The Age of Revolt 1.

            Where did “Trumpism”–the political movement–come from?[1]  It arose out of the profits and losses from globalization.  The costs were born by one segment of American society while the profits flowed to another segment.  The beneficiaries were, first and foremost, the “political, cultural, and financial elite.”  Their right to lead rested upon the pursuit of the common good. 

In theory, the free-trade policies pursued by a whole series of American administrations after the Second World War would benefit Americans.  They would allow the American economy to shift jobs producing low-value goods offshore and to redeploy assets toward higher-value jobs and goods.  For a long time, these policies had no costs for Americans.  The American economy emerged from the war with a long-term competitive advantage over anyone else.  It could have not only butter and guns, but low-end butter and high-end butter.  By the Sixties, that advantage had eroded badly.  As foreign competition began to bite, it turned out that a lot of people depended on those low-value jobs for their living and found it difficult to shift into high-value jobs. 

Globalization began to take a more serious toll on the American working class in the wake of the “Oil Shocks” of 1973 and 1979.[2]  That seems incomprehensibly long ago to most journalists and politicians, so they just ignore the larger story.  Then the North American Free Trade Agreement (NAFTA, 1994) reduced tariffs on trade with Mexico and Canada.  It accelerated the early wave of job-losses.  Already in the 1990s, Pat Buchanan and Ross Perot could run for president, if not win, on the loss of blue-collar manufacturing jobs.  At the same time, China’s abandonment of suicidal Maoist economic policies and its entry into the World Trade Organization (1990) greatly accelerated the loss of jobs.  Those job losses not only tossed many workers into unemployment, they also left whole communities hollowed out and unable to address human problems.  They not only tossed workers into unemployment, they undermined the value of the homes that formed an important asset of many workers.  They not only tossed workers into unemployment, they also foreclosed the possibility of the children of the workers finding steady work at a living wage anywhere near their parents. 

Globalization may have eroded manufacturing jobs, but it created enormous opportunities for the American financial services industry.  Industrializing countries needed capital and expertise.  Wall Street could provide both, not least because of the inflow of Chinese profits to New York banks and to the swelling 401(k) savings of the Baby Boomers.  Increasingly “cosmopolitan” in its outlook, Wall Street also became increasingly influential over national economic policy.[3] 

The year 2008 marked a turning point.  A great deal of elite foolishness and some guile created the 2008 financial crisis.  That, in turn gave rise to revolts on the right (Tea Party) and left (Occupy Wall Street); and to the invasion of the political system by “outsiders” like Barack Obama and Sarah Palin.  Donald Trump, the ultimate outsider, was just a heart-beat away. 


[1] Gerald F. Seib, “Where Trump Came From—And Where Trumpism Is Going,” WSJ, 16-17 January 2021. 

[2] “In the wake of” does not mean “solely caused by.”   For more of my peculiar view of this process, see https://waroftheworldblog.com/2015/03/02/american-union-stay-away-from-me-uh/  and https://waroftheworldblog.com/2015/12/17/the-new-economy/

[3] For one highly critical view of this process, see Simon Johnson, “The Quiet Coup,” The Atlantic, 5 May 2009. 

The Asian Century 18.

            How “hawkish” on China does President Biden want to be?  Between the election and inauguration, observers recognized that the Democratic foreign policy establishment is divided.  On the one hand, there is the global issues[1] faction that deprecates great power competition as a diversion from key future developments.  On the other hand, there are the traditionalists who see a strong United States as the leader in a movement to create a rules-based international order that can shackle “evil doers.”   China would provide a first test of which faction had the upper hand. 

            The Biden administration has moved quickly to confront the Peoples’ Republic of China (PRC).[2]  It invited Taiwan’s chief diplomatic representative to Biden’s inauguration; it announced that it would sell weapons to Taiwan; it fended off a Chinese suggestion of talks in the near future by pleading the need to consult allies; it endorsed the Trump administration’s position that China’s Uighur minority art the target of genocide[3]; and allowed the voyage of a naval force to the South China Sea to go forward. 

            On the surface, there is much to like about Biden’s assertion of traditional forms of American power.  At the same time, previous practitioners would warn that it is all too easy to get into an escalating cycle of actions.[4]    

            If Zi wants tough action and not just tough talk, he could order some kind of military demonstration.  Perhaps China could whack the Indians along their common border, as they did in late January, or fly war planes into Taiwan’s air defense zone, as they also did.  The trouble is that such action might bring forth some new action by the Americans.  This, in turn, would require some further response.

The alternative of doing nothing but talk tough in response would be tricky for Zi Jinping.  It could signal weakness or uncertainty to people inside and outside China.  Zi could easily survive foreign perceptions, because he could calmly wait on the growth of Chinese power while looking for safe opportunities to demonstrate it.  Could he survive domestic perceptions of weakness?  Is he sure enough of his position?  Are his rivals sufficiently contained, his enemies imprisoned?[5]  In this case, a renewed round of domestic repression would serve a dual purpose.  On the one hand, it would offer a chance to weed out suspected weak links and dissidents.  On the other hand, human rights is now an entrenched American foreign policy concern.  So, domestic brutality would be both a way of shoring up Zi’s own position while openly defying one of American foreign policy’s stated goals.  What are the Americans going to do about it?  Sovereign countries can pretty much get away with doing whatever they want inside their own borders.  It’s one of the privileges of sovereignty. 

One might expect that Zi will opt for a policy of domestic toughness, notably against any “nationalists” who questions his toughness abroad.  Meanwhile, the US and the PRC probably will continue strengthening their positions.  Perhaps they will find a way out. 


[1] Climate change first of all, but then human rights, migration, and—now—pandemic disease. 

[2] Walter Russell Mead, “Can Biden Find Clarity on China and Russia?” WSJ, 14 December 2020; Mead, “Biden’s Opening Salvo on Beijing,” WSJ, date misplaced. 

[3] Biden had said the same thing on the campaign trail before his election. 

[4] For a scary, real-world example, see: https://www.youtube.com/watch?v=ef7f9v2HEl0 

[5] In all fairness, it usually took a long series of reverses before a Chinese emperor was said to have lost the “Mandate of Heaven.” 

Team of Rivals in 2024.

            In the likelihood that Joe Biden will not run for a second term, he has stocked his Cabinet and White House with his view of what would be desirable contenders for the Democratic presidential nomination in 2024. 

            Susan Rice briefly entered the Democratic primaries in 2020.  She went nowhere, so she angled for the Secretary of State.  Biden never seriously considered her, but he didn’t just toss her aside either.  Rice is a foreign policy expert without domestic policy credentials or much political sense.[1]  Biden appointed her head of his domestic policy council.  This will broaden her area of expertise and bring her into contact with many political figures.  If she’s a quick learner, she could make a stronger candidate in 2024. 

            Gina Raimondo is Secretary of Commerce.  BA, Harvard; Rhodes Scholar, Oxford; JD, Yale: she’s smarter than the average bear.  Venture capitalist, then Rhode Island State Treasurer, where she had the audacity to reform the near-bankrupt state employee pension system.  So, smart, but also a tough little cookie.  First female Governor of Rhode Island from 2015 to 2021.  Also, she seems to be on bad terms with Governor Michael Cuomo of New York. 

            Pete Buttigieg[2] is Secretary of Transportation.  BA, Harvard; Rhodes Scholar, Oxford: so he, too, is smarter than the average bear.  Consultant at McKinsey for a few years; mayor of South Bend, Indiana.  Service in Afghanistan with the Naval Reserve.  Openly gay, but the military service in a combat zone inoculates him against blowhards in recliners.[3]

            Most attention has focused on Vice President Kamala Harris.  However, Biden still doesn’t seem to have hived-off some large area of responsibility for her.  Unless he does, she may spend the next four years representing the United States at the funerals of foreign leaders.  That isn’t great preparation to run for president.  Why take her on as Vice President, then basically short-circuit her presidential ambitions?  Perhaps he can’t help holding a grudge about being blindsided by the question on bussing?  Perhaps he is a little concerned about her questioning of Brett Kavanagh?  Perhaps he’s alert to the reality that she flamed-out as a primary candidate, particularly among Black voters. 

            Equally interesting is who is not in the cabinet.  Elizabeth Warren probably wanted to be Secretary of the Treasury,[4] but would have settled for Attorney General.[5]  Bernie Sanders probably wanted to be Secretary of Labor.  Both got skint.  So did the “progressive” wing of the Democratic Party.  Biden may believe that linking too closely to the left wing of the party spells disaster in future elections. 

            Thus, one could read the tea leaves to say that Biden is using second-tier positions as a school for the development of the next generation of Democratic party leaders. 

            Nancy Pelosi and Charles Schumer are not doing the same with the next generation of House and Senate leaders.  There gerontocracy has dug in. 


[1] Otherwise Hillary Clinton could not have run a pick off her on the Benghazi television interview. 

[2] What were the clerks at Ellis Island thinking? 

[3] See: https://www.youtube.com/watch?v=LUyjT8VpwMI 

[4] Neither Wall Street nor the AARP would have sat still for that. 

[5] Anti-trust suits galore; claw-backs of “illegitimate” profits earned during the Trump presidency; and endless investigations (backed with pre-dawn serving of search warrants) of everyone who ever held a federal government position under Trump. 

The Asian Century 17b.

Yet, for historians—if not for political scientists or economists—there is reason for cautious optimism.  On the one hand, the historical record suggests that democracies can be slow to mobilize their strength, but better able to mobilize that strength over the long haul.[1]  If one looks at (or, much worse, had to live through) the period from 1930 to 1942, one could easily believe that the liberal system had shot its bolt.  Economic depression, the collapse of new democracies, the appeasement of authoritarian nations, and military defeat slammed confidence in the Western system.  Three years later Berlin and Tokyo lay in smoking ruins. 

Second, “there’s a great deal of ruin in a nation.”[2]  The recent unpleasantness at the end of the Trump presidency led journalists and public intellectuals to invoke the example of the disputed presidential election of 1876.  Squalid as were those events, they also helped settle a period of deep division within the United States and helped bring on a long period of rising power and prosperity.[3] 

American business may be resistant to government guidance on China policy, but it is resistant to government policy on many things.  Usually, the outcome is satisfactory to most people.  American society is immensely creative and innovative.  The rapid development of two vaccines for Covid 19 demonstrate that old truth.  Conversely, the many problems with distributing the vaccine fall to the responsibility of the state and federal governments.  Hardly cause for business to defer to the state.  During the pandemic, American businesses have moved rapidly ahead with collaboration software (like Zoom), direct delivery bypassing stores, and cloud computing to manage all of it.  Compare this with the PRC’s treatment of Jack Ma, the entrepreneur who created Alibaba and Ant.  He got “disappeared” for a while after he suggested that entrepreneurial innovation outstrips old ideas.  About the subordination of business to the state for example. 

America remains remarkably open to immigration.[4]  Immigration helps off-set the aging of the native-born population, while admitting large numbers of people eager to work and to create their own futures.  In contrast, the PRC oppresses its own people and violates international agreements, like the Anglo-Chinese agreement on Hong Kong, in order to get more people to oppress.  China is not a country of voluntary immigration. 

By any standard, China’s economic progress since the death of Mao has been extraordinary in statistical terms.  However, much of that progress came from moving peasants out of low productivity rural farming and into higher productivity urban manufacturing.  The government has used subsidies, entry into the world market, and massive intellectual property theft to push China so far forward so fast.  There is good reason to wonder if the PRC has reached the limits of what can be obtained by such methods.  Just when they’ve alarmed the US. 


[1] This is a central theme of Gordon Wright, The Ordeal of Total War, 1939-1945 (1968).  It remains the best single volume history of the Second World War. 

[2] Adam Smith.  I forget where I read it, but it stuck with me. 

[3] Richard White, the author of The Republic for Which It Stands: The United States During Reconstruction and the Gilded Age, 1865-1896 (2017), would wish to qualify this view if it ever came to his attention. 

[4] In 2017, 2018, and 2019, an average of 1,085,181 people obtained lawful permanent resident status each year.  In 2013, 2014, 2015, and 2016, an average of 1,060,401 people obtained lawful permanent resident status each year.  See: https://www.dhs.gov/immigration-statistics/yearbook/2019/table1 

The Asian Century 17a.

            It is now commonly accepted that the United States (US) and the Peoples Republic of China (PRC) are strategic competitors.[1]  All eyes regard this competition, for they represent two different approaches to government and economic management.[2]  China combines an effective authoritarian government with state-managed semi-capitalism.  The US combines democracy with a regulated free market.  For the duration of the “Fifty Years War”[3] the United States represented the preferred wave of the future for an ever-growing share of the world’s population.  Is the US able to win a new competition or have essential elements of its previous strength dissolved?  Is China better able than were Nazi Germany and the Soviet Union to win a competition with the US?  It depends where you look. 

Does the Covid 19 pandemic of 2020 offer any insight into the relative positions of the US and the PRC?  The answer must be NO if examined in international perspective.[4]  Democratic Taiwan did better than the PRC; the United Kingdom did even worse than did the US in spite of doing all the things that Democrats criticized the Trump administration for not doing.  The explanation for the diversity of results may have something to do with an Asian culture of compliance with the public interest in comparison with a Western culture of asserting individual rights at the expense of the community. 

It is sad, but true that the Covid pandemic is a transitory event.  It has been deadly and disruptive in its impact, but in a year it will be history.  More fundamental issues should be alarming.  So far, China has won the trade war launched by President Trump.  During 2020 its trade surplus increased, as did the trade deficit of the US.  The Trump administration’s attack on Huawei Technologies led the PRC to pour resources into its semi-conductor industry.  American efforts to get other countries to join in exerting pressure on China signally failed.  European, South American, and Asian countries are so entranced by the promise of the China market that they seek to fill the gaps when other countries try to pressure China.[5]  Nor is American politics oriented toward pursuing a coherent industrial policy during peacetime.  One of Trump’s last acts as President was to see his efforts to encourage an American rival to Huawei come to grief.  Intel announced plans to offshore some of its chip production; while Cisco rejected government entreaties to buy either Nokia or Ericsson.  Here they put the bottom line ahead of national strategy.  One of Biden’s first acts as President was to cancel the permit for the Keystone XL pipeline.  Here he put the demands of environmentalists over the interests of America’s Canadian ally (and over those of the American construction workers who had been building the pipeline). 

Finally, Chinese news media are portraying the riot at the Capitol as proof that American democracy is crumbling.  Many, here and abroad, would agree with this grim judgement. 


[1] Greg Ip, “China Played Its Hand Well in 2020.  Will It Keep Winning?” WSJ, 23-24 January 2021. 

[2] I’m not sure how Francis Fukuyama makes sense of this development.  Apparently, Hegelianism only takes you so far.  See Fukuyama, The End of History and the Last Man Standing (1992).  Still, he’s teaching at Chicago and I’m working at an educational wide spot in the road.  So,…

[3] The struggle from 1940 to 1990 between capitalist liberal democracy and autarkic dictatorships. 

[4] See: https://ourworldindata.org/covid-cases 

[5] For example, the European Union recently concluded an agreement with China to increase investment.  In doing so, they ignored a suggestion from Jake Sullivan, then President Biden’s national security advisor-designate that they should wait. 

Attainder?

John Wycliffe (1320s-1384) was an English theologian and religious dissenter. He is often seen as a distant fore-runner of the Protestant Reformation that began in 1517. He was a distant forerunner because the Latin Christian Church rejected his criticism of the institution and his doctrinal arguments. Well after his death, the Council of Constance (1415) declared him to have been a heretic. Subsequently,in 1428, a pope ordered both his books and his earthly remains to be burned. Yet his ideas continued to be passed along in the secrecy required of censorship and universal official denigration. They helped prepare the coming of the English Reformation.

https://upload.wikimedia.org/wikipedia/commons/2/25/Wycliffe_bones_Foxe.jpg

It is vastly unfair to the good John Wycliffe to compare him to Donald Trump. But is it unfair to the clergymen eager to dig up Wycliffe’s grave and make a cage of his bones to compare them to the Democrats? (My apologies also to Warren Zevon.) Nancy Pelosi, Chuck Schumer, and the editorial board of the New York Times all seem eager to put Trump on trial before the Senate so that he can be convicted on pretty much a party-line vote where–this time–the Democrats have the votes. To what end? Apparently, Pelosi et al hope to have him barred from ever holding elected federal office again.

Why? They seem to believe that he might run for president again in 2024. If Joe Biden turns out to be a one-term president, then there will be a Democratic free-for-all in the primaries. There is no guarantee that a really strong candidate will emerge from that fray or that the party will not rupture into Progressive and Mainstream wings. Trump pulled almost 74 million votes in November 2020. Many Republican voters appear to oppose impeachment, so even the Trump-inspired riot on 6 January 2021 can’t shake their dislike of Democrats. Seen in this light, impeachment appears to be an insurance policy against possible Democratic defeat.

They might bar him from taking office, but can they bar him from seeking office by running in Republican primaries? If he won in the primaries, could he be barred from running for office? If he won in the Electoral College (as in 2016) or even in the popular vote as well, could he really be barred from taking office?

I have the idea that bills of attainder are barred by the Constitution.

My Weekly Reader 16 January 2021.

            Between 1750 and 1914, what the British historian Eric Hobsbawm called the “Dual Revolution”[1] gave the West a sudden and enormous advantage over the rest of the world.  Taking advantage of this shift in the balance of world power, Western countries returned with new energy to the policy of imperialism.  By 1914, the Indian sub-continent and South East Asia had been subdued and Africa partitioned, while the rotting Ottoman and Chinese empires were next on the list.  Political control went hand-in-hand with determined effort at economic and social Westernization.  Christian missions, banks, schools, railroads and steamship lines, army posts and naval bases, mines, tropical medicine institutes, plantations, newspapers, tax collectors, and courts sprang up everywhere.[2] 

            Half a century later, those empires were gone.  How did that happen?  Many factors played a role.  The Second World War left Europe in ruins, while elevating two anti-colonial “Superpowers.”  Relatively few Westerners had gone out to run the empires.  Their sway over non-Western subjects depended heavily upon prestige, the sense that Westerners really were superior.  The Japanese victories over Westerners in British Malaya, the Dutch East Indies, French Indochina, and the American Philippines showed that non-Westerners could defeat Westerners.  After the war, European countries were preoccupied with using their limited resources for economic reconstruction and social reform.  Finally, the war had been fought by the Westerners for the cause of individual liberty, human rights, and democracy.  Faced with colonial independence movements after the war, they couldn’t say “For us, but not for you.”  

            Yet the Western collapse tells, at most, half the story.  More important is the rise of support for independence movements.  The colonial people had been no more happy to be subjugated to foreign rule than had African-Americans to be subjugated to slavery.  How to respond to the Western challenge had long divided non-Westerners—from the American Plains to Central Africa to the Ottoman Empire to East Asia.  One answer was to turn Western achievements against Western rule.  This ran from wholesale imitation of the sources of power (Japan) to the exploitation of Western political thought, like the idea of nationalism, against those who claimed to represent it (India).  Then the wars incidentally created a base of nationalists.  They did so by accelerating the creation of a middle class and a cadre of experienced military leaders.  Both groups were strongly nationalist and eager to rise. 

            Finally, there were the committed revolutionaries.[3]  Their numbers continually winnowed by the colonial police, they printed illegal newspapers and handbills, organized demonstrations and strikes, travelled within their homelands and between different empires using false documents, and sometimes led armed uprisings.  These were the men who often would take office at the hand-over of power.  They would try—with uneven success–to build new states. 


[1] In politics this meant the emergence of strong centralized nation-states ever-more based upon the support of the governed.  In economics this meant the Agricultural and Industrial Revolution, which generated immense wealth.  The political revolution began in France, the economic revolution began in England.  With the passage of time, both revolutions spread everywhere, simultaneously creating and destroying. 

[2] For a compelling view of the British Empire at its height, see James (Jan) Morris, Pax Britannica: Climax of an Empire (1968). 

[3] Tim Harper, Underground Asia: Global Revolutionaries and the Assault on Empire (2021).  See the perceptive review by Walter Russell Mead, WSJ, 13 January 2021. 

The Asian Century 16.

            At the dawning of the Cold War in Asia, the United States limited its security commitments in the region.  Holding Japan headed the list of American concerns.  The Chinese Nationalists (Kuomintang) seemed close to defeat by the Communists.  American efforts to reform or reinforce the Kuomintang, or to mediate a peace had foundered.  Nothing more could be done.  Communist victory in 1949 did not trigger an American commitment to stop further dominoes from falling.  The remnants of the Kuomintang were left to fend for themselves; American troops began to withdraw from Korea; and the Americans made clear to the French that their war in Indochina was a lost cause.[1]  Then the Korean War began (1950); Communist China intervened against the Americans; the Americans committed themselves to South Korea, Taiwan, and Indochina; and the two countries were at daggers drawn for twenty years. 

            All this suddenly changed in the 1970s.  Richard Nixon and Henry Kissinger began an “opening” to China, while post-Mao China launched a sweeping transformation of its economy and society.  That transformation accelerated after the collapse of the Soviet Union.  The United States and China appeared to develop a community of interest that would shape the future world.[2]  One of the sticking-points that had to be finessed was the fate of Taiwan.[3]  China has held to a “one China” policy that amounts to a determination to regain all the parts of traditional China that have been lost.  Chiefly this has meant Macao, Hong Kong, and Taiwan.  The United States has accepted this policy as a long-term goal while insisting that it not take place by force.  Without adequate military force to face-down the United States, China had to play the long game.  Meanwhile, protected by the United States, South Korea and Taiwan flourished. 

            It seems to some observers that we are at the beginning of a new phase.  China’s rapid economic development has permitted the once-weak country to begin projecting its power and claims.  China has engaged in a massive military build-up, expressed in a sustained campaign to gain control of the South China Sea.  It has begun reeling-in lost territories.  Macao and Hong Kong have been the first to fall.  Now Taiwan has become the focus of attention.  The loss of Taiwan would harm American national interests.  Partly the reasons are economic; partly they are diplomatic and military; taken altogether they are strategic.  Which system will dominate Asia?  Will it be the American system of democratization and an open market economy?  Will it be the Chinese system of autocratic government and a state-controlled economy? 

            Grand gestures without solid backing likely will lead to humiliating climb-downs in Asia.  “Solid backing” means military spending and alliance-revival through sustained diplomacy.  It alos means looking to the economic and technological foundations of national strength.  This grave challenge comes at a difficult time for Americans.  Donald Trump’s “America First” policies expressed, rather than caused, a pre-occupation with domestic social and economic concerns.  Seeing beyond the here-and-now will take strong leadership.  


[1] Brian Crozier, The Man Who Lost China: The First Full Biography of Chiang Kai-shek (1976); Nancy Bernkopf Tucker, Patterns in the Dust: Chinese-American Relations and the Recognition Controversy, 1949-1950 (1983); Lloyd C. Gardner, Approaching Vietnam: From World War II through Dienbienphu (1989).

[2] The omnipresent British smarty-pants Niall Ferguson coined the term “Chimerica.”  See: https://en.wikipedia.org/wiki/Chimerica 

[3] Walter Russell Mead, “Beijing Won’t Bow to Bluster,” WSJ, 12 January 2021. 

China Data.

            During the late 1980s, Judy Shelton, a researcher at the Hoover Institution, began an examination of the public documents on the Soviet Union’s budget.[1]  Communism’s centrally-planned economy had spent decades setting unreachable production targets and then hiding the failure to achieve those targets.  The huge Soviet arms build-up after the humiliation suffered at the hands of the Americans in the Cuban Missile Crisis had long term effects.  The military (the “metal-eaters” as they were called) creamed off resources that could have been devoted to either civilian consumption or investment in production.  Economic stagnation went hand in hand with mounting popular discontent behind a veneer of great military power.  Shelton concluded that massive inflationary forces were being held back by controls, but eventually the dam would burst.  In the meantime, she argued, Mikhail Gorbachev sought to stave off the disaster by obtaining Western credits and technology.[2]  As Shelton predicted, collapse followed. 

            Twenty years on another financial crisis arose in Greece.[3]  Following a historical pattern, Greece had borrowed a lot of money from foreign lenders, spent the money on a higher standard of living in the short-term without investing in higher productivity in the long-term, cooked the books to cover what they were doing for as long as possible, and then loudly bemoaned their unjust fate when the sheriff finally showed up. 

            The common thread here is that reality and perception differed widely.  Both the Soviet Union and Greece worked hard to project an image that concealed grave problems.  Only a handful of budget experts could—with much labor—discern the truth.  The reason these historical cases matter is because not everyone today is happy with the state of data from China.   

            In the eyes of one analyst,[4] it is necessary to do a lot of digging to figure out what is going on.  On the one hand, Chinese government officials and managers are under continual pressure to meet certain quantitative standards.  In this situation, “real” growth (adjusted for inflation) is more important to managers than is actual new output.  So they may tend to overstate “real” growth.  Calculating inflation is a coarse art in China when compared to Western industrial countries.  This facilitates overstating “real” growth.  In addition, the government suppresses existing, reliable data reports when they diverge too much from the government’s line.  In 2016, the government halted publication of lending to public versus private borrowers; in 2018, it halted publication of purchasing managers indexes in Guangdong province. 

            On the other hand, this manipulation of data can makes things really difficult for people who are just trying to do productive things.  Obviously, it hinders the work of foreign observers who are trying to understand and anticipate the performance of the world’s second largest economy.  However, it can have the same effect on Chinese managers struggling to run their firms.  If uncertainty about economic performance piles up year after year, there’s going to be a reckoning.  Also, this isn’t public finance, but it may be true there as well. 


[1] On Shelton, now a controversial figure and notable spoil-sport, see: https://en.wikipedia.org/wiki/Judy_Shelton   

[2] Judy Shelton, The Coming Soviet Crash: Gorbachev’s Desperate Pursuit of Credit in Western Financial Markets (1989). 

[3] Carmen M. Reinhart and Christoph Trebesch, The Pitfalls of External Dependence: Greece, 1829-2015 (2015), Brookings Papers on Economic Activity, https://www.brookings.edu/wp-content/uploads/2015/09/ReinhartTextFall15BPEA.pdf 

[4] Nathaniel Taplin, “China’s Growth Data Dazes and Confuses,” WSJ, 5 January 2021. 

My Weekly Reader 7 January 2021.

            The Enlightenment had a good year in 1776.  The year witnessed the publication of “The Declaration of Independence,” Edward Gibbon’s History of the Decline and Fall of the Roman Empire, and Adam Smith’s The Wealth of Nations.  Smith attacked the prevailing “mercantilist” economic policies of the time, arguing that tariffs serve only politically-connected special interests at the expense of the larger community. 

            Broadly, for much of their history, Americans rejected free-trade as the best engine of prosperity.[1]  While James Madison advocated a ‘very free system of commerce” in the early days of the Republic, Alexander Hamilton preferred a mercantilist/protectionist line.  Tariff policy veered toward the Hamiltonian line once industrialization began, to the great distress of Southern cotton exporters.  After the Civil War, high tariffs became an article of faith among Republicans.  It is by no means clear that tariffs actually contributed much to American economic development in the “Gilded Age.”  Abundant natural resources combined with a scarcity of labor that put a premium on technological innovation probably did much more than tariffs.  Still, they didn’t hurt.  High tariffs as a protection against “unfair” foreign competition became a totem.[2] 

            Making a totem out of high tariffs came back to bite Republicans when passage of the Smoot-Hawley Tariff Act (1930) coincided with the plunge into the Great Depression.  Even though the Federal Reserve’s tight money policy during the 1920s played a far larger role, the high tariffs and falling trade explanation was ready to hand.[3] 

After the Great Depression drove many countries toward high tariff walls and autarky, after the Second World War wrecked most world economies, Republicans and Democrats converged on a new orthodoxy of free trade.  The United States played the leading role in designing the new world order of the Bretton Woods System.[4]  Americans continued this drive through the 1990s, with successive “rounds” of multilateral tariff reductions and the North American Free Trade Agreement (NAFTA). 

Some of the economic and social dislocations of recent decades loosened the post-war consensus.  Republicans still clung to free trade as tightly as they once clung to high tariffs, while Democrats lost the enthusiasm for free trade that inspired them from Franklin D. Roosevelt through John F. Kennedy.  More recently, populist uprisings in both parties have disrupted the march toward a still more integrated world economy.  Senator Bernie Sanders attacked free trade in general and the Trans-Pacific Partnership (TPP) in particular during his run for the Democratic presidential nomination in 2016.  Rival Hillary Clinton soon moved from being a leading proponent of the TPP to having her doubts to opposing it.  Donald Trump seized the Republican nomination in part by dint of his scalding criticism of NAFTA and Chinese trade practices. 

Will policy now snap back to normal under Joe Biden or are we at the dawn of a new era of managed trade?  The ability to formulate policies that help those displaced may hold the key.         


[1] Douglas A. Irwin, Clashing Over Commerce: A History of US Trade Policy (2017).  Reviewed by George Melloan, WSJ, 29 November 2017. 

[2] Tax cuts as the solution to every problem has become a similar totem for Republicans since the Reagan presidency. 

[3] See: https://en.wikipedia.org/wiki/Availability_heuristic 

[4] The General Agreement on Tariffs and Trade (GATT), the World Bank and the International Monetary Fund (IMF), the Marshall Plan and support for European integration all were vital early contributions.