Explaining China’s Slowdown

Here’s the TL;DR version of Noah Smith’s excellent and chart-filled post on the economy of China:

So anyway, this is my simple story for why China’s economy slowed down so early in its development and then experienced a crash in the early 2020s. Export-led and FDI-led growth can’t go on forever, and when they run out, it’s better to divert capital toward building a well-balanced economy of high-tech manufacturing and services than to shower it on property developers and shadow banks. Pivoting to real estate will come back to bite an economy eventually. For all the talk of China’s “100-year plans” and whatnot, they fell into a pothole that was right in front of their feet.

The real story is going to be more complicated than that, but if you want a quick-and-dirty explanation of why China’s crash is on everyone’s minds right now, I think the story of the pivot to real estate is probably the best simple story you can tell.

I’m not 100% convinced by that although he does make some good observations about demographic change and having picked the low-hanging fruit. I can’t help but think that the CCP had decided that basing its economy more on consumer spending threatened its hold on the country.

3 comments

Will Coincidences Never Cease?

Yevgeny Prigozhin, the head of the Wagner Group who marched his troops on Moscow not long ago, has apparently been killed in a plane crash. Associated Press reports:

MOSCOW (AP) — A private jet crashed in Russia on Wednesday, killing all 10 people aboard, emergency officials said. Mercenary chief Yevgeny Prigozhin was on the passenger list, but it wasn’t immediately clear if he was on board.

Prigozhin’s fate has been the subject of intense speculation ever since he mounted a short-lived mutiny against Russia’s military leadership in late June. The Kremlin said the founder of the Wagner private military company, which fought alongside Russia’s regular army in Ukraine, would be exiled to Belarus.

But the mercenary chief has since reportedly popped up in Russia, leading to further questions about his future.

A plane carrying three pilots and seven passengers that was en route from Moscow to St. Petersburg went down more than 100 kilometers (60 miles) north of the capital, according to officials cited by Russia’s state news agency Tass. It was not clear if Prigozhin was among those on board, though Russia’s civilian aviation regulator, Rosaviatsia, said he was on the manifest.

That’s quite a coincidence.

1 comment

There Can Be Only One

Here’s Ved Shinde’s assessment of India’s view of a “multipolar world” at Geopolitical Monitor:

It is in the last decade that India’s strategic illusions are clearing. China has secured its position as India’s primary challenge. A series of clashes at the Himalayan border and Beijing’s growing influence in South Asia have convinced Delhi that Beijing is its primary preoccupation. China’s all-weather partnership with Pakistan, economic undercutting of India, and expansive maritime ambitions have created suspicions about China’s long-term motivations in Delhi.

Now when India calls for a “multipolar world,” it makes it abundantly clear that a multipolar Asia is a necessary prerequisite for a multipolar world. In essence, the Asian order is fragmented. The phenomenal rise of China does not mean that Beijing can act like the local mafia. Asia is a playground of contestation, with various emerging and middle powers quietly protective of their identity and sovereignty. The U.S. and India are working together to uphold this reality and ensure stability.

Delhi has also realized that the U.S. is essential for its economic growth. American capital and technology are crucial for India’s transformation. India’s fate in the upcoming decades is inextricably tied to the United States, with or without China as its neighbor.

I find that puzzling. Is that actually how India is behaving? Also how is the balancing act he describes possible? In a multipolar world is India place solidly at the U. S.’s side or not?

I see India in pursuit of its own sphere of influence in Asia more than Mr. Shinde seems to. And what about the episodic border conflicts between China and India? To my eye they constitute the same course on land that China is pursuing in the Yellow Sea.

0 comments

Party Renovation

While I agree with Danielle Allen’s argument for what she calls “democracy renovation” in the Washington Post, I think she’s operating under some false premises. So, for example, I agree that constitutional democracy is a good system:

Human beings thrive when they can steer their own lives — both in their private lives and by acting together in the public sphere. Constitutional democracy is the only form of government that makes this possible for all. It’s not perfect by any means, but it’s the best that’s humanly imaginable.

and I agree that our democracy needs “renovation”:

The constitutional democracy set up in the 18th century started from the idea that power could be reserved to some (mainly White, male holders of property, with some exceptions) while nonetheless being deployed for the good of all. This proposition is false. The only way to ensure that a political system serves the good of all is to ensure that power is shared by all. We’re still learning how to build a political system that genuinely supports fully inclusive power-sharing.

even if I’m not entirely in agreement with her assessment of the direction of reform:

Some of these I’ve written about already; some will be explored in columns to come. Employing unified all-comers preliminaries in place of party primaries, and having those preliminaries move four or five finalists forward to a final round where there is an instant runoff using ranked-choice voting; increasing the size of the House of Representatives; eradicating news deserts; ensuring full voter access; and embedding citizen deliberation in our representative system.

but, basically, I think I disagree with some of her assumptions. For example, why does she assume that “all-comers preliminaries” followed by instant runoffs using ranked-choice voting will render the system more democratic? The exact opposite seems to have transpired where it has been tried, e.g. California. What actually seems to have happened is that it has strengthened the position of the most extreme minorities.

Why does she ignore the role of party politics in her exposition? It receives short shrift. She treats the determination of who is allowed to vote as a given. I would only point out that expanding the franchise has not resulted in greater participation. Quite the opposite. At the very least we should consider raising the legal voting age to 25. Proposals that are being bruited about do the opposite. I find her assumptions about our legal system troubling. And, finally, why not direct democracy? To my eye, every argument against direct democracy, primarily that relatively few have the time or inclination to devote enough attention to governing pertains equally to representative democracy at the federal level, at least as it operates at present. Our elected representatives don’t spend most of their time performing constituent service, legislating, engaging in oversight, etc. They spend most of their time raising money for re-election.

However, rather than bickering about the pros and cons of direct democracy, I would prefer that we turn our attention to renovating our political parties. Our parties are ossified and authoritarian. As presently constructed your preferences or even those of your elected representative make little difference. I would suggest the following reforms:

  • Term limits
  • Failing term limits party leadership should be determined by lot. Determination based on seniority should be prohibited by constitutional amendment if necessary
  • The authority of House Speaker and Senate majority leader should be strictly curtailed. Any member should have the authority to propose legislation which must be brought to the floor, propose amendments, etc. That’s the way it was until relatively recently.

I’m open to other reforms but I believe those are long overdue.

I should mention that although I agree with her proposal to increase the size of the House no foreseeable enlargement would be sufficient. We might also consider increasing the number of states by requiring states to be divvied up once they reach a certain population. Or abolishing the Senate entirely. With the popular election of the Senate a century ago it serves little useful purpose.

0 comments

No Time to Compromise

The editors of the Washington Post are not ready to join Team Compromise over Ukraine:

Nearly half a million casualties, including almost 200,000 dead — that is the staggering toll to date of the slaughter by which history will remember Russian President Vladimir Putin’s lawless invasion of Ukraine. The estimates, by U.S. officials, are a running count as the war reaches its 18th month this week. The numbers will surely climb.

No end to the carnage is in sight, and calls for a negotiated solution are wishful thinking at this point. As Mr. Putin invests in Russia’s war economy, he shows no signs of giving up his fantasy of Russian neo-imperial glory. That hard truth leaves the United States and its European allies with few appealing options, especially as Ukraine’s grinding military offensive, launched in early June, remains far short of its goal: to evict Russia’s forces. Deeply entrenched in a miles-deep maze of defensive lines behind some of the most heavily mined terrain on Earth, the occupiers retain control of roughly 18 percent of Ukrainian territory.

According to a recent Post report, U.S. intelligence officials have concluded that Kyiv is unlikely to achieve its main objective this year: breaking south through enemy lines and reaching the Sea of Azov. The idea was to sever the occupied corridor through Ukraine that connects Russia to the Crimean peninsula, which Moscow seized illegally in 2014.

Washington’s intelligence assessments have been wrong in the past, specifically by overestimating the proficiency of Russia’s military and the competence of its political leadership, and by underestimating Ukraine’s resolve and resourcefulness on the battlefield. Reports from the front lines and from Russian military bloggers suggest that Ukrainian morale remains high and that badly led, poorly supplied Russian troops are increasingly desperate. Kyiv’s forces continue to make modest gains despite the daunting challenge of advancing against Russia’s massively fortified positions.

Still, the raw disparities of scale in this fight are not going to disappear. Russia’s huge advantages in population and weapons-making capacity are bolstered by Mr. Putin’s decision to mobilize the nation’s industrial might to sustain an indefinite war. The Kremlin, having intensified its propaganda and crackdown on political dissent, has all but eliminated public expressions of antiwar views. The war could continue for years — waxing, waning or frozen.

concluding with a warning:

Mr. Putin’s only hope for victory lies in ending Western aid for Ukraine, a goal he hopes Donald Trump would advance if he is elected to a second presidential term. History’s clear lesson is that rewarding such a dictator’s aggression will only invite more of the same. Part of laying the groundwork for a sustained commitment to Ukraine will be for Western leaders to explain to their voters why it is necessary.

They blame Ukraine’s lack of progress on tardy military supplies from the U. S. and other G7 countries. I see no way that the G7 can simultaneously increase their rate of production of armaments while meeting goals for reducing carbon emissions. Most progress to date has been accomplished by offshoring their heavy industry to China which has been counterproductive to that aim.

Even were the United States, United Kingdom, France, Germany, Canada, and Italy to provide arms to Ukraine at the pace and in the quantity desired it would not replenish the scarcest supply: Ukrainians. The longer the war goes on the more likely is outright Russian victory. I wish the editors had presented their plan for countering that reality.

0 comments

The Problem With Technology

I’ve read pieces at several places from various writers noting that electric vehicles (EVs) are stacking up in China as the old models are made obsolete by the new ones. This is a situation familiar to anyone in the technology business. Personal computers become obsolete with frustrating rapidity. Stocking up on them is an error for a reseller—it inevitably means you will be stuck with unsaleable personal computers in your warehouse.

It’s a factor that should be taken into account when reckoning the effect of EVs on carbon emissions. Don’t expect them to have the life expectancy of internal combustion engine vehicles.

7 comments

Proposing the Unacceptable

At UnHerd Aris Roussinos muses over whether Ukraine should consider compromising:

The Biden administration’s approach to the war has always been fundamentally sound: that Ukraine should be supported to negotiate, but only from a position of relative strength. Yet it is no good to belatedly observe, as US officials are now anonymously wont to do, that perhaps America’s top general Mark Milley was right in claiming that Ukraine’s greatest period of relative strength was last winter, following the unexpected success of the Kherson and Kharkiv offensives, when an overstretched Russia was on the ropes and seemingly willing to negotiate. True, back then, Ukraine’s star was ascendent and the planned offensive, then slated for the spring, seemed fraught with terrible potential for Russia’s leadership. Yet even then, Russia insisted on Kyiv recognising Moscow’s possession of the Ukrainian territories it had just abandoned, an impossible starting condition for talks.

and

Instead of public expressions of eternal support followed by private disavowals, Washington should not now promise Kyiv more than it can realistically expect to deliver, factoring in the possibility of a White House transition. Equally, Ukraine now needs to cut its ambitions to America’s cloth: it should abandon fantasies of carving a humbled Russia into ethnic republics, or bundling Putin into a dock in the Hague, and focus on what can be realistically be achieved over the course of the next year. Both America and Ukraine will need to compromise: Washington by delivering more aid over a longer timeframe than Biden is politically comfortable with, and Kyiv by lowering its goals to match its objective capabilities.

I don’t believe that Ukraine can compromise; continuing to demand a return to their pre-2014 borders is an existential issue for them. Equally existential for the Russians is continued control of Crimea and independence at the very least for the two Donbas provinces. That’s not a new development; Russia has maintained that view all along. Like it or not it’s not up to us to dictate the Russian interest.

It may well be that Ukraine will join NATO, just not in the way advocates had wanted but by federating with Poland. That may be the most viable alternative for the rump eastern Ukraine. Declaring that such judgments are up to the Ukrainians is meaningless noise. U. S. support is critical to Ukraine’s ability to continue at its present level although it could continue a guerrilla war essentially forever.

7 comments

Will Self-Preservation End the Writers’ Strike?

It’s a bit too rambling to excerpt and quote meaningfully but I found David Dayen’s analysis of the WGA-SAG/AFRTRA strike at The American Prospect interesting. As I understand his point it’s that reaching out to the federal government to break up Disney, Netflix, and Amazon will bring them to the bargaining table. Why those companies?

The report was intended for the eyes of the Biden administration’s antitrust enforcers. It recommends that Disney, Netflix, and Amazon be prevented from any further consolidation, and investigated for anti-competitive practices in streaming. It was a call from inside the industry to break the industry up. And the administration got the message. That may be the primary reason why the studios are backtracking.

and

There are other streaming platforms, but the WGA reasonably predicts that if Disney, Amazon, and Netflix are allowed to continue their practices, those other platforms will wither away or be bought by one of the Big Three, which Wall Street analysts have already begun to demand.

The three walled gardens have essentially recreated the state of the three major networks before the fin-syn era, the WGA explains. That brings us back to the issues in the writers’ and actors’ strikes: low starting salaries, little or no residuals, the inability to move a production from one walled garden to another, no recourse when the Big Three reduce investment, and rising fees for consumers, who are essentially trapped for their entertainment dollar. “Unless antitrust agencies and lawmakers prevent future merger activity by dominant firms and step in to preserve and protect the competitive environment for other streaming services, the future of content is in peril,” the report concludes.

It reminds me of the pre-1948 situation with the Hollywood studios. From Hollywood’s beginnings movie studios had run their own theater chains until the Supreme Court ruled in United States v. Paramount Pictures. That, abetted by the unstoppable rise of television, resulted in the slow motion collapse of the Big Five studios over the next twenty years and the attendant increase in independent theaters and production.

Frankly, I’m skeptical. Disney’s annual sales are around $87 billion; Netflix around $32 billion; Amazon around $538 billion, only about $3 billion of which is streaming services. For Amazon streaming is a loss leader for its other segments. It’s hard for me to see how you justify splitting up Disney, Netflix, and Amazon without splitting up Google ($282 billion) and Apple ($384 billion), each of which in its own way is involved in stream and production, as well.

Quite to the contrary, my gut-level reaction is that the strike is a masterpiece of bad timing the participants will gain little and might lose a lot. Not only is Hollywood in competition with independents, the UK, Canada, and Australia for eyeballs but with China, India, and South Korea as well. There’s lots of content out there and the longer the strike goes on the greater the likelihood that Hollywood as we’ve known it may never return.

I wish the strikers well and don’t begrudge them a bigger slice of the pie but I think the pie may be shrinking.

0 comments

The Crumbling Narrative

At UnHerd Philip Pilkington laments that “the West” has “lost the plot”:

For more than a decade, our ability to form a coherent narrative about ourselves has been degrading. By “our”, I mean the West, which emerged in its current form in 1945 after three decades of war, desolation, and economic upheaval. The narrative that it told itself was crystalised during the Cold War: that the West would stand for liberty and freedom against the very live totalitarianism of the Soviet Union.

But this framework crumbled together with the Berlin Wall and the fall of communism. Overnight, a new narrative was needed, and it didn’t take long for one to emerge. The post-Cold War narrative formed in response to the Gulf War in 1990, when Saddam Hussein’s Iraq aggressively attacked Kuwait, principally with an eye to seizing its oil reserves. The United States and a 42-country coalition intervened, the Iraqis were soon pushed back, and Kuwait was allowed to govern itself. Here was the seed of the new narrative: the West, having won the Cold War, would keep the peace in the new status quo.

concluding:

In both the UK and US, then, there is reason to think that we have no real coherent narrative. No one is sure where to go next or what to believe. And as three recent events have demonstrated, this noxious position is already causing serious dysfunction in our political culture.

noting stressors imposed on the present narrative, e.g. COVID-19, the destruction of the Nordstream 2 pipeline, Prigozhin’s brief march towards Moscow, the coup in Niger.

What should we think about each of those? We don’t really know. They’re shrouded in the fog of war.

While I agree with him that it’s darned hard to promote the image of yourself as a peacekeeper while going around starting wars everywhere, IMO the problem is even more basic than that.

The initial narrative is past its sell-by date. “The West” is and always has been a device for pursuing national interest. Although the concept goes back thousands of years earlier, in the late 1930s-early 1940s Britain promoted the us against them notion of “the West” to draw the United States into its war with Germany, an effort which proved successful. After the war “the West” was used to promote American national interest, this time against the Soviet Union.

But it’s a struggle to dredge a notion of “the West” from the euro, always an attack vehicle against the dollar, from the invasion of Iraq, or from U. S.-UK-French support of the removal of Moammar Qaddafi. We certainly weren’t keeping the peace and the images that have emerged from Libya make it difficult to see it as promoting liberty and freedom. Particularly the open air slave markets which did not exist previous to Qaddafi’s removal.

I strongly suspect that the connecting thread among the incidents Mr. Pilkington lists (COVID-19, the destruction of Nordstream 2, etc.) is interest but for the life of me I can’t see whose.

Meanwhile maybe we should return to an idea of U. S. interest that predates the promotion of the Anglo-French view of “the West” to one that is more natively American. We have interests that go beyond those of Europe and European interests are not necessarily ours.

6 comments

The Annual Ritual

When Jack and I set out on our morning walk this morning we saw many, many moms, dads, and their kids engaging in an annual ritual: the first day of school. In this neighborhood it is a commonplace for one parent, mom or dad, to accompany their child to school every day. Today was distinctive because in so many cases both parents were making the trek.

I remember my first day of school. I think I was five. My mom walked me to school to show me the way. I think that was the last time either of my parents ever walked me to school. I’m sure I remember my first day of school because it was the first time I had ever spent that much time without one of my parents. Nowadays nursery school or day care of some sort before the age of five is a commonplace but that wasn’t within my experience.

When my younger siblings started kindergarten walking them to school was my responsibility.

As Jack and I walked I asked one of the sets of parents whether they remembered their first day of school. Neither of them did.

2 comments