State of the Union

Even If Hobby Lobby Wins, We Lose

Today’s Supreme Court oral argument, in the case of Hobby Lobby Stores, Inc. and Conestoga Wood Specialties Corp. v. Sebelius, is correctly understood to pit defenders of religious liberty against those who believe that the government has a compelling interest in requiring employers to provide contraception, abortifacients, and sterilization services through their healthcare policies. In significant part, the case hinges on whether the companies—privately held businesses whose owners are unquestionably deeply religious individuals, and who run their businesses informed by those views—can be considered “persons” under the Religious Freedom Restoration Act. I, like many Christians, hope their case prevails.

But while the businesses are often characterized as “family-owned businesses,” each is a national business with hundreds of employees and multi-state operations. Hobby Lobby is by far the larger chain, with 640 stores that employs 28,000 individuals. While it has religiously-themed goods, plays Christian music, and closes on Sundays, in most respects it is identifiably a “big-box” store that can usually be found in major retail corridors, surrounded by acres of concrete and provisioned largely by merchandise made in China. While it is a “family-owned” business, it is hardly a mom-and-pop shop.

The dominant narrative—religious liberty against state-mandated contraception—altogether ignores the economic nature of the case, and the deeper connections between the economy in which Hobby Lobby successfully and eagerly engages and a society that embraces contraception, abortion, sterilization, and, altogether, infertility. Largely ignored is the fact Hobby Lobby is a significant player in a global economy that has separated markets from morality. Even as it is a Christian-themed brand, it operates in a decisively “secular” economic world. It is almost wholly disembedded from any particular community; its model, like that of all major box stores, is to benefit from economies of scale through standardization and aggressive price-cutting, relying on cheap overseas producers and retail settings that are devoid of any particular cultural or local distinction. The setting where one finds Hobby Lobby near us—on Grape Road in nearby Mishawaka—is about as profane imaginable a place on earth, accessible by six lanes of concrete roads where there is a heavy concentration of large chain retailers, where it anchors a sensory-deadening row of retail store fronts that border acres of cracked and barren pavement, awash in discarded plastic bags and crumpled fast food wrappers. On the rare occasion that I enter the store, even amid the Chinese mass-produced crosses and the piped in Christian music, under the endless florescent lighting and displays carefully-managed to optimize impulse buying, I am hardly moved to a state of piety, prayer, and thanksgiving. I am, like everyone else, looking for the least chintzy item at the cheapest price.

Hobby Lobby—like every chain store of its kind—participates in an economy that is no longer “religious” or even “moral.” That is, it participates in an economy that arose based on the rejection of the subordination of markets embedded within, and subject to, social and moral structures. This “Great Transformation” was detailed and described with great acuity by Karl Polanyi in his masterful 1944 book of that title. He described a sea change of economic practice that took place especially beginning in the 19th-century, but whose theoretical groundwork had been laid already in the 17th- and 18th-centuries by thinkers like Thomas Hobbes, John Locke, and Adam Smith. As he succinctly described this “transformation,” previous economic arrangements in which markets were “embedded” within moral and social structures, practices, and customs were replaced by ones in which markets were liberated from those contexts, and shorn of controlling moral and religious norms and ends. “Ultimately that is why the control of the economic system by the market is of overwhelming consequence to the whole organization of society: it means no less than the running of society as an adjunct to the market. Instead of economy being embedded in social relations, social relations are embedded in the economic system.” Read More…

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Taiwan’s Protests Could Mean Trouble With China

Taiwan, the semi-autonomous nation not known for making waves, is erupting over a trade pact with China. Last week, hundreds of student protesters occupied the Legislative Yuan, Taiwan’s unicameral legislative body, demonstrating against the Guomindang’s (KMT) unilateral passage of a service trade agreement signed last year. According to CNN, protesters successfully blocked riot police from the Legislative Yuan with chairs, and have been seated both in and outside the building, singing, chanting, and holding up signs. Police have since used force to clear the Legislative Yuan, with the prime minister saying that the students were “paralyz[ing] our administrative workings,” according to a New York Times report yesterday.

The pact’s passage breaks the KMT’s promise to collaborate with the Democratic Progressive Party (DPP), staving off an inevitable conflict with the opposition over the pact. The DPP’s longtime stance is rooted in advocating full Taiwanese independence and dissolving ties with China, with much of its energy expended attacking the KMT for colluding with China against local Taiwanese interests. One of the DPP party slogans is, “sell Taiwan”, implying that the KMT is a cowardly puppet government with no interest in advocating for Taiwanese independence.

The protests come at the tail of a long decline in popular opinion of Taiwanese president Ma Ying-Jeou, whose conciliatory stance with China has incited a slow-burning resentment among his political opponents, and has even caused those within his own party to distance themselves from him. Ma’s approval ratings have dropped close to the level of disgraced former DPP prime minister Chen Sui-bian, who was convicted of money laundering in 2009.

One possible outcome of these protests, especially if the trade pact is derailed, is that formal relations across the strait could begin to deteriorate. Damon Linker in The Week speculates that if China were to take Taiwan, it would herald the end of American expansionism in the region. He argues that in spite of written agreements to help Taiwan defend itself, the United States would be unlikely to join in such a war. American neutrality in a hegemon-underdog dispute would bespeak our weakening global image as the world’s national guard, in Linker’s view. While logically sound, this perspective overlooks one important aspect of U.S.-China-Taiwan relations: The United States’s ability to influence Taiwanese relations with China or in the international community was never very strong to begin with. Read More…

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How to Confront Chinese Power Peacefully

As America grew in the 1800s from a republic of a few millions, whose frontier stopped at the Mississippi, into a world power, there were constant collisions with the world’s greatest empire.

In 1812, we declared war on Britain, tried to invade Canada, and got our Capitol burned. In 1818, Andrew Jackson, on an expedition into Spanish Florida to put down renegade Indians harassing Georgia, hanged two British subjects he had captured, creating a firestorm in Britain.

In 1838, we came close to war over Canada’s border with Maine; in 1846, over Canada’s border with the Oregon Territory.

After the Civil War, Fenians conducted forays into Canada to start a U.S.-British battle that might bring Ireland’s independence.

In 1895, we clashed over the border between Venezuela and British Guiana.

War was avoided on each occasion, save 1812. Yet all carried the possibility of military conflict between the world’s rising power and its reigning power. Observing the pugnacity of 21st-century China, there appear to be parallels with the aggressiveness of 19th-century America.

China is now quarreling with India over borders. Beijing claims as her national territory the entire South and East China seas and all the islands, reefs and resources therein, dismissing the claims of half a dozen neighbors.

Beijing has bullied Japan and the Philippines and told the U.S. Navy to stay out of the Yellow Sea and Taiwan Strait.

In dealing with America, China has begun to exhibit an attitude that is at times contemptuous.

Here is a partial list of the targets of Chinese cyber-espionage:

The Wall Street Journal. The New York Times. Bloomberg. Google. Yahoo. Dow Chemical. Lockheed Martin. Northrop Grumman. Secretary of State Hillary Clinton. Chairman of the Joint Chiefs Adm. Mike Mullen. Los Alamos and Oak Ridge nuclear-weapons labs. The classified avionics of the F-35 fighter jet. The U.S. power grid.

U.S. computers are being hacked and secrets thieved, as Beijing steals the technology of our companies and manipulates her currency to minimize imports from the U.S.A. and maximize exports to the U.S.A.

“The international community cannot tolerate such activity from any country,” says National Security Adviser Tom Donilon.

Yet the “international community” has been tolerating this activity for years.

No one wants a war with China, and provocative though it is, China’s conduct does not justify a war that would be a calamity for both nations. But China’s behavior demands a reappraisal of our China policy over the past 20 years.

Consider what we have done for China. We granted her Most Favored Nation trade status, brought her into the World Trade Organization, threw open the world’s largest market to Chinese goods, encouraged U.S. companies to site plants there and allowed China to run trillions of dollars in trade surpluses at our expense.

In 2012, China’s trade surplus with the United States was over $300 billion, largest in history between any two nations.

What has China done with the wealth accumulated from those trade surpluses with the United States? How has she shown her gratitude?

She has used that wealth to lock up resources in Third World countries, build a world-class military, confront America’s friends in neighboring seas, engage in cyber-espionage, and thieve our national and corporate secrets. Is this the behavior of friends or partners?

And if the Chinese airily dismiss our protests, who can blame them?

For years they have engaged in cyber-espionage. They know we know it, and they have seen us back off calling them out. For years we have threatened to charge them with currency manipulation, and for years we have backed off.

If they have concluded we are more fearful of a confrontation than they, are they wrong? Other than fear or cowardice, what other explanation is there for our failure to stand up to China, when its behavior has been so egregious and insulting?

Does America fear facing down China because a political and economic collision with Beijing would entail an admission by the United States that our vision of a world of democratic nations all engaged in peaceful free trade under a rules-based regime was a willful act of self-delusion?

What China is about is as old as the history of man. She is a rising ethno-national state doing what such powers have always done: put their own interests ahead of all others, suppress ethnic minorities like Tibetans and Uighurs, and crush religious dissenters like Christians and Falun Gong.

There is no New World Order. Never was. The old demons—chauvinism and ethno-nationalism—are not ancient history. They are not extinct. They are with us forever. And America is not going to be able to deny reality much longer or put off facing up to what China is all about.

Given her current size and disposition, one day soon we are going to have to stop feeding the tiger. And start sanctioning it.

Patrick J. Buchanan is the author of “Suicide of a Superpower: Will America Survive to 2025?” Copyright 2013 Creators.com.

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We Need a Tariff, Not a Corporate Income Tax

Sen. Carl Levin was aghast.

Before his committee sat, unapologetic and uncontrite, Apple CEO Tim Cook, whose company had paid no U.S. corporate income taxes on the $74 billion it had earned abroad in recent years.

“Apple has sought the Holy Grail of tax avoidance,” said Levin. “Apple has exploited an absurdity.”

Actually, Apple had done nothing wrong, except hire some crack accountants who chose Ireland’s County Cork as the headquarters of their international division. Thus Apple paid on profits earned outside the U.S.A. nothing but a 2 percent tax imposed by the Irish government.

Far from being condemned, Apple’s CPAs ought to be inducted into the Accountants Hall of Fame.

It is no more immoral for Apple to move its headquarters for foreign sales to Ireland than for Big Apple residents to move to Florida to escape the 12 percent combined state and city income tax.

Among the reasons the Sun Belt is booming at the expense of the Rust Belt is not just the weather. Southern states strive to keep income and estate taxes low or nonexistent. They want companies and families to relocate and live there, and to spend their money there.

The problem here is not with Apple, it is with Sen. Levin & Co. Read More…

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Tragedy in the Factories, and The New York Times

The furniture industry in North Carolina is doing better than the textile industry, but that’s a little like saying the African elephant is doing better than the mastodon. Between the advent of mass Chinese imports and bookcases of particleboard you “assemble” at home, the market for domestically produced quality furniture has taken a beating, and the communities that market once supported have not been spared the blows. A New York Times report over the weekend pulled back the curtain a bit on the rougher side of life in the Tarheel State.

The Times story is ostensibly about the Occupational Safety and Health Administration’s failures to prioritize health concerns in its regulation and enforcement, but the thorough reporting and balanced storytelling makes the story human, with real, conflicting pressures. It centers around Royale Comfort Seating, foam cushion supplier to many of the top furniture brands. It also centers around Sheri Farley, a single mother, who, “For about five years…stood alongside about a dozen other workers, spray gun in hand, gluing together foam cushions for chairs and couches sold under brand names…” The traditional glue for this purpose in the 1980s was eliminated because of effects related to ozone depletion, and the glue after that earned the sobriquet “methyl ethyl bad stuff” by killing more than 30 workers a year. The glue Sheri Farley and her coworkers were immersed in, nPB, is a powerful neurotoxin that raised health concerns as soon as it was introduced to the market. It appears to have been seen as the least bad option.

Read More…

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Qz.com: Business News for the Secessionist Rich

In his widely read essay for TAC, Mike Lofgren, author of The Party is Over, recounted a conversation he had back in 1993:

I was having lunch with a staffer for one of the rare Republican congressmen who opposed the policy of so-called free trade. To this day, I remember something my colleague said: “The rich elites of this country have far more in common with their counterparts in London, Paris, and Tokyo than with their fellow American citizens.”

That was only the beginning of the period when the realities of outsourced manufacturing, financialization of the economy, and growing income disparity started to seep into the public consciousness, so at the time it seemed like a striking and novel statement.

The just-launched digital business news platform Quartz is targeted precisely at this globally mobile set whose existence, 20 years removed from NAFTA, now seems old-hat.

David Carr has a nice write-up about the new Atlantic Media-owned publication in today’s New York Times. He explains:

Quartz is the company’s effort to take advantage of a changed environment, not just in publishing, but in the world at large. The editorial product is aimed at the front half of airplanes that crisscross from Zurich to São Paulo to Singapore, serving executives who are increasingly having similar conversations no matter where they land. It was built for tablets, conceived as a mobile product for mobile people.

“This is a global audience, one that is growing very rapidly,” [Justin] Smith said. “When you walk through a busy Asian airport, nobody is talking about or thinking about the American economy. The world has gotten much bigger than that.”

Over to you, Mr. Lofgren.

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Democrats Ignore Clinton’s Fingerprints on the Great Crash

Ahead of Bill Clinton’s convention speech Wednesday night, former Bush administration spokesman Ari Fleischer predicted rightly that the former president would conveniently ignore his own role in the Great Crash of 2008 — specifically, his signing into law the repeal of the Depression-era Glass-Steagall firewall between commercial and investment banks. That was progress, I thought.

More typical since the crash have been strained deregulation apologetics like this, from the Competitive Enterprise Institute’s John Berlau:

Clinton was correct to sign Glass-Steagall’s repeal, which benefitted banks of all sizes by allowing them to offer their customers insurance and brokerage services under one financial services roof. And there is little evidence of Glass-Steagall’s repeal playing a role in the mortgage crisis.

As the American Enterprise Institute’s Peter Wallison noted in The Wall Street Journal, “None of the investment banks that have gotten into trouble—Bear, Lehman, Merrill, Goldman or Morgan Stanley — were affiliated with commercial banks.”

True, but incomplete. The repeal of Glass-Steagall was not the proximate cause of the crash, but rather the culmination of a deregulatory trend that, as the Washington Post’s Barry Ritholtz has noted, encouraged banks to merge “into more complex and more leveraged institutions.” The upshot: “These banks, which were customers of nonbank firms such as AIG, Bear Stearns and Lehman Brothers, in turn contributed to these firms bulking up their subprime holdings as well. This turned out to be speculative and dangerous.”

Inequality watchdogs like Timothy Noah claim that the hollowing out of the middle class was briefly interrupted by Clinton’s term. That’s not entirely true, either. Dylan Matthews observes that “the Clinton years saw the top 1 percent and top 0.1 percent pull away from the rest of the country more aggressively than they had before.” Matthews also points to Bureau of Economic Analysis data demonstrating that “trend of finance taking up a greater and greater share of the economy continued apace during the Clinton years.”

All the fixin’s for our current mess were alive and present during the reign of Clinton, Alan Greenspan, and Robert Rubin: financialization; deregulation; and the willy-nilly leap into the word of “global interdependence,” in which the U.S. blithely shed manufacturing jobs and ran increasingly high trade deficits.

Democrats are right to point out that it’s absurd to blame President Obama for the fallout of an economic disaster that was years in making. That disaster was indeed years in the making — and the first year was not 2001.

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Global Financial Capitalism: Not Working

The International Monetary Fund issued a warning that will no doubt send deflation hawk Paul Krugman into a #facepalm. The Washington Post reports:

Europe could suffer a dangerous bout of deflation if regional officials, including those at the European Central Bank, do not move quickly to support the continent’s banks and the wider economy, the IMF  warned Wednesday. Using some of its most ominous language yet, the usually understated IMF called the euro zone “unsustainable in its current form.”

In testimony to Congress last month, Fed Chairman Bernard Bernanke explained how the Eurozone crisis acts “as a drag on our exports” and weighs heavily on U.S. financial institutions. And this week Reuters reported on National Association for Business Economics survey data that suggests “American companies are scaling back plans to hire workers and a rising share of firms feel the European debt crisis is taking a bite out of their sales.”

Meanwhile, at his Foreign Affairs blog, trade deficit watchdog Clyde Prestowitz writes today:

The weaknesses of the whole global system are now becoming excruciatingly apparent. China has been urged by the G-20 and has committed to rebalancing and focusing on domestic consumption led growth. But consumption accounts for only 35 percent of China’s GDP and is not large enough to be an engine of growth in the short term.

Over here we’re conducting a farcical debate in which “rugged individualists” are apparently resettling the Wild West (with no damned federal government handing out land grants or confiscating property on behalf of railroad companies or subsidizing transoceanic cables, of course!).

Sure, guys, another round of tax cuts will fix this.

It’s at once pathetic and deeply frightening.

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On Being “Anti-Capitalist”: Spare Me

In my TAC review of Jonah Goldberg’s The Tyranny of Cliches, I suggested a few lexicological alternatives for the phenomenon that people are describing when they criticize “ideology.” “Apriorism” was one; “absolutism” another.

ra2 studio / Shutterstock.com

Good old-fashioned “tribalism” was a third.

On that score, the apriorists-absolutists-tribalists of the conservative mainstream dutifully insist that any criticism of Bain Capital is tantamount to anti-capitalism, full stop. More broadly, we’re not allowed to have any qualms about the financialization of the American economy or to entertain the possibility that high financiers are not necessarily another species of entrepreneur.

“Obama wants the middle class to do well, but does not see the role that people with risk-taking capital play in building job opportunities for economic advancement at all income levels,” as Don Lambro put in a column about Obama’s “Anti-Capitalism Strategy.”

Sounding oddly hip, Jack and Suzy Welch decry “this movement afoot that hates on business.”

And Rush Limbaugh drops the hammer:

I think it can now be said, without equivocation … that this man hates this country.  … Barack Obama is trying to dismantle, brick by brick, the American dream.

Groan.

Fortunately, there is a constructive conversation happening elsewhere.

There’s the indirect Austrian short-term critique of financialization that implicates central banking — in particular the “persistently easy monetary conditions” that led to the current financial crisis.

Relatedly, there’s John B. Judis’s long-view argument that financialization is a byproduct of the true cause of increasing inequality and anemic growth: the decline of American industry that followed the unraveling of the Bretton Woods system of gold-pegged currencies, bringing us the era of massive trade deficits and relentless downward pressure on wages.

After Bretton Woods was replaced with a system of floating exchange rates, the United States, Europe, and later parts of Asia and Latin America gradually removed controls on the mobility of capital and the value of their currencies. That gave the world’s leading banks and insurance companies, as well as a host of hedge funds like the infamous Long-Term Capital Management, new ways to make money.

Judis’s recommendation is for the U.S. to get “tough with its trading partners” — which Mitt Romney promises to do if he’s elected — as well as subsidize industrial “innovation and growth” — which Romney and co. dismiss as so much crony capitalism.

What the Austrians and left-liberals like Judis have in common, it seems to me, is a recognition that the U.S. economy was fundamentally unsound long before anyone had heard of Barack Obama — that the Reagan-Clinton-Greenspan boom (if you want to think of it continuously) was built on an unsustainable model. The Austrians finger Fed-fueled asset bubbles; Judis, deindustrialization.

At its essence, this is a conversation that doesn’t ask “Whither capitalism?” but rather “What kind of capitalism should we have?”

I wish more of my confreres on the right were willing to have this conversation.

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Good Europeans

The former German foreign minister Joschka Fischer has a revealing op-ed in today’s Süddeutsche Zeitung (link in German, h/t @yascha_mounk). Although his argument is not new, Fischer states the dilemma facing Europe more sharply than other public figures in Germany have done. Either Europe must establish “a fiscal union, and that means Germany must guarantee the financial survival of the Eurozone with its economic power and resources: unlimited purchase of bonds from the countries in crisis through the ECB, Europeanization of national debts by means of Eurobonds, and a stimulus program in order to prevent a depression in the Eurozone and generate growth.” Or the Euro will have to be abandoned.

Fischer’s service is to puncture the illusion that it’s possible to have both the Euro and fiscal independence. Saving the Euro means a major and continuing financial burden for Europe’s most powerful state. Allowing it to fall apart will also cost a fortune, although it’s unclear whether it would lead to a worldwide depression, as Fischer asserts. It’s no good to recall that the Germans were promised that they would never have to bankroll the Spanish and the Italians. They now face the choice between two policies of uncertain outcome: bailing out their junior partners and trying to swim for safety by themselves.

For Fischer, a “good European” of long standing, the right course is clear: Germany must identify itself unreservedly with the European Union. But his argument is ultimately moral rather than economic: “In the 20th Century, Germany twice used war to the point of crime and genocide to destroy the European order in order to subordinate the continent. But Germany drew the correct consequences from those experiences. It was only because of convincing change and the integration of this great country in the center of the continent into the West and the EU that there was agreement to German unity.” For Fischer, then, Germany has a duty to become the banker of a United States of Europe.
Read More…

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