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

Author: Ian Welsh Page 1 of 387

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

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

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

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

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

Offered without comment:

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

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

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

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

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

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

Austerity, Demand and Reindustrialization

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And China:

The End of Austerity & Reindustrialization

Austerity Is Mostly Stupid… Mostly.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

2024 Fundraising Update

We’ve raised something over $5,400 since the fundraiser started, meaning we’ve reached the first goal of $4K and our $2,500 out from $7,000 tier, at which point I’ll do 3 reviews of important books. At 10K, which is $4,600 out, I’ll write an article on:

…the fundamental process which keeps society together, how it fails and renews and under what conditions it fails to renew.

And at $13,000, I’ll write:

an article on the weaknesses of North American style police, and how a determined and ruthless opponent could take advantage of those weaknesses to rip them a new one.

I really appreciate everyone who’s given. Donations and subscriptions from readers which have kept this blog alive and running. Times are hard, since Covid each fundraiser has become more difficult, because people are hurting, in particular from inflation.

I think this is a place where we tell the truth as we know it and where we try to make educated guesses about what the future holds. Every year it seems there are fewer places like this left.

If you’re in trouble financially, if food or shelter or medicine is an issue, please don’t give.

But if you can afford it, and you like my writing, I’d appreciate it if you did.

SUBSCRIBE OR DONATE TO OUR 2024 FUNDRAISER

Open Thread

Use to discuss topics unrelated to recent posts.

Europe Is Turning Anti-Immigrant

Politico has a long article on it, and it’s hilarious. A border wall longer than Trump and Biden’s. “Return centers” in other countries, because they’re too gutless to say deportation, and so on. Complaining about Russia and Belarus’s immigration warfare (letting refugees thru Russia to get to Europe. Including, er, Afghan refugees.)

Let’s cut thru the bullshit.

The EU is in economic decline and can no longer afford refugees they can’t monetize.

Europe is also responsible for much of the refugee crisis, having enabled the destruction of Afghanistan and Iraq (Poland, one biggest criers, was part of the “coalition of the willing.”) Europe, with some honorable exceptions like Ireland and Spain, is behind the Israelis, who are about to institute a flood of Lebanese refugees. Europe, thru the world bank, IMF and various post-colonial policies has worked hard to keep third world nations in poverty, increasing refugee flows.

They have helped destroy or impoverish entire nations, then whine about how migrants come to them begging for safety or a decent life.

In humanitarian terms, and international law terms, what the EU is doing is wrong, but the simple truth is that they can’t afford immigration any more, and that mass immigration has exacerbated the right wing turn. Not that it had to, but if you have large numbers of immigrants into a bad economy, who are competing for jobs and housing and social welfare with the desperate, they will naturally blame the immigrants instead of purging the incompetent and corrupt elites who are managing the economy with eye only to benefit themselves.


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The Ukraine war has made this particularly bad, not just because of all the Ukrainian migrants, but because it has increased the de-industrialization of Europe’s industrial heart, Germany.

This is, again, a self-inflicted wound. If Europe had kept the Minsk accords, or, more long term, treated Russia and its security concerns seriously, there wouldn’t have been a war. If Europe did not insist on being subordinate to America, none of this would have happened.

But Euro elites can’t imagine taking actual responsibility for their own countries and telling the US to bugger off, then following something other than neoliberal politics and economic policies.

Reducing immigration makes some sense, even if it’s inhumane, but it’s very much a “treat the symptoms, not the problems” situation.

Europe’s decline will continue until they decide to take responsibility for themselves and to overthrow an ideology which prioritizes the rich and financial games over the entire population and the real economy.

Immigration is meaningless in comparison.

Harris Is Making The Same Mistake Clinton Did When She Lost To Trump

Harris was asked what she would have done differently from Biden, and she answered:

Nothing comes to mind.

Trump won against Clinton in large part because of the stories they told:

Trump’s was. “I’m going to make America great again.”

Clinton’s was. “America is already great.”

So people who wanted change voted for Trump, if they could stomach him.

It’s that simple.

Economists will go on and on about how great the Biden economy is, but they’re basing that on statistics no one believes, nor that they should believe, like the inflation numbers, which are complete bullshit.

There’s a point at which people will believe their lying eyes, especially when it comes to grocery prices.


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Kamala’s just another mediocre member of the elite. The system worked for her, so she figures it’s basically a good system. She doesn’t have the empathy or intellectual honesty to see that it isn’t good for many, many other people and that she needs some of those people’s support.

This was her election to lose, just as Clinton should have won in 2016. All she had to do was show some genuine concern, some empathy and offer some significant change, even if she was lying.  (This was Obama and Bill Clinton’s strategy, and it worked well. Bill was very empathic as he screwed over the working class and poor.)

She couldn’t even manage that. Polls are now basically dead-even, and battleground states are in the wind. Generally Democrats, because their votes are concentrated in urban and suburban areas need to be a few points ahead.

I won’t predict who’ll win. I don’t know. But I know that Harris is making unforced errors and acting like she doesn’t really want to win.

As for Trump, he’s clearly senile, out to lunch and would make a terrible President, but at least he wants it.

Fundamentals Series: On Problems, Principles & Solutions

When we want to change the world we’re usually reacting to a problem. Even positive visions usually come out of negatives. We want liberty because we have tyranny. We want health because we have sickness. We want prosperity because we have poverty. We want equality because some people have way more than they need and others less than need.

When we solve a problem it’s generally mediated by a principle. Very often the principle is just the problem stated slightly differently.

Problem: Some people have more than they need, others have less than they need.

Principle: Make sure no one has more than they need while anybody has less than they need.

A principle tells you, generally speaking, what you should be doing about a problem. It doesn’t tell you how to do it.

So, for the example above, post-war Welfare states generally came upon the solution:

Solution: Tax the rich heavily and put the poor on Welfare, controlled by social workers and other bureaucrats because poor people can’t be trusted to use money wisely.

If you think poor people aren’t stupid, then you have another solution, basic income + progressive taxation.

Restate the problem slightly by removing having too much as a problem, and the principles and solutions change:

Problem: some people don’t have enough.

Principle: Make it so that everyone has enough, or more than enough.

Solution: Just give everyone who has less than enough money, enough money. (Basic Income.)

Solution: If we make the rich even richer, enough will wind up flowing down to take care of everyone else. (Trickle Down Economics.)

Solution: The rich should give away most of their money over time, on good works or to organizations which do good works. (Charity.)

The difference between welfare and a basic income is instructive: one trusts those without enough money to spend it themselves, the other doesn’t. It’s mediated thru a view of why people are in poverty. Welfarism assumes poor people are somehow defective, basic income assumes they’re fine, they just don’t have enough money.

The first solution assumes having too much is bad, the second solutions all assume that some people having too much isn’t wrong, it’s that others don’t have enough


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Let’s look at another Triune, closely related, which focuses on being rich or powerful as the problem.

Problem: rich and powerful people use their power and wealth to take control of society and direct the benefits to themselves, hurting everyone else.

Principle: Keep the rich poor and the powerful weak.

There are a lot of different solutions to this and solutions are often in used together. Those that work usually only work for a while.

Solution: If they have enough money to influence politics or society, take it from them. (Specific policies like progressive taxation, estate taxes, wealth taxes, and so on.)

Solution: Don’t let the rich spend their money on politics. (Public finance laws, donation limits and so on. Doesn’t work all that well, but does have some effect.)

Solution: Don’t let the rich have private specialists in violence.

Solution: Don’t let rich people happen at all. (Proposals for maximum income and maximum wealth taxes.)

But wealth isn’t the only type of power, so something also needs to be done about people who control rich or powerful organizations. If I only have 3x as much money as median, but control a large bank, that’s all bullshit. I’m rich, I just have some limits on how I can spend that money. And this is where you come up with things like anti-trust law, limits on how large any organization can be, limits on corporate political spending, separation of church and state and so on.

Let’s move to another problem, primarily from the 18th and 19th century.

Problem: industrialization requires large numbers of people willing to work in factories but most people don’t want or need to work in factories because they can support themselves thru agriculture on common lands and factory jobs involve much more work in horrible conditions.

Principle: Large numbers of people must not be able to support themselves without working in factories.

Solution: Take away their commons rights so they must take any other job.

Note that other principles and solutions could have been tried. Perhaps:

Principle: Make factory work more desirable than agricultural commons work.

Solution: concentrate on safety and wages and don’t have 6 1/2 twelve hour shifts a week.

Pay them better and treat them better, in other words. The argument against is that it wouldn’t have been profitable, but profit is a function of political and social choices.

In fact, in post WWII America, that solution was tried, and it worked. China had to deal with this problem, and used both principles and solutions in concert.

Problems suggest principles, and principles suggest solutions, but there relationship isn’t 1:1, it’s mediated thru ideology, which is to say how the decision makers think the world is and should be.

I’m going to write a series of articles on the principles which would create a good society: the Fundamental series.

But it needs to be understood that every principle is based on a perceived problem or vision. Every principle is based on a set of assumptions about the world, an ideology, and that solutions are extensions of principles.

You don’t discard problems unless you don’t think they’re problems.

You don’t discard principles unless you disagree with their underlying ideology.

You blow thru solutions until you find some that work, and work without creating problems you can’t mitigate.

When FDR was in charge he knew what he wanted to do, but if a solution didn’t work, he’d throw it out and try something else. He wasn’t wedded to specific solutions.

There are non-negotiable means, mostly along the lines of “don’t torture or rape”, but mostly the question is “are you actually solving the problem and doing so while respecting the principle?”

This three part design is the first fundamental.

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