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The Trump China Showdown Aligns with Reality

2016 December 12
by Ian Welsh

Trump received a phone call from the Taiwanese president. That was a violation of the One China policy, where in order to have diplomatic relations with China, one cannot have formal relations with China.

It is quite clear that Trump did this deliberately, it was not a gaffe, but planned.

China stated this was unacceptable, but was willing to pretend it was a gaffe.

Trump doubled down, accusing China of currency manipulation hurting the US (not true right now, but massive in the past), of not helping enough with North Korea, and of unacceptable behaviour in the South China Sea, where it has been building islands in order to seize control of the sea. He said he sees no reason to abide by One China if the US isn’t getting something in return.

China’s official response is that there will be no negotiations over anything without One China first.

A Chinese tabloid which is party associated said that if the US rescinded One China, China should invade Taiwan and arm American enemies.

And here we are.

Some basics. One power maximum; the potential power, of a modern state, is equal to its industrial power. Many nations may not have as much power as their industry allows, but this is the limiter.

China is now the world’s largest manufacturer. It is the world’s potentially most powerful nation. However, China’s policy has been (quite sensibly) to gain the base first, then arm, for classic guns or butter reasons.

China did manipulate its currency to gain their manufacturing base, but the US and other Western elites were entirely complicit. China offered large profits to individuals and corporations, and they took that money. It’s that simple.

China’s ascension did not just hurt the US, it hurt Japan, who is probably America’s most loyal ally (with the possible exception of the UK or Canada).

The manufacturing jobs performed in China would have been, in an alternate universe, done by the people who elected Trump in the Rust Belt.

Trump and his advisors do not believe that China and the US’s interests are aligned; they see China as the rising power, who is rising at the expense of the US.

This is not insane. In fact, it is accurate. It is possible to imagine a world in which that rise led to shared prosperity, but no one is offering such policies and no one ever has.

Now, I want you to turn your attention to Russia. Yes, Russia.

See, the problem with NATO expansion, the overthrow of the Ukrainian government, the color revolutions, and sanctions against Russia, and all that stuff, is that it was forcing Russia into China’s camp.

Russia does not want to be China’s ally. Russians (at least in the past, not so sure any more) would far rather have allied with Europe and the US, but Europe and the US would simply not allow it. Running on crazed fumes from the Cold War, the US and Europe feared Russia, who is no longer a threat to take first sport, rather than China, who is.

Note that Trump has also expressed great skepticism about NATO. He puts it in money terms: “Why should we pay for Europe’s defense?” But the end is the same, a NATO pointed at Russia doesn’t make sense to Trump or his advisors.

And Trump’s plans for the US involve a change in trade, anyway. People are scared of a trade war, and they should be.  Right now, what Trump is saying is at a meta-level which most people are too stupid to get: China is going to have to make a deal which helps American manufacturing, and everything is on the table in order to negotiate that. Everything.

Because Trump owes his election to the Rust Belt. He must deliver for them, in four years, or he will not be re-elected. His people, at least, will understand this. The election was too close. Trump must deliver.

And if China won’t cut a deal? Fine, slap tariffs on them. America is still America; American consumers can still consume, and if it turns into a trade war, manufacturing jobs may well come back to the US.

This is high stakes poker. It could cause a serious war, or it could send the world economy into a serious tailspin.

It is also a realignment moment. The US is pivoting from treating Russia as a big enemy, to treating China as the big threat. This is, whether you like it or not, rational: China is the actual threat to American hegemony.

I assume Trump thinks there is a deal to be made–perhaps he even thinks there is a way to make the deal into a win/win. We will see.

But do not think this is pure insanity, or that it is not well thought out. This is based on a world model in better accord with actual world conditions–more so than the world model under which Obama was operating.

If the status quo continues, the US will be superseded by China. At that point, if China and Russia are allies, options for the US are extremely limited. China is the rising power, Russia is a great power, but won’t a threat at the “super power” level again in the immediate future.

I will remind readers, once again, to stop assuming that Trump and his team are idiots just because they are doing things in new ways. I do not know if this pivot will work, and it could blow up spectacularly, but it is not prima facie stupid.

In fact, politicians who actually put the US’s real interests first would have never allowed China into the WTO, and certainly would have gone out of their way to make sure that China’s ascendence was a win/win, rather than a win/lose OR (if they were ruthless and slightly less smart) they would have done everything they could to prevent it. (I would not have favored that, to be clear).

Certainly, the US should have pivoted East years ago. This is a move which is made much more dangerous and problematic than it could have been by the fact that it wasn’t done when it should have been, enabled by an absolutely deranged policy towards Russia, which schizophrenically treated Russia as if it were both powerless and a huge threat.*

The world is getting a lot more dangerous, fast. But it was going to anyway. This may not be the best China policy possible, but it at least acknowledges reality.

(*I understand the impulse to prevent Russia from turning back into a huge threat, but that could have been managed with far less difficulty and in ways that wouldn’t have estranged Russia.)


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43 Responses
  1. December 12, 2016

    Not quite right, China and the US are arming for war, slowly. and they realize that the other one is the ultimate enemy. Similarly, Trump will not have two worry about the rust belt – there will be a housing boom.

  2. tatere permalink
    December 12, 2016

    We can either be Britain to China’s America, or the Soviet Union. Very roughly speaking. But sliding out of first place gradually with some illusions left intact seems preferable to exiling ourselves from the locus of the 21st century.

    I just don’t see Trump having any investment in the long term. After him, the deluge (literally).

  3. BlizzardOfOz permalink
    December 12, 2016

    @tatare – right. It’s not like Trump has any children. And the ones he does have are marginal figures who don’t like the spotlight, and won’t have any skin in the game of the Trump administration and its aftermath.

    Do you guys do a basic reality-check of your counter-Trump memes? Can you just not come up with anything better?

  4. realitychecker permalink
    December 12, 2016

    Thanks for this post, Ian.

    I see things pretty much as you lay them out in this post.

    I would just add that, as always, following the money is always a good idea.

    I argued endlessly at Firedoglake, and have here as well, that the grand strategy of the corporatocracy had to be that the future lay in China (i.e., developing markets always offer the fastest growth rates, especially once their economics progress to the point where the middle and working classes have money to spend on consumption, and China’s potential in that regard is collosal), and that everything we saw happening in America vis a vis the transnational corporations was best understood as a deliberate siphoning of all liquid assets out of this economy because they intended the locus of their future business interests to be in China and in Asia generally, and that this meant that they had made a strategic decision to leave behind a dry and empty husk here, because this market had already been exploited fully in each and every important market niche, so that growth here would be very limited going forward. That was my view because I have been, first and foremost, a market analyst.

    This has been the basis of my interminable pleas for people to stop thinking in terms of their favored duopoly ‘team,’ and rather start thinking in terms of “regular folks vs. the corporatocracy and their minions and enablers.” I absolutely believe that is where the political battle lines should be drawn, but will the dumb American populace ever see it before it is way too late?

    Doubtful, IMO. I’ve seen no evidence of it yet. Most Americans seem to still think the corporations are their friends.

    Unfortunately and inevitably, I fear, unbearable pain will be the only effective wake-up call, and it will come too late to matter.

  5. BlizzardOfOz permalink
    December 12, 2016

    Ian, thank you for this analysis – very interesting.

    The world is getting a lot more dangerous, fast. But it was going to anyway. This may not be the best China policy possible, but it at least acknowledges reality.

    Agree with this 100%. There has been this pervasive sense of “there’s nothing you can do”, so that it’s almost startling to see us pursuing a definite goals. It’s time to revive that ancient esoteric doctrine of “action”, last seen under FDR.

  6. markfromireland permalink
    December 12, 2016

    Good posting and an alliance with the US makes sense from a Russian point of view. As the desertification of China proceeds and the depletion of their aquifers (currently at -1mpa and accelerating) gets worse they’re going to have to look around for arable land and, far more importantly, water. Where will they find it? Well from a Chinese POV Eastern Russia must be very tempting. There are plenty of Russians who are well aware of this.

  7. Lisa permalink
    December 12, 2016

    It was part of the neo-liberal and most definitely the economic elite consensus in the west (particularly US, UK, Canada, and Australia) to deliberately move manufacturing out of the country and China (amongst others) was to be the big recipient.

    As I have stated before labour costs was just one (and relatively small) factor, the biggest one being tax avoidance.

    The Chinese were happy to oblige and receive all the capital and expertise to create their massive manufacturing base. The western economic elites laughed all the way to their (Cayman, Swiss…etc) banks.

    The west dug it own grave by doing this and have doubled (trebled?) up by destroying research, scientific and technical education as well.

    In the west we ‘squared the circle’ and held up demand (despite dropping incomes for the majority) by massive increases in private debt, the financial sector also laughed all the way to ..their ..banks..

    So here we are now ..and we blame China for this? Nonsense, blame the real culprits our own elites that quite deliberately created this situation. I can go back to references by them in the early 1990s that this was their plan.

    By and large the Anglo countries (and the most neo-liberal) pushed this the most until they (in the case of UK, Canada and Australia) have almost no manufacturing at all now and even the US has been gutted. Germany was one of the few to resist this trend, but it was playing it own game to de-industralise the rest of Europe to its benefit.

    Note that Germany has had and still often does, have a bigger trade surplus than China has…so why isn’t it being picked on?

    So let’s drop all this economic pretence, because that is not a factor for the elites, especially since many US corporations (etc) have a large, or all, of their manufacturing assets in China and are not going to risk them.

    Note the beat up about China started long before anyone noticed or thought (even the slightest) about the impact on home working classes. This is just a regional political power struggle, fed by the need in the US for ‘enemies’ to justify military spending, in the case of China especially by the US Navy and its suppliers.

  8. Peter permalink
    December 12, 2016

    @RC

    I searched to find what was meant by the term Middle Class in China and I don’t know if the numbers I found were accurate but they are sobering. Apparently earning more than $10 a day puts someone in the MC under their metrics and the 300 million people who were lifted out of poverty are making more than $1.50 a day. These numbers may be outdated and wage pressures have driven wages there higher but this is not a consumer class there or on the world stage.

    I think the new two child policy is aimed at the more affluent urban dwellers who will breed a 300,000,000 strong educated, more prosperous and hungry MC to build their consumer society. I can’t fault them for thinking big but much can happen in the next few decades and even in the next few years.

  9. Hugh permalink
    December 12, 2016

    I do not think we should equate the confluence of a couple of vague ideas re China and Russia with a strategic vision. It doesn’t take a lot to realize that US foreign policy and interests have been grossly distorted, indeed twisted like a pretzel by neocons and neoliberals.

    But in economic terms, you need only look at Trump’s Cabinet picks to see that bringing back jobs, especially those with high wages, is not on the table. And on the political side, while Trump is advocating a more confrontational approach to China and a less confrontational one toward Russia, he remains just as goofy as any neocon in his support of apartheid Israel.

  10. Some Guy permalink
    December 12, 2016

    It’s a humpty-dumpty world these days:

    (“The question is,” said Alice, “whether you can make words mean so many different things.
    “The question is,” said Humpty Dumpty, “which is to be master—that’s all.”)

    It’s funny to see folks simultaneously clutching their pearls that Trump confronting China means irresponsibly bringing on World War III while at the same time gleefully signing on with the notion of imposing a no-fly zone in an area where the Russian airforce is operating (along with every other manner of provocation one could possibly imagine – personally I thought the Economist cover of Putin with his eyes replaced by red airplanes was a bit too understated, but, naturally, opinions vary).

    Except it’s not really funny any more, more bemusing, in the sense of, ‘where is this all incoherent screaming and yelling taking us and how long is it going to take to get there?’

  11. realitychecker permalink
    December 12, 2016

    @ Peter

    Well, one disadvantage of being a good market analyst is that your analyses and predictions are worthless if the premises have already happened and there is already hard data that matches your predictions lol.

    My prediction is based on what I believe will unfold over the next few decades, and I think you can take my word for it that the strategic planners for the major international corporations are capable of thinking a few decades ahead as well. (Just like the Chinese are, btw.) I am not a trend-follower, rather I am about predicting what will happen before it happens, and most especially before others see it. The seeds of consumer growth in China are already in the ground. As the trend becomes more obvious, the growth rate there will be phenomenol, and that is what corporate planners really care about Feel free to check back with me in 30 years if you want to tell me I’m wrong on this, amigo. 🙂

  12. realitychecker permalink
    December 12, 2016

    @ Peter

    BTW, just to be clear, I was not rejecting your analysis from the other thread; in fact, I agree with almost all the individual points you made there. I just think the grand global corporate economic realignment point is the 800 pound gorilla in the room, and therefore the most important one for getting the big picture right, and your points were not so long-term oriented as that one.

  13. Peter permalink
    December 12, 2016

    @RC

    I don’t mean to step on your wizard slippers, Tovarich so I’ll avoid forecasting. Market analysis/strategic planning are certainly necessary and useful but I won’t be here in thirty years to check the results of this prediction.

    You seem to be predicting opportunities for US located corporations to sell to this nascent Chinese consumer class which was also promoted decades ago when China was first opening. I don’t have to drive far to see mile long trainloads of mostly Chinese containers heading east while I’ve learned that about 90% of them return to China empty. The containers that return loaded are mostly filled with scrap metals and scrap paper not the high tech and high value products we were told would find buyers there. It seems that most of the products that the existing consumer class in China wants are already made in China even if they are Amerikan brands.

    Another related topic is the Madison Av like promotions of the Silk Road concept by some reporters/China boosters. I see China’s need for this secure conduit but the glossy tales of co-prosperity zones popping up along its tracks seems like more PR snake-oil.

  14. Ian Welsh permalink*
    December 12, 2016

    Hugh,

    what I sketched above is consistent with what Bannon’s world view, and combined with the world view of many generals, seems about right.

    Remember, at this point Trump, functionally, is Trump’s Team.

  15. GrimJim permalink
    December 13, 2016

    I remember when a friend of mine texted me that Trump had publically called the Taiwanese President, I was mind-boggled at the stupidity…

    But then I remembered something… I had recently read Archdruid\’s bit here:

    http://thearchdruidreport.blogspot.com/2016/11/the-end-of-american-century.html

    And recalled the part about China, notably:

    \”Thus the Chinese have been advancing their country’s interests against those of the United States and its allies in a less dramatic but equally effective way. While distracting Washington’s attention with a precisely measured game of “chicken” in the South China Sea, the Chinese have established a line of naval bases along the northern shores of the Indian Ocean from Myanmar to Djibouti, and contracted alliances in East Africa and South Asia.\”

    And there\’s more there, though hardly everything that China has been up to.

    And the more I thought about Trump\’s move, the more I really began to wonder…

    Was it stupidity and bravado?… or

    Something rather kind of scary brilliant.

    For you see, China has been for decades, secure in the knowledge of the One China Policy, which means that really, while they put on a good show around Taiwan, they really don\’t spend nearly what they would, attention, military, or dollar-wise, and thus they can continue their expansion elsewhere.

    One of China\’s grand motivations (as in the Chinese government, whatever sort, whenever, whoever) has always been to secure their borders. China usually does well enough when they have secure borders, but ALWAYS gets screwed up when they don\’t. Thus Tibet (yes, yes, Lebensraum and all that, but it is about protecting the Heartland more than anything).

    So, if this is merely some sort of stupidity, wow, he fell into a pile of poo and came up wearing the crown jewels, because this requires China TOTALLY shift their attentions back to their own borders, messing up their plans elsewhere completely…

    And if it was PLANNED, well then, there\’s more to Trump than many believe.. well, Trump or one of his very, very canny advisors.

    Of course, with Trump\’s latest missives on the issue, there\’s the third alternative… we are seeing Trump the Deal Maker in action, as he said he\’s willing to basically throw Taiwan under the bus as long as America gets something for it…

    Of course, if this is the case, China needs to remember just what happens to the \”little guys\” that Trump has always made contractual deals with… and at this point to Trump, EVERYONE is a little guy compared to Trump…

    So… wheels within wheels or bold stupidity? Time will tell…

  16. Peter permalink
    December 13, 2016

    @Ian

    Good point, Ian. What is apparent to me is that some commenters here and elsewhere just cannot deal with the idea that Trump may not behave as Obama did and Clinton would have. Obama’s throwing people under the bus and reneging on his campaign promises so quickly was a harsh blow to his admirers and apparently anything that Trump does do has to be viewed through that pattern. Some people will be incensed unless Trump calls his supporters ‘fucking retards’ and mocks them with “make me do it’ They want to see Geithner. Holder and Emmanuel style behavior aimed at the deplorables or they will try to create the appearance that is what is happening. It seems a rather warped and foolish agenda but they have little else.

    Trump’s bold shot across the bow of mainland China came from the undefined position of President-elect so it may not actually violate the One China policy but it did get their attention. It might be called a type of gunboat diplomacy but without the guns or boats. The Chinese have been informed that business as usual will not be tolerated by the new regime and change is coming so get ready to deal with it.

  17. realitychecker permalink
    December 13, 2016

    @ Peter

    Wrote you a longish response that got disappeared as I was about to submit it, and can’t retrieve it and won’t re-type it,

    So, here is the bare essence. We are growing at about 2% annual GDP. China has recently dropped from 9% annual GDP to closer to 7%. Compound that differential out over 20 or 30 years, and you will see that it does not take much of a wizard to see where the transnational corporation want to situate their futures. Growth rate is what matters, not current income levels.

    I have thirty years of extremely intensive hands-on experience to qualify my opinions in market matters. I won’t brag further about my ‘greatest hits,’ they would be very hard for you to believe, but some of the old Firedoglake hands that come here might remember that I used to give very specific trading calls there to help what I considered to be my community make some quick and easy money, and nobody ever lost a single penny by following my very specific guidance. Believe it or not, as you choose.

    But please accept my apology if I have inadvertently hurt your feelings in some way, that was never my intention.

  18. Ian Welsh permalink*
    December 13, 2016

    Yes, growth matters. But it changes.

    And most American CEOs and execs don’t want to live in China. Smart money’s still probably /on China/, but the game is changing. And the thing is, China hasn’t been letting us round eyes make as much money any more. See what happened to Uber there. That’s the new norm, they’ve got the tech they think we’ll be willing to give and they aren’t going to have foreigners owning the important parts of their economy.

  19. realitychecker permalink
    December 13, 2016

    @ Ian

    Yes, Ian, of course growth rates can change. In fact, every damn thing you’ve ever thought about can change, right? But planners have to plan, anyway, and corporate planners do plan anyway.

    They use the best available data, and they consult historical patterns, and they project their thoughts into the future.

    And history tells them very clearly that growth rates are highest in developing nations and economies as opposed to very mature ones like the U.S.

    And, it won’t just be China that corporation establish themselves in during this realignment. It will include all the Asian nations that meet the criteria. India, Indonesia, etc. Huge populations that have gotten to the point where they have a few dollars of disposable income.

    And, corporations know how to insinuate themselves into a culture over time (just consider how they did it here lol), and it won’t just be ’round eyes’ that they hire to be their face people.

    Of course, we could have a nuclear war tomorrow, and all be dead by this weekend, that would be a change, but that would not be in anybody’s corporate plan.

    The point is, the great consumer markets of the future will obviously be in Asia, and the corporations know that, and they will be thinking about milking those opportunities more than thinking about being centered on the overripe U.S. economy, and they will try to take every possible drop of our liquid assets with them to use over there.

    Above all, they try to insure that their quarterly and annual reports show increased numbers every single time; there is nothing that affects their stock prices more. Faster growth rates matter.

    Honestly, people on the left would understand markets better if they did not start from a place of hating them.

    And of course there will be some major fluctuations along the way; just look at our stock charts and the variance that we’ve seen along the way. The Dow was at 2,000 when I started doing this. Lostt half iits value in 2000, lost half again in 2007, has more than tripled since 2009. Business and market people deal with these variations all the time.
    Above all else,

  20. realitychecker permalink
    December 13, 2016

    ON EDIT: Last paragraph should read:

    And of course there will be some major fluctuations along the way; just look at our stock charts and the variance that we’ve seen along the way. The Dow was at 2,000 when I started doing this. Lost half its value in 2000, lost half again in 2007, has more than tripled since 2009. Business and market people deal with these variations all the time. But the long-term trends are what matters.

    P.S. Ian, can we someday get an actual post-submission edit feature here? I think there are devils that live in every computer keyboard, that throw the cursors wherever and disappear whole essays at will. I know all my computers have been that way. So frustrating. And, as long as I’m wishing, numbered comments would also be lovely 😉

  21. December 13, 2016

    Good analysis. I hope the Chinese elites realize this time is different and the status quote is no longer an option. I think if Trump puts a 45% tariff on Chinese exports it could actually be a good thing for both countries if and a big IF the Chinese elites throw away their neoliberal doctrines in their policy response. China has a huge internal market and is self sufficient in food and energy. This could be the tipping point to a deep reform to address all the issues China is facing. As for Taiwan, I doubt China will attack this island. Mao leaves Hong Long and Macau alone for thirty years as door to engage the west even as he could take them easily.

  22. Ché Pasa permalink
    December 13, 2016

    It is certainly comforting to know that Hillary’s brinkmanship with Russia is unnecessary and would almost certainly lead to nuclear holocaust whereas Trump’s brinkmanship with China is necessary for hegemonic purposes and most likely won’t lead to nuclear war or any other gross unpleasantness.

    Hm.

    Who’d a thunk?

  23. Peter permalink
    December 13, 2016

    @RC

    No offence taken, Tovarich means friend/comrade. You seem to be talking about predicting US corporate investment opportunities in a growing China while I was looking at the history and present effects of already huge investments. I thought the consensus was that making investment in China less attractive was what was needed to drive job growth here.

    I only made one really successful stock investment when I bought $5,000 in Intel and watched it grow 70x in value.

  24. realitychecker permalink
    December 13, 2016

    @ Peter

    I gladly embrace the Tovarich, amigo, it was the “wizard” that made me wonder lol. I want you to know that I consider you a very worthwhile person to engage with.

    Also, I have no interest in protecting corporate anything, in fact I regard corporations as the deadly enemy of everything I really care about, which is mostly the interests of regular people who try to lead decent lives.

    My true and deepest interest is always to try to see and be as accurate as possible. My personal desires and preferences are completely irrelevant to that overarching goal. I sense that you share that goal. Same for Ian, which is why I come here.

  25. Peter permalink
    December 13, 2016

    @CP

    The fantasies about war with Russia or China are convenient but improbable scenarios in a MAD world. Clinton and her ilk were bent on regime change in Russia and they are still trying to play that game with their pathetic Russian interference in our elections nonsense.

    Trump has rejected the notion that regime change in Russia is a wise goal and his rhetoric on China is about their behavior not about removing their leadership.

  26. realitychecker permalink
    December 13, 2016

    Reuters is now reporting that the head intel guy, Clapper, does not agree with the CIA bs that the MSM and Clintonites are pushing so hard.

    He says there is no way to have any certainty about the INTENT of the hackers. That is also why the FBI is not on board.

    Certainty matters to serious people, not so much to partisan political players or Internet commenters.

  27. Ian Welsh permalink*
    December 13, 2016

    “Che Pasa”. The article explicitly says it is dangerous, and explains why China is actually a threat to the US in ways that Russia isn’t. It is always good to read the actual article

    And, while I didn’t mention it, I would assume someone as /savvy/ as you are, would know that China has a lot less nukes than Russia. Right now, war with China is a LOT less likely to result in armageddon than war with Russia.

    These distinctions are important, one tends to miss them when one’s response is primarily emotive and geared to scoring points.

  28. S Brennan permalink
    December 13, 2016

    Ian;

    This analysis is EXACTLY right…I wouldn’t change a word, or back down to any naysayer.

  29. John k permalink
    December 13, 2016

    Neither 10 or 7% growth is stable. Chinese debt growth far higher than GDP is not stable.
    Japan was predicted to quickly overtake us in 1990, then quarter century no growth. Same in China because even more contradictions. Local rich now bailing as fast as they can.
    More totalitarianism coming because people not happy. Trade war most damaging to exporters not importers, just like the 30’s when we were biggest exporter, were hit hardest… but very damaging to tech profits.

  30. Tagio permalink
    December 13, 2016

    Ian,
    Trump’s rapproachement with Russia likely also indicates a pivot in sourcing America’s oil imports away from the increasingly unstable Mideast. Trump’s appointment of Exxon’s CEO as Secretary of State portends as much. Saudi Arabia is burning through its sovereign wealth fund at a record clip and it just issued 17 billion in bonds to pay its bills. Another 2 years of low oil prices and the place will be chaos. In addition, sourcing oil from Russia will permit the US to reduce its defense costs there, potentially saving billions.

  31. realitychecker permalink
    December 13, 2016

    @ John k

    As I noted, there can and will be enormous fluctuations along the way, enormous moves in one direction followed immediately by equally strong moves in the opposite direction. Most will believe that the present moment direction will go on forever, and will be surprised by each reversal. That is a fundamental characteristic of modern markets. Astute traders will play the up moves and the down moves in the short term. All those data points will resolve into a long-term trend line over time. I think the ultimate overall direction is clear enough already. Long-term predictions will always seem iffy until the final results validate them. That’s just how it is, and must be, if you think about it.

  32. markfromireland permalink
    December 13, 2016

    All: re losing comments – Ctrl +A and Ctrl +C during and before posting are your friends.

  33. okanogen permalink
    December 13, 2016

    Trump seeing China as the bigger threat isn’t necessarily evidence of his intelligence, case in point, he also sees Mexico as our biggest threat…. He also threatens corporations with huge tax liabilities for moving factories, which unfortunately incentivizes them to build the factory elsewhere in the first place. I suppose that is a win for him, if the jobs are in Mexico, Mexicans won’t flood into Michigan. Winning!

    So, no, that fact is still not evidenced.

    But there are valid reasons for the US to be cautious with Russia. Setting aside any humanitarian concerns (Jesus, I suppose we are normalized to that….), a stable Europe is a vital interest to the US, and Putin has been working very hard to destabilize Europe. Annexing Crimea, Ukraine, and threatening the Baltics and Finland.

    I agree we should have worked harder to embrace Russia 15-20 years ago, but it takes two to tango, and they were too busy building an oligarchy.

    But China. Yeah, that is some high-risk poker, and what is the reward again? Where is the upside in the brinkmanship? China has substantial holdings of US dollars. Do we want to be the world’s reserve currency? Do we want oil sold in US dollars? These are things that are directly in China’s control at this point. It would hurt them to change (given their position in US debt), but if they had to, they would. Saudi Arabia is already threatening this, because Trump is unstable.

  34. Ian Welsh permalink*
    December 13, 2016

    Russia has an oligarchy, in large part, because the US insisted on shock doctrine, then intervened to keep Yeltsin in power.

    Don’t think Russians don’t remember that.

  35. okanogen permalink
    December 13, 2016

    Not every outcome is forced by the US. Is Chechnya also the West’s fault?

  36. Lisa permalink
    December 13, 2016

    okanogen “Annexing Crimea, Ukraine, and threatening the Baltics and Finland.”

    Nope, that is western Govt ‘fakenews’. Last time I looked the Crimea voted to return to its historical Russia roots. Plus, anyone with any geo-political knowledge whatsoever knew that there was no way Russia would allow its Navy to be kicked out and NATO allowed in.
    How Russia did it was very clever ..it used money. Every Crimean saw their living standards increase greatly, in some case (like with pensions) triple. A not well recognised fact is that many Ukrainian army people that were based there switched to Russia largely because of that.
    Due to their agreement Russia and the Ukraine each had about 20.000 army people there…the Ukrainian army gave up without a fight.

    The democratic and voted for Ukraine Govt was overthrown by the US, a bunch of oligarchs and rabid (many neo-naizi) nationalists were put in place which then tries to oppress the eastern and largely Russian ethnically, areas (they tried to ban the Russian language for example). They then fought back and there was a civil war, with the eastern areas won (in an amazing military feat). Since then a mostly Russian effort to keep the Ukraine together in a more decentralised manner (like US States) has been attempted, which the Kiev Govt has not implemented.

    Russia also absorbed about one million refugees from the Ukraine…. running away from the coup Govt.

    Russia has not threatened the Baltics or Finland in any way. It has, carefully, responded to NATO aggression and expansion in those areas with a ‘tit for tat’ strategy.

    If you look through the timeline, Russia has responded to each US/NATO aggression ..but not instigated them.

    In Syria while the Coalition of the Terminally Insane (US, Turkey, Saudi Arabia, Qatar, UK , France and Israel) or CoTI for short, have armed, backed, funded, trained and supported the Sunni jihadists (especially including Al Qaeda), Russia backs the legitimate and largely non sectarian Govt there. In fact the majority of the Syrian army are Sunni who have been to date the biggest victims of the jihadists and their Wahabbi extremist doctrine.

    The CoTI have all done this for different and very ‘wet dream’ reasons many contradictory, with little respect for reality. Israel wanting jihadist Sunni nutjibs on its border and hoping they will clear out the Shiites from Southern Lebanon so Israel can move in with said nutjobs happily moving aside to let them …like that is going to happen. Turkey having mad dreams of re-creating the Ottoman empire, Saudi Arabia fantasising about every Shiite, Druze, moderate Sunni, Christian, etc being exterminated in the Middle east, the US doing what SA and Israel want and following its old cold war rule of always supporting religious extremists of any type (they are always right wing and anti communist after all).

  37. StewartM permalink
    December 13, 2016

    I cautiously agree with Bo about China having every reason in the world *NOT* to attack Taiwan no matter how loudly it proclaims otherwise (though MFI could rightfully chime in about the theme of Tuchman’s March of Folly…)

    @Peter

    Insofar as ‘free trade’ building the Asian middle class, in China at least wages have fallen as percentage of GDP since China’s entry into the WTO:

    http://conversableeconomist.blogspot.com/2013/03/next-stage-for-chinas-economy.html

    Like NAFTA wasn’t good for Mexico, ‘free trade’ hasn’t been great for China for its ordinary workers.

    What puzzles me is how this is shaking down internally in the Trump administration. A trade war with China would put a major hurt on GM’s profits:

    http://www.forbes.com/sites/bertelschmitt/2016/12/13/trumps-taiwan-remarks-could-bring-general-motors-down/2/#6f3fbe427038

    Mind you, if one re-established the domestic understanding we had before we started this unsustainable crusade for so-called ‘free trade’–that for American consumers to buy the stuff made, and services rendered, of American businesses, then said consumers would have to be paid enough to afford them–so forcing GM and US manufacturers to rely on domestic consumption might be a good thing in the long run. But Trump has said that American workers are “paid too much” and “wages are too high” which makes one wonder how exactly he is going to make this all work, let alone reward all those Rust Belt voters who elected him. When I look at Trump’s appointees, I see a bunch of nobles who still think the serfs have it way too good, so I am not inspired to think this group competent.

  38. Peter permalink
    December 13, 2016

    @Stewart

    American consumers already pay high prices for higher value American brand products made in China and elsewhere. So far Trump is concentrating on this segment of manufacturing. Consumers don’t get a discount on these products such as autos made in Mexico and shipped to the US. The sale price is the same as a model built here but the profit is different.

    Trump’s targets seem to be the higher wage higher skill production that was profitable for the corporations when done in the US and is already or is planned to be moved elsewhere purely for more profit. There has been no discussion or demands about US manufacturers producing products in foreign countries for foreign consumption only product production that was offshored destroying US jobs while the product is sold in the US.

    It’s not easy to separate what Trump says and means from the sound bites and rewrites the Clintonite media presents. If Trump was addressing the cost of labor for the production here of the myriad of low cost consumer junk we buy from China he is right. Our low skill wages can’t compete with those in China and are ‘too high’. I don’t think that means he wants to lower wages here but that those jobs can’t be returned.

  39. Ché Pasa permalink
    December 14, 2016

    The reality is that there is no evidence that brinkmanship results in war between nuclear armed powers. The evidence is that brinkmanship is a negotiating tactic that can have desirable results, but won’t always.

    Logically then, neither Mrs Clinton nor Mr Trump were or are engaged in rhetoric or acts intended to start a nuclear war with Russia or China. The risk is always there, of course, but the likelihood is slim.

    Neither China nor Russia are existential threats to the United States. Both Russia and China have primary self interests and those interests exist independently of the United States and its interests.

    Sometimes interests will align, sometimes not. For the most part, it’s no great gain or loss to any national interest whether a nation’s self interest aligns with that of another or not. That’s how a post-imperial, post-cold war, multi-polar world should work. Of course we’re not there yet.

    China did not force American manufacturers to abandon their United States plants and set up in China. That is largely a matter of American government policy and corporate practice. Attacks on China, even rhetorically, do nothing to correct counterproductive and destructive policies and practices.

    China is not to blame for the decline of US or any other nation’s manufacturing sector, though China is a convenient scapegoat. Scapegoating and threatening China is a convenient way to divert attention from the policy issues and greed of sectors of the American economy that are responsible for the decline of American manufacturing. Provoking China won’t fix it.

    Just so, Russia is not to blame for the inherent flaws in the Anglo-American neo-imperial project that has been wrong-footed from its conception. But Russia is a convenient scapegoat. And so it goes.

    The reality is that the US corporate-government has been a catastrophe for so long that too many people take it for granted, assume it’s normal, and pretend that a marginal adjustment to the status quo, or a full on corporate quasi-dictatorship will somehow fix what’s wrong. It won’t.

    Either course protects and preserves the catastrophic nature of modern US governance.

    Scapegoating China or Russia for what ails the US is a futile exercise. But it is unlikely to lead to war, nuclear or otherwise. Those risks unfortunately are growing elsewhere — which would be the case regardless of who occupies the White House.

    

  40. okanogen permalink
    December 14, 2016

    Lisa, you present the “poor blameless Russia” case very well, and certainly there are ethnic Russians in all those areas who appreciate an aggressive Russia defending their positions. But that does nothing to counter the actual facts that Putin’s Russia is very deliberately working to destabilize Europe by interfering in elections (including our own), instigating unrest in Ukraine, military threats against the Baltics, Finland, and even Canada (Arctic Sovereignty) .

    Whether their motives are justified is really meaningless for these countries, and should be for the US, too.

    Regarding Syria, yes, it was folly from the start, but real people are dying there now, and they are mainly being killed by the Syrian army and Russian bombing. It is true that the majority of rebels are horrible, horrible murderers who are cynically using the civilian population as shields. But the Russians are cynically not giving a shit and bombing the civilian population anyway.

    All of which is to say, there are a lot of very good reasons why we would hold Russia at arms length, regardless the history of “who’s fault” it is, and regardless of how much more pure their motives may be over ours. Those are all just talking points.

    None of which is to say we should be openly antagonistic, but it’s a little too early to be giddy over “Medals of Friendship”.

  41. nihil obstet permalink
    December 14, 2016

    @Che Pasa

    The evidence that brinksmanship results in nuclear war would be that few of us would be here, especially not with a functioning internet. At the beginning we’re always aware of dangers and take multiple steps to insure against what may go wrong — lots of fail-safe procedures to stop, say, nuclear plant meltdown or drilling platform blowout. Then time goes on. We get blase, because there’s no evidence that the dangers will actually materialize. So all the fail-safe measures seem just a limitation on what we’d like to do. And you get Chernobyl or Fukushima or the Deepwater Horizon.

    I’m not in general on the high end of the fear scale. I think most TSA procedures are nonsense and I object to the kind of high security that limits people’s access to government buildings. I don’t have deadbolts on my doors and in fact I’m lackadaisical about locking them. But holy hallelujah, I do think a bunch of egotistical hotshots have a non-zero change of blowing up large portions of the world if we don’t keep our fear of nuclear exchanges.

    “Won’t happen” is an invitation to its happening.

  42. Ché Pasa permalink
    December 14, 2016

    @nh

    Didn’t say “won’t happen.”

    I specifically noted that the risk is always there.

    I would also point out that certain elements of our military (and among their ostensible civilian overlords) have long believed that nuclear war is survivable — by enough of the Right People — and is a desirable alternative to the frustrations of interminable negotiations and the inevitable failure to get ones own way all the time — whether or not one is engaged in various forms of non-nuclear hostilities.

    So we’ll see, won’t we?

  43. StewartM permalink
    December 14, 2016

    @Peter

    American consumers already pay high prices for higher value American brand products made in China and elsewhere. So far Trump is concentrating on this segment of manufacturing. Consumers don’t get a discount on these products such as autos made in Mexico and shipped to the US. The sale price is the same as a model built here but the profit is different.

    Agreed in principle (running shoes made in Vietnam cost the same when they were made in the US; the cost difference in labor is simply pocketed as profit) but that’s not the case here with GM. The cars that GM builds in China are almost all for the Chinese market and not shipped to the US (sole exception: the Buick Envision, and that only started this year and has only sold like 10,000 units here).

    Mind you, if China were to retaliate against US manufacturers selling cars in China, that would hurt GM’s profits, and thus hurt Wall Street. It might even be a boom to American workers in the long run (but a pain in the short run,as any loss in profit is taken back by layoffs, reduction in worker pay and benefits, in capital spending, or similar…while in capitalist theory huge profits are justified by risk, the motif of the Reagan economy that we still live under (thanks, Obama!) is “big investors must never, ever, have to lose a dime”) . But the way I read them, the “nobles” of the Trump administration would be more horrified by the loss of loot for their fellow “nobles” than in the welfare of the serfs, who we all know are “paid too much”.

    Trump’s targets seem to be the higher wage higher skill production that was profitable for the corporations when done in the US and is already or is planned to be moved elsewhere purely for more profit.

    In truth, there is simply *nothing* we can’t make here. I hail originally from a locale whose factories have long been closed due to outsourcing, and those businesses were profitable. But back then a business making 3 %, 5 %, 6 % profit was perfectly fine, before Wall Street and finance was deregulated. These businesses couldn’t compete with Wall Street ponzi and fraud schemes, or businesses like Apple or Microsoft in gamed markets, promising 10, 15, 20 % or more profit. Businesses in competitive markets making real goods or delivering real services either made unsustainable cuts to capital and their futures (in Ian’s words: “burning the house down in order to heat it”) to generate totally unrealistic profit levels and/or eventually move overseas. Of course, even moving overseas (with the intent of deliberately never paying workers enough to buy the things they make) and relying on increasingly hard-pressed workers in developed countries to somehow consume enough to keep the whole party going (pass out those credit cards!) is just postponing the day of reckoning.

    Trump’s team sez the answer is “too much regulation” and “too heavy taxes” (even though in America’s glory days, taxes on the rich were far higher). I see just as much Goldman-Sachs and as many Reagan talking points here as I would have in a Clinton administration. That doesn’t inspire confidence.

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