavior, we can attempt to make both—and particularly the Uighurs—a different class of issue: what it means to belong to the international order. Hong Kong is the harder issue, because the threat to the national control is bigger. However it’s easier to think about compromise once the sovereignty isn’t the main story.
The South China Sea is a national security question. More than two-thirds of Chinese trade comes via the South China Sea. China, like us, wants complete control of its immediate strategic environment. We after all have the Monroe Doctrine. Thus far we’ve taken the worst possible approach, asserting US control of the seas for any purpose we choose. That’s going to be hard to walk back, but the only way to do it is by making freedom of the seas a matter outside of national whim, perhaps linked to some kind of regional agreement. It won’t be easy, but we can at least dial down some of the immediate pressure.
Regime-incited nationalism is the usual face of fascism. We heighten it by continuing to act as an imperialist power—asserting that it is our decision whether to continue to allow Chinese economic development. We have limited ability to change the issue, as it is a tool the regime uses to maintain its power. However, the more contacts there are and the less rabid our own vocabulary, the better the chance to cool it. It’s worth noting that in the Nazi era, most Germans justified Nazi aggression by a belief that Germany had been purposely shoved aside.
Finally we return to Taiwan. The only thing you can say is that it’s clear how much the issue means for both sides. If cooperation is necessary for continued prosperity, then both sides need to find a way to save face. That’s what we were doing for decades. Trump and Pompeo were part of the change, but it was probably happening on Chinese side anyway. The only way out is to strengthen the motivation for sanity. For that, common interest (with a united West) is always better than military threats. Even today, the impediment to invasion is more economic than military. International institutions strengthen both the carrot and the stick—you’re giving up more and making retaliation more comprehensive and certain.
All that being said, we end by again emphasizing the parallel with climate change. Climate change is a pending catastrophe that is forcing the world to come together in a more closely-coordinated way than ever before. As with climate change, the China-US relationship constitutes a critical issue that can only be resolved by strengthening international frameworks for both cooperation and competition. The world can be a better place, or we’ll all face the consequences.