Category: Economics Page 28 of 94

Know Your Enemies

On November 23, 2020

An enemy is someone who means you harm and has the means to inflict it.

A friend is someone who has wants to do good for you, and has the means to bestow it.

I once wrote primarily to predict and to change the world.

I now write to help a few people, those who listen.

So, listen, because other than understanding climate change is written in, won’t be stopped (can’t at this point, minus geo-engineering), this is the most important message I have for you.

You must know who wants to harm you and has the means.

Let’s start here:

“If America’s distribution of income had remained the same as it was in the 3 decades following the second world war… A low-income American earning $35K this year would be earning $61K. A college-educated worker now earning $72K would be earning $120K.

Everyone responsible for this is your enemy, unless you’re in somewhere between the top 4% to top 10%.

How much money, how much good, has the end of the post-war economic order inflicted on you? Adding in interest (because you wouldn’t be in debt, but have investments) it’s over a million dollar for almost everyone. You’d have a home and probably have the mortgage paid off if you don’t. You wouldn’t be drowning in student debt if young (especially since that order kept college costs down.)

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So the people who are responsible have robbed you of a million or more dollars, and a good, prosperous life. These people had names. It started with with intellectuals like Milton Friedman and the oligarchs who funded economics departments to overturn the economic orthodoxy the old order ran on. It moved onto politicians, executive and CEOs. Margaret Thatcher, and Reagan; then Blair and Clinton, who made their victory complete. Thatcher understood that it was Blair who made her victorious, until Labour accepted “There Is No Alternative” they could have simply undone almost everything she did. Clinton, cutting welfare and smashing blacks and poor people in the face with punitive jail sentences, was Reagan’s heir more than George Bush Sr. ever was.(Biden, of course, was there for all of it and supported almost every shitty piece of it. Enemy. If you can’t manage “enemy, but perhaps not as bad an enemy as Trump, you can’t think.”)

This piece isn’t primarily about ideas and the influence of intellectuals and academics, but I do want to give another nod to Milton Friedman. Please remember, always, that in politics and economics ideas do usually come before action, despite everyone telling you otherwise.

that stuff is all downhill from real intellectuals like Milton Friedman giving the intellectual OK for it. (Nobel Prize winning Friedman.)https://t.co/1X02j3Bs40

— Ian Welsh (@iwelsh) November 17, 2020

1970, Baby! The sound you hear, to paraphrase Ross Perot, is your jobs going down the drain to every low wage countries around the world.

Now, here’s another fact: wage theft is almost equal to ALL other theft combined, except (get this) it isn’t considered a crime. That’s right, when your boss steals from you, it’s a civil/regulatory matter!

Who’s the enemy?

Now, when it comes to dying, if you live in America or Britain or most of Europe, who is most likely to get you killed?

That dastardly Putin, twirling his metaphorical mustache and cackling about how much he hates the West, “muahahahahahaha, I hate democracy,” he cackles, or your own elites? Did Putin send you or your children to war in Iraq or Afghanistan? Did he bungle your Covid response.

Did Putin do this?

It is very rare, unless you are an Iraqi, say, that the leadership of any country save your own is more dangerous to you than your own. On those rare occasions when they are, it’s because a great power is fucking you up (yes, sometimes that’s Putin, but not if you’re American or a member of the EU.)

Your enemies are you own elites. They are the people who price drugs so high you can’t afford them, fuck up a pandemic response so your parents and grandparents die, or send you to war. They are the ones who create economic policies which funnel money to the rich and impoverish you, and if you don’t think being poor isn’t bad for you, you ain’t ever been poor, that’s for certain.

So, when you prioritize the people to be wary of, to be scared of, and to hurt or harm if you ever can, remember, a wise person knows who their enemies are.

Be a wise person.

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The US Can Have a Boom Economy Six Months from Whenever It Gets Serious

By Ian Welsh

On November 13, 2020

38 Comments

From Architecture DiY

One of the great problems in the US — and most of the Western world — is that we have been unable to accomplish anything important for over 50 years. The last significant US project was the moon landing. Failure or muddled success is the norm, now. The US even loses or muddles all its wars, and when it “wins,” as with Libya, well, they “made a desert and called it peace.”

Because nothing really works, and because every effort is half-assed (some tax cuts and an underfunded program run by corrupt incompetents) we don’t think anything big CAN be done.

But plenty of big things were done in the past, and recently by other countries like China (who just industrialized in record time and build unbelievable amounts of infrastructure.) We have, in the past, been able to put up buildings almost overnight, send a man to the moon, mobilize most of the population, etc, etc, etc.

None of this is impossible today, it is especially possible for the US (other countries it can be hard for, because the international order is set up to cripple small and medium countries’ ability to act independently, but the US set up the order and is still a superpower, even if it is in marked decline.)

So, if you’re the US and you finally get serious, you can have a boom start in six months with a real Green Deal (no caviling, no trimming).

You make a mandate to get every single building energy neutral at least. The Federal government effectively guarantees all mortgages; it sets the norms. You state that no mortgage is considered conforming starting in a year to three years if it doesn’t meet the new standards.

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You then offer the funds for the refit. This isn’t a gift, it is paid out of savings on utilities: half to the building owner so they win, half to the government. If you insist on doing this through financial markets, then half goes to the entity who puts up the fund.

You MUST create a proper auditing group to inspect a significant number of the buildings, so that there isn’t widespread fraud.

These refits are about passive and active solar, proper insulation and so on. Back in the 90s, it was possible to build an energy neutral building at -40 degrees Celcius, we can certainly refit buildings now.

Another conforming mortgage change is that lawns are no longer legal except on golf courses. Specify ecologically sane alternatives.

You take over/break up/heavily regulate all utilities, and have them do proper maintainance and set up grids which allow people to feed energy back in. Utilities are going to take huge income hits with this plan, so you’re going to have to support them, but that means taking them public or regulating their profits, dividends, and so on. You move grids and generation to as local as possible, because there is vast loss in energy by long distance transmission and because solar (passive and active) works best locally, because you need to store heat during sunny periods (both daily and annually). Of course, solar is not the only energy you use, and the emphasis is on reducing energy draw, and even more than changing the energy mix.

High-speed rail is a dead obvious thing to do, and proper high-speed rail is faster from city center to center when you take into account things like traveling to and from airports and security theater. A huge high-speed rail build-out, similar to the 50s expansion of highways, is an easy win (and traveling by plane sucks).

Note that most of these jobs cannot be off-shored or out-sourced. Refitting buildings is manual labor; building high-speed rail is done locally, and there are domestic companies who can build the trains. China dominates solar power, but there are ways to build up US industry, simply by equalizing prices through industrial policy. This can be done so both China and the US win; it doesn’t have to be zero sum.

Farming is a huge source of carbon emissions, but it doesn’t have to be. This isn’t about everyone going vegan, there are ways to make animals expel a lot less methane by changing their feed. Regenerative agriculture produces higher outputs per acre than standard industrial agriculture and requires more workers. If you want to break up the big farms, there is some evidence that small farms also produce more (ideal roughly what one person can work, which doesn’t mean no machinery.)

Vast planting of trees in cities in another no-brainer, as is an expansion of mass transit. Standard asphalt roads are expensive and have to be constantly re-paved. Moving them to alternatives like cobbled streets will lead to fewer emissions and reduce city budgets massively over time, again the alternatives take a lot of labor (if you’ve ever laid cobbles you’re wincing at the thought, but cobbles aren’t the only alternative).

There are a bunch of other things to do (for example, rebuild wetlands around cities and on the coast; build sea walls around cities which are too low, blah, blah), but the point should be obvious by now: You can help the environment, produce a massive number of jobs, and create an economic boom. It isn’t hard, though it is complicated. You simply have to have the will to do it.

Further, if you can get it going, it will soon have massive support because it will create a truly good economy for the first time in 50 odd years. People will have better things to do than squeal about red state/blue state bullshit, the era will be like the post-war period: People are making money, and having kids and politics would be, in fact, largely consensus-driven because everyone sees that what is being done works.

I first outlined this back at The Blogging of the President 16 years ago. Others have also suggested similar plans.

The most fundamental, irritating thing about the world today is that we know what to do to fix most of our problems, we just refuse to even consider doing any of it because we have corrupt, psychotic, decrepit, and incompetent leadership and populations who support them. We roar towards the abyss, staring in horror, refusing to simply turn the wheel. It’s amazing to see, a true lesson in how pathological human societies can be.

Boom, essentially tomorrow, any time we want it. Well, if we don’t leave it until our civilization is actually collapsing and we no longer have the resources. Which is the current glide-path.

Bullshit Economic Statistics

By Ian Welsh

On October 15, 2020

52 Comments

So, I was going to write a state of play economics article today, but I can’t. Well, I could, but the article I originally intended would take a couple days of work, because I’d have to construct my own inflation indexes.

It’s reached the point where I completely don’t believe the American inflation numbers. I can’t use them. They’re in cuckoo-fantasy land. That means I can’t use the inflation adjusted wage numbers or price numbers, which means that to compare wages and their actual purchasing power I either need my own index or I need to take raw data and do compare and contrast series. I might do that one day, out of sheer cussedness, despite the work.

A good example of how broken price indexes (and thus inflation is) is the inflation in automobile prices. You will be relieved, and perhaps amazed, to know that automobile prices are flat for the last 20+ years.

This is based on hedonic adjustment: you see, cars are just that much better now, so all the nominal sticker prices increases haven’t actually happened because you’re getting more car now.

Maybe you are, maybe you aren’t, but if you don’t have a car you can’t drive one where you need to go. Something similar is done to computers, but my computer today is not much better than the one I had 20 years ago. Really, it is only better at pretty graphics, in every other way it is effectively as good at web surfing, word processing, spread-sheets and so on as it was then. In many ways I could argue it is less functional, it works less well than that computer did.

The truth is that for decades the prices of everything that matters: transportation, housing, health care and food has been rising in the prices actually paid by most people and rising faster than most people’s wages. But when you look at a real wage chart it shows that wages are rising faster than inflation.

This is wonderland-level bullshit. It is fantasyland “emperor has no clothes” mass pretense.

Meanwhile places like the Fed and Treasury are basing policy on these numbers. “Oh, we need higher inflation” they squeal as the ignore the massive inflation in every part of the economy where a seller has pricing power or where they themselves have created a bubble. “We’ll use rent equivalent as a proxy for housing prices” they spewed as the housing bubble went its merry-way, because “the economy behaves as if it were what we want it to be!”

So I go thru these numbers over at FRED and I can’t use half of them. They’re just lalaland garbage, completely disconnected from reality on the ground.

Then you’ll have some reporter ask a politicians “so what does a banana cost” and they have no idea, because they don’t do their own shopping and haven’t in thirty years.

Lalaland. More delusional than the Red Queen or the Mad Hatter.

There are many ways that elites are completely disconnected from the consequences of their decisions, and one of them is that the systems designed to report to them conditions are so broken and corrupted that they are providing completely erroneous feedback, “inequality’s high, sure, but honest, most people’s wages are actually rising after inflation so it’s just not that big a deal.”

BULLSHIT. Absolute bullshit.

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Delusion Regarding the Fall of Neoliberalism and Globalization

By Ian Welsh

On September 25, 2020

64 Comments

So, the article below was published December 8th, 2015.

The pull quote is:

Neo-liberalism is nearing the end of its cycle. It will kill a lot of people dying, but its death is now ordained and can only be slowed by fanatical levels of police state repression in a few countries. And its death convulsions and the birth pangs of the new system will create a new age of war and revolution which will kill far more.

This is now as close to inevitable as human affairs, endlessly complicated and subject to unexpected shocks, can be.

Nothing has changed, the process has simply continued. Notice the repression going on in the US right now. Since I wrote it, the UK left the EU, there was massive resistance to Macron in France, and so on. We have massive fires all over the world: Australia, California, South Africa the Amazon and more. Wealth continues to concentrate at the top, etc, etc…

These convulsions take time. Slap the start of the actual fall as 2020, with the UK’s Brexit, and we’ve got 12 to 20 years to go. This one’s going to be bad, really, bad, simply because of climate change and our vast over-exploitation of limited resources. There’s going to be a lot of real hunger and lack of water, and so on.

The next age is undetermined, but one possibility is a centrifugal period. It is hard to imagine a future in which, India, for example, survives as a unified nation. For that matter, I’m not sure I’d put my money on China holding together over the middle run: 50/50 it’s fallen into warlordism by 2050 to 60.

The simple way to make your guesses is ask if a country can feed itself with domestic production AFTER the effects of climate change. If it can’t even feed itself now (or only barely); or if it is going to have serious water issues (water, obviously affects agriculture, so it’s not really two things), then the smart money is that it’s going to break up or lose effective control of various hinterlands.

And if you’ve got resources a more powerful nation on your border wants, well, that could go very badly for you. (My fellow Canadians, who seem clueless about how violent Americans are, should take note here.)

On the upside, this will be a very interesting period to be alive, if you can stay that way.

Natalie Nougayrède writes in the Guardian about The Front National’s victory in France:

Marine Le Pen has no solution for France’s problems, her economic programme is all about retreating from the outside world and Europe. Her social vision is of a mythical, homogeneous France that never existed. What she has to sell is an illusion. It’s only because so little else is on offer that people are buying.

This analysis is, there is no kinder way to put it, delusional.

And Nougayrède should know it, because she writes:

The impact of globalisation marked the end of what the French demographer Jean Fourastié coined Les Trente Glorieuses (The Glorious Thirty), the 1945-1975 period when France was modernising and increasing its international influence. There is much twisted nostalgia in the rise of the National Front.

Nougayrède blames this on the oil shocks, which the entire West failed to handle (note that Japan, far more vulnerable to the oil shock, DID handle it. Their later failure had other causes). She notes that France’s elites have not, since 1975, been able to turn things around, something I have noted as well.

But she is wrong about a retreat from globalization being delusional. The simple fact is that in France and almost every other country (including, by the way, most African countries), growth was better before globalization, and the proceeds of that growth were distributed to their populations much more evenly.

This is a fact, and you can only argue against it by invoking China (which used classic mercantalist policies, and was not meaningfully party to the 1945-1975 consensus economy.)

There will always be trade. There will always be global movement in goods, capital, and ideas, but more is not always better. In fact, one can easily argue that more is rarely better.

As for “Europe,” the fact is that increased integration has not been to the benefit of most Western Europeans. That assertion is, again, extraordinarily hard to argue against and is especially true of the creation of the Euro.

Nougayrède wants France’s leaders to fix things, and not to fail, but she is very nearly as delusional as them. She admits that their failure has led to the rise of Front National, but cannot admit that their policies have failed, economically, along the lines that Marie Le Pen says they have.

Just because someone is a near-Fascist does not mean they are wrong about everything. I have no tolerance for LePen’s brand of Imperialism and cultural supremacy, but she, like Trump, is telling a lot of truths to a lot of people who feel like their country has been on the wrong track for a long time. (In the U.S., white, working class male salaries peaked in 1968. No matter how much you scream about white privilege, you are a fool if you expect white males to gravitate towards anyone who doesn’t at least pay lip service to reversing that.)

As an economic project, the EU is a failure for many of its members, including France. There are exceptions (Germany, Poland, etc.) but the losers cannot be expected to just sit there and take the beating forever. The “beating” has been exacerbated by Europe’s deliberate imposition of austerity. It is not just that Europe’s elites have failed to create a good economy, it is that they have deliberately made the economy worse for the majority of residents in many of its countries.

Until we can honestly evaluate the failures of neo-liberalism, and gut globalist cant which claims more trade and capital flows are always a good thing (and, even if they aren’t, are “inevitable”) we cannot fix the economy.

France, like about half of the EU, should leave the Euro. It should re-impose tariffs on a wide variety of goods and produce them in their own countries. Yes, they would cost more, but wages would be higher. It should also move radically to non-oil-based energy (as is true of, well, almost everyone).

These basic policies are not difficult. Corbyn is not wrong to say “make the necessary adjustments so it will work today, and go back to post-war policies.” It failed, yes, but it was the last economy which spread money evenly through the economy. Make sure it’s not sexist and racist, update it for new energy technology, and try it. It may not be the best solution (I’d like some fairly radical changes), but it’s certainly not crazy, given that it did give France those 30 great years.

The failure to deal with the oil price shock doomed the post-war world, yes. But it is 40 years later and we have technology and knowledge they did not have.

Until the developed world’s sanctioned intellectuals (as opposed to pariahs like myself and my ilk) and their masters come to grip with these facts, the population will continue to turn elsewhere. They may turn to sane and reasonable people like Corbyn, or they may turn to people like LePen and Trump, but people will not put up with “it’s going to get worse for the forseeable future” forever.

We can have reasonable policies, which will make the world better for everyone (even if that means there will be a lot less billionaires–the Corbyn solution), or we can have the rise of fascists and their left-wing equivalents.

The room in the mushy middle for those who aren’t willing to do something radical to fix the economy and other problems is narrowing. It will continue to narrow.

Our current elites will not adjust, so the question is: Who will we get? Corbyn and FDR? Mussolini, LePen, Trump?

Neo-liberalism is nearing the end of its cycle. It will kill a lot of people dying, but its death is now ordained and can only be slowed by fanatical levels of police state repression in a few countries. And its death convulsions and the birth pangs of the new system will create a new age of war and revolution which will kill far more.

This is now as close to inevitable as human affairs, endlessly complicated and subject to unexpected shocks, can be.

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The European Union

By Mandos

On September 21, 2020

8 Comments

CONTENT WARNING: *** MANDOS POST *** MANDOS POST *** MANDOS POST ***

Both inside and outside Europe, the left is highly divided on the topic of the European Union, with a large current being firmly against it for reasons that are actually quite understandable, from multiple perspectives (not just economic). The recent history, especially the Syriza episode in Greece, does not help the reputation of the EU from a left-wing perspective, and there is a temptation to see anything that damages the EU as being good for the people of Europe. Jeremy Corbyn’s somewhat incoherent position towards the EU can therefore be dismissed by some as the result of a circumstance impossible for him, whereby a good chunk of Labour voters were supportive of EU membership while a principled leftist like Corbyn would have to, in their inner selves at least, be against it. The EU’s association with neoliberal economic policy has led some, including a large percentage of this blog’s own commentariat, to view Brexit as just another stick with which to beat the neoliberal dog, so to speak, and to take at best a neutral view of who and how the stick is wielded.

It is absolutely correct to say that EU institutions have developed in such a way as to embed neoliberal attitudes and policies deeply within them. The institutions of European integration were largely built at the very same time as the neoliberal consensus’ apparent accession to the Mandate of Heaven. (Providence does not hand out these mandates on the basis of evident goodness or wisdom.) Starting from the late 2000s, it became obvious that neoliberalism was losing the Mandate, and no clear claimant has as yet emerged, a worrying sign.

The dilemma for those who want a more just and sustainable human future is extent to which the active dismantlement of the EU is necessary or warranted. There is a left-wing position that is a kind of short-term nihilism which celebrates the destruction of institutions as a necessary step in creating the opportunities for beneficial change. This position should certainly be taken seriously and becomes increasingly relevant as neoliberal institutions continue to operate in “zombie” mode, deprived of the providential imprimatur.

The ideal case is that the dismantlement of the EU would lead to a condition that was more beneficial, i.e., replacement from the ground up with, if not with a single institution, then with a collection of polities that are better empowered to serve the needs of their citizens. The prospects for this can only be understood in terms of the forces that created the European Union (and its predecessor organizations) in the first place. Europe as viewed from a Martian height consists of extremely unstable, contentious nation-states with badly drawn borders (as it is impossible in Europe, the birthplace of the nation-state, to draw the borders well). A handful of these nation-states took advantage of a specific set of historical circumstances to become great colonial-imperial powers, but partly due to their own internal contradictions and external developments eventually lost their own heavenly mandates. Present-day Europe, ex-EU, is a checkerboard of small states and middling industrial powers which had to reinvent themselves in the latter half of the 20th century.

A cursory, common-sense examination of Europe’s present-day geographic situation indicates that the checkerboard (or chessboard) analogy is more than apt. European countries sit on geographically strategic (if resource-poor, relatively speaking) real estate between the current hegemonic military powers and become easy prey for the very colonial tactics Europe itself perfected. The post-WWII architects of European convergence, themselves functionaries of states skilled in colonial tactics, were absolutely correct to surmise that Europe required a super-state level of organization that was at least partly independent of other power blocs in order to prevent being further carved up like a Thanksgiving turkey. The Middle East’s current, long-standing troubles illustrate clearly what can happen in that case.

The adolescence of European institutions during the neoliberal moment presents the central dilemma, because it itself is now a major threat to a protective European unity. The question is: what is the optimal and most feasible way to lever out zombie neoliberalism without putting European countries at risk of “integration” into the pathologies already evident in the current hegemons? The question is not an abstract one: one of Brexit’s consequences is that the UK likely will adopt an even harsher internal economic stance with integration into the weaker, less consumer- and worker-friendly economic regulation of the USA.

My own position is that the only way to resolve the deadlock is by the boring, difficult work of building cross-border, cross-polity popular solidarity both inside and outside the current EU. It is the only way to enshrine the benefits of European integration with the necessary reform of the EU’s economic management. Anything else — and admittedly, “anything else” is the most likely prospect — risks that those who live in Europe jump from the frying pan into the fire, following a mirage of dead-end cultural-nationalist idylls and emotional appeals to a clean, safe world that never really existed.

Wage Slavery on Labor Day

By Ian Welsh

On September 7, 2020

23 Comments

One of the simplest ways to evaluate a society is by the common denominators of the lives most people have to live. For a lot of history that was farming. Sure, there were people who weren’t farmers, but 80% to 95% of the population farmed.

Most people in the modern world are wage laborers. They work for someone else, and without the money they earn from their employment they would be homeless, go hungry and after a few years of misery, likely die.

We have a weird idea of freedom “I am free to sell my labor,” that many people who lived would consider essentially slavery, which is, in fact, why the term wage slavery was coined. Most of us are not free to not take orders, only (maybe) to choose our boss.

Most of the time we don’t even really get to choose who gives us orders: there aren’t a lot of options and we need a job now. If the labor market is bad, and it’s been bad in most places for most of my life (there have been a few exceptions), bosses get to choose workers, not workers bosses. You take what you can get, put up with what you must, because the alternative is worse.

Some of us get good labor jobs, some of us bad labor jobs, but most of us ultimately take orders, often daily, hourly or even as often as every few minutes (if you’ve never had a job like that be grateful).

We are wage slaves. It’s not as bad as traditional slavery, but you’re still spending your entire working life doing what other people tell you (after spending your childhood obeying teachers.)

We’re a society of order-takers, who MUST take orders or die (with few exceptions and the exceptions cannot scale to the majority, there aren’t enough slots). Yet, somehow, we think we’re free.

That’s the sign of a very good indoctrination and propaganda system.

Anyway, enjoy Labor Day, but remember, wage-slaves treated better are still wage-slaves. The idea is to change who gives the orders from them to ourselves.

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The Principle of Elite Consequences

By Ian Welsh

On September 3, 2020

51 Comments

Sometimes the comments on an article, like my recent post on reforming the justice system, reveal a deep misunderstanding of how the world works.

People with money and power run our societies. The Princeton/Northwestern oligarchy study found that what they want is what matters, and that the opinions of the rest of us don’t matter.

If they are not subject to how a part of society operates, they don’t care if it runs well, and it will run badly (or, in a way that profits them, which is generally the same thing).

The justice system, for the rich and powerful, works well. They have good counsel, because they can afford it. They can afford bail. They generally go to minimum security prison if they happen to be indicted, and they are never actually charged with most of their crimes — as was the case in widespread fraud leading up to the financial crisis or the robo-signing fraud used to steal people’s houses afterwards. (At most, they pay fines, which are less than the value of what they stole.)

The security systems in airports are hell. But rich people don’t go through it, they fly in private jets.

The medical system in the US is bad and overpriced for most people. But it’s very very good if you’re rich or powerful.

The US has been at war for almost 20 years now, but US elites don’t care, because they and their children don’t fight in it.

The US education system is bad, and worse in places which are poorer. US elites don’t care, because they either go to private schools or cluster in rich neighbourhoods where the schools are good, because they are funded through property taxes.

Covid-19 is not a problem, because it mostly kills poor people and minorities, and it’s making the rich much much richer, getting rid of their competition among small business-owners.

If you want something to work well, powerful and rich people must be forced to use it. They must have the same experience as ordinary people.

It takes an especially bad dose of capitalist ideology (or aristocratic or oligarchic ideology) to not perceive this point. If the powerful aren’t affected by how they run society (except to get richer and more powerful), if they don’t experience how the society runs for ordinary people, then society will be shit, AND, if you want society to be good, you can’t allow rich and powerful people to opt out of ordinary experiences.

They must have the same health care as everyone else, including the same odds of not receiving care, being bankrupted by it or getting bad care. They must go through the security lines at airports and be groped. Their kids must have the same odds of having shitty schools. They must have the same odds of dying of Covid-19. They must be given rifles after voting for a war in the Senate and sent to the front lines (or at the least their kids must be, though I see no reason why they shouldn’t be, and if they’re too physically weak to fight, they shouldn’t be allowed to vote on a war they won’t be involved in).

All of this is the most basic of common sense, a level of reasoning that a ten year old would be able to follow easily.

If you cannot follow this reasoning you are suffering from a very bad case of ideological poisoning or you identify with the rich and powerful class. Perhaps you belong to it, or perhaps you’ve just lost a sense of your own position.

I can hear many people now, “rich and powerful people deserve to be treated better, and everyone else deserves shit.”

You can have a good society when you are willing to do what it takes, and the most important rule of a good society is that important people don’t get to opt out of the world their class creates for everyone else.

9/3-20: article edited to reflect oligarchy study authors being at Princeton/Northwestern, not Harvard.

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Cold War 2.0 Incoming

By Ian Welsh

On August 11, 2020

37 Comments

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

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

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

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

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

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

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

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

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

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

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

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

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

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

China is a threat.

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

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

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

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

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

For others, China will be unacceptable.

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

This is a recipe for Cold War 2.0.

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

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

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

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

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

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

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

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

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

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