Ian Welsh

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

Category: China Page 6 of 10

Thinking Out Ukraine Sanctions

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On March 7, 2022

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Question:

If you could not buy anything you wanted using Western currency, why would you sell anything to the West?

Western sanctions on Russia are fairly close to: “You can sell us oil, wheat, and gas, but we’ve frozen all your foreign currency reserves we can touch (almost all of them), and we won’t sell you anything that’s useful to you. Anyone who tries to do so using our system is committing a crime, even if not in one of our countries, and we will punish them.”

It’s hard to imagine that Russia is going to keep selling us what they have. Naked Capitalism reprinted a good article by Olga Samofalova (second half, you can skip the first.):

Stopping gas supplies to Europe is even more disastrous in terms of consequences for both sides. Russia will not be able to transfer West Siberian gas, which goes through European pipelines, to other markets. There is no gas pipeline for such a volume to China or other Asian countries. To send gas by sea by tankers, it needs to be liquefied, but Russia does not have so many LNG plants for this, or gas carriers too. This means that Russia will have to stop production. ‘In the western direction, if without Turkey, there is about 150 billion cubic meters of gas from Russia. Where will we put so much gas if we don’t supply it to Europe? Nowhere. We’ll have to stop lifting the gas. This means that the world market will lose these volumes, and immediately there will be a large deficit of gas in the supply-demand balance of the European Union,’ says Yushkov.

‘No matter what anyone says, Europe will have nowhere to take such volumes of gas from. The world is not able to increase production by 150 billion cubic meters. Europeans will try to switch to other energy sources. An attempt to switch to coal will fail, since Russia is also the largest supplier of coal to the EU. The Europeans will try to launch everything that is possible: all the shut-down nuclear power plants [to reopen], the closed coal deposits in Germany and Poland.’

Now, this isn’t quite accurate. One of the main reasons that Iran is finally getting a renewal of the Iran deal is that the West needs oil and gas supplies from Iran back on the market. But even so, there will be a huge effect.

The core thing to understand here is that we in the West don’t know how to handle supply shocks. The last generation that knew how was the Lost, and they’re all dead. No one alive even remembers a properly-handled supply side shock, as we mishandled the OPEC oil shock catastrophically, and even those people are mostly aged out, unless they’re 80 and in Congress.

The Covid supply shocks have pretty much proved it. We could go into all the issues like price gouging, monopoly concentration, supply chain dispersal, just-in-time, consolidated shipping, the hollowing out of the trucking industry, and blah blah, blah, but it doesn’t really matter. Bottom line, we aren’t handling it well. All we really know how to do is raise interest rates and use central bank policy to keep wages below the rate of inflation, thus making the majority of the population even poorer.

So what happens when Russia cuts us off from a whole pile of minerals, hydrocarbons, and food that we need? Russia is the number one wheat exporter. Ukraine is #5. Gas we’ve already discussed. Oil will spike. Energy costs will go through the roof. Most titanium comes from Russia and is used to build planes, and if Boeing and Airbus have cut Russia off even from repair manuals and spare parts, why should they let the West have any?

I’m not 100 percent on this, but if Russia reacts the way I believe it would be rational for them to act, then we will have a supply shock bigger than the OPEC crisis, especially as it is being added to the Covid shock. Our companies will, of course, use the opportunity to increase their profits even more and price gouge (something they mostly didn’t do in the 70s), and we will get massive inflation.

I lived through the 70s. In the late 70s, during a period of about two years, the price of candy bars (you can tell how old I was) went from 25 cents to a dollar.

This is likely to be worse.

The Russians are also just not going to pay back their debts to Western countries in any form they can use. A law has already been passed where companies owing money to countries with sanctions can pay in rubles to the Russian government, who will then handle any negotiations, for example. More such measures will continue. Freezing reserves amounts to theft, and Russia is not going to pay back thieves.

Russia will probably also break all Western IP. With some under-the-table Chinese help, they’ll then set up production.

Meanwhile, China is thrilled — whatever they’re saying. Xi recently told the Central Committee that China could not rely on world markets for food security. But as a locked-in junior partner with a land border, Russia is a safe provider, especially since a lot of markets will be closed to it, and as we mentioned, Russia’s the producer of wheat. Oil and gas supplies can always be interdicted at the Straits of Hormuz by the American navy, but Russian land supplies are not so simple, etc, etc.

Now, let’s talk about the confusion of money for real economic goods. Money does a lot of things, but money cannot buy what a society cannot produce. Conversely, as Keynes pointed out desperately (and was ignored) anything a country can actually make, it can afford. So when you see things about money, or even stock markets, remember, China is the largest industrial state. Russia is the largest wheat exporter and a vast exporter of oil, gas, and minerals. Russia can survive this if they stop their economy from seizing up, because bottom line, they can feed and heat themselves. The food may be a bit boring, but it’s food.

China is hooking up Mastercard and Visa clients who were cut off with UnionPay and their Mir Card. This isn’t something that would happen if the CCP didn’t give the green light, not a chance. Russia’s SWIFT alternative and China’s are going to be hooked together. China’s banking system actually produces more loans than the US at this time, so they’ll keep the Russians afloat.

Many people think the Chinese will screw the Russians since the Russians need them so badly. They may, but I don’t think so. This is Western thinking, the same stupid, short-sighted greed that led us to ship the majority of our industrial base elsewhere, so a few oligarchs and politicians and consultants could get rich.

China needs an ally. They need good will. Give Russia cheap loans and help when they need it, be the country that helped them when almost no one else would or even could, and Russians will remember that for generations. China doesn’t need a resentful ally, they need a willing, happy, and healthy one. They don’t need an ally who they’re strangling with debt, and right now, loading Russia down with usurious debt in the middle of this crisis would make things worse.

Remember, people often fail to pay back debts they hate.

Contrary to Western propaganda, while there have been cases where China has loaned countries too much at too high rates, generally, Chinese development loans have been below market rates. This is because what the Chinese want isn’t a revenue stream, it’s resources. So they’ll build your mines, your factories, and your transportation networks, and throw in some smart cities, hospitals, and schools too, as a form of domestic subsidy. What they’re going abroad for is resources.

So my guess is that China doesn’t screw Russia to the wall, helping cripple them further and making Russia resent them during their moment of need. They aren’t modern Westerners. That doesn’t mean they don’t expect things in return, they sure do, but what Russia needs and wants to sell them, lines up perfectly with their needs, and there’s no need to screw Russia. In fact, I expect Chinese technicians to flood Russia and help with their infrastructure issues, oil industry, and so on. It’s enlightened self-interest and enlightened beneficience. To use econospeak, this is a positive sum game.

China and Russia have issues, sure, but they need each other massively, and each of them almost perfectly fixes the other countries weaknesses and needs. Russia will definitely be the junior member of the Alliance (and Russian tendencies to think in realpolitik geopol terms mean they get this and won’t even even resent it, as long as they feel fairly treated.)

The wildcard here is India. India and Russia have had good relations, indeed, have been friends, since independence. The Indian people themselves have genuinely fond feelings for Russia that they don’t have for the West or the US. But Indians hate the Chinese because of their territorial disputes.

If I were China, I’d just go to Modi and settle the territorial disputes generously. Give them a bunch of land, lay it on thick. I don’t expect them to do this, because it’s an emotive issue, but most of the land the countries dispute is basically worthless. It just doesn’t matter if India has that land. If China were to do this, it could probably move India into its alliance group, or at least keep it neutral.

So, let’s assume that Russia survives sanctions. Western elites don’t think it will, but Western elites are used to sanctioning powers like Iran and Venezuela, not a great power that China needs in its pocket, which has a huge land border with China. It’ll be ugly.

Assume Russia retaliates and there’s a big inflation shock. The West tries to get China to enforce sanctions, China says all sorts of mealy-mouthed stuff, but basically doesn’t do anything. The West then has three options:

  1. Full scale sanctions on China. If they do this, the OPEC crisis will look like a walk in the park. It will be a great depression. China is the world manufacturing center and the West cannot, yet, decouple.
  2. Targeted sanctions, like the chips sanctions that damaged Huawei so badly. These won’t make China change its mind, but it’s what Westerners do, especially Americans, so I assume this is the default.
  3. Try and cut a deal.. “All sanctions off and some stuff you want if you cooperate.” This is probably the best option for the West, but I don’t think China will go for it, because ever since Obama, the US has said that China is actually enemy . They’ll probably figure (I would) that once Russia is taken out, all deals are off and China is next in the crosshairs.

So what happens is probably (targeted sanctions), at first. The West hurriedly moves some production back home (but not much, rentier societies are too high-cost for manufacturing) and a ton to low cost western allies, like Mexico. Once it feels confident, it ratchets up the sanctions, and we are in full cold war. I’d guess four to eight years, but it’s really hard to time these things. You can know something is inevitable, like this cold war, and not be sure when. I’ve been talking about this for years, and now it’s started. The Cold War is on: It’s just only with Russia right now. It will spread to China. If the West gets too emotional and foolish and tries to force China right now, it could happen with a year.

So we move into a new Cold War, in the middle of terrible inflation and possibly even a depression. One can expect most of the South to go with China/Russia. They may have voted against Russia in the UN General Assembly, but their arms appear to have been twisted hard. As soon as its credible to move to the monetary area China and Russia are setting up, they’re going to move their monetary reserves en-masse — unless they’re a Western client state, because the West has now repeatedly stolen other countries reserves.

This means most of Africa. Most of South America will want to, as China is their primary source of development loans, but they may be too scared. Any Asian country which isn’t an American ally will go. India is an unknown.

But at the end, you have China which is world’s most populous country, with the biggest industrial base, and even (in purchasing power parity terms) the highest GDP on the other side, along with Russia, and the Number 2 nuclear power, likely still with a massive military, and a ton of southern resource states, all oriented around China. (Though some, like the oilarchies, will try to remain neutral.)

I don’t see this as a competition in which we are the top-dog. Feels like a 60/40 thing to me, and we’re the 40. For too long, we have thought that money and financial games were the same thing as an economy, and that we could just buy whatever we wanted so it didn’t matter who made it, grew it, or dug it up. That world is ending. It was killed by us, with our sanctions, ironically.

Welcome to interesting and shitty times. Put aside  your belief in our superiority: We’ve been top dogs for about 200 years now, in some places 500 years, so it’s hard. But all periods in which one group is dominant end, and we’re probably living through that end.

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The China Trap

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On March 2, 2022

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I’d really hate to be China’s leadership right now. This is rock/hard place for them. If they don’t keep Russia alive, they will have no ally when it’s their turn, but the US and Europe are likely to put a ton of pressure on them for sanctions & that will start the cold war earlier than they wanted (for them — it’s already started for Russia).

Obama famously pivoted to China, calling it the biggest threat. Trump slapped on sanctions and used a ban on semiconducters to absolutely savage Huawei, the flagship Chinese tech company, whose phones were rivaling Apple and Samsung, and whose 5G technology was the most advanced and ready-to-deploy in the world.

They put immense pressure on Europe to not use Huawei 5g tech and largely succeeded.

When Biden came in, he removed none of Trumps sanctions.

In effect, the US has been declaring China its enemy for about 12 years now, through both Democratic and Republican administrations, and over the last few years, anti-China sentiment in DC has solidified. As far as I can tell, it is truly bipartisan.

China has known that a cold war with the US was inevitable for a couple of years now, though they suspected it before. They had hoped to keep Europe as a neutral customer, but Europe has bowed down to the US whenever push comes to shove, so China, like Russia, appears to regard Europe as an American satrapy — a subject state who will do what the US says.

The US and Europe will now put immense pressure on China to comply with sanctions on Russia and to not help Russia get around them.

My guess is that China will not, substantially, comply. The calculus is simple: Cold war with the US is coming, and if they let Russia get taken out, they lose a powerful ally and will then be surrounded, rather than having most of their Western flank covered by another Great Power.

Russia has repeatedly told the West to go fuck itself with regards to sanctions. They regarded, even before this war, more sanctions as inevitable. All that the war has done, they believe, is move the sanctions forward. China is likely to have the same calculus: sanctions, tariffs, and so on are never removed, only increased over time.

Both China and Russia have their own SWIFT alternatives. They will hook together and be offered to the rest of the world. As non-US allies have seen, with Venezuela, Iran, and now Russia (among others) that the US will even freeze reserves, they will join the Chinese and Russian systems and settle trade in Yuan. They will move reserves out of the US/European system.

This is, however, a huge hit to both China and the US. The US cannot currently decouple from China — it’s impossible. The US actually needs China more than China needs them. Remember, China is the largest industrial power, not the US.

It’s still a terrible trap, though, and the Chinese will, I think, play to mitigate. The US will not slap the worst sanctions on just yet, but will rush to move production to low-cost US allies.

There is an alternative, of course. China could buckle, agree to join the “rules-based order,” and play by American rules. The issues here are threefold.

First: This means China is not allowed to take control of value chains, which provides much of the real profit. Probably 15 percent or so of the value in a value chain comes just from that. They will have to keep paying US intellectual property fees, which amount to another ten to 15 percent in a lot of industries.

Intellectual property, if it’s not obvious, is on the table. Certainly Russia will stop paying these fees, that’s almost certain.

Second: Playing by Western rules means, the Chinese believe, staying stuck in the middle income trap and not making it to high income. This is one of those places which is a genuine trap: Decoupling will be a huge hit, but staying in the system and playing by the rules set up to favor the US and its allies means being in a system which keeps China from becoming a rich nation.

Third: There is an emotional component. As much as many Europeans, especially eastern Europeans, hate and fear Russia, China has a deep resevoir of hate for Europe, and the US for the “century of humiliation,” for Taiwan (to them a rebellious province which they would have retaken years ago if the West didn’t support it), and of course, a lot of hatred for Japan, the West’s primary Asian ally, for its invasion, occupation, and atrocities before and during WWII.

Emotionally, the Chinese are primed to tell the West to go fuck itself. They didn’t see why they should’ve play by rules made even when they were at their weakest. The “rules-based international order” to them is nothing but a set of rules set up by people who don’t want them to be a great, rich nation again. Rhetoric from the US has solidified this impression, and I think more correctly than not.

So the “cut a deal and compromise” really means “accept the current world order and play by rules that China thinks are unfair to them, and are made without their input.”

My guess is that China will do whatever it takes to keep Russia alive and to stop Western sanctions from achieving their declared aim: To collapse the Russian economy and cause regime change. Viewed pragmatically, I think that is the right call if you are the Chinese leadership, because the other two options (acquiescing to Western rules or letting Russia collapse and facing the West w/o Russia) seem worse.

I would guess, and it is just a guess, that this takes about four to eight years, because the US would be insane to decouple now, and China also wants time to prepare. But emotions are running high and a lot of policies have been made without clearly thinking through their consequences lately, so I while I think it’s odds on, I won’t be surprised if emotions rule instead. The decoupling may happen sooner.

Welcome to the new Cold War. Remember, in this one, the world’s biggest industrial power and most populous nation is on the other side. This isn’t 1950 or even 2000. China is the biggest trade partner of more nations than the US, not the other way around.

And China needs what Russia has: wheat, oil, and mineral resources.

Cold War 2.0 isn’t one in which the West are necessarily the favorites to win.

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The Ukraine Crisis Is Speeding Up Arrival of Cold War

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On February 4, 2022

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So, Biden has warned that other countries should not help Russia evade Ukraine-based sanctions.

Meanwhile, China’s Xi has backed Russia on its “no NATO expansion” demand and received support in return:

In the joint statement released by the Kremlin, Putin and Xi called on NATO to rule out expansion in eastern Europe, denounced the formation of security blocs in the Asia-Pacific region, and criticised the Aukus trilateral security pact between the United States, United Kingdom, and Australia.

I don’t expect Russia to invade, but what it can and will probably do is recognize the breakaway regions in the Ukraine, Donbass and Luhansk, and help them enforce their borders.

This will trigger sanctions, including personal sanctions against Putin. China will, indeed, help Russia “evade” the sanctions, and China, Russia, and other states will move forward with their own payments area.

Trade will become more difficult, so will travel, and another huge step towards the on-rushing Cold War will occur.

This isn’t rocket surgery, the US is moving hard towards “containment” of Russia & China, and those countries recognize that they have interests in common. Because neither of them can make a separate peace — the US won’t allow that. The US effectively won’t negotiate with Russia at all (saying no to everything the Russians have asked for isn’t negotiation), so they may as well continue preparing for what they know is coming.

As I discussed at length elsewhere, I don’t see this Cold War ending as favorably for the US as the last one did, for the simple reason that the US has already shipped the majority of its industrial core to China.

This is certainly the stupidest world. American elites, backed by European subject states (they all are), don’t seem to get that it isn’t 1947 or 1991. They no longer control the world’s most important economies, and their states are dysfunctional, incapable of even handling a pandemic, let alone rallying the necessary social support to win a two-generation economic war while in the midst of ecological collapse, climate change, and with a huge proportion of their populations suffering from health problems due to Long Covid, as well as a pandemic that goes on and on.

China and Russia combined are stronger than the USSR was, and the US and Europe are weaker than they were during the Cold War.

This won’t end well.

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China’s Economic Plans Amount to Preparation for Cold War

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On January 17, 2022

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From the Wall Street Journal:

The article itself is a bit foolish. China can’t, and knows it can’t, be entirely self-sufficient. But it can reduce its dependency, in particular on US and Western sources, and that’s what it has to do. Unlike with Venezuela and Iran, seizing Chinese freighters routinely is a no-go (and, if necessary, China can send military escorts). But US sanctions can bite, and hard, as they did with semiconductors, and the US showed its teeth under Trump and continues to growl under Biden.

What Americans don’t seem to understand is that China could easily retaliate: It is the sole source for a huge number of manufactured goods and is the world’s largest manufacturing power. So far it has chosen not to; it wants the status quo to limp on for as long as possible, but if the US decides to start a real trade war, it’s likely the US will be hurt badly. This isn’t the USSR vs. the US, where the US was the clear, superior industrial power. The US has the lead in a few areas, its allies in others (it’s Taiwan that makes semiconductors), but China is the lynchpin industrial economy.

Still, the Chinese have decided that the US is determined to have a cold war, and they are right, and they are preparing for it.

US propaganda has become particularly unhinged of late. My favorite being this from the NYTimes:

It seems more apt to describe the “herd immunity” policies followed in the West, especially since Omicron, as Holocaust-like, as official US death figures are 800K, and likely real figures are twice that and Covid isn’t close to over yet.

But “they are very strict at lockdowns and the work is exhausting but they’ve saved millions of lives” seems like an odd thing to criticize China for, but US elite lack of self-awareness continues to be the marvel of the world.

Western elites can’t admit basic facts. Covid could be controlled. They chose not to control it because letting it rip made them rich. Millions died as a result. They are responsible for more deaths than the Holocaust due to their refusal to handle the pandemic (and it will be many more by the end). The “evil, totalitarian Chinese Communist Party” are the ones who went all out to save lives, not the “good, wonderful, free democratic governments of the West.” (With, yes, a few minor exceptions.)

Western elites, through their actions and lack of actions, in effect, murdered millions of people. Covid could be controlled, China proves it, and so they hate China even more.

Hopefully they won’t let their hate reach such a peak they toss nukes around when the Cold War they are so determined to have goes hot.

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Mass Democratic Legitimacy Loss from Mass Disabling

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On January 11, 2022

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The figures I have seen for Long Covid start at about 10 percent. You can have Long Covid without knowing it; there can be organ damage, including brain damage, without you having symptoms, but that damage will effect your future health and lifespan. Ironically, it may create a co-morbidity if you get Covid again and you’ll be considered part of a vulnerable population.

For some, it is very severe. One acquaintance had enough brain damage to cause aphasia, and needs speech therapy. Others go from fit to out-of-breath walking down the street.

As the policy in most Western nations is “Everyone will get it, let’s just make sure it doesn’t swamp the hospitals,” let’s run some numbers. Assume everyone is 80 percent. The US population is 329 million, so 263 million people will get Covid. Of those, assume 10 percent (and I’ve seen double that number, but we’re going with conservative estimates), about 33 million people, will get Long Covid.

In the EU, numbers run to about 36 million. Worldwide, excluding China and Japan (who seem to be handling Omicron), there are about 5.9 billion people (with some generous rounding against Long Covid). 80 percent of that is 3.9, so you’re talking 390 million people with Long Covid.

These are VERY conservative numbers. Long Covid estimates go as high as 20 percent that I’ve seen, and there is the issue of re-infection. If you get Covid multiple times, do you have multiple chances to get Long Covid? Bear in mind that there will be new variants as well, so immunity will not carry forward that well.

So it wouldn’t be hard for those headline numbers to double: 780 million worldwide, 72 million in the EU, and 66 million in the US.

These are—staggering numbers, and their affect on our societies cannot be underestimated. The deaths are terrible, but the bad health and disabling of many (and remember, that organ damage will lead to disabling later in people who seem fine now) will require us to restructure large chunks of our society to support those who are injured. Many people will not be able to work, or their working lives will be reduced in length and intensity.

What’s worse about this is that, while people die only once, they can remain sick and disabled for decades. So unlike the Spanish Flu, say, Covid will be with us in ways we can’t ignore — every time someone looks at a friend or loved one who is sick because of it. No matter what people “feel” now, years to decades of watching the consequences will sour them.

Letting Covid run wild through the world was a choice. We made it. A few societies didn’t.

Ironically (or not?), the Chinese Communist Party decided to not let their population die in droves and acquire long-term health problems (the number for China would be 112 million at the conservative end). Most Western “democracies” chose to have mass deaths and Long Covid.

This isn’t just about the horrid consequences of our choice to let Covid rage and mutate, this is also a mass legitimacy loss event for the West and for democracy, though a very few democracies have proved non-psychopathic.

If “freedumb” means governments that let you die or get Long Covid, is it “freedumb” worth having? If being ruled by “commies” means that you live and stay healthy and so do your parents, grandparents, and kids, is “Communism with Chinese characteristics” so bad?

That’s a question a lot of people are going to be asking themselves.

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Covid and China’s Victory

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On January 6, 2022

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One of the most clarifying things about the Covid epidemic has been which countries have been able to handle it and which haven’t.

To oversimplify, China and a few other nations have handled it well. None of the major Western powers have; certainly not the US.

In biology, there’s a distinction between natural selection and sexual selection. In sexual selection, you compete against other members of your species. In natural selection, you compete against your environment.

In nations, societies, and civilizations there is something similar: internal vs. external competition. You compete against fellow members of your society for status, wealth, and power within your society, but your society as a whole competes against other societies. There are always top dogs, hegemonic powers, and so on, and losing an inter-society culture can, at worst, lead to you being genocided and, at best, lead to long periods of poverty and subjugation. (The Irish to the English, say, for hundreds of years. Native Americans to the Europeans. Indeed, almost everyone to the Europeans, but before that there have been various hegemonic powers — including China.)

In the West, with some minor exceptions, Covid was treated as a profit event. It was a way for the richest and most powerful to become even more rich and powerful. That millions would die and millions more would be crippled (Long Covid rates seem somewhere between 10 to 20 percent depending on definitions) was secondary to the possibility of funneling more power and wealth to those who already had the most. Billionaires, just one group among elites, have seen their wealth double during the pandemic.

China, or more accurately, the Chinese Communist Party did not treat the pandemic primarily as being about internal competition. To them it was important that large numbers of citizens did not die and were not disabled.

This means that China will come out of this stronger than the West, because the economy, fundamentally and always, is people, and there’s aren’t mass-disabled and/or dead. Plus the legitimacy of the ruling class, rather than being reduced by their pandemic response, has been increased.

To the CCP, the health of their citizens is integral to maintaining their power. To the West’s elites, it is an asset to be burned down to make more money and improve their internal position.

The irony of this is that by taking care of their citizens, the CCP has both improved their external and internal positions, while the West’s elites, who can be best characterized as incompetent psychopaths capable of nothing but accumulating more internal power and wealth, have been weakened despite their gains in wealth. This is because, as a group, their power is dependent on the health of their population and on their legitimacy.

As far as I can see, Covid pretty much proves that, barring outside shocks, China has already won the hegemonic competition between itself and the US. Oh, it’ll have to play out, but the CCP governs its country basically competently, and US elites are fools who let their society’s power run down.

US military superiority, in the face of nukes and the Russia/China alliance, is insufficient to alter this fact. China has the industry, it has more competent government, and its government’s legitimacy is riding high while the legitimacy of the West is in tatters.

Given these facts, and that China has a much larger population, it’s hard to see how the US can remain in its position. Just as the end of Britain as world ruler took generations after the US actually surpassed it economically, so this will take time to be seen. However, just as, by 1900, it was essentially inevitable that the US would take over from Britain, so it now seems that the hand-off to China is inevitable, or would be in a world without climate change and ecological collapse, those being the likely external shocks that even a functioning society may not be able to overcome.

I take little pleasure in this. I dedicated a decent chunk of my life to trying to help fix the US, as a Canadian-American collapse is likely to be ugly. But it is what it is, and it must be faced squarely.

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What Would Chinese Democracy Look Like?

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On December 1, 2021

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A few months ago I read a couple of books by the Singaporean intellectual Kishore Mahbubani. In Has China Already Won?: The Chinese Challenge to American Primacy, Mahbubani discusses Taiwan.

The one exceptional trigger for a war involving China is Taiwan. Most of the time, the Chinese leaders have a lot of policy flexibility. There are no strong domestic lobbies to worry about. But the one issue where the Chinese leaders cannot bend and compromise is Taiwan. Any Chinese leader, including Xi Jinping (despite all his power), could be removed if he is perceived to be weak on Taiwan. Why is Taiwan so fundamental to China? There is a very simple explanation. Every Chinese knows the century of humiliation that China suffered from the Opium War to 1949. Nearly all the historical vestiges of this century of humiliation have been removed or resolved, including Hong Kong and Macau.

Only one remains: Taiwan. It was Chinese territory until China was forced to hand it to Japan after the humiliating defeat in the Sino-Japanese War of 1894–1895.

Mahbubani also discusses what sort of person would be elected if China was a democracy.

Think Theodore Roosevelt, who, if you aren’t aware, was a raging warmonger. Xi, and the CCP in general, are a moderating influence on Chinese foreign affairs. China’s population has far more aggressive feelings than China’s current rulers. They are still furious about the “century of humiliation,” and they want China to be the number one nation in the world — or certainly to be dominant in its sphere of influence, exactly as Americans did in through the late 19th century to the 20th century.

We have some really weird ideas about our own  history, or about what is normal for rising or re-establishing great powers.

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They always take control of their near abroad if they can. This is why Russia is willing to fight a war for the Ukraine, if it comes to it: The Ukraine was part of Russia for centuries. China is actually being remarkably flexible about Taiwan for a rising power. The US bent every country near it to its will and took chunks of land out of both Mexico and Canada, while replacing governments in Latin and South America regularly. Britain brought Scotland and Ireland into its “union.” Germany grabbed everything near it that it could, until defeated in World War II. Japan went on one of the biggest empire building sprees in history.

Other countries, of course, will resist as best they can, and I personally think that Taiwan should stay free. But the price of its freedom is allowing Chinese leaders to save face with their own population: They are saying “Taiwan and China are part of one country.”

This isn’t the 90s, when the US had an easy veto over a Chinese conquest of Taiwan. American aircraft carriers, if they try to intervene, will be sunk by China’s massive arsenal of missiles. China has nuclear weapons and is de-facto allied with Russia, so escalation is extremely dangerous.

Taiwan and the Ukraine are not, fundamentally, the West’s business — except, of course, that the West’s semiconductor fabrication is concentrated in Taiwan due to idiotic Western trade and industrial policies.

Both China and the West are building semiconductor fab as fast as they can in their heartlands. Soon even this vulnerability will be gone, on both sides.

In the meantime, if China wants to say “Taiwan is part of China,” which is something the US agreed to as far back as Nixon, it’s a cheap way to keep a small democratic state going and avoid a potential world war.

The EU Needs To Get Clear On Its Interests

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On November 10, 2021

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One of the more useful neoliberal writers I’ve been reading recently is Kishore Mahbubani. A point he made about US and European foreign interests really came home to me recently, seeing news of a refugee crisis at the Belarus/Poland border, where Belarus has deliberately released migrants in retaliation for EU sanctions and, this

Readers may remember that Turkey, during the last refugee crisis (still ongoing, but much reduced) used holding and releasing refugees as part of its negotiation with the EU, similar but not identical to what Belarus is doing. Those refugees, of course, came from countries like Libya and Syria which the EU had helped devastate, as well as other countries in the Middle East and Africa which could not give their residents decent lives. So the people fled to Europe.

Which brings us back to Kishore’s points. The US has no significant interests in most of Africa and none in the Middle East now that it is a net producer of oil. It should disengage from places it has no significant interests in (this includes Afghanistan.)

The EU, on the other hand, shuddered under the relatively mild recent refugee crisis. It is where refugees will go when their countries blow up, especially countries nearby, because it offers the best quality of life in Eurasia.

This means it is not in the interest of the EU to destabilize countries, to sanction them or to even to see them stagnate or fail economically. If they do, Europe is who gets the refugees, and Europe cannot handle refugees, politically or economically. (Arguably Europe might figure out how to economically, but Europe is wedded to doctrinaire technocratic neoliberalism and incapable of meaningful policy outside that framework.)

This is why the EU screamed so loudly when the US unilaterally left Afghanistan: they knew they would get the refugees.

The EU is the world’s second or third largest economy, depending on how you measure it. They could have provided sufficient aid to Afghanistan to reduce the refugee flow. They didn’t. They couldn’t continue occupying Afghanistan themselves, because their militaries are set up as auxiliaries for US troops: they aren’t capable of long term, long distance, large scale operations though France manages some in its old African possessions.

After World War II Western Europe was a US satrapy, and Eastern Europe belonged to the USSR. This was simply a fact: huge numbers of US and Russian troops were stationed in Europe.

The Europeans have never recovered from this: they still act as if the US rules them; they act as if satrapies, expecting the US to take the lead.

But the US does not have the same interests as Europe any more. Not only is Europe far more subject to refugee issues, as already noted, but it’s far more integrated into the Eurasian (and Chinese) economy, and its future is within that economy, not with the US.

So Europe needs to get off its knees, and stop pretending it isn’t a great power. It needs to stop damaging countries that will send refugees to it; it needs to support countries so that they don’t shed refugees, including helping them develop; and it needs to build a reasonable military, capable of operating where it has interests and certainly big enough to credibly deter Russia without American help. (That the EU is scared of Russia, a country with a much smaller population and economy, is ludicrous and pathetic.)

It may be that for its own reasons (its commitment to technocratic rules) the EU will come to oppose the rise of China, or it may be that the EU will decide to cooperate with China in developing countries whose undevelopment is a threat to the EU, but whatever Europe decides should be based on a clear-eyed look at its own interests.

If Europe continues acting weak, putting its defense off on the US (which no longer has the same interests) and refuses to look after its unique interests, there’s a good chance the EU will eventually collapse or be reduced back to its western core (German, France, hangers on). It already lost the UK, the eastern provinces are restive, and its prestige is weak compared to 20 years ago.

It’s time for the EU to either decide to be a great power, or to simply buckle under to whoever offers the best combination of threats and blandishments: the US or China.

(My writing helps pay my rent and buys me food. So please consider subscribing or donating if you like my writing.)

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