ChiMerica 3 14 July 2019.

In the late 1500s, Richard Hakluyt collected the stories and reports of the English mariners who had explored the Atlantic world.[1]  He wanted to celebrate these doughty adventurers, but also he hoped to encourage others to emulate them.[2]  Hakluyt’s basic approach became a staple of the reference shelves.

Now we have the equivalent for the entrepreneurs who have raised up China into the “second economy in the West.”[3]  Sort of.  A bunch of American business school professors interviewed Chinese executives to supplement their library research.

Deng Xiaoping’s reforms started everything, but Chinese entrepreneurs had to muscle through hordes of bureaucrats who failed to adjust their old thinking to new realities.  Thus, “If it were not from Deng Xiaoping’s reform and open door policy, none of us would be able to achieve much, regardless of how capable we are.”  At the same time, owing to deeply-ingrained anti-capitalist prejudice, “the lowest thing you could do in the early ‘80s, as a scientist, was to go into business.”  So, early Chinese entrepreneurs had to make it up as they went along.  Much like the industrialists of the American “Gilded Age.”  The Chinese adapted to prevailing conditions.

Some of them fell into error along the way, which is easy to do in China.  They over-promised and under-performed.  They aligned with the wrong factions and fell victim to Xi Jinping’s anti-corruption drives.  They just made bad decisions.

Chinese entrepreneurs take a long-term view.  Quarterly profits and share prices don’t mean much to them.  The pursue what some call a “lean architecture” that gives the companies nimbleness in responding to new situations.  American companies, in contrast, haven’t entirely reduced the massive bureaucratization of the 50s-70s.  However, Chinese government support for Chinese businesses in competition with American businesses plays an important role.  For example, Didi Chuxing Technologies, the Chinese Uber, spent like a drunken sailor in order to defeat the American Uber.  By 2016, Didi was drawing four times as many customers in China as was Uber.  This suggests that a.) Didi didn’t worry much about banks breathing down its neck, and b.) that the Trump administration may have to negotiate limits on non-tariff Chinese government support for industries.  Then, China’s systematized, even industrialized, theft of Western intellectual property play a large role in the success of Chinese industry.

One issue here is that systems reinforce what has worked in the past, rather than seeing each successive situation as new.  (That’s called a heuristic device.)  Will China’s previous success with state-sponsored business development lead the country to double-down in the future?  If so, then the potential for conflict between the United States and China will grow.

It is a little bit like many people didn’t want to “come out of the closet” about China’s abuse of its international trade relationships.  Now, that “that man in the White House” has done so, will more and more people fall into line?  Or will there be a counter-vailing swing in the next election cycle to return to the policies of yore?

[1] See: https://en.wikipedia.org/wiki/Richard_Hakluyt

[2] Extremely well educated, Hakluyt doubtless took as his model Plutarch’s Lives.

[3] Michael Useem, Harbir Singh, Liang Neng, and Peter Cappelli, Fortune Makers: The Leaders Creating China’s Great Global Companies (2017).

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The Asian Century 2 12 July 2019.

In the 1960s, Charles de Gaulle believed that the bi-polar international system of the Cold War would eventually give way to a multi-polar system.  This—correct—belief led him to imagine that the future world already had come into existence.  He pursued policies that put up the hackles on Americans, without advancing the interests of France.

Fifty years later, de Gaulle’s vision has come true—kinda-sorta.  It’s fair to say that America has been living through a prolonged dark hour.  The Soviet Union has collapsed into something more than a “regional power” but less than a superpower.  Latin America, Africa, and the Middle East count for little in the councils of the world.  The European Economic Community of his day has grown stronger and larger, and then has begun to go into retreat for the moment.  The Peoples Republic of China has emerged as an economic and military powerhouse.  Today, many smart people are uncertain of what the future holds.

Early in the Trump Administration, the highly-intelligent and highly-experienced journalist Gideon Rachman[1] took a stab at prognostication.[2]  The new multi-polar world is, Rachman thinks, “unstable and dangerous.”  The Chinese American relationship stands at the center of the new world order.  The competition between these two states is likely to spread into every corner of the globe.  The core area, however, will be the Western Pacific.  Since 1945, these waters have been an American lake.  Many of the countries surrounding that “lake” are American allies or under American protection: Japan, South Korea, Taiwan, and the Philippines.  Now Chinas economic growth is enabling it to increase its own military power.

Is “Asia’s Rise and America’s Decline” unstoppable?  Hardly.  For one thing, China isn’t all of Asia.  Even if Japan, South Korea, and Taiwan are not China’s equals, they are prosperous societies which have benefitted greatly from the American-sponsored global economic system.  If Xi Jinping hopes to reverse China’s “century of humiliation,” these other countries won’t want their own humiliation forced on them by China.  For another thing, while China may want to construct its own global system, Westerners know how to work the actually existing system.  Finally, like every other country, China has its own vulnerabilities.  At the heart of these vulnerabilities is the very thing that has made China so strong.  The Communist Party has led a rapid industrialization of the country.  That industrialization has sucked tens of millions of people out of the countryside into urban slums.  It has generated immense wealth, but distributed it very unevenly.  It has degraded the environment.  And the Communist Party is an in-bred elite that protects its own interests ahead of those of the people.

Nothing is written.  It can blow at any seam.

[1] See: https://en.wikipedia.org/wiki/Gideon_Rachman

[2] Gideon Rachman, Easternization: Asia’s Rise and America’s Decline (2017).

ChiMerica 2 12 July 2019.

For decades, the United States built its Far Eastern policy on a deepening engagement with China.  Richard Nixon “played the China card” to shift the terms of the Cold War with Russia.  Jimmy Carter sponsored a full normalization of relations with China.  Aside from the old-fashioned balance-of-power rationale that had driven Nixon, a further rationale for engagement developed.  Ever-deeper economic relationships would build a strong bond between the two Pacific giants.  In time, economic development might nudge China’s leadership toward political liberalization.  This engagement intensified after Deng Xiaoping could use the collapse of the Soviet Union as evidence for important policy changes.

More recently, China seems to have drawn far more benefit from the economic relationship than has the United States.  At the same time, since Xi Jinping came to power in 2012, China has turned back toward authoritarian government.[1]  Doubts have been growing for some time about the wisdom of the long-standing American policy.

Now President Donald Trump has used tariffs and sanctions on companies like Huawei to bring the Chinese government to negotiate a new economic relationship and continued the pressure during the on-and-off negotiations.  His confrontational stance has alarmed many people.  A group of 150 China experts, both scholars and former officials, recently denounced the approach as “fundamentally counterproductive.”[2]  However, others—including Democrats like Senator Chuck Schumer—have begun to see real merits in the new course.

The lingering fear is that President Trump will not sustain the pressure for long enough to force the Chinese into a long-term deal that fundamentally restructures the relationship to better the position of the United States.  With an election barely a year away, some fear that he will settle for less in order to have a bragging point.  However, even if he settles for half a loaf, he appears to be shifting the broad consensus of opinion toward the need to confront China.

[1] Edward Wong,” America’s Gamble: Shatter enduring Strategies on China and North Korea,” NYT, 12 July 2019.

[2] Like the old policy was “productive”?

The Asian Century 1 11 July 2019.

Much of our understanding of the contemporary world is essentially historical.  (OK, you wouldn’t know this from watching the news on the devil-box.  Still,…)

“Manifest Destiny” = “An Obvious Fate.”  It’s a term in American history, but it applies to China as well.  Both countries believe themselves to be “bound away” to greatness.  Historically, China was the “middle kingdom,” an axis around which the rest of the world revolved, and where civilization and good government prevailed.[1]  From this point of view, China’s degradation at the hands of the “Southern barbarians” is but a speed-bump in History.

Since the economic reforms launched by Deng Xiaoping, China has become the center of world manufacturing.  Literally hundreds of millions of people have been lifted up out of an abject poverty of a kind most Western progressives cannot imagine.

Industrial power transforms into military power.[2]  China’s potential for a military build-up and its effort to shoulder-aside other claimants to various reefs and islets in the South China Sea have alarmed many observers.  What if China tries to seize Taiwan or test America’s will to back its traditional allies like the Philippines, Japan, or South Korea?

If we did an audit of China’s problems, what would we find?  First, state-owned firms are gigantic and powerful.  They’re also inefficient and deep in debt.  Second, Communist China has not regained the high level of creativity that characterized much of the history of Imperial China.  As a result, it depends on the massive theft of intellectual property from the West.  Third, the income inequality and environmental degradation have begun to arouse resistance.  (There are as many as 180,000 demonstrations each year.)  Fourth, the lack of well-established legal norms is scaring people.[3]  There is a grave danger of an elite “brain drain”: one report says that up to half of the wealthiest citizens want to move abroad within the next five years.  A Gallup poll recently estimated that 120 million Chinese would like to move to America.[4]

Then, “off-shore China” has done best of all.  Places where traditional Chinese values have been combined with Western legal codes—Hong Kong, Singapore, Taiwan—have done even better than has mainland China.  Yet the current Chinese leadership seems not to take the obvious, if uncomfortable, point.

For a long time, American policy has been to encourage the liberalization of trade and economic management in other countries, China included.  The underlying theory holds that economic liberalization will lead to the growth of a middle-class.  A growing middle-class will demand political liberalization.[5]  This “long game” will then lead to the spread of economically and politically congruent societies.  Wars will end.  Prosperity will flourish.  Well, “Scotch verdict” on that.

[1] Michael Auslin, The End of the Asian Century: War, Stagnation, and the Risks to the World’s Most Dynamic Region (2017).

[2] See: Germany, 1865-1945.

[3] It looks very much like the long-running “anti-corruption campaign” is directed chiefly at rivals and opponents of the current leadership.  If you’re a “FOX” (“Friend of Xi”), you’re probably safe.

[4] It seems at least reasonable to think that many of the would-be migrants are people who have already been to the US.  In 2015, there were just over 300,000 Chinese students in American universities and colleges.  See: https://foreignpolicy.com/2015/11/16/china-us-colleges-education-chinese-students-university/

[5] That’s what happened in 19th-Century Europe.

ChiMerica 1 10 July 2019.

There are real grounds for alarm over China.[1]  Many economists believe that the continuing growth of the Chinese economy will lead it to supplant that of the United States as the world’s largest by 2030 or 2035.  Moreover, China is a dictatorship with apparent ambitions to push the United States out of its dominating position in the Far East and perhaps to exert Chinese influence more broadly.  China has been imprisoning he numbers of Uighurs (Muslims) in Xinjiang province.  Some people suspect that, under Xi Jinping, China has chosen a new course.   Abandoning a “liberalizing” path, the Chinese want to spread modern authoritarianism to other countries in the same way that the United States has been trying to spread democratic capitalism.

The Obama Administration saw the challenge in China.  However, it became mired in peripheral issues (the Middle East, Ukraine).  It never managed to mount an effective response to the central problem of China.  The “Trans-Pacific [Trade] Partnership” treaty fell victim to the populism of the right and the left.  It would not have been implemented even if Hillary Clinton had won the election.

Since 2017, the Trump Administration has pursued a different course.  In December 2017, the White House issued a “National Security Strategy” paper that claimed that China and Russia “want to shape a world antithetical to U.S. values and interests.”  In June 2018, Secretary of State Mike Pompeo said that “China wants to be the dominant economic and military power of the world, spreading its authoritarian vision for society and its corrupt practices worldwide.”  The head of the State Department’s Policy Planning Staff[2] said “This is a fight with a really different civilization and a different ideology, and the United States hasn’t had that before.  The Soviet Union and that competition, in a way, it was a fight within the Western family.”

So far, the struggle has been waged purely on the trade front.  For many years, China has been running a huge trade surplus in trade with the United States.  That is, it sells far more to the United States than it buys from the United States.  However, much of that production is done by American companies who have off-shored factories to cut costs.  If they have to charge higher prices to their American consumers because of the tariffs, then why make the stuff in China?  There’s Vietnam, the Philippines, and Indonesia.  In 2018, President Trump began slamming tariffs (taxes on imports) on Chinese exports to the United States.  Then, Trump tightened the screws with sanctions on the Chinese tech giant Huawei.  It has urged other countries to boycott Huawei and to refuse to participate in China’s “Belt and Road” infrastructure project.  Supply chains are going to start to move.

Because of the huge trade imbalance, China can’t exert much direct pressure on the United States by imposing tariffs of its own.  It can look for substitute suppliers for American exports, like soy.  It has started running lots of old Korean War movies (in black and white) in which China battles American aggression.

At the same time, neither side has pulled out all the stops.  For example, the U.S. has not made much of a deal about China imprisoning many Uighirs

However, we are in the early days of a huge struggle.  It is difficult to see yet how it will shake out.  Weak ending, I know, but true.

[1] Edward Wong, “U.S. vs. China: Why This Power Struggle Is Different,” NYT, 27 June 2019.

[2] See: https://en.wikipedia.org/wiki/Kiron_Skinner

Summer 2016 2 10 July 2019.

In the many days ago, some people suspected that FIFA (International Federation of Football Associations—i.e. the organization that ran the “beautiful game”) was as crooked as a dog’s hind leg.  When the British Football Association contemplated trying to get the World Cup venue in 2018 or 2012, it hired Christopher Steele’s firm to investigate FIFA.  He learned a lot.  In 2011, when the FBI opened its own investigation into corruption in soccer, agents talked to Steele.  The FBI group conducting the soccer investigation, was the “Eurasian Organized Crime” group.  It was based in the New York field office, rather than in Washington.  The FBI group’s leader at that time may have been Michael Gaeta.  Gaeta later moved to the American embassy in Rome.[1]

In the first week of July 2016, Steele asked Gaeta to come to London.  Gaeta got the meeting approved by Victoria Nuland, the Assistant Secretary of State for European and Eurasian Affairs, then met Steele in London on 5 July 2016.  Steele gave the agent 2-4 pages highlighting his information gathered so far.  It has been reported that Gaeta said “I have to show this to headquarters.”[2]  Was that the answer Christopher Steele hoped to hear?

To whom did Michael Gaeta report?

On the one hand, Gaeta reported back to Assistant Secretary Nuland, sending the papers he had been given by Steele.  Nuland later stated that “our immediate reaction to that was, ‘This is not in our purview.  This needs to go to the FBI, if there is any concern here that one candidate or the election as a whole might be influenced by the Russian federation. That’s something for the FBI to investigate.”[3]  Unless Nuland was using the “royal we,” who were the people with whom Nuland discussed the information sent by Gaeta?  Did it go as far up as Secretary of State John Kerry?  Then what did Nuland do?  Did she forward the report to FBI headquarters or did she tell Gaeta to tell Steele to tell the FBI himself?

On the other hand, another account says that Gaeta also sent the reports to the Eurasian Organized Crime team in the FBI’s New York field office.  There it sat until mid-September 2016.[4]  Gaeta had been, or still was, the boss of the Eurasian Organized Crime team.  So, he sends this stuff to the outfit and they go “meh, fan-mail from some flounder”?  Or do they cable/email him back, going “WTF Mike?”  IDK, maybe the FBI does run like the Post Office.

In September 2016, a frustrated Steele shared some of his materials with Jonathan Winer, previously the deputy assistant secretary of state for international law enforcement, and before that an aid to Senator John Kerry, now the Secretary of State.  Winer took the stuff to Nuland, “who indicated that, like me, she felt that the secretary of state needed to be made aware of this material.”[5]

[1] Mark Hosenball, “Former MI-6 spy known to U.S. agencies is author of reports on Trump in Russia,” Reuters, 12 January 2017.

[2] Michael Isikoff and David Corn, Russian Roulette: The Inside Story of Putin’s War on America and the Election of Donald Trump (2018).

[3] Emily Tillett, “Victoria Nuland Says Obama State Dept. Informed FBI of Reporting from Steele dossier,” CBS News, 4 February 2018.

[4] Mike Levine, “Trump ‘dossier’ stuck in New York, didn’t trigger Russian investigation, sources say,” ABC News, 18 September 2018.  https://abcnews.go.com/Politics/trump-dossier-stuck-york-trigger-russia-investigation-sources/story?id=57919471

[5] Jonathan Winer, “Devin Nunes is investigating me. Here’s the truth,” Washington Post, 9 February 2018.

Summer 2016 9 July 2019.

I’m 65 years old.  I’ve been reading some version of “History” since I was—IDK–ten years old?  I’ve been teaching History for 30+ years.  I’ve concluded that Human Error plays a vastly larger role in explaining events than does Human Conspiracy.  Still, there is enough strangeness in the Trump-Russia investigation to give someone other than me a suspicion.  We’re gonna have to lance this abscess somehow.  I hope that Michael Horowitz and John Durham do the job.  For the sake of the American Republic.

In April 2016, Marc Elias, of Perkins, Coie, hired Fusion GPS to conduct opposition research on Donald Trump on behalf of the DNC and the Hillary Clinton campaign.[1]

Then either nothing happened for a month or so, OR journalists have not yet discovered what did happen at Fusion GPS, OR I haven’t tracked down the reporting.[2]

In June 2016, the Russians began publishing the “hacked” e-mails from the DNC.

At some point in June 2016, Fusion GPS hired Christopher Steele to investigate Donald Trump’s Russians affairs.[3]  Glenn Simpson and Peter Fritsch, the owners of Fusion GPS, “gave [Steele] no specific marching orders beyond this basic question: ‘Why did Mr. Trump repeatedly seek to do deals in a notoriously corrupt police state that most serious investors shun?'”[4]

Fusion GPS billed Perkins Coie for $1.02 million in fees and expenses.  Fusion GPS then paid Orbis $168,000.[5]  Steele didn’t pay his sources.[6]  According to one source, “Steven L. Hall, former CIA chief of Russia operations,” said that ‘Steele spied against Russia to get info Russia did not want released; ….’”[7]

It is just now reported that Christopher Steele has testified to the IG of the Department of Justice.  They find his statements “credible.”[8]  But what did he say?

[1] See: http://cdn.cnn.com/cnn/2017/images/10/25/fusion.perkins.coie.pdf  and https://www.cnn.com/2017/10/24/politics/fusion-gps-clinton-campaign/index.html, CNN, 25 October 2017.

[2] May and June 2016 are the months when Alexander Downer’s report on what George Papadopoulos had told him about the Russians having “dirt” on Hillary Clinton was not shared with the Americans, either formally or informally.  “Alas, and Alack, and Alaska.”  I’ll try to keep on it.

[3] Scott Shane, Nicholas Confessore, and Matthew Rosenberg, “How a Sensational Unverified Dossier Became a Crisis for Donald Trump,” NYT, 11 January 2017.  https://www.nytimes.com/2017/01/11/us/politics/donald-trump-russia-intelligence.html  NB: Here the chronology is not clear because the witnesses are not clear in their public statements.  Perhaps John Durham will sort out my confusion?

[4] Glenn Simpson and Peter Fritsch, “The Republicans’ Fake Investigation,” NYT, 2 January 2018.  https://www.nytimes.com/2018/01/02/opinion/republicans-investigation-fusion-gps.html  NB: Who formulated this question?  Snark: As opposed to doing deals in China, India, Brazil, or the Republic of South Africa?  Kleptocracies.

[5] See: https://www.reuters.com/article/us-usa-trump-russia-dossier/ex-british-spy-paid-168000-for-trump-dossier-u-s-firm-discloses-idUSKBN1D15XH

[6] See: https://www.cnn.com/2017/11/15/politics/russia-investigation-fusion-gps-glenn-simpson-dossier/index.html

[7] See: https://thehill.com/blogs/blog-briefing-room/news/357602-ex-cia-russia-chief-unlike-trump-dossier-russia-wanted-to-give  NB: So, people in the Russian government decided to give Steele information for free that Vladimir Putin didn’t want released?  Really?  See: Sergei Skripal https://en.wikipedia.org/wiki/Sergei_Skripal, Alexander Litvinenko https://en.wikipedia.org/wiki/Alexander_Litvinenko, and Boris Berezovsky https://en.wikipedia.org/wiki/Boris_Berezovsky_(businessman), and a bunch of other people.  In contrast, “[Aldrich] Ames received $4.6 million from the Soviets.” https://en.wikipedia.org/wiki/Aldrich_Ames#Espionage.  Can’t tell how much /Robert Hanssen got, beyond a basic $100K.    See: https://en.wikipedia.org/wiki/Robert_Hanssen

[8] See: https://washingtonmonthly.com/2019/07/09/dojs-inspector-general-report-on-russia-delayed-as-steele-found-credible/