Ian Welsh

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

Month: August 2020

Cold War 2.0 Incoming

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On August 11, 2020

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Right, with the ban on Huawei using chips made with American manufacturing equipment (one of the US’s last few places of absolute advantage), the bans on TikTok, Tencent, and WeChat, the attempt to convince other countries to not use Huawei 5G, and the arrest of the Huawei founder’s daughter for doing business with Iran, along with the US seizing a freighter full of medical supplies for Iran, I think we can state that the world is moving towards a second cold war.

The US pivoted to China containment under Obama, not Trump — though Trump has been far more aggressive. The Trans-Pacific Partnership (TPP) was created as a way of marshaling Asia-Pacific countries into an anti-Chinese trade area. While Trump didn’t go ahead with it, he’s pushed hard against China in other ways.

When the US asked Canada to seize the daughter of Huawei’s founder, for example, it destroyed Canada-China relations: Canada was forced to take sides, and the Chinese were furious. The USMC (the NAFTA replacement) included a clause that says signees cannot make new trade deals with non-free states if the others object: This was aimed squarely at China.

Britain had originally intended to use Huawei 5G, but after leaving the EU, reversed course.

It’s important to understand that the anti-China pivot is bipartisan, as are the sanctions against Huawei and others.

The United States has a number of advantages and it’s using all of them aggressively. First, the fact that it is the center of the financial universe, to the point that movement of funds often goes through the US even when the transaction doesn’t involve them, is a major one. The US has made its financial laws extra-territorial, in effect. If a transaction goes through the US at all, even if no one involved in the transaction is American-related, the US claims jurisdiction. (Famously, this was used by the US to launch an investigation in the World Cup, in which the US is a trivial player, because a bribe went through the US on its way somewhere else.)

This often happens unintentionally, and firms that do business with the US at all are thus often unwilling to do business with anyone whom the US has sanctioned.

US naval power and military presence is also important, with their ability to interdict the Strait of Malacca. China imports about 70 percent of their oil, and 80 percent goes thru the Malacca strait and the US can shut it down any time they want. This is true of much else that China imports or exports.

The Belt and Road Initiative is, in part, meant to cut out the US ability to use its navy to hurt China; it creates alternate land routes, including one right across the continent to Europe, and it includes pipelines. The alliance with Russia, fraught as it is, is also about reducing dependence on Malacca.

Indeed, even the ability to protect and control trade to nearby neighbours is in doubt, which is why China built artificial islands in the South China Sea.

Fundamentally, the post-WWII trade, financial, and military order is an American creation, with a European assist.

When the US let China into the WTO, they let the power most likely to overtake them inside, as it were, the house. They did so for the simplest of all reasons: greed. Oh, sure, there was talk of capitalism meaning democracy and all that, but basically, offshoring and outsourcing to China made a lot of money for a lot of corporations and rich people, and that’s why they allowed China in.

The US deliberately sped up the transfer of industry to China as a way of making more money and undercutting wages at home. China knew the deal it was offering; they understood Americans, and they were patient.

So now, China is a larger manufacturing country than the US and, by some measures, has a larger economy.

China is a threat.

China is seen as a threat and this perception is, again, bipartisan.

There is no reason to expect this to change. China is not going to buckle under to the US, like some third-world nation or a vassal like Canada. They now have a de-facto alliance with Russia. China has nuclear weapons, and Russia is not going to allow China to be taken out with a nuclear first strike (without China, they’d have to give the US anything it wants, and they know it.)

The US will keep using its financial and technological power to weaken and isolate China.

So what will happen is an acceleration of the creation of a banking system that routes entirely around the United States and which does not use the US dollar, but instead the Yuan. Countries will be folded into this, as part of the Belt and Road Initiative. Even core US allies may have little choice: South Korea does twice as much business with China as with the US, for example, and Australia is extremely dependent on China.

For many countries, China clearly offers the better deal: they provide far more cheap loans than the US, they provide development, and their goods and services are suitable for both developed and developing nations. Nor do they natter on about “human rights” while they bomb Yemen.

For others, China will be unacceptable.

This leads to a world with two trade areas, not a free trade world. It leads to an end of the dollar as the world reserve currency. It leads to a continued arms race. It may well lead to a breaking of world IP into two sets: one American lead, one China lead. (There’s no particular reason for China to respect US IP if the US refuses to let them use it.)

This is a recipe for Cold War 2.0.

This time, however, understand that the US is facing an “enemy” with more population and more industry than it, not a nation devastated by World War with less population. Likewise, China and Russia combined have more land and more resources, while Europe is not a sure American ally, though Britain, absent EU support, will fall completely into US vassal status.

This is especially true as the US is experiencing late-imperial rot. It is nearly completely unable to handle its internal affairs, and its social cohesion is breaking down to the point where it may soon become a failed state.

Many American supporters of Cold War 2.0 are trying to use China as the external enemy to rally Americans around and, by closing China off from the US, to drive manufacturing back to the US, or at least to its firm allies (like Taiwan).

Bringing manufacturing back is smart, it should never have been sent overseas, but American elites are confused: Their primary enemy isn’t China, their primary enemy is themselves. They are responsible for the US decline and China could not have risen so fast if they were not so corrupt, greedy, and short-sighted.

It’s a very stupid world we’re moving into, but some of what is going to happen has to happen. It’s not good that the US has the ability to sanction anyone it wants to. Those medical supplies seized off that freighter? Covid-19 medicines.

Power which is routinely abused, as the US has abused its financial and military power, is eventually removed. The US is accelerating this progress as fast as it can.

The ban on Huawei using chips manufactured with US tech will hurt, for example. But it’s time limited: China isn’t some backwards third-world country. They will advance their own chip manufacturing and erase the deficit.

By fighting the dragon, the US is making a rival an enemy.

Cold War 2.0 is coming and essentially inevitable, because it is something the leadership of both countries either wants or is willing to accept. The only monkey wrench in this are the effects of climate change and ecological collapse. More on them later.

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Week-end Wrap – Political Economy – August 9, 2020

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On August 9, 2020

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Week-end Wrap – Political Economy – August 9, 2020
by Tony Wikrent

Kansas Should Go F— Itself

Matt Taibbi, August 2, 2020
Review of Thomas Frank’s new book The People, No: A Brief History of Anti-Populism

Frank published What’s the Matter with Kansas? in 2004, at the height of the George W. Bush presidency. The Iraq War was already looking like a disaster, but the Democratic Party was helpless to take advantage, a fact the opinion-shaping class on the coasts found puzzling. Blue-staters felt sure they’d conquered the electoral failure problem in the nineties, when a combination of Bill Clinton’s Arkansas twang, policy pandering (a middle-class tax cut!) and a heavy dose of unsubtle race politics (e.g. ending welfare “as we know it”) appeared to cut the heart out of the Republican “Southern strategy.”

Yet Clinton’s chosen successor Al Gore flopped, the party’s latest Kennedy wannabe, John Kerry, did worse, and by the mid-2000s, Bushian conservatism was culturally ascendant, despite obvious failures. Every gathering of self-described liberals back then devolved into the same sad-faced anthropological speculation about Republicans: “Why do they vote against their own interests?”

Frank, a Midwesterner and one of the last exemplars of a media tradition that saw staying in touch with the thinking of the general population as a virtue, was not puzzled….

Frank ripped the political strategy of Clinton Democrats, who removed economic issues from their platform as they commenced accepting gobs of Wall Street money in a post-Mondale effort to compete with Republicans on fundraising. Gambling that working-class voters would keep voting blue because “Democrats will always be marginally better on economic issues,” New Democrats stopped targeting blue-collar voters and switched rhetorical emphasis to “affluent, white collar professionals who are liberal on social issues.”…. Perceiving correctly that there would be no natural brake on this phenomenon, since the executive set was able to pay itself more and more as the country grew more divided, Frank wondered, “Why shouldn’t our culture just get worse and worse, if making it worse will only cause the people who worsen it to grow wealthier and wealthier?”

When I was first sent out to cover the Donald Trump campaign years later, I assumed the editorial concept would be simple: mockery. New York’s infamous “short-fingered vulgarian” had taken over national headlines in the summer of 2015 with a foul-mouthed stream-of-consciousness rap, organized around an impossible Pharaonic wall project and scare tales about rape-happy Mexicans – the Diceman doing Pat Buchanan. If this was taking over the Republican Party, there wasn’t much to report. The enterprise was doomed, and journalism’s only mission was to make sure the silliest bits were captured before being buried under the sands of history.

Twenty minutes into my first Trump campaign event, I knew this was wrong, and was seized by a sinking feeling that really hasn’t left since. Trump in person sounded like he’d been convinced to run for president after reading What’s the Matter with Kansas? His stump act seemed tailored to take advantage of the gigantic market opportunity Democrats had created, and which Frank described. He ranted about immigrants, women, the disabled, and other groups, sure, but also about NAFTA, NATO, the TPP, big Pharma, military contracting, and a long list of other issues.

America Is About To Feel Like A 3rd World Nation

Ian Welsh, August 7, 2020
America’s about to make a double digit percentage of its population homeless. Something like 20 to 30%, or more of American small businesses have or will shut down by the end of the pandemic. The jobs won’t all come back and those that do will pay worse and feature worse treatment than the ones before (which were mostly not well paid and featured routine meanness.) We’re talking about 30 million to 60 million homeless….
America is “undeveloping.” It is moving from being a developed nation to being an undeveloped nation.

“A Historian of Economic Crisis on the World After COVID-19” (interview with Adam Tooze)
[New York Magazine, via Naked Capitalism Water Cooler 8-7-20]

Why has the balance of power between governments and bondholders shifted so dramatically? Or was the figure of the “bond-market vigilante” — who would punish states for excessive spending by dumping their debt — always a bogeyman in the developed world?

To be honest, I think we’re all still struggling to figure this out. To offer a definitive answer would not only be conceited on my part; it would fail to capture the slightly shocking historical novelty of the situation. I feel like we’ve all just stumbled out of a cave into this wide-open space and are still blinking in the sun.

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On August 8, 2020

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America Is About to Feel Like a Third World Nation

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On August 7, 2020

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I spent a good chunk of my childhood in third world countries. Most of that chunk was spent in Bangladesh, which was then arguably the poorest country in the world, but I visited or lived in Malaysia, Singapore, Indonesia, Nepal and India, among others.

There’s a feel to the third world one becomes familiar with: beggars, infrastructure that doesn’t really work, people doing terrible menial jobs. There’s the huge disparity between the wealthy and everyone else, or even those who have managed to attach themselves in a semi-dignified way to the wealthy.

Cruelty is routine and unremarked. Indian police officers routinely beat people as punishment (similar to their American counterparts). Servants are treated terribly, and in fact the locals routinely treated the servants far worse than foreigners. This has hardly changed, Vivekenanda, in the 19th century, noted that Americans treated their servants far better than Indians did.

The US is about to make a double digit percentage of its population homeless. Something like 20 to 30 percent — or more — of American small businesses have or are soob to shut down by the end of the pandemic. The jobs won’t all come back and those that do will pay worse and feature worse treatment than the ones before (which were mostly not well-paid and featured routine meanness).

We’re talking about 30 million to 60 million homeless.

These are staggering numbers.

The United States will feel third world. Oh, parts already did, when I landed in Miami airport the first time I immediately thought “third world.” Relatively prosperous third world, but third world.

Those places will be worse–and Florida (as I predicted near the beginning of the crisis) has handled the pandemic noticeably badly.

Of course, for many, little will change. They’ll keep their jobs, they’ll be fine. I recently witnessed a discussion of infosec jobs, talking about how for a person with a degree and a couple certifications, $120,000 was a lowball. There will still be good jobs, and you’ll still be able to lose everything in a few months if you become seriously ill.

But when those people who are hanging on go out in the streets, they’ll see, even more than now, the fate that awaits them if they slip.

So much of American meanness, and the culture is mean in the details of its daily life, comes from this fear. Because it is so easy to slip into the underclass, even if one “does everything right,” Americans are scared, even terrified, all the time. They suppress it with massive amounts of drugs (most of them legal), and most deny it, but the fear drives the cruelty.

In the Great Depression, people became less cruel, not more. They saw that the idea of meritocracy was absolute bullshit: The richest people in society had fucked up, good people wound up in poverty, and merit had nothing to do with who had how much.

I hope this is what will happen in the US this time. I fear, instead, it will lead to even more cruelty. Instead of saying, “We should make sure everyone is taken care of” and instituting universal health care, good wages, and a non-punitive welfare system (whether through a universal income or some other way), Americans will instead become even more cruel out of fear of losing their place.

The US is “undeveloping.” It is moving away from being a developed nation to being an undeveloped nation.

This process has been going on for a loooooong time. At least 40 years (1980), and arguably since about ’68 or so. The frustration, as an analyst, was that the trend was obvious but it took so long. There is, as Keynes said, a lot of ruin in a nation.

Change is slow, very slow, until it is fast. People who live in the slow period, of long decline, don’t really believe in collapse, they assume that things will get worse in a steady line.

But, in fact, there are long periods where everything changes slowly, then periods like earthquakes. 2008 was an earthquake (and collapse nearly inevitable by bailing out the rich). This is also an earthquake. Amercians will FEEL different afterwards, even if Covid goes away 100 percent, which it may not, because Americans refuse to do what is necessary. American media keeps having articles about how Covid will never go away. Well, except for quarantining visitors, it will for many countries. But not for the US, or Brazil, or India. Third world countries all.

Nor should we get too down on third world countries. The US is third world and experiencing the complete corruption of its ruling and governing classes, with the collapse of its administrative ability. When your post office can’t even deliver mail, you’re a failing state; this is such a basic part of being a government that it’s part of the Constitution, written in the 18th century, but because the post office isn’t a kleptocratic institution, the American political class is destroying it.

Most third world nations, indeed, are handling Covid better than The US.

Nonetheless the process is underway. The US is already governed like a third world nation, it just has a lot of legacy infrastructure and institutions to destroy to get the full experience.

So, expect that this is one of the times that matters. Expect that the US will be different after this. Expect that it will feel different. Understand that your personal position has become much more perilous. You must reduce your vulnerability and/or attach yourself to a corrupt money stream in a way which makes you indispensable. Being valuable is not enough, it needs to hurt important people if you you go down. If it doesn’t, the second the numbers say you go, you’re off, and any individual who can be replaced will be if you get on the wrong side of someone more powerful.

There’s lots of good paying jobs, yes, but almost all of them can be done by someone else. It doesn’t have to be you.

Bear all this in mind as you plan your future in the new third world United States.

Everything I write here is free, but rent isn’t, so if you value my writing, please DONATE or SUBSCRIBE.

Understanding Leadership Responsibility For Death, Harm & Welfare

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On August 5, 2020

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In the law there is a crime known as criminal negligence.

Criminal negligence is the failure on the part of a person on whom a duty is placed to take reasonable steps to prevent a certain bad outcome from happening. Duties may or may not be specifically known to you. For instance, as a driver, you have a duty not to hurt others with your vehicle. You may or may not have known that.

Other examples of people who have duties to others include: parents owing a protective duty to their children, or employers/supervisors at work owing a duty to their workers.

Let’s extend this. When you have authority, if you do something a reasonable person should know would cause harm, you are responsible for that harm.

All positions of power come with duties. American Presidents like to whinge on about how they have a duty to protect Americans, but the actual sworn duty is to uphold the Constitution. All leaders in any sane system are broadly responsible for the welfare of the people they rule and for the consequences of the actions they take, even on non-citizens.

If you go to war, like George W. Bush did, you know that a lot of bad things will happen: deaths, injuries, rapes, property destruction and so on. So you are responsible for all of those deaths. Therefore if you go to war without sufficient reason, you are a criminal. This is true for Obama (Libya, Yemen) and Trump as well (all the ongoing wars he could stop but hasn’t.) It is true of drone murders, both because they kill innocents and because they violate any reasonable reading of the Constitution (due process of law.)

It is also true of creating a medical system that kills tens of thousands of people a year. If you raise the price of drugs so that people can’t afford them without sufficient justification (aka. production and distribution costs have gone up that much), you know people will die. You are guilty of negligent mass murder.

Politicians and bureaucrats have positive duties: to see to the welfare of the people they oversee.

The same is true of corporate officers, or should be. Corporations are bundles of very valuable rights, given to corporations by the people, in the expectation that corporations will increase public welfare. A corporation which does not increase public welfare has broken that bargain and the officers have failed in their positive duty. Likewise the expectation is that the corporation will not actively do harm, certainly not harm that outweighs the good it does.

When you analyze various leaders in society thru this lens it becomes quickly clear who is doing their job and who isn’t. The Federal Reserve deliberately crushed wages for decades. That was deliberate harm, and they knew it. They deliberately made sure that full employment was not reached, which is in direct violation of the explicit aims of their institution.

Trump swore to uphold the constitution and repeatedly violated the prohibitions against profitting from public office. All Presidents of the past decades have supported laws that violate the first and fourth amendments, and do so very clearly.

And so on and so forth.

If a reasonable person, with the knowledge expected of someone in the role (aka. a drug executive should know the result of price increases of drugs, that’s a basic competency of the job) are responsible for the affects of their decisions. Since all of them exist to increase, at the least, the welfare of society, if they do things they know will decrease that welfare, then they have, at best, been negligent, and probably criminally negligent.

This the floor for how leaders in society, whether private or public, should be judged. This doesn’t mean they can never do anything to hurt anyone, many public decisions involve trade-offs, and sometimes harming a few is required to aid the many. A simple example would be a wealth tax. Bezos and Gates would squeal and feel badly done by, but many people would be better off as a result.

If a result of an action or policy is what a reasonable person in that role would expect to happen, leaders can be judged by it. Going to war has obvious consequences. Drone murders with big explosions have obvious consequences. Helping Saudi Arabia keep food out of Yemen has obvious consequences. Keeping life-saving drugs from Iran and Iraq has obvious consequences. Dropping progressive taxes thru the floor and taxing capital gains lower than earned income has obvious consequences. Massively raising insulin prices has obvious consequences. Treating warehouse workers like automata has obvious consequences (acknowledged in at least one case by keeping an ambulance outside an Amazon warehouse.)

When we fail to hold our leadership to “you are responsible for the obvious consequences of your decisions” our leadership no longer serves the people or their welfare, but only the welfare of the very few they decide to care about. At that point they become not leaders, but rulers, and we their subject and in all but name: serfs. Disposable assets to be used up as they see fit, for their benefit, not ours.

Everything I write here is free, but rent isn’t, so if you value my writing, please DONATE or SUBSCRIBE.

American and Sending Your Children Back To School In September? Bad Idea

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On August 3, 2020

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OK, full argument incoming, but for the folks who only read the first paragraph: if you’re American outside of a very few Northeastern states and  can avoid sending your children back to school without going to jail, you probably shouldn’t.

Recently, in a 3 day summer overnight camp, 44% of attendees got Covid-19. They didn’t do everything perfectly: staff wore masks, students didn’t, and they didn’t leave doors and windows open to ventilate cabins.

The attack rate was 44% in just 3 days. Forty-four percent got the virus.

Now schools aren’t as bad as overnight camps. However, we can assume that mask compliance will be less than perfect, especially with younger children. Seven or so hours a day are spent inside, with bad ventilation.

And children will be there for months, day after day.

Now, the US Covid map for today, August 3rd, at 1 AM.

If you send your kids back to school in most of these states (there will not be a turnaround by September), there is very good chance they will get it. It may not kill them, though it may give them problems for the rest of their lives, but they will bring it home. You, not being young, then stand a good chance of getting it and dying. If you don’t die, there is reason to believe many people suffer permanent health issues from it, even if they live.

Then, of course, there are cases like this.

Grandparents? Prime death chance.

This isn’t just about killing kids, it’s about killing parents, teachers and grandparents.

This is either sheerest insanity (if you think elites are completely clueless) or a deliberate measure meant to kill hundreds of thousands more Americans.

Anyway, I know there are laws, and you should look into them. But I’d think twice before sending my kids back to school under these circumstances. Maybe you’ll dodge the bullet, but you may not, and a lot of people won’t.

Everything I write here is free, but rent isn’t, so if you value my writing, please DONATE or SUBSCRIBE.

Week-end Wrap – Political Economy – August 2, 2020

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On August 2, 2020

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by Tony Wikrent

How to hide from a drone – the subtle art of ‘ghosting’ in the age of surveillance

[Tech Explore, via Naked Capitalism 7-29-20]

Strategic Political Economy

Chinese Banks Urged To Switch From SWIFT And Drop USD In Anticipation Of US Sanctions
[Reuters, via Mike Norman Economics 7-29-20]

China should prepare for potential U.S. sanctions by increasing use of its own financial messaging network for cross-border transactions in the mainland, Hong Kong and Macau, according to a report from the investment banking unit of Bank of China…

Foreign Affairs — It Is Time to Abandon Dollar Hegemony–Issuing the World’s Reserve Currency Comes at Too High a Price

[Foreign Affairs, via Mike Norman Economics 7-29-20]

Time to resurrect Keynes (and E. F. Schumacher’s) bancor proposal made at Bretton Woods but rejected in favor of using the US dollar as the global reserve currency? President Nixon famously ended the Bretton Woods agreement when he closed the gold window, ending dollar convertibility into gold at a fixed rate. This set the world on a floating rate monetary system with the USD remaining the reserve currency.

The War Nerd: Amateurs Talk Cancel, Pros Talk Silence
[Exiled, The War Nerd, via Naked Capitalism 7-27-20]

Victorian Britain carried out several of the biggest genocides in human history. It was also a high point of virtuous literature.

Because they were smart about language. They didn’t rant about the evil of their victims or gloat about massacring them, at least not in their public writings. They wrote virtuous novels, virtuous poems. And left a body count which may well end up the biggest in world history.

Open genocidal ranting is small-time stuff compared to the rhetorical nuke perfected by Victoria’s genocidaires: silence. The Victorian Empire was the high point of this technology, which is why it still gets a pass most of the time. Even when someone takes it on and scores a direct hit, as Mike Davis did in his book Late Victorian Holocausts, the cone of Anglosphere silence contains and muffles the explosion. Which is why Late Victorian Holocausts is Davis’s only book that didn’t become a best-seller.

Davis was among the first historians with the guts and originality to look hard at some of the Victorian creeps who killed tens of millions — yes, tens of millions — of people from the conquered tropics:

“The total human toll of these three waves of drought, famine, and disease could not have been less than 30 million victims. Fifty million dead might not be unrealistic.”

An English radical of the Victorian Era, William Digby, saw the scope of the horror: “When the part played by the British Empire in the nineteenth century is regarded by the historian fifty years hence, the unnecessary deaths of millions of Indians would be its principal and most notorious monument.”

….Let’s take a far more serious case: Eric Hobsbawm, still revered as canonical Marxist historian of the UK. As Davis notes, Hobsbawm does “mention” the Irish Famine, but — and if any phrase ever deserves to be written in all-caps, this phrase from Late Victorian Holocausts does: “Hobsbawm…makes no allusion in his famous trilogy on nineteenth-century history to the worst famines in perhaps 500 years in India and China.”

There are no excuses for this. There are reasons, but as the song says, “It doesn’t make it all right.” Still, once the rage passes and you stop clenching your jaw ’til it aches, there are reasons. Most of all, there’s a deep Imperial skill in the trope of silence. The stupid Nazis ranted and raved and lasted 13 years, then got completely destroyed. The Empire kept its rants for private letters, passed on to a guild of coopted historians, pundits, and publishers—and has never been called to account.

The Cult of Selfishness Is Killing America

Paul Krugman, July 27, 2020 [New York Times, via DailyKos 8-1-20]

But there’s a deeper explanation of the profoundly self-destructive behavior of Trump and his allies: They were all members of America’s cult of selfishness.

You see, the modern U.S. right is committed to the proposition that greed is good, that we’re all better off when individuals engage in the untrammeled pursuit of self-interest. In their vision, unrestricted profit maximization by businesses and unregulated consumer choice is the recipe for a good society.

Support for this proposition is, if anything, more emotional than intellectual. I’ve long been struck by the intensity of right-wing anger against relatively trivial regulations, like bans on phosphates in detergent and efficiency standards for light bulbs. It’s the principle of the thing: Many on the right are enraged at any suggestion that their actions should take other people’s welfare into account.

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On August 1, 2020

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