Cold War With China ?

We are in a cold war with China. Suggested reading:

At the 2018 Aspen Security Conference, CIA analyst Michael Collins said about China,

“By their own terms and what Xi enunciates I would argue by definition what they’re waging against us is fundamentally a cold war, a cold war not like we saw during the Cold War, but a cold war by definition. A country that exploits all avenues of power licit and illicit, public and private, economic and military, to undermine the standing of your rival relative to your own standing without resorting to conflict. The Chinese do not want conflict,” Collins said.

A conference video is available at CIA.gov. Key-strings:  “News and Information”, “Michael Collins at CSIS”, “CIA Headlines Schieffer Panel on “China’s Rise” at CSIS”.

With the exception of panelist Margaret Brennan, a word count suggests conference panelists unconsciously respect a division between geopolitics and economics, and military threat. As I write this, Christopher Johnson’s expectation that there will be a trade deal has has been frustrated. Instead, a progression has occurred: economic imbalance–>exploitation–>negotiations–>trade war–>cold war.

In this current phase, China’s strategy now accepts economic damage in the goal to depose a Western leader. Instead of a trade deal, China wants to get rid of Trump, even at the cost of a world-wide recession.

Until the  bag of attitudes known as “globalism” was challenged in the last election, economic indicators were strongly associated with general welfare.   Shrinking blue collar jobs became a political issue. In the public eye,  unemployment and farming vie with traditional economic indicators.

“Globalism” has now become a politically charged term. Let’s skip the conspiracy theories. The advocates of globalism genuinely believe that regional diversities and efficiencies are best served by manufacturing and marketing that transcend national boundaries. In an ideal world, they are right. They did not anticipate the

  • Rise of state sponsored capitalism.
  • Tendency of areas with low labor costs to cause job migration, with resulting social stress that can break a nation.
  • The vulnerability of democracies to supply chains that intertwine with totalitarian states.

Job losses blamed on globalism were the #1 issue in the past election. Until then,  economic health was largely equated with “quality of life” by globalists and economists. With “growth”, good things would come.

The consensus idea of “growth”, that comes with measurable numbers, is under siege. A significant division of the electorate has been created by the split between economic indicators, and the welfare of particular groups . It tends to follow the haves and have-nots.  Yet Wall Streeters still talk the numbers. Jamie Dimon is a rare exception. See his  shareholder letter via (CNBC) Jamie Dimon:  The social needs of far too many of our citizens are not being met .

Esteem for globalism has diminished, but no one has offered a plan compatible with  the 5 requirements of a replacement:

  • Reduce or eliminate the balance of trade deficit to conform with some definition of solvency.
  • Restore the U.S. manufacturing base to provide jobs for those whose skills are not in demand by the “new economy.”
  • Provide access to markets larger than a single country  to support hyper scale manufacturing, typified by semiconductors. An LCD fab plant costs 8 – 10 $BN See (DSCC)  LCD Manufacturing in the USA?  Don’t Hold Your Breath.
  • Maintain access to raw materials, which could become unaffordable with the establishment of alternative reserve currencies.
  • Incur at most a mild impact on the standard of living.

So there are four discussions going on:

  • The Aspen conference follows geopolitics, so the 5 points are noted only in passing.
  • Wall Street adheres to globalist “growth”, with numbers as a proxy for the general welfare.
  • Nationalist economics, personified by Steve Bannon. It fails the 5 goal test. A hermit kingdom is not viable.
  •  China’s military ascendancy and disregard for what Westerners imagined was “international law.”

The discussions proceed almost in isolation. In any one, the others  are mentioned only in passing. Even the Aspen conference passes on the Nine Dash Line (military ascendancy), which may be the largest seizure of territory in history.

With split discussions, issues fall between the cracks. Supply chain security is one example.  Critical global supply chains loop in and out of China. Some are high tech, others low tech. Even low tech chains offer the possibility of extreme disruption to quality of life. It could be argued that Chinese use of supply chain disruption, as part of a cold war strategy,  would inflict too much damage on  China’s economy.  In the present, perhaps so. One characteristic of China discussions is to be trapped in the present, snap-shot view. But the present is…presently gone.

The separate discussions have prevented convergent development of terms and indicators for costs and goals. “Growth”  remains  a compact quotable number used as a proxy for human welfare. It is not; trickle-down economics doesn’t trickle. Let’s try to remedy this:

  • Devise  measures of  prosperity, and also of suffering, that overweight human economic misery: unemployment, and low/middle income first dollars.

The four discussions inevitably have economic consequences. Everything has a cost. But over the past 20 years, we have slipped from one stationary mindset to another, reliant on “growth” as the unimpeachable metric. This is how we end up comparing strategic issues with the price of Christmas toys. The four discussions need to break out of the present, and come up with their own  prognostications, with numbers of cost and benefit.

  • Once the four discussions have numbers, we can sum them, and optimize strategies. We escape the sin of politics, which is to believe without thinking. The reverse results in better choices.
  • About the price of Christmas toys  and sundries, talk to Americans like they’re grownups. Explain that our independence is at stake in a cold war with China.
  • The soybean issue is the focus of China’s strategy to deprive Trump a second term.  Corn and soybeans can be partially exchanged in crop rotations. Ethanol waivers should be reversed, to increase demand for corn. As an alternative to loans, for an adjustment that may take years, consider  a soybean board, a single-desk market, modeled on the Canadian Wheat Board.

The odds are not in our favor. China  knows this, accounting for extreme patience in a world view that spans decades. We have a chance only if we are very smart and bipartisan.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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