Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Seven Days Till The US Federal Election

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On October 29, 2024

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And Trump is very slightly ahead in the polls.

As is usually the case in modern American elections, much that is important isn’t at stake in this election: most notably whether or not the genocide in Palestine will continue. Both candidates and both parties are under the thumb of the Israeli lobby. Nor is an end to the terminal decline of the American Empire on the ballot, though Trump pretends it is.

That isn’t to say the election doesn’t matter, but it’s a choice between two terrible candidates. Trump is clearly senile and mercurial is the kindest word one can use to describe him. Harris is not that bright, and appears to fall into the Bush Jr. category: something happened to damage her. Plenty of rumors of alcohol problems, though I don’t know if they’re valid.

Both candidates are moral and ethical monsters, whose ambition and vanity are such that they would kill or impoverish any number of people to achieve their personal goals. (No, don’t even. This isn’t in question.)

I can’t be bothered to endorse either of them. This is a case of “would you prefer Satan or Beelzebub?” Unless you’re in a swing state I’d strongly urge you to vote third party or spoil your ballot. Even in a swing state you should seriously consider it.

About sixty percent of Americans think that the two-party system is broken, but they won’t vote for a third party because they think it’s a wasted vote, and this collective action problem makes continued decline inevitable.

(This blog is for understanding the present, making educated guesses at the future, and telling truths, usually unpleasant ones. There aren’t a lot of places like this left on the Web. Every year I fundraise to keep it going. If you’d like to help, and can afford to, please Subscribe or Donate.)

Domestically it’s clear that Harris, who says she wouldn’t have done a single thing differently than Biden, is the candidate of status quo decline. Things will keep getting worse in about the same way. Trump will shake things up, primarily because of who he will appoint to government and their plans of taking over the bureaucracy.

Democrats aren’t serious about abortion rights, but Trump will make the situation even worse. His economic policies will be disastrous in different ways than Harris’s: tariffs aren’t a bad idea, but without industrial policy and policies designed to end rent-seeking and funnel resources into industry they won’t don’t do much but cause different types of pain. His appointments to the supreme court will be awful, though that ship has sailed and until Democrats are willing to court pack it seems unlikely there will be any near-term change.

This election was Harris’s to win, but she didn’t want it enough to distance herself strategically from Biden. It wouldn’t have taken much, I’d bet that just some serious talk about taming the inflation which ordinary people feel but economists insist doesn’t exist would have done it. Or she could have come out against genocide, and courted the left instead of the right by campaigning with Liz Cheney, et al.

But at the end of the day, people like Harris would rather the right win than do anything seriously left-wing like “not mass murder”, which is now so far from the central axis of American politics that it amounts to extremism, and is treated by universities, the political class and the justice system as the hand maiden to terrorism.

In such a decaying Empire, the truth is there are few good, viable, choices left. Pick your arch-demon or vote for someone who at least isn’t into mass murder but won’t win.

Middle East War: The Israeli Ground Forces Still Can’t Deliver

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On October 28, 2024

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Israel has three great assets:

  • Its air force;
  • Its spies;
  • America.

What it doesn’t have is a good army:

After nearly five weeks of intense fighting, Israeli soldiers have managed to enter several border villages, advancing a maximum of just under two kilometres in some areas. However, they have been unable to establish overnight positions. These forces have resorted to widespread destruction, levelling homes and mosques along the border to create “scorched earth” zones. This tactic, however, exposes Israeli tanks, making them vulnerable and preventing adequate concealment as they cautiously advance through Lebanese villages. Consequently, Israeli casualties have surged

Or, to put it another way, Netanyahu’s mouth has written checks that Israel’s ground forces can’t cash. So Israel is back to wanton destruction, mostly by air.

I’ve said for years that Hezbollah’s army is one of the best in the world, man for man, and so far it seems that judgment is vindicated.

Israeli forces are currently only engaging Hezbollah’s “spoiling attacks” within the “engagement area”. They are yet to penetrate the “main battle area,” where Hezbollah’s primary defences and “striking forces” are positioned. Hezbollah’s strategy integrates conventional and guerrilla warfare tactics, employing adaptable defences above and below ground. It focuses on attrition strategy, using mobile defence tactics to harass and weaken enemy forces before drawing them into decisive engagements. These tactics include tactical retreats that expose enemy flanks, allowing Hezbollah to strike at Israel’s advancing spearhead, systematically disrupting momentum and inflicting heavy losses.

Meanwhile Israel’s attack on Iran does not appear to have done great damage and Hamas ordered Northern Israeli villages being used as invastion staging points to evacuate, and has started hitting them with missiles and drones, leading to another couple hundred thousand Israeli internal refugees.

(This blog is for understanding the present, making educated guesses at the future, and telling truths, usually unpleasant ones. There aren’t a lot of places like this left on the Web. Every year I fundraise to keep it going. If you’d like to help, and can afford to, please Subscribe or Donate.)

But the weak suffer what they must, and Northern Gaza has spent October under complete embargo of food and water. The Israeli genocide of Palestinians continues, and the clear intention is to occupy North Gaza permanently once its residents are displaced or dead.

Indeed the Israeli way of war is now clearly “genocide uber alles” with Israel’s air attacks in Lebanon prioritizing civilian buildings, with multiple attacks on hospitals, at least one attack on an orphanage and repeated warnings that they will strike first responders who try to save lives.

Israel is attempting to break the will of civilian populations through terror. Israel’s war doctrine is mass terror, ethnic cleansing and genocide, with attacks meant to maximize civilian casualties both during and after the attack. The fewer hospitals, doctors and so on, the more people who will die or be permanently maimed.

This is a war of the cowardly against civilians, which makes sense: Israel’s occupation has left its military specialized in brutalizing civilians. It had great difficulty against Hamas, a rag tag militia with missiles and other weapons built in basements. Against Hezbollah’s ground forces: seasoned, well equipped and dug in, it has been unimpressive.

The problem for Israel is simple enough: terror from the air doesn’t win wars and doesn’t break moral. Instead it makes people more determined to resist, not less.

If Israel, after its assassinations and attacks on warehouses had declared victory, it would still look strong. But engaging with Hezbollah on the ground has proven a serious mistake.

Israel is a great example of “those who are abused become abusers.” Israel might as well be Nazi Germany when it comes to both ideology (national ethnic supremacy) and actions: genocide of a despised ethnic/religious group.

It is a sad thing to see, both for their victims and for themselves. They have become monsters, and with polls indicating over 90% support for the way the war is fought, it’s clear that this has infected the mass of the Israeli citizenry.

When Israel is finally defeated, likely in a future war, it will need to completely de-Zionised, in a way Germany was never properly de-Nazified.

This entire war is sad and stupid and based on the fundamental injustice of taking other people’s land and homes. It is pursued thru terror, mass murder, genocide and ethnic cleansing and war crimes are so routine they happen every day as a matter of policy.

Every nation who supports Israel in this is stained by Israel’s crimes. We all know genocide is happening, and our countries have supported it, made it possible and opposed all efforts to end it.

To riff on Jefferson, we had best hope that there is no just God.

Week-end Wrap – Political Economy – October 27 2024

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On October 27, 2024

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by Tony Wikrent

 

Strategic Political Economy

The Right Believes It Has the Supreme Court Votes to Overturn Labor Law

[In These Times, via Naked Capitalism Water Cooler 10-22-2024]

 “The foundational 1935 labor law protecting workers is unconstitutional, according to major corporations and right-wing zealots who believe they have enough votes on the Supreme Court to overturn it. In the latest sign that anti-union forces will doggedly press the matter, a federal judge for the Northern District of Texas enjoined the National Labor Relations Board (NLRB) from processing any allegations of employer violations of workers’ rights. The National Review hailed the decision as ​’A Welcome Blow to the NLRB.’ This is after Elon Musk’s SpaceX won a similar injunction against the NLRB before the Western District of Texas in July. Both cases will work their way up to the Fifth Circuit Court, which has served as an expressway to steer anti-regulatory legal appeals to the Supreme Court ever since Trump packed it with right-wing ideologues. ‘I don’t think a lot of labor folks are focused on this right now,’ says Stephen Lerner, a fellow at Georgetown University’s Kalmanovitz Initiative for Labor and the Working Poor. … ‘This is the culmination of a 50-year anti-union agenda.’… But, in trying to repeal all the rights and protections workers gained during the New Deal, including the limited protections that workers currently enjoy for organizing and engaging in collective bargaining, killing the 1935 National Labor Relations Act (also known as the Wagner Act) would also mean the lifting of a host of restrictions on unions’ ability to carry out solidarity activism and effective economic sanctions. Are unions prepared for a return to ​’the law of the jungle?’”

MASTER PLAN Bonus: How Democrats Lost The Courts

[The Lever, October 22, 2024]

In this exclusive Master Plan bonus episode, David Sirota interviews former Senate Leader Tom Daschle, who led Democrats’ fight against George W. Bush’s plan to pack the federal courts with conservative judges — and paid the ultimate political price.

Daschle’s success stalling Republicans’ judicial picks in the Senate made him a prime target of the master planners — so they had him ousted from Congress and filled his South Dakota Senate seat with their own corporate candidate.

Sirota and Daschle discuss the Federalist Society’s influence in transforming the judicial nomination process into an ideological purity test. They also weigh in on the last major campaign finance legislation — the McCain-Feingold Act of 2002 — and whether similar reforms could even be possible in post-Citizens United America.

 

MASTER PLAN Bonus: The Federalist Society’s “Pipeline For Power”

[The Lever, October 22, 2024]

DAVID SIROTA: …To understand the roots of the Federalist Society, we spoke with Lisa Graves. She worked in the Department of Justice and on the Senate Judiciary committee and is now the founder of True North Research, a dark money watchdog organization. We heard from Graves briefly in Episode 7, but wanted to share the extended interview she did with producer Laura Krantz. Their conversation began with an overview of the four men who have been integral to the success of the Federalist Society: Ed Meese, C. Boyden Gray, Jay Sekulow, and Leonard Leo.

LISA GRAVES: Ed Meese was there near the beginning of the Federalist Society when it was created in 1981 as I mentioned, and Meese had served as Attorney General under Ronald Reagan. And he is certainly considered one of the fathers, or, you know, godfathers, in essence, of The Federalist Society from that period, and has been active in it throughout this, you know, these past 40 years, in a variety of ways. C. Boyden Gray, the highest role that he had in government was as White House Counsel for George Herbert Walker Bush. He helped select Clarence Thomas for the Supreme Court to replace the great civil rights leader, Thurgood Marshall — he was someone who had an active opposition to civil rights or, you know, core civil rights laws.

Thomas had served in the Reagan administration in the EEOC in a way that many people in civil rights community consider to be destructive, not supportive of that institution. And C. Boyden Gray had a had a key role in that as White House Counsel, but he also had a role in the selection of David Souter to go to the U.S. Supreme Court, and that is the nomination and confirmation of a judge who, you know, is considered to be a Republican or having Republican roots, but he was not sufficiently doctrinaire.

When George W. Bush became president, C. Boyden Gray was not White House Counsel during that period, but he was operating on the outside, and he was seemingly determined to help make sure that, you know, ideologues were put on the bench. And so from the outside of the administration, he launched a thing called the Committee for Justice, CFJ, which was an attack machine to attack the Democrats for opposing any of these Bush nominees who were at the circuit court level, largely drawn from the ranks of The Federalist Society….

… in many ways, this so-called movement that The Federalist Society has been at the helm of was in part in reaction to Brown v. Board of Education, and whether they were going to try to justify it or not, along with opposition to the Roe v. Wade decision, which was built on a really important case called Griswold v. Connecticut, which recognized a right to autonomy in reproductive decisions that states could not limit, for example, women from accessing contraception. And so there’s a whole host of decisions by the court in the 20th century, including decisions affirming major public policies like social security and programs to, you know, protect labor rights and more, and the Federalist Society and Leo and these men have you know worked for years to try to undo those precedents by, in part, by this appointment process of personnel being policy….

LISA GRAVES: The Powell Memo expressly targets the courts as a lever of power… Lewis Powell [was] a lawyer for the tobacco industry, he had been instrumental in trying to prevent the federal government from regulating tobacco, despite the fact that the tobacco industry knew full well that its products caused cancer… He also had been a lawyer advising the city of Richmond, as it was contending with Brown v. Board of Education. And though he wasn’t the most outspoken of the white segregationists at that time, he helped put forward policies to pave the way for white kids to attend, you know, private institutions in order to not be subject to racial integration.

And in Powell’s memo, of the things he wrote was that businesses needed to play a more active role in influencing Congress, in influencing universities and influencing the courts. And he singled out the courts as a particularly important lever of power. And then just 10 years later, The Federalist Society was created. A number of institutions or entities were created in the aftermath of the Powell Memo — the Pacific Legal Foundation, the Heritage Foundation, ALEC, the American Legislative Exchange Council … there was a concerted effort over the next 10 years to implement the Powell Memo through creating these entities … and infusing them with cash from sort of proto-billionaires … to advance an alternate vision for our constitution….

… one of the things that happened was that Leonard Leo became actively involved in trying to destroy the role of the American Bar Association in evaluating potential judicial nominees for the federal bench….

…the Bush administration basically outsourced the pre-selection process to the Federalist Society to Leonard Leo, and they were involved. I know for a fact that they were involved in 2001 in contacting potential circuit court nominees and asking them how they voted. Did they vote for George W. Bush or not? As a precondition, for the Federalist Society recommending them for circuit judgeship….

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Quick Takes: US Naval Decline, ASML’s Fall & More

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On October 25, 2024

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Some topics deserve a mention but not a full article and that’s what quick takes are for.

***

This blog is for understanding the present, making educated guesses at the future, and telling truths, usually unpleasant ones. There aren’t a lot of places like this left on the Web. Every year I fundraise to keep it going. If you’d like to help, and can afford to, please Subscribe or Donate.

***

I’ve written about US ship building problems before, but it’s not just about that, the Navy is retiring ships faster than they are being built. (And yes, China is building them way faster than it is retiring them.)

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Seems that the extra surveillance for the Paris Olympics will become permanent. Surveillance state, HO!

Offered without comment:

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There’s a meme going around that when Norway increased taxes on the rich it lost tax income because so many rich people fled. Turns out that was not the case.

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Add to, “what a mystery!” and “Who would have expected!”

The analysis revealed that the mortality rate of Americans ages 1 to 19 rose by 11% between 2019 and 2020 and an additional 8% between 2020 and 2021.

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The new BYD Seagull EV costs $9,700 American, though that price is only really available to Chinese, they kick it up a lot even for countries without tariffs.

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ASML, which creates advanced lithography machines, has 49% of its sales in China. Due to sanctions, it expects that number to drop to 20% of sales. Share prices crashed 16% in a single day.

ASML’s CEO previously indicated he expect China to learn how to make lithography machines and that ASML and the West would eventually lose essentially the entire market. What he didn’t say is that once China can make these machines, they’ll then take the entire non-Western market too. Truly sanctions stupidity.

Austerity, Demand and Reindustrialization

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On October 24, 2024

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This blog is for understanding the present, making educated guesses at the future, and telling truths, usually unpleasant ones. There aren’t a lot of places like this left on the Web. Every year I fundraise to keep it going. If you’d like to help, and can afford to, please Subscribe or Donate.

So, it’s clear from the response to my last post that some readers aren’t familiar with the effects of austerity on balance of payments and vice-versa. Balance of payments is, oversimplified, how much money is going in and out of a country.

When money goes into a domestic economy, if it is used to buy something that is imported, that effects balance of payments negatively.

If you’re selling more than you buy, which can mean services as well as good, then that helps balance of payments. It also includes financial games: so if people are sending money to the London financial center, well, that improves BoP. London’s the world’s second largest financial center, after New York.

Now here’s the thing. Britain doesn’t grow enough food to feed its population. It doesn’t have a lot of industry left. North Sea oil is depleting, to the point that Britain became a net importer of oil in 2013. (Take a look at that chart.)

When the government spends money it isn’t magically siloed from causing import demand. The government cut back on heating subsidies, for example, and limited child support payments to two children. Without that money, oil and other demand is not as high as it would be otherwise.

Indeed, nothing is really siloed. If the government spends, almost always some of that money is going to go overseas and spike imports.

Britain controls its own printing press. It can print as many pounds as it wants, but it can’t make people in other countries take the money. The more they print, the less the pound will be worth, and the more inflation there will be because the dropping pound will increase prices of imported goods.

The pound is not the world trading currency any more. It hasn’t been since WWII. It can’t print pounds the way the US can print dollars and expect everyone to just take them.

Austerity is, in many ways, cruel and stupid, but if Britain (or Canada, or Australia, or even Europe) is to print money without it causing serious economic issues and to actually reindustrialize, it has to be done intelligently, along with serious industrial and domestic economic policy. (Currently tons is printed, but siloed to the rich, which keeps general demand from exploding but destroys markets’ ability to function properly.)

Now the thing is that Britain is a high cost of living economy: food and housing are expensive. Very expensive. Workers need to be paid well to survive, and that makes Britain un-competitive against lower cost (or higher productivity) countries.

If you wanted to make Britain competitive again, you’d have to crash housing and rent, to start. You can imagine how politically fraught that is: people who have high net worth due to real estate aren’t going to like it.

Then there’s the issue of the City, the financial center. Financial center profits are HIGH. That’s a problem, because people would rather put money into finance than into industry or farming or whatever since returns are better. Finance cannibalizes the rest of the economy. So you have to weaken the city and silo it, and probably tax it a lot. That’s hard to do, because the City has a lot of power, and there’s a real issue because it does, actually, bring a lot of money in to Britain, it’s just that money doesn’t get spread around.

When you industrialize, or re-industrialize, you have to make sure that money in the domestic market buys domestic goods, doesn’t buy a lot of foreign goods, and is used primarily on industrialization: capital goods, primarily. It’s unpleasant, it means a lot of goods (imported goods) aren’t available or are very expensive. Your new industry, ideally, either serves the domestic market, or is good for export, or both.

Austerity doesn’t exist just because governments are run by stupid psychopaths (though that’s part of it), it exists because of very real constraints caused by a need to send more money out of the country than is coming in to the country. In the seventies the UK was in so much trouble it had to actually go to the IMF for help, and join the EU so Europe would help it bail out.

Now, again, there are ways around this, but they require taking on powerful interests and hurting a big chunk of the population, especially in the short to medium term (about twenty years or so.) It means, as much as possible, making do with what you can produce yourself, and when you can’t, going cheap. No foreign fresh fruit imports, except the cheapest (hope you like bananas.) Cheap phones and appliances. Etc…

It also means ending all sorts of stupid financial games: no more Private Equity. No stock buybacks. No huge stock option grants. You want money reinvested. Currency controls so money doesn’t flood out. Possibly a dual currency.

All of this is painful. But if you don’t do it, decline inevitably continues and eventually you’re back to being a third world country.

Austerity is a pressure bandage on a wound that still won’t stop bleeding. It slows down the decline, but it doesn’t heal the wound.

Update: Just for kicks, here’s Germany’s BOP:

And China:

Postliberalism, Liberal Apogee, Routine Elite Failure and Then?

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On October 23, 2024

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I was alerted to Nathan Pinkoski’s “Actually Existing Postliberalism,” by N.S. Lyons’ response “The Post-Cold War Apotheosis of Liberal Managerialism,” and enjoyed both tremendously.

Pinkosi’s piece is an excellent short history of the public-private partnership currently aiming for absolute global cultural control via the weaponization of finance that he calls postliberalism.

I thought it would be fun to excerpt all the times Antony Blinken’s name appears in the piece.

First mention:

When Bill Clinton took office, he continued the pursuit of openness. In 1993, he ratified NAFTA and relaxed the ban on homosexuals in the military. However, he made it clear that the old liberalism was not enough. Eager to extend the reach of democracy and confront foreign enemies who stood in its way, his administration developed new tools to advance America’s global power. In September, National Security Advisor Anthony Lake outlined a new paradigm. His speech, “From Containment to Enlargement,” bespeaks a political revolution. It provided the blueprint not only for the foreign policy agenda of nearly every U.S. president since then, but for the convictions of every right-thinking person. Lake’s speechwriter was Anthony (sic) Blinken.

Second mention:

After Biden was sworn in as president, his administration shelved a plan to overhaul sanctions policy. A consensus held that if the kinks of the past could be worked out, then the Americans and Europeans had all the weapons in place to launch a devastating financial first strike against their preferred targets. Planning began in the first year of the new administration, with Secretary Blinken’s State Department taking the lead. So by February 2022, just as the Russian invasion of Ukraine faltered, the arrangements were already in place. The strategic possibilities seemed limitless. Russia could be brought to its knees; Putin would follow in the ignominious footsteps of ­Milosevic and Gaddafi.

The execution of the strike was dazzling. The scale, especially the involvement of SWIFT and the targeting of Russia’s central bank, caught the Kremlin by surprise. It was ­Barbarossa for the twenty-­first century. Yet the first strike did not yield the promised results. Nor did the second, third, or fourth. Putin’s approval ratings soared, Russia’s industrial output increased, and its military continues to grind away at the Ukrainian army. Despite implementing nearly 6,000 sanctions in two-plus years, the euphoria of spring 2022 (let alone that of the holiday parties of 2011) is long gone. Although American policymakers have said again and again that they have mobilized a global coalition against Russia that has left the country isolated, that is not the case. The map of the countries that have imposed sanctions on Russia closely resembles the map of the countries that have legalized same-sex marriage. Economic warfare against Russia has exposed the limits of the global American empire.

Lyons applauds Pinkoski’s essay but rejects the notion that this is a revolution against liberalism — instead, it is its apogee.

Sadly, he doesn’t mention Blinken, but he does elaborate on the frightening ambition of this movement:

The managerial ideal is the perfect frictionless mass of totally liberated (that is, totally deracinated and atomized) individuals, totally contained within the loving arms of the singular unity of the managerial state. To achieve its utopia of perfect liberty and equality, liberalism requires perfect control.

This ideal is, of course, the very essence of totalitarianism. Yet if we wonder why the distinction between public and private has everywhere collapsed into “the fusion of state and society, politics and economics,” this is the most fundamental reason why. Perhaps, for that matter, this is also why the U.S. and EU now habitually sponsor LGBT groups in Hungary or India, and finance human-trafficking “human rights” NGOs in Central America and the Mediterranean: because managerialism’s blind crusade to crush any competing spheres of social power has gone global.

In response, a comforting tonic from The Archdruid, John Michael Greer at Ecosophia, whose reader “Dave” asks him:

I’ve noticed a growing and extremely worrying trend of the “elites” of politics and entertainment pursuing reckless and (to me) clearly wrong courses of actions that blow up in their faces, and then instead of honestly looking at the situation they’ve had a large hand in creating and doing a mea culpa, either doubling down and getting mad at regular people when they’re less keen to do what the elites tell them, or trying something else without ever really honestly accounting for their mistakes. The actions remind me of signs of elite collapse that this blog has talked about for years now and it’s very surreal and worrying to see happening in real time. What is going on and why can’t the “elites”, the people with access to more data and resources and advisers than anyone else, seem to realize what’s going wrong? Do they not care or are their actions part of a larger plan, not to sound conspiratorial?

Greer’s response was just what I needed to hear:

Dave, I don’t think that it’s any kind of plan. Quite the contrary, this is normal elite failure, the thing that comes right before an elite replacement crisis. Just as the capitalist elite of the 1920s crashed and burned, and was replaced by a managerial elite in the 1930s and 1940s, the managerial elite of the 2010s is crashing and burning, and will be replaced by an entrepreneurial elite in the 2020s and 2030s. The entitled cluelessness of a class that has remained in power too long is a familiar thing; comparisons to French aristocrats just before the French Revolution also come to mind.

Although, honestly if this means that Elon Musk and company are going to win what Chris Hedges calls “The Choice Between Corporate and Oligarchic Power”…eek!

Kamala Harris, anointed by the richest Democratic Party donors without receiving a single primary vote, is the face of corporate power. Donald Trump is the buffoonish mascot for the oligarchs. This is the split within the ruling class. It is a civil war within capitalism played out on the political stage. The public is little more than a prop in an election where neither party will advance their interests or protect their rights.

And what do the oligarchs want?

Warlord capitalism seeks the total eradication of all impediments to the accumulation of profits including regulations, laws and taxes. It makes its money by charging rent, by erecting toll booths to every service we need to survive and collecting exorbitant fees.

Trump’s cohort of Silicon Valley backers, led by Elon Musk, were what The New York Times writes, “finished with Democrats, regulators, stability, all of it. They were opting instead for the freewheeling, fortune-generating chaos that they knew from the startup world.” They planned to “plant devices in people’s brains, replace national currencies with unregulated digital tokens, [and] replace generals with artificial intelligence systems.”

As much as I eagerly anticipate the long-overdue fall of our current elite, I truly dread what’s coming up in their wake.

The End of Austerity & Reindustrialization

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On October 23, 2024

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Austerity Is Mostly Stupid… Mostly.

This blog is for understanding the present, making educated guesses at the future, and telling truths, usually unpleasant ones. There aren’t a lot of places like this left on the Web. Every year I fundraise to keep it going. If you’d like to help, and can afford to, please Subscribe or Donate.

But there is some logic to it, especially in places like Britain. The fundamental problem is de-industrialization. You can print as much money as you want, sure, but if almost everything you need is made or grown or dug somewhere else well, you have a problem. The US avoids this thru having dollar hegemony, for now, but the UK doesn’t have that and the Euro ain’t what it used to be either. The solution is simple in concept: you need to re-industrialize with than printed money.

(This is a theme and topic we’ve covered before, but forgive me running thru it again from another angle.)

Industrializing or reindustrializing is hard, especially with open markets. You need very careful use of tariffs and subsidies, and you need to cut deals with the current hegemonic industrial power: aka. China. You need real industrial policy, in other words. And neoliberalism doesn’t believe in that.

Instead neoliberalism believes in this weird idea that markets are self-correcting and that whatever markets do is right. Nor does it believe in increasing wages for domestic demand, because it came to power during the oil shocks/stagflation period.

Raising wages and thus general domestic demand when you don’t produce enough domestically means money flooding out of the country. This isn’t necessarily bad. A lower pound or Euro is an export subsidy and helps reindustrialize, but it’s still a hard sell and it has to managed.

You can’t let the trade and balance of payments deficit grow too large. And you have to manage domestic demand: pushing people to buy what is produced locally and making imports for consumer goods expenisve, while funneling import buys towards capital equipment.

This playbook has been run many times. Japan, South Korea, Taiwan, the US in the 19th century, China most recently. We know how to do it. But it does require discipline and an ideological change from neoliberalism, plus a willingness to cooperate with the main industrial power

It’s damn near impossible to industrialize or re-industrialize without aid from the current industrial hegemon. That means getting into a trade war with China is counter-productive. You need to import capital goods from them, and sell them what you produce at competitive prices.

Japan and the USA had Britain. Japan (2nd time), South Korea, China and Taiwan had the United States. You need the markets, knowledge and capital goods.

This mean, in effect, that you need to cut a deal with the current industrial power. They don’t precisely have to be good deals (China offered to make American rich people richer), but the deal has to be something they want.

For US/China one obvious deal is to let them get goods like EVs into the US without tariffs if they build branch plants and help create a supply network in the US. Another obvious deal is to stop supporting Taiwan so much & another is to let them have the South China sea. The EU and Britain can make the same deals.

If the last two bother you, well, look at it this way: they’re going to get Taiwan and the South China Sea anyway, you’re just making it easier for them. You’re giving up things you’re going to have to give up anyway.

This requires a psychological change among Western elites. They need to be willing to admit that they are no longer the top dogs, at least economically and that they can no longer just impose the terms they want.

The longer you leave cutting deals with China to help you reindustrialize, the worse deals you’re going to get. Leave it too long, and reindustrialization may be essentially impossible.

Of course there’s much more to it than this. A complete rejiggering of internal markets is necessary. You have to gut finance and put it at the service of industry. Private equity has to be destroyed wholesale. People can only get rich by exporting or making goods for the domestic market which replace imported goods. Anyone doing significant import of anything but capital machinery (with an eye to building your own) can only be allowed to survive, not prosper.

Generally speaking, to use econo-speak, incentives have to be aligned for re-industrialization, and dis-aligned for anything predatory. Betraying elites must be crushed.

There is no solution to declining standards of living in the Anglosphere and the EU without re-industrialization (maybe Canada and Australia could find another way.) You’ve got to either produce what you need, or produce what others want to buy from you. It’s that simple.

 

Georgia Is Forging A Unique Path In The Post-Soviet Space

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On October 21, 2024

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Earlier today I responded to a comment asking if Armenia and Georgia are next after the Ukraine.

I wrote: “Armenia has long been a Russian client state. They will remain one for the foreseeable future. Georgia is divided. When Georgia attacked Russian positions in South Ossetia in 2008 both Russian forces in and around South Ossetia and jointly with Abkhazian forces, Russia occupied Zugdidi, Gori, Poti and Senaki and the Abkhaz captured the Kodori Gorge. Through these actions Russia effectively split Georgia into three parts and there will be no Georgian admission into NATO. In fact, my buddy Mamuka who lives in Tbilisi, Georgia told me earlier this year, “we just have to make our peace with our giant neighbor to the north, like Mexico has made its peace with the USA.” He’s not wrong.”

Artin DerSimonian echoes, albeit much more eloquently and with more convincing evidence and arguments, exactly what I said: “While Georgia has condemned Russia’s actions in Ukraine at international fora and has provided humanitarian aid to Kyiv, Tbilisi has also reopened direct flights with Russia, refused to adopt European sanctions (though generally restricting sanctions-busting trade) or supply arms to Ukraine, and increased its bilateral trade turnover. While some have been understanding of Georgia’s uniquely challenging position amid the war in Ukraine, others have been less forgiving and more circumspect of the underlying motivations of the ruling party’s actions.”

You can read his full article here. It is an outstanding piece of analysis, reminiscent of the arguments I had with Georgians when I visited the country in 2003. It was as clear as a window pane that Georgia must inevitably find an accomodation with its giant neighbor to the North, just as Mexico has done with the United States. Right or wrong, a giant neighbor next door is an ugly reality that must be faced honestly.

As DerSimonian writes, “If that initial strategy falls short of achieving our desired outcomes, then our next step ought to be adjusting our existing policies to fit the realities that develop beyond our borders without unnecessarily alienating those whom we seek to influence.”

It’s wonderful to see at least one nation in the post-Soviet space acting with some strategic and diplomatic maturity. That it is the Georgians is even better. I hope they prosper and solve their dreadful seperatist issues.

 

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