I’m trying to get my head around the recommendations of the editors of the Washington Post to the leaders of the G-7 regarding China:

This weekend’s summit of the Group of Seven industrial democracies offers an opportunity for those governments, including the United States, to send Mr. Xi a clear message: If he chooses to crush Hong Kong’s democracy movement, there will be far-reaching consequences for China’s political and economic relations with the West. The G-7 leaders should make clear that they will not hesitate to adopt punishing sanctions, including the immediate revocation of Hong Kong’s special economic status, which facilitates flows of trade and investment to the mainland.

Such a declaration is needed because, until now, the West’s response to the Hong Kong crisis has been weak. Official statements, such as one issued last week by the European Union and Canada and another by the State Department, have mostly stuck to generic diplomatic calls for “restraint” and “deescalation” and “dialogue.” While supporting Hong Kong’s “fundamental freedoms,” neither the E.U.-Canada statement nor the State Department’s explicitly backed the mass protest movement or its entirely reasonable demands.

Worst of all has been the performance of President Trump, who has repeatedly made statements siding with Mr. Xi. In July, he declared that the Communist ruler had handled the protests “very responsibly” because “he has allowed that to go on for a long time.” A couple of weeks later, he called the demonstrations “riots” and mused that China might “want to stop that” before flashing a green light: “But that’s between Hong Kong and that’s between China, because Hong Kong is a part of China.”

They have routinely ignored China’s disregarding of the commitments it made when admitted to the World Trade Organization. They don’t care about China’s violations of the UNCLOS law of the sea agreement to which China is signatory. The Chinese authorities are supposed to take them seriously now?

If world leaders want the countries of the world to take international law seriously, they must enforce it even in small things. Even when it hurts their own countries.

In his column in the Wall Street Journal in reaction to the CEOs of the Business Roundtable’s averring that they would place stakeholders above stockholders, Holman Jenkins remarks:

Widely cited is the 1970 article by the late Milton Friedman, arguing that a public company’s purpose is to increase its profits legally and nothing else. Supposedly his wisdom is now obsolete. But his most important words, in the same article, may be a conditional statement questioning whether any corporate sloganeering to the contrary should ever be taken “seriously.”

After all, CEOs will still be hired by boards who are elected by shareholders; they will still be rewarded under contracts that pay them for producing sustainable increases in the stock price (that’s what those vesting requirements are for). Before this week’s statement, CEOs boasted freely about their employee-happiness ratings, their sustainability programs, their diversity efforts, as if these were perfectly consistent with shareholder wealth-maximization duties. What changed?

My reaction was that I’ll believe it when I see it. IMO they’re engaging in self-defense against the prospect of an Elizabeth Warren presidency, hoping to be eaten last.

However, it does raise the possibility of a wonderful opportunity. Boards of directors should stop giving corporate CEOs stock options as part of their compensation packages in favor of compensating them by some evaluation of how well they look out for the concerns of stakeholders. Indeed, CEOs should demand it. Then I’ll believe they’re sincere.

Update

Better yet, take a page from China’s book. Put the CEOs under 24 hour video surveillance and have their actions reviewed by representatives of various stakeholders’ groups who will assign each a social score. Compensate them based on their social scores.

C’mon, guys. Be part of the wave of the future!

At the Wall Street Journal Elizabeth Braw wonders whether insurance should cover damages due to hacking:

In the best-case scenario, today’s hybrid warfare drives up the cost of insurance enormously, as in the Strait of Hormuz. Anthony Gurnee, CEO of Ardmore Shipping, told CNBC in July that the cost of covering a trip through the strait had grown 10-fold in two months.

Other corporate victims of foreign assaults are even unluckier. Two years ago, the NotPetya attack, a virus targeting Ukrainian government agencies and businesses, spread to various multinational corporations. It caused an estimated $870 million in losses to Merck; $400 million to FedEx ’s European subsidiary, TNT Express; $300 million to Maersk, the Danish shipping giant; and $188 million to Mondelez, which makes Oreos.

It’s unclear if some of those companies will get an insurance payout. Mondelez’s and Merck’s claims have both been denied on grounds that the NotPetya attack was an act of war—an argument supported by the fact that several countries including the U.K. and the U.S. attributed the attack to Russia. Both companies are fighting in court with their insurance companies.

Attacks on businesses linked to foreign governments are becoming increasingly frequent. Hackers working for Beijing and Pyongyang regularly target Western companies. Last year the U.S. Department of Homeland Security and the Federal Bureau of Investigation reported that hackers linked to Russian government operatives have attacked American firms in a variety of sectors, including energy, water, aviation and manufacturing. This is the new state of foreign policy. Earlier this summer the U.S. reportedly hacked the Russian grid.

If the risks of hybrid warfare become too high, certain business activities—think sending cargo ships along particular routes or operating critical national infrastructure such as power plants—may become uninsurable. Businesses are cheap, easy and largely risk-free targets. Western countries’ march toward smart cities, and their increasing use of the internet of things, make their companies and residents more vulnerable still.

My answer is it depends. Maritime insurance usually covers damages due to acts of piracy but not from foreign navies. Consequently and in full recognition that often it’s very difficult to tell, I would think that the source of the hacking would determine whether the risk was insured or not.

As to the broader question she asks, yes, government-sponsored hacking is an act of war just as espionage or sabotage by foreign agents are. The factor that links private hacking with the government-sponsored sort is that government action is required. Just as tamping down the damage done by piracy required intervention by governments, so does that done by hacking.

Under a Westphalian system it is the responsibility of governments to control wrongdoers operating within their own borders and we should requiring Russia, China, or North Korea (the big three of hacking) to deal with hackers operating from within their countries.

Whether they or we take hacking seriously or not, insurance companies should be pricing insurance according to the risk and that includes risk from hackers. We should not be subsidizing shipping companies by indemnifying them against losses. It may be that globalization and global communications networks are a lot more expensive than had been thought.

I found this story, reported at Buzzfeed, disturbing:

Extending the reach of its propaganda beyond its borders, Chinese state-owned media is running ads on Facebook seemingly designed to cast doubt on human rights violations occurring under the government’s mass incarceration of Muslim minorities in the country’s northwest Xinjiang region.

BuzzFeed News found three ads — two active and one inactive — within Facebook’s ad library extolling the alleged success stories of detainees at the camps and claiming that the detention centers were not meant to interfere with religious beliefs and practices. The two active ads had been placed in the last four days and were targeted to an audience in the United States and other countries.

Doesn’t running paid advocacy ads constitute agency? Is Facebook a news organization? I thought the company had explicitly denied that. If it’s not a news organization it isn’t excluded from the requirement to register under the Foreign Agents Registration Act.

Just for the record I don’t think that Facebook is a foreign agent. I just think they’re stupid, sloppy, and greedy. They shouldn’t be serving ads from foreign governments to U. S. users at all.

I’ve said this before but in our government as defined the most powerful elected official in the United States is the Speaker of the House of Representatives. The second most powerful is the Majority Leader of the Senate. The president of the United States is third.

It is only Congressional inaction and dereliction that has resulted in the ever-increasing power of the presidency. The Imperial Presidency is a creation of the Congress.

In an op-ed in the Wall Street Journal Senate Majority Leader Mitch McConnell rises in support of the people of Hong Kong:

China’s trading partners, including the U.S., should make it clear that any crackdown would have real and painful costs. I wrote the Hong Kong Policy Act of 1992, which extended special privileges to the region because of its unique status. This special access to the U.S. and other nations helped drive the investment and modernization that have enriched Hong Kong, and Beijing by extension. Beijing must know the Senate will reconsider that special relationship, among other steps, if Hong Kong’s autonomy is eroded.

I support extending and expanding the law’s reporting requirements to illuminate Beijing’s interference in Hong Kong. And the Senate will do more. I have asked Jim Risch, chairman of the Foreign Relations Committee, to examine Beijing’s actions in Hong Kong and its efforts to expand the Communist Party’s influence and surveillance across China and beyond. I am working with Lindsey Graham, chairman of the Appropriations Subcommittee for State and Foreign Operations, to fund democracy and human-rights programs across Asia. I will maintain our strong focus on rebuilding and modernizing the military, continuing the huge strides of the past 2½ years, so that our ability to project power and defend American interests keeps pace with this major competitor.

But it is not America’s task alone to address these threats. The world is awakening to China’s abusive and aggressive practices, from unfair trade actions to intellectual-property theft to offshore expansion. Now Hong Kong has plastered front pages with yet another cautionary tale about how the Chinese regime treats those within its envisioned sphere of influence and disregards international agreements that govern them.

Every trading nation and democracy that values individual liberty and privacy has a stake here. Their choice is not between the U.S. and China but between a free, fair international system and the internal oppression, surveillance and modern vassal system China seeks to impose.

The U.S., for its own interests, seeks international peace, a good relationship with China, and a mutually prosperous future for our peoples. Hong Kong is only one piece of the complex set of interests that makes up the U.S.-China relationship. But China’s treatment of the people of Hong Kong will shape how the U.S. approaches other key aspects of our relationship.

While I support the sentiments he expresses I am uncomfortable with his expressing them. His is too high a profile. Hong Kong is a part of China. The protests and the Chinese authorities’ response to them are a Chinese internal matter. U. S. government support of the protesters lends credence to those authorities’ claims that American agents provocateurs are fomenting discord.

IMO the best thing both for the United States and the people of Hong Kong is to maintain a low profile. What we then do if the Chinese authorities do, indeed, take action against the protesters is up to us.

The editors of the Wall Street Journal take note of the discrepancy between what was anticipated and what has actually happened with student loans over the years:

Defaults have fallen for most forms of consumer debt as the economic expansion continues. Mortgage delinquencies last quarter hit a historic low. But severely delinquent student loans have soared since 2012 and are now 35% of “severe derogatories”—more than credit cards (23%), auto loans (21%) and mortgages (11%).

About 10% of the $1.5 trillion federal student-loan portfolio is 30 days or more past due. Another 20% is in deferment or forbearance, and about 30% is in income-based repayment plans that allow most borrowers to cap monthly payments at 10% of discretionary income and discharge the remaining balance after 20 years or 10 for folks in “public service.”

Note that the effective expansion of the loan program was not written into the legislation. It was created by executive action.

The inability of recent graduates to repay their loans is not tremendously surprising. Underemployment, i.e. a job that pays a lot less than would be expected for a college grad, is widespread and persistent among today’s college grads.

The discrepancy has budgetary implications:

Many borrowers in income-based repayment plans aren’t repaying principal, so their balances are growing as they accrue more interest. By 2012 a majority of new borrowers had bigger balances after two years of making payments.

Yet during the Obama years CBO scored student loans as a government profit center by underestimating the growth in income-based repayment plans. CBO has slowly scaled back its 10-year revenue projections for student loans to a $31.4 billion government cost in this year’s forecast from a $219 billion 10-year revenue gain in 2012.

The nearby chart tells the story. Using fair-market accounting that prevails in the private economy, CBO now projects a $306.7 billion cost to taxpayers over the next 10 years. The red ink will be far worse beyond that 10-year budget window.

Another non-surprise: The government is spending more to administer student loans than the Obama crowd forecast. In 2010 the government spent $800 million on “administrative costs,” which CBO projected would increase to $1.2 billion in 2019. The government’s overhead tab this year was $2.9 billion.

This entire student loan arrangement is a scam; it’s a racket:

Income-based repayment plans have also encouraged schools to raise prices and enroll students who probably won’t earn enough to pay off their loans. Someone with a master’s degree in dance from New York University shoulders on average $96,000 in debt, according to government data. Imagine if the government created income-based repayment plans for mortgages.

Capping student-loan monthly payments has also enabled more borrowing since most lenders review a customer’s total monthly debt payments when underwriting loans. Americans who borrow more than they can repay typically default first on student loans. Cars and homes can be repossessed if borrowers don’t make payments. Past-due credit card bills incur late fees and hefty interest payments. Borrowers who default on student loans, on the other hand, are encouraged by loan servicers to enroll in income-based repayment plans.

The results make it clear that some serious reform is necessary in our system of higher education and how we finance it. Federal loan programs should be much more tightly tailored to help people pursue gainful employment in the private sector. A tax dollar to higher education to underemployment or government employment is a vicious circle that will inevitably fail.

Olivia Giovetti’s Washington Post op-ed urging the de-emphasis of the present common repertory which consists largely of 19th century Italian opera in favor something more relevant to modern audiences is one of the dumbest I have read recently. There is a reason that 19th century Italian operas are performed again and again and again. People like them. Meanwhile, 21st century operas largely play to empty houses. Do you know who in particular doesn’t attend modern operas? Young people.

I don’t know what Met productions are like and I don’t much care. Chicago’s Lyric Opera has produced some great re-imaginings of old operas. It has also produced some awful ones. The reason that it has produced Harold Prince’s production of Madama Butterfly year after year after year is that it’s an interesting and effective way of telling the story blending traditional production with modern technology.

Here’s the reality. It’s not just opera that’s dying. Live performance is dying. Jazz is dying. Broadway musicals are dying. Live theater is dying. Pop music concerts are dying. They’re all dying. Attendance at pop music concerts is increasing far more slowly than the population. There are many reasons for that but they include a lot of people who would rather sit in their living rooms watching something pre-recorded streaming than get up, go out, and attend a live performance.

If you have any doubts about my claim that it will be hard if not impossible for any president to withdraw our troops from Afghanistan, you have only to consider this editorial at the Washington Post to understand my reasoning:

Though most Americans wish to end the Afghan mission, there is little reason to abandon the country in haste. Of the more than 2,300 Americans killed in Afghanistan since 2001, 15 had died through July this year, and 53 since the drawdown in 2014. If the result of a quick withdrawal is the collapse of the government and the reestablishment of sanctuaries for terrorists, the United States could be dragged back into the conflict at a far greater cost — as happened in Iraq three years after the pullout. That’s not to mention the loss of all that this country has invested, in lives and treasure, in helping to build Afghanistan’s democratic political system and extend basic rights to women.

An acceptable agreement with the Taliban would condition the final withdrawal of U.S. troops on a settlement between the insurgents and the Afghan government. It would also provide for a continuing presence of U.S. counterterrorism forces to strike the Islamic State and other emerging terrorist threats. If Mr. Trump agrees to a pullout that omits such requirements, he will risk turning what could still be a successful outcome for the United States in Afghanistan into a shameful failure.

Another 15-20 years tops is all that would be needed to secure victory. Counter-insurgency is and always has been a strategy doomed to fail in Afghanistan. All the Taliban needs to do is wait us out. We have no strategic interest in Afghanistan as long as the country is not serving as a staging area for attacks against us. That points to a counter-terrorism strategy rather than counter-insurgency. The editors of the WP continue to support CI despite its abject failure.