The American Conservative

European foreign ministers have approved an oil embargo against Iran. The sanctions ban any new oil contracts with Iran, while existing contracts will be honored until July 1st. While this might seem like a good way to way to stall Iran’s nuclear ambitions, it will only serve to unite the Iranian people and worsen the already fragile diplomatic relations the west has with Iran.

The European Union currently buys a significant amount of oil from Iran, about 20% of total exports. Iran’s economy is already suffering, with rising house and food prices. In order to avoid a worsening economic situation, the Iranians will have to find other buyers for 20% of their oil exports. China, Japan, and India are already major buyers of Iranian oil, and it is possible that exports to these countries could increase. If this does happen some of Europe’s major economic competitors will be benefiting from the sanctions while the negative effect on Iran’s economy will be minimized. This is the best outcome. Read More…

There has been more bad news out of Europe today. On top of the downgrades of several eurozone countries and the EFSF bailout fund, Germany today announced that it has lowered its growth forecasts for 2012 from 1% to 0.7%. Throughout the euro crisis Germany has been central to the bailouts of struggling countries, contributing a huge amount to the recently downgraded EFSF. Economic recovery in Europe is not possible without an economically stable and strong Germany. While this would be very worrying in isolation, the World Bank today announced that it has cut global economic growth forecast from 3.6% for both 2012 and 2013, to 2.5% in 2012 and 3.1% in 2013. While there is some hope of a more relaxed monetary policy for Europe in the future, this is only because of China’s slow economic growth, something that should not be welcomed in the long term.

While there are serious economic concerns in Europe the continent is also facing domestic political upheaval. The unelected Greek government is failing to implement needed austerity measures, Italy’s technocratic government is making too few changes too late, and the patience of the German people is being tried. There is only so long that Germans will put up with contributing to the clean up of their neighbor’s mess, and we could soon see domestic German politics reflect this growing attitude.

While the continual downgrade of European countries and the slowing growth of China are out of the responsibility or remit of any American politician, the GOP should take note. The sovereign debt crisis in Europe is our future if serious measures are not taken to adapt an aggressive and serious fiscal policy that tackles spending and government growth. Unfortunately the only candidate who understands the severity of the situation and is advocating such measures is alienated by the GOP because of his pro-peace, pro-trade and pro-diplomacy foreign policy.

Dow Jones reports that a federal bankruptcy judge gave the go-ahead for Hostess to begin tapping a $75 million loan to keep the company above water while during bankruptcy proceedings.

Some attribute Hostess’ troubles to healthier eating habits among Americans, the USA Today article on their filing states:

Hostess has enough cash to keep stores stocked with its Ding Dongs, Ho Hos and other snacks for now. But longer term, the 87-year-old company has a bigger problem: health-conscious Americans favor yogurt and energy bars over the dessert cakes and white bread they devoured 30 years ago.

Last year, 36% of Americans ate white bread in their homes, down from 54% in 2000, according to NPD Group. Meanwhile, about 54% ate wheat bread, up from 43% in 2000.

That explanation sparked some discussion from Reason’s Nick Gillespie, who writes:

I’m not sure I’m buying that argument in its totality, but there’s no question that sliced white bread, especially Wonder Bread, went from being the staff of life for upward-striving post-War middle-classers to being a cultural touchstone for all that was bad and wrong with America. Whether we’re buying less of the stuff – or feel less in need of the myriad ways it supposedly enriches our bodies – I don’t know. But there seems less a role for white bread in a world where even the Olive Garden is pushing rustic loaves of yeast and flour.

Big Government’s Dana Loesch was skeptical, observing that the USA Today article buried facts about Hostess’ union problems and rising ingredient costs deep in the article.

 It’s not difficult to sell creme-filled heaven snacks and America isn’t exactly eating healthier. If anything, America is eating leaner because the price of everything has increased eleventy-fold because the cost of energy is passed to us, the consumers.

…

…Hostess, a privately held company based in Irving, Texas, has outstanding debts of more than $860 million and owes over $50 million to vendors, an economic situation that sources attribute to rising prices for sugar, flour and other ingredients and higher labor costs which the company’s approximately $2.5 billion in annual sales have not been able to cover.

…

Additionally, Hostess employees are unionized while most of its competitors aren’t. As a result, Hostess has high pension and medical benefit costs.

While the broader trend Gillespie observes is certainly true – Trader Joe’s anyone? – it’s also true that during recessions, people adjust their purchasing habits. The stock price of McDonalds, for instance, has doubled since late 2007. Based on today’s report, it appears Loesch is right. If an agreement with the unions isn’t reached in 75 days, the terms of the loan state that Hostess could begin selling off its assets.

Also, apparently during the earlier negotiations the international parent union was representing the local chapters, which they aren’t authorized to do:

In perhaps the hearing’s most dramatic moment, Hostess President and Chief Executive Brian Driscoll took the witness stand and told a lawyer for the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, or BCTGM, that he was unaware that during recent labor negotiations, the international parent union wasn’t actually authorized to negotiate on behalf of the local unions.

“Who were you negotiating for?” Driscoll asked the union’s lawyer, Bredhoff & Kaiser PLLC’s Jeffrey Freund.

“I’m asking the questions,” Freund responded.

“I would like my $900,000 back,” Driscoll said, referring to the amount of money Hostess has paid to its professionals negotiating with the unions. While Driscoll’s response elicited laughter from nearly everyone in the courtroom but himself, the back-and-forth is a clear precursor to a tough fight between Hostess and the union both in and out of the courtroom.

It’s hard out there for a snack food company, and these hamfisted union negotiations certainly don’t help. Hostess is more or less the last independent publicly-traded purveyor of snack foods with names most people have heard of. Almost all of the brands that filled the school lunchboxes of American children for decades have experienced major upheavals in the last quarter-century. The venerable Keebler (est. 1853) is in the hands of Kellogg as of 2001.  Nabisco has been passed around like an, erm, Ho Ho since its merger with RJ Reynolds in 1985, and will presumably be a part of the snack-food company resulting from Kraft Foods’ planned split.

For a company like Hostess with a less diversified line of products, it’s a lot harder compensate for the cost of something like this, too.

These are discouraging times, but once in a blue moon a bit of hope appears. I am pleased to report on the bit of hope delivered in March of 2011 by Michael Spence, a Nobel prize-winning  economist, assisted by Sandile Hlatshwayo, a researcher at New York University. The two economists have taken a careful empirical look at jobs offshoring and concluded that it has ruined the income and employment prospects for most Americans.

To add to the amazement, their research report, “The Evolving Structure of the American Economy and the Employment Challenge,” was published by the very establishment Council on Foreign Relations.

For a decade I have warned that US corporations, pressed by Wall Street and large retailers such as Wal-Mart, to move offshore their production for US consumer markets, were simultaneously moving offshore US GDP, US tax base, US consumer income, and irreplaceable career opportunities for American citizens.

Among the serious consequences of off-shoring are the dismantling of the ladders of upward mobility that made the US an “opportunity society,”  an extraordinary worsening of the income distribution, and large trade and federal budget deficits that cannot be closed by normal means. These deficits now threaten the US dollar’s role as world reserve currency. Read More…

Last year, Barack Obama committed his administration to doubling U.S. exports in half a decade.

The good news: He is on the way. U.S. exports of goods and services grew in 2010 by 16.6 percent.

Bad news: U.S. imports, starting from a higher base, surged by 19.7 percent.

Result: The U.S. trade deficit in 2010 worsened by 33 percent, rising from $375 billion to $498 billion, the largest percentage increase in a decade. If Obama keeps this up, he may prove as big a disaster for U.S. manufacturing as his predecessor, although these are big shoes to fill.

As he has each February for years, Charles W. McMillion of MBG Information Services has compiled the stats on the industrial decline of his country under our free trade presidents. Here are but a few numbers for the decade from December 2000, the month before George W. Bush took the oath, to December 2010, the end of Obama’s second year.

In that decade, America ran a total of $6.1 trillion in trade deficits, more than our entire economic growth. To finance those 10 years of deficits, America had to borrow $1.553 billion every day.

And we wonder why China owns America.

In 2010, our trade deficit in manufactures alone rose 27 percent to $416 billion, far exceeding our trade deficit in crude oil. A decade of such deficits in manufactures has devastated the industrial states. Read More…

George W. Bush must have been the despair of the history department of every school his daddy managed to get him into.

Consider his latest excursion into the history of the republic, at Southern Methodist, where the Great Man’s papers are to be housed.

“What’s interesting about our country, if you study history, is that there are some ‘isms’ that occasionally pop up. One is isolationism and its evil twin protectionism and its evil triplet nativism. So if you study the ’20s, for example, there was an American-first policy that said, ‘Who cares what happens in Europe?’ … And there was an immigration policy that I think during this period argued we had too many Jews and too many Italians, therefore we should have no immigrants. And my point is that we’ve been through this kind of period of isolationism, protectionism and nativism. I’m a little concerned that we may be going through the same period. I hope that these ‘isms’ pass.”

Where to begin?

First, “America First” was the antiwar movement begun in 1940 and backed by the young John F. Kennedy and his brother Joe, Gerald Ford and ex-president Herbert Hoover. It had nothing to do with the 1920s.

In the Harding-Coolidge decade, America was deeply interested in “what happens in Europe.” It began with Hoover rushing U.S. food aid to the defeated nations of World War I and even to the USSR, for which Lenin personally thanked the Americans. Read More…

Missiles fired from the Chinese mainland could destroy five of the six major U.S. air bases in the Far East. So states a new report of the U.S.-China Economic and Security Review Commission, adding:

“Saturation missile strikes could destroy U.S. air defenses, runways, parked aircraft, and fuel and maintenance facilities. Complicating this scenario is the future deployment of China’s anti-ship ballistic missile, which could hold U.S. aircraft carriers at bay outside their normal operating range.”

Opposite Taiwan, China’s missile force has reached 1,600.

Beijing is also building rockets, submarines and surface fleets to extend her dominance out to the third chain of islands, enabling the People’s Liberation Army to strike U.S. carriers and bases as far away as Guam.

Since the demise of the blue-water navy of Russian Adm. Sergei Gorshkov, the Pacific has been an American lake. No more. Read More…

Hubris will do it ever time.

The Chinese have just made a serious strategic blunder.

They dropped the mask and showed their scowling face to Asia, exposing how the Middle Kingdom intends to deal with smaller powers, now that she is the largest military and economic force in Asia and second largest on earth.

A fortnight ago, a Chinese trawler rammed a Japanese patrol boat in the Senkaku Islands administered by Japan but also claimed by China. Tokyo released the ship and crew, but held the captain.

His immediate return was demanded by Beijing.

Japan refused. China instantly escalated the minor incident into a major confrontation, threatening a cut off of Japan’s supply of “rare-earth” materials, essential to the production of missiles, batteries and computers.

Through predatory trading, China had killed its U.S. competitor in rare-earth materials, establishing almost a global monopoly.

The world depends on China.

Japan capitulated and released the captain.

Now Beijing has decided to rub Japan’s nose in her humiliation by demanding a full apology and compensation.

Suddenly, the world sees, no longer as through a glass darkly, the China that has emerged from a quarter century of American indulgence, patronage and tutelage since Tiananmen Square.

The Chinese tiger is all grown up, and it’s not cuddly anymore. Read More…

For those who can yet recall the backyard blast furnaces of Mao’s China in the 1950s and the Great Proletarian Cultural Revolution to re-instill peasant values in the 1970s, the news was jarring.

In 2011, said the Financial Times, China will surpass the United States as first manufacturing power, a title America has held since surpassing Great Britain around 1890.

Each year, China passes a new milestone.

Last year, China surpassed Germany as the greatest exporting nation. This year, China surpasses Japan as the world’s second-largest economy. This year, China became the first auto manufacturer on earth.

For a decade, China has been running history’s largest trade surpluses with the United States and has amassed a hoard of $2.3 trillion in foreign currency. She now holds the mortgage on America.

How has China vaulted to the forefront in manufacturing, trade and technology? Export-driven economic nationalism.

Beijing cut the value of its currency in half in 1994, doubling the price of imports, slashing the price of exports and making Chinese labor the best bargain in Asia. Foreign firms were invited to relocate their plants in China and told this was the price of access to the Chinese market. Beijing began looting these firms of technology, as she sent her sons to study in America. Industrial espionage and intellectual property theft became Chinese specialties.

And how has America fared in the new century? Read More…

So grave was the crisis in western China that President Hu Jintao canceled a meeting with President Obama, broke off from the G8 summit and flew home.

By official count, 158 are dead, 1,080 injured and a thousand arrested in ethnic violence between Han Chinese and the Muslim, Turkic-speaking Uighurs of Xinjiang. That is the huge oil-rich province that borders Pakistan, Afghanistan and several Central Asian countries that seceded from the Soviet Union.

Uighur sources put the death toll much higher.

The Communist Party chief in Xinjiang has promised to execute those responsible for the killings.

In 1989, fear that what was happening in Eastern Europe might happen in Beijing produced Tiananmen Square. The flooding of Chinese troops into Xinjiang bespeaks a fear that what happened to the Soviet Union could happen to China. Unlike Mikhail Gorbachev, the Chinese, as they showed in Tibet, will wage civil war to crush secession.

Already, Beijing has struggled to ensure perpetual possession of Inner Mongolia, Xinjiang and Tibet — half of the national territory — by moving in millions of Han Chinese, swamping the indigenous peoples, as they did in Manchuria.

The larger issue here is the enduring power of ethnonationalism — the drive of ethnic minorities, embryonic nations, to break free and create their own countries, where their faith, culture and language are predominant. The Uighurs are such a people.

Ethnonationalism caused the Balkan wars of 1912 and 1913, triggered World War I in Sarajevo, and tore apart the Austro-Hungarian and Ottoman empires. Ethnonationalism birthed Ireland, Turkey and Israel.

Ethnonationalism in the 1990s tore apart the Soviet Union and Yugoslavia, and broke up Czechoslovakia, creating two-dozen nations out of three. Last August, ethnonationalism, with an assist from the Russian Army, relieved Georgia of Abkhazia and South Ossetia.

Russia has its own ethnic worries in Chechnya, Dagestan and Ingushetia, whose Moscow-installed president was nearly blown to pieces two weeks ago and where a Chechen convoy was ambushed last week with 10 soldiers killed.

The ethnonationalism that pulled Ireland out of the United Kingdom in 1921 is pulling Scotland out. It split the Asian subcontinent up into Pakistan, India and Bangladesh. Iran, Iraq and Pakistan are all threatened.

Persians are a bare majority against the combined numbers of Azeris, Kurds, Arabs and Baluch. Each of those minorities shares a border with kinfolk — in Azerbaijan, Kurdistan, Iraq and Pakistan.

Turkey has fought for decades against Kurd ethnonationalism.

If one were to wager on new nations, Kurdistan and Baluchistan would be among the favorites. And Pashtun in Pakistan outnumber Pashtun in Afghanistan, though in the latter they are the majority.

In Africa, the savage attacks on the Kikiyu by Luo manifest a resurgent tribalism, as did the horrors of Rwanda, where Tutsi in the hundreds of thousands were massacred by Hutu.

President Clinton may have apologized to the Africans for not sending troops to stop the genocide in Rwanda, but if the America of Obama is into interventionism to protect human rights, Africa in the 21st century should provide us plenty of opportunity.

Evo Morales in Bolivia, Ollanta Humala in Peru and Venezuela’s Hugo Chavez are stoking the embers, goading the Indian populations, the indigenous peoples, to take back what the white man took 500 years ago. They have met with no small success.

The contrast between insouciant America and serious China today is instructive. China is protectionist; America free trade. China is nationalist; America globalist. China’s economy is export-driven; America’s base is consumption. China saves; America spends. China uses its foreign exchange to lock up overseas resources; America uses foreign aid for humanitarian assistance to failed states. Behaving like ruthlessly purposeful 19th-century Americans, China grows as America shrinks.

Where Beijing floods its borderlands with Han to reduce indigenous populations to minorities, and stifles religious, ethnic and linguistic diversity, America, declaring, “Diversity is our strength!” invites the whole world to come to America and swamp her own native-born.

Observing the lightning breakup of the Soviet Union, the Chinese take ethnonationalism with deadly seriousness. American’s elite regard it an irrelevancy, an obsession only of the politically retarded.

After all, they tell us, we were never blood-and-soil people, always a propositional nation, a nation of ideas. Our belief in democracy, diversity, and equality define us and make us different from all other nations.

Indeed, we now happily predict the year, 2042, when Americans of European ancestry become a minority in a country whose Founding Fathers declared it set aside for “ourselves and our posterity.”

Without the assent of her people, America is being converted from a Christian country, nine in 10 of whose people traced their roots to Europe as late as the time of JFK, into a multiracial, multiethnic, multilingual, multicultural Tower of Babel not seen since the late Roman Empire.

The city farthest along the path is Los Angeles, famous worldwide for the number, variety, and size of its ethnic and racial street gangs.

Not to worry. It can’t happen here.

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