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.
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…
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.
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.
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.
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.
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.
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.
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.
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.
Ramesh Ponnuru remarks at how public support for free trade has fallen since the 1990s, and that even politicians who nominally support open trade rarely do so full-throatedly:
Instead they make mercantilist arguments for free trade, in which we must regrettably open our markets to foreign imports as the price for getting other countries to do the same for our exports. In debates over trade agreements, both sides typically accept the notion that imports are bad and exports are good. The question becomes whether the agreement will do more to boost imports or exports.
Ramesh concludes: “Falling support for trade has many causes, but the failure of almost anyone in politics to make the real and unequivocal argument for it has almost certainly been one.”
One cause among many, I think, has got to be the rising cost of health care.
A RAND Corporation analysis of the burden of health care costs on typical families between 1999 and 2009 noted this:
Although family income grew throughout the decade, the financial benefits that the family might have realized were largely consumed by health care cost growth, leaving them with only $95 more per month than in 1999. Had health care costs tracked the rise in the Consumer Price Index, rather than outpacing it, an average American family would have had an additional $450 per month — more than $5,000 per year — to spend on other priorities.
This trend is lost on no one and lamented by everyone, but its connection to other issues, like trade, might be less so.
Here’s what I think is happening: What you might call the Clinton-Rubin-Greenspan Bargain didn’t pan out as advertised. A cocktail of deficit reduction and tight money would keep inflation in check. Liberalized global trade would make consumer goods cheaper, and check inflation further still. Sure, the process of de-industrialization would mean a steady erosion of the kind of stable, high-paying jobs that middle-class Americans had become accustomed to. But even comparatively lousy-paying service jobs (not to mention homes that seemed like they’d increase in value in perpetuity) might still increase standards of living because a strong dollar could buy more goods that it could under a protectionist high-inflation regime.
Enter the spike in health care costs.
Whatever material gains that workers realized under the Clinton-Rubin-Greenspan bargain have been outstripped by the burden of paying for health care. In this light, the benefits of free trade — and indeed low inflation — don’t seem like, well, a fair trade.
The old hands of the Clinton administration would no doubt respond by saying they didn’t get their way on health care reform, which might have preempted the subsequent years of inflation. But that’s another argument. We are where we are — and it seems clear that, in addition to driving our long-term debt and entitlement problems, the cost of health care is at least partially to blame for angst over trade.
The Department of Energy can guarantee loans with taxpayer money, but they can’t guarantee a company with Obama administration connections won’t come along with a fat check and snap those contracts right up.
The wires are reporting major layoffs at First Solar, one of the largest recipients of green-tech investment. From Reuters:
First Solar Inc said it would cut production of its thin-film solar panels and slash 2,000 jobs, or about 30 percent of its workforce, as the largest U.S. solar maker speeds up its cost-cutting efforts.
Solar makers, particularly in China, have rushed to build new manufacturing capacity in recent years as demand for the renewable energy systems grew. But that expansion left the industry struggling with nearly twice as much output capacity as customer demand, creating a glut of inventory that sent prices for panels down by more than half over the last year.
Like others in the industry, First Solar had been operating its plants at reduced rates. Tuesday’s moves appeared to make it the first in the industry to permanently shut down a production site, amid signs the industry is set to undergo a shakeout of the weaker players.
The company is shuttering their German plant too. That’s more drastic of a move than one might expect from SEC filings, but not all that surprising given that much of the company’s trouble stems from European nations pulling back their green energy investments.
How does a company receiving billions of dollars in in federal loans go from posting a net income of $664 million in 2010 to a net loss of $39.5 million in 2011? This story needs a little unpacking because it fits both partisan narratives so well. Most conservatives will say the cutbacks demonstrate the futility of investing in renewables, Democrats will say it shows how the industry would fail in the absence of a fiscal lifeline.
But there are other issues at work here. The stock price has been sinking steadily since mid-2011, partially a result of the clean tech bubble bursting though the $215 million “manufacturing excursion” (read: screw-up) probably didn’t help. Investor Guide also points out that they’re being outcompeted by companies making cheaper, more efficient solar panels (kind of like Solyndra was).
It deserves a closer look because First Solar was one of the largest recipients of Department of Energy financing, having had two loans approved for $1.46 billion on September 29, 2011 and $646 million for a pair of California solar farms named Desert Sunlight and Antelope Valley. They nearly got a third loan of $1.93 billion for a project named Topaz Solar, were it not for an imprudent disclosure of insider information that scuttled the deal. Fortunately, the great philanthropist Warren Buffett took the project off First Solar’s hands anyway. Also, it’s the same company that received $455 million in loan guarantees from the Ex-Im Bank subsidizing the sale of solar panels…to itself.
Like so many other DoE loans, the circumstances of these two were dodgy. The day after they were approved the Desert Sunlight project was sold to NextEra Energy, one the largest renewable energy firm in the country whose CEO Lewis Hay III sits on the President’s Council for Jobs and Competitiveness. Exelon, the company where David Axelrod was once a consultant that Rahm Emmanuel helped found in 1999, bought Antelope Valley and has begun to draw on the loan.
Also, Sherry Barrat, a director at NextEra, is also Vice Chairman of Northern Trust, the company that once owned the Obamas’ house.
Beyond that, the loans were arranged through the Financial Institutions Partnership Program, which allowed investment banks to get in on the action. Goldman Sachs submitted the Desert Sunlight proposal with Citigroup as the co-arranger. Nor were the participating banks limited to U.S.-based institutions in need of an extra hand after the financial crisis, the lead lender for NextEra’s Genesis Solar project was Credit Suisse.