On May 20, 2019, Nouriel Robin writes on The Guardian:
A few years ago, as part of a western delegation to China, I met Xi Jinping in Beijing’s Great Hall of the People. When addressing us, Xi argued that China’s rise would be peaceful, and that other countries – namely, the US – need not worry about the “Thucydides trap”, so named for the Greek historian who chronicled how Sparta’s fear of a rising Athens made war between the two inevitable. In his 2017 book Destined for War: Can America and China Escape Thucydides’s Trap?, Harvard University’s Graham Allison examines 16 earlier rivalries between an emerging and an established power, and finds that 12 of them led to war. No doubt, Xi wanted us to focus on the remaining four.
Despite the mutual awareness of the Thucydides trap – and the recognition that history is not deterministic – China and the US seem to be falling into it anyway. Though a hot war between the world’s two major powers still seems far-fetched, a cold war is becoming more likely.
The US blames China for the current tensions. Since joining the World Trade Organization in 2001, China has reaped the benefits of the global trading and investment system, while failing to meet its obligations and free riding on its rules. According to the US, China has gained an unfair advantage through intellectual property theft, forced technology transfers, subsidies for domestic firms and other instruments of state capitalism. At the same time, its government is becoming increasingly authoritarian, transforming China into an Orwellian surveillance state.
For their part, the Chinese suspect that the US’s real goal is to prevent them from rising any further or projecting legitimate power and influence abroad. In their view, it is only reasonable that the world’s second-largest economy(by GDP) would seek to expand its presence on the world stage. And leaders would argue that their regime has improved the material welfare of 1.4 billion Chinese far more than the west’s gridlocked political systems ever could.
Regardless of which side has the stronger argument, the escalation of economic, trade, technological, and geopolitical tensions may have been inevitable. What started as a trade war now threatens to escalate into a permanent state of mutual animosity. This is reflected in the Trump administration’s national security strategy, which deems China a strategic “competitor” that should be contained on all fronts.
Accordingly, the US is sharply restricting Chinese foreign direct investment in sensitive sectors, and pursuing other actions to ensure western dominance in strategic industries such as artificial intelligence and 5G. It is pressuring partners and allies not to participate in the Belt and Road Initiative, China’s massive programme to build infrastructure projects across the Eurasian landmass. And it is increasing US Navy patrols in the East and South China Seas, where China has grown more aggressive in asserting its dubious territorial claims.
The global consequences of a Sino-American cold war would be even more severe than those of the Cold War between the US and the Soviet Union. Whereas the Soviet Union was a declining power with a failing economic model, China will soon become the world’s largest economy, and will continue to grow from there. Moreover, the US and the Soviet Union traded very little with each other, whereas China is fully integrated in the global trading and investment system, and deeply intertwined with the US, in particular.
A full-scale cold war thus could trigger a new stage of deglobalisation, or at least a division of the global economy into two incompatible economic blocs. In either scenario, trade in goods, services, capital, labour, technology and data would be severely restricted, and the digital realm would become a “splinternet,” wherein western and Chinese nodes would not connect to one another. Now that the US has imposed sanctions on ZTEand Huawei, China will be scrambling to ensure that its tech giants can source essential inputs domestically, or at least from friendly trade partners that are not dependent on the US.
In this Balkanised world, China and the US will both expect all other countries to pick a side, while most governments will try to thread the needle of maintaining good economic ties with both. After all, many US allies now do more business (in terms of trade and investment) with China than they do with America. Yet in a future economy where China and the US separately control access to crucial technologies such as AI and 5G, the middle ground will most likely become uninhabitable. Everyone will have to choose, and the world may well enter a long process of deglobalisation.
Whatever happens, the Sino-American relationship will be the key geopolitical issue of this century. Some degree of rivalry is inevitable. But, ideally, both sides would manage it constructively, allowing for cooperation on some issues and healthy competition on others. In effect, China and the US would create a new international order, based on the recognition that the (inevitably) rising new power should be granted a role in shaping global rules and institutions.
If the relationship is mismanaged – with the US trying to derail China’s development and contain its rise, and China aggressively projecting its power in Asia and around the world – a full-scale cold war will ensue, and a hot one (or a series of proxy wars) cannot be ruled out. In the 21st century, the Thucydides trap would swallow not just the US and China, but the entire world.
Gary Reber Comments:
The Communist Chinese government controls a large portion of the Chinese economy by State-owned or State-invested corporations. The Communist Chinese government controls the largest Chinese banks and it can force the State-owned banks to loan money to businesses in financial danger of collapse. The government can shift revenue from one propersous industy to another industy directly by subsidizing corporations in those industries.
Our government cannot and should not subsidize industries, nor do we have to if we use our central bank properly. Still, with this trade war our private sectors are divided. There are those sectors who want high tariffs to protect against unfair trade practices and there are those sectors who want to return to free trade and no tariffs so that they can continue to shift from manufacturing in our homeland to manufacturing their supply chain parts and finished products, or even completely off-shore all their manufacturing in Communist China and other slave-wage labor foreign countries to maximize profits.
American workers cannot compete with Chinese workers who are paid less than $3.00 (20 yuan) per hour, and in many cases less than $2.00 per hour, or approximately $364.00 (2,300 yang) monthly.
We should be asking ourselves why have we been effectively incentivizing American corporations to outsource and off-shore their production to Communist China and to other slave-wage labor, non-environmentally- and non-worker-safety-regulated countries without penalty of a federal tax on foreign-made products exported back to the United States? Such products are produced with the aim of competitively producing at the lowest cost, while decimating home-based production. They have effectively been entering the United States tariff-free, duty-free or tax-free.
Communist China has attracted our corporations to invest in China and decrease investment in the United States, significantly decreasing the availability of good-paying manufacturing jobs, and Communist China has pilfered our intellectual property, as more and more American corporations have moved their production to Communist China
According to international trade experts, Communist China has been “stealing” more than $5 TRILLION from Americans — each year. Communist China and its American outsourcing accomplices have devastated our heartland, our businesses, and the livelihoods of millions of Americans.
As a result of our past governments doing nothing about American corporations abandoning the American heartland, we have undermined our once powerful industrial capabilities with the out-sourcing of production to Communist China and other developing countries. This means American corporations have been investing in the development of China’s capabilities to produce cheaper than us due to the willingness of their masses to become slave-wage laborers working in far less than ideal conditions. American corporations have left our country and have continued to leave in droves to outsource their production, or to source parts used in the assembly of products in the United States.
We also should be asking why have our governments used our taxpayer dollars to provide lucrative federal contracts to some of the largest overseas outsourcers in America, who have not only robbed us of productive development at home but shipped thousands of jobs to Asia, India and Europe?
There needs to be a policy to deny federal contracts to companies that outsource American jobs overseas. We should be awarding federal contracts to companies that create, not destroy, good jobs in the United States and whose ownership includes all of their employees and other Americans.
These questions should be front and center in the 2020 presidential election as well as how will we create new productive capital asset owners simultaneously with building a future economy that can support general affluence for EVERY child, woman, and man?
While other slave-wage labor foreign countries are open to replace Communist China as a low-end production source, this will take years to implement, and then only if those countries, with far lower hourly wage levels, are not subject to tariffs as well. As such, until we can revive and strengthen our own manufacturing capabilities using the most advanced technologies, U.S. companies, dependent on Communist China, will continue to buy Chinese product just with higher prices due to added tariffs. Hopefully, though, U.S. companies will stop investing and contracting with Communist China companies and other slave-wage labor countries and invest in the United States to ensure we are the most advanced producer of technologically superior and quality products. Of course, tariffs alone will not accomplish this goal. Other incentive and penalty measures will be necessary.
If we do not act, after decades of no-tariff free trade, Communist China will continue to gain an unfair advantage through intellectual property theft, forced technology transfers, subsidies for domestic firms and other instruments of State, Communist controlled capitalism.
There are American companies dedicated to helping corporate owners manufacture goods in China. They have been doing this for over 40 years––boosting profits and reducing costs for those corporations who outsource their manufacturing. Now, we have the opportunity to penalize these corporations who have out-sourced their manufacturing of goods and products, and create a level playing field. We have the opportunity to replace Communist China and Asia manufacturing of the products we want and desire with American-made products. This will require a tremendous investment in the development of our own country-based manufacturing capability, using to the fullest extent the non-human factor of production to create optimized efficiencies and the finest quality. Such growth will not only create tremendous job opportunities, but also new capital asset ownership as new factories and revamped automated production is realized, enabling us to fairly compete on a global scale.
During the 2016 presidential election, an issue front and center was outsourcing of our manufacturing and associated technologies, as well as the job destruction and wage stagnation caused from American corporations investing in foreign operations, rather than the United States. Tariffs are a way to deal with non-fair trade, and penalize those corporations who are manufacturing in Communist China and elsewhere in slave-wage labor countries, yet able to sell what they produce back into the United States without penalty of a tariff. Obviously, this is why corporations are building in foreign lands that offer far lower production costs, such as land, labor and regulations. Communist China companies, both majority owned by the State or solely owned by the State, are significantly dependent on accessing our markets for contract manufacturing and to sell their less expensive goods and products. They are also dependent on our technologies.
Communist China cannot win a tariff war against the United States.
It would not be in our long-term interest to seize implementing a policy of strict tariffs on those trading partners who do not practice fairness or who steal our technologies.
Our best position is to pull back where there is not fair trading practiced, and focus on developing and building our own domestic capabilities for manufacturing, while simultaneously empowering EVERY child, woman, and man to acquire an ownership portfolio of new formed productive capital assets using pure, interest-free capital credit, repayable out of the earnings of the investments, without the requirement of past savings. In this way, ALL American would be able to benefit form a full-earnings dividend income, as well as have greater opportunity to work and earn wages and salaries.
We are at a pivotal point that will largely dictate our future economic status and for the possibility of an economically secure and affluent future for our children.
The greater impact derived from fair trade and tariff policy should be to stimulate the return of American corporations, who over decades have invested and outsourced production to foreign countries instead of investing in productive development at home, and to stimulate exports of American-made goods to other countries at competitively fair prices.
Of course, we should expect that as a result of a trade policy that readjusts the cost of imported products, prices in the short term will increase for both home-based American manufacturers and assemblers, who have come to rely on foreign-made materials and parts, and consumers, during the time American corporations readjust and return or expand to manufacture goods in the United States and embrace fair trade supply chains, in cases where we are unable to produce all the material necessary for production. No doubt, tariffs, in the short term, will force some U.S. importers and retailers to raise prices and in turn, the tariffs imposed by foreign countries on United States exports will make those American goods less competitive. But looking ahead, this is a cost we need to absorb.
But should we reason, as is sadly prevalent, that, because prices will increase for certain materials and parts, as well as for certain consumer goods imported into the United States, we should abandon policies that deter outsourcing and provide new opportunities for Americans to produce at home American-made replacements? The short-term thinking to stop taxing goods imported into the United States is, in reality, a rally for continued outsourcing of American manufacturing and investment in Communist China and other slave-wage, non-environmentally- and non-worker-safety-regulated countries, depriving Americans of opportunities to become productive at home. Those engaged in “Stop Imposing Tariffs” thinking are obviously no-restriction free-trade advocates, not fair-trade advocates and are OK with the continued outsourcing of the production of goods and services, as long as wholesale and end user prices can be kept lower than if those goods and services were produced in the United States.
What Americans do not see is how, with the earnings boost provided by American corporations outsourcing productive capital asset investments, Communist China is spending billions to automate Chinese factories and to employ technologies gained by interaction with U.S. and Western manufacturing contractors and investors. Also, Communist China is exempting foreign investors and American outsourcers from being taxed on profits from investments in China provided the proceeds are reinvested in industries high on the Communist Chinese government’s priority list. In other words, Communist China is using tax breaks to discourage foreign earnings from flowing out of the country. These measure are aimed at gaining an edge in global competitiveness.
Why are we not spending trillions to fully developed our at-home productive capabilities, using our central bank to create new money backed by the formation of productive capital assets? Highly automated production could just as feasibly be employed in the United States as in Communist China or other countries. Tariffs are a means to incentivize the development of such production and other production in the United States and penalize investment in Communist China and other non-fair trade practicing countries.
Instead, duty-free imports over decades have resulted in propelling American corporations to outsource and offshore production to Communist China and other third-world slave-wage labor countries, enabling new investment in those countries and building their economies through exporting tariff-free back to the United States. This is at the expense of Americans, who have been losing jobs to outsourcing. Of course, the wealthy capital asset ownership class, who monopolize the ownership of the large American corporations doing most of the producing and who outsource investment to produce at the lowest possible cost, continue to enrich themselves by investing in productive capital asset formation in other countries, which, as a result, they own or share ownership with, for example, the Communist Chinese State-supported and controlled manufacturing elite. We need a pro-active policy to stop allowing goods produced as a result of outsourcing from entering the United States without a stiff tariff applied so that the imported pricing is commensurate with the pricing for the same or similar goods produced here. This will help to deter American corporations from further outsourcing and eliminate production cost advantages, while incentivizing investment and production in the United States instead of elsewhere.
The American people should share a large part of the blame for American corporations outsourcing as we have widely embraced buying lower-cost Communist Chinese-manufactured goods and products instead of higher-priced American-made equivalents. And this has further propelled more and more American corporations to outsource their production to stay competitive with those American corporations in the same industries who have preceded them. The snowballing result has been “American Made” production has not been able to compete, resulting in factory closings and underproducing.
But after years of sitting back and letting hardworking Americans take the brunt of Communist China’s attacks and unfair trade policies, imposing tariffs is a way to de-incentivize American corporations from further outsourcing, and instead invest in the expansion of American-made production, while simultaneously creating new productive capital asset owners and jobs.
What is frustrating is that there is not a broader discussion on the national level in political circles over the threat to our economic well-being from Communist-ruled China. Over the last two decades, Communist China has gotten away with robbing us of our jobs and the productive foundation that enables us to be self-sufficient in producing the goods, products and services that Americans need and want, and create and keep jobs at home.
If we continue on this outsourcing path it will do significant harm to our economy and our ability to strengthen our capability to produce at home, and empower EVERY citizen to be productive. Without productive input there can be no consumption outtake. We need to uphold an economic policy that strengthens manufacturing in the United States, while ceasing production in Communist China and other slave-wage labor countries. This will strengthen our economy and galvanize “Made In The USA.”
In the current political climate, the question is why would any American support outsourcing? De-incentivizing outsourcing and creating a fair trade system should be an issue that receives bi-partisan policy support.
We need to call out those who advocate for continuing to allow cheap-labor-produced Communist Chinese goods to enter duty-free or near duty-free when exported to the United States.
We need to face up to Communist China’s mercantilist economic policy and plan for pushing its “Made In China 2025” campaign, an ambitious plan not only to upgrade Chinese industry––most notably in advanced sectors like information technology, robotics and pharmaceuticals, where IP is key — but to compete with and ultimately displace foreign companies domestically and globally. To that end, China has continued to aggressively push foreign companies to hand over technology and IP rights in exchange for market access — a violation of World Trade Organization (WTO) rules.
At home, there is virtually no political discussion of how globalized manufacturing and manufacturing that employs the non-human factor of production — productive land; structures; infrastructure; tools; machines; robotics; computer processing and apps; artificial intelligence, which are owned by people individually or in association with others — is continually eliminating the need for masses of human workers. Yet, as tectonic shifts in the technologies of production continue, resulting in more and more AI-assisted automation, the result is less-educated workers, who have in the past performed the physical work needed by our industries, now must increasingly compete against labor-saving, efficient machinery. With plenty of want-to-be workers, willing to work for less pay, wage levels are dropping, especially for less-educated workers.
Unfortunately, in light of these decaying developments and opportunities, no politician has come forth to offer solutions to empower Americans to earn income by owning the productive capital assets that are continually eliminating the necessity for their labor.
Isn’t enough, enough? Or will we continue to not penalize American corporations who outsource to Communist China and other slave-wage labor countries, without tariffs? The plan should be to make “Made In The USA” the gold standard for quality.
Solutions to energizing our at-home economic growth have been developed since the 1960s but political leaders and academia have ignored the policy recommendations.
We do not have to depend on the Chinese or the wealthy, wherever they are, to create investment monies to re-build and build new productive capabilities in the United States and create a technologically advanced new industrial economy that can produce general affluence for EVERY child, woman, and man. We should and can manufacture the materials and parts necessary to supply industries at home and produce products for consumers in the United States, and adopt and expand the application of highly automated processes to create efficient production, and not rely on foreign producers.
The key to our success as we rev up to develop new production capabilities and factories is to finance their formation using financial mechanisms that will empower workers and other citizens to own the new productive capability. By simultaneously creating new productive capital owners with the development and growth of our future economy, there will be more financially sound “customers with money” who earn from the productive capital assets they own, as well as from their earnings from jobs that will be created as a result of the huge demand for workers to build a future affluent economy.
What we need to do is enact legislation that will empower EVERY citizen to acquire productive capital assets to be formed in the future, without the requirement of past savings (the exclusiveness of the wealthy), and whose investments pay for themselves out of the earnings generated (future savings).
The solution to economic inequality and productive capital asset broad ownership can be found in the following:
Support the Agenda of The JUST Third WAY Movement (also known as “Economic Personalism”) at http://foreconomicjustice.org/?p=5797, http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/ and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.
Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.
Support the enactment of the proposed Capital Homestead Act (aka Economic Democracy Act and Economic Empowerment Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/. And The Capital Homestead Act brochure, pdf print version at http://www.cesj.org/wp-content/uploads/2014/11/C-CHAflyer_1018101.pdf and Capital Homestead Accounts (CHAs) at http://www.cesj.org/learn/capital-homesteading/ch-vehicles/capital-homestead-accounts-chas/
