No Place For Ambitious Men

From a Wall Street Journal article about American entrepeneurs departing China:

SHANGHAI—Fifteen years ago in California, a tall technology geek named Steve Mushero started writing a book that predicted the American dream might soon “be found only in China.” Before long, Mr. Mushero moved himself to Shanghai and launched a firm that Amazon.com Inc. and Alibaba Group Holding Ltd. certified as a partner to serve the world’s biggest internet market.

These days, the tech pioneer has hit a wall. He’s heading back to Silicon Valley where he sees deeper demand for his know-how in cloud computing. “The future’s not here,” said the 52-year-old.

For years, American entrepreneurs saw a place in which they would start tech businesses, build restaurant chains and manage factories, making potentially vast sums in an exciting, newly dynamic economy. Many mastered Mandarin, hired and trained thousands in China, bought houses, met their spouses and raised bilingual children.

Now disillusion has set in, fed by soaring costs, creeping taxation, tightening political control and capricious regulation that makes it ever tougher to maneuver the market and fend off new domestic competitors. All these signal to expat business owners their best days were in the past.

The article is accompanied by a graph illustrating foreign direct investment in China. I don’t think it shows what the editors presumably think it does since FDI in China remains at a very high level. Yes, it has plateaued since 2015 but it hasn’t declined.

A more interesting graph illustrate’s China’s net capital outflows.

I can’t disaggregate capital flight from Chinese overseas investment from FDI’s plateau. I can only relate an anecdote. 35 years ago I stood in the boardroom of my Fortune 500 then-employer trying to explain the complexities of doing business in China to a group of men with dollar signs dancing in their eyes who could only see the headline number: 1 billion population. They had asked me to head up their technical organization there, an opportunity I was about to decline. I suspect that tens of thousands of Americans went to China with dreams of fortune and that many have been disappointed. China was and may still be a place where great fortunes can be made. But not by the laowai

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Discussion Question: Anti-Semitism vs. Anti-Zionism

Anti-Semitism is a fear or hatred of Jews. Anti-Zionism is fear or hatred of a Jewish state, particularly Israel.

The question: is it possible to be anti-Zionist without being anti-Semitic?

I think it is but, depending on your terms, it may be quite difficult and there is so much overlap between the two it may be difficult to distinguish one from the other. I think that Gulf Arabs tend to be both anti-Zionist and anti-Semitic.

I am most definitely not anti-Semitic; if anything I’m philo-Semitic. I also do not think I’m anti-Zionist. Rather I am indifferent to the state of Israel and hold the view, out-of-step for an American, that Israel is a state just as Russia, China, or Saudi Arabia are. The people who created the state of Israel do so in the way most states did: they took it by force of arms and the Israelis will keep it as long as they can do so by force of arms. Israel has its interests; we have ours. Sometimes those interests coincide; sometimes they conflict; sometimes we just don’t give a darn.

I am uneasy when we pursue Israel’s interests uncritically just as I am when we pursue the United Kingdom’s or Germany’s interests, particularly when they do not coincide with our own. I don’t think that makes me an anti-Semite.

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WASP Nostalgia

I am not a white Anglo-Saxon Protestant. I do not aspire to be a WASP. I have never wanted to be a WASP. I have been subjected to anti-Catholic bigotry nearly all of my life, largely by WASPs, since I knew that there was such a thing as anti-Catholic bigotry, just about the same time as I learned about anti-Semitism. I think that the wave of nostalgia about WASPs is foolish, ill-considered, and uninformed.

Fareed Zakharia’s latest column in the Washington Post is pretty typical of the lot:

The death of George H.W. Bush has occasioned a fair amount of nostalgia for the old American establishment, of which Bush was undoubtedly a prominent member. It has also provoked a heated debate among commentators about that establishment, whose membership was determined largely by bloodlines and connections. You had to be a white Anglo-Saxon Protestant to ascend to almost any position of power in the United States until the early 1960s. Surely, there is nothing good to say about a system that was so discriminatory toward everyone else?

That’s a lie. Yes, you had to be a WASP to be elected president until 1960 and even then the Catholic elected was the son of the richest man in the world at that time. But that points to the real problem: the altar at which all too many Americans worship is Mammon.

Roger B. Taney, Chief Justice of the U. S. Supreme Court from 1836 to 1864, was a Maryland Catholic. There have been Catholic Congressional representatives and U. S. senators as long as there has been a Congress.

And that highlights another basic misconception. The overwhelming power and importance of the federal government is a 20th century phenomenon and, indeed, a late 20th century phenomenon. Prior to that the real power and influence was at the state and local level and there have always been non-WASPs in positions of influence in state and local governments.

Yes, George Washington and George H. W. Bush were WASPs. So were Benedict Arnold and Nathan Bedford Forrest. So is Donald Trump.

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The Dangers of the Euro

Make no mistake. From its very inception the euro has been an attack vehicle against the dollar. This article at the Center for European Reform by Adam Tooze and Christian Odendahl explains the changes Europe and in particular Germany must make for the euro to rival the dollar.

If that actually happens we are in terrible, terrible trouble.

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Winning in Asia

In his piece in The Interpreter Brendan Taylor makes some sound observations about the handicaps that face us in Asia:

For one, geography favours China and Russia too strongly. Taiwan, for instance, is 11,000 kilometres away from the continental United States. It lies a mere 160 kilometres from China. Coupled with its development of increasingly powerful and precise anti-access/area denial (A2/AD) capabilities, this geographic advantage is fast enabling Beijing to block America from coming to Taiwan’s defence.

Second, even if America finds more funding to throw at this problem, the costs to Beijing of countering such responses are considerably lower. Washington, for example, is seeking to establish military bases at a greater distance from China and to project power into key theatres such as the South China Sea from these. The new joint US-Australia base at Manus Island could well be a case in point. But Beijing can simply react to these efforts by producing more missiles with the capability to strike at such facilities.

Third, countries are generally most willing to use military force to secure interests closest to them. Russia’s 2008 incursion into Georgia and its 2014 annexation of Crimea confirm this. China too has been unequivocal in its commitment that Taiwan constitutes a “core interest” that it would fight to defend.

As should be needless to say I disagree with his prescription. He’s thinking too much in terms of hard power. The way we can win in Asia is by ensuring that we are a juster, more equitable, more prosperous society.

We didn’t win the Cold War by force of arms at least not by force of arms alone. We won because our system was obviously successful and the Soviets’ wasn’t. China’s spreading money around Asia won’t be enough to buy friends for them. For every friend they buy, there’s resentment. There’s a Sri Lanka.

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Making America Revolutionary Again

Rather than comment on the repellent story of Jeffrey Epstein, I will delegate the task to T. A. Frank at Vanity Fair. He says enough.

It’s enough to make you think longingly of guillotines in town squares.

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The Awful Truth

I won’t dissect the entire vision of the future described by Tom Friedman in his latest New York Times column. I want to focus on one small part of it:

My friend Heather E. McGowan, a future-of-work strategist, puts it this way: “The old model of work was three life blocks: Get an education. Use that education for 40 years. And then retire. We then made the faulty assumption that the next new model would be: Get an education. Use it for 20 years. Then get retrained. Then use that for 20 more years and then retire.”

But in fact, in the Next America, argues McGowan, the right model will be “continuous lifelong learning’’ — because when the pace of change is accelerating, “the fastest-growing companies and most resilient workers will be those who learn faster than their competition.”

The problem with this view of the future of work is that it’s a lie. How do I know it’s a lie? Not only does it not describe most of the financially successful people I know or have heard of, it doesn’t describe Tom Friedman’s own life experience. It characterizes the life experiences of very few.

Here’s a description of the future of the work more tethered to reality. People in Jobs that are protected or subsidized will prosper. Everyone else will struggle.

Let’s dissect his claim a little more. “Continuous lifelong learning” does not mean continuous lifelong learning. It means creeping credentialism. Everyone learns through experience. If that were the sort of learning that is increasingly valued, you would expect that older workers would be in demand. But that is not the case. Agism, whether against the law or not, is rampant and everyone knows it.

Additionally, Americans cannot win the credentials race. Outsourcing companies like Tata or Infosys can essentially deliver workers to order. That the workers they deliver do not have the knowledge or experience to do their jobs doesn’t really matter. What matters is that they’re cheaper.

People gain responsibilities through life. They have families and children. They purchase homes. And they work. That means they cannot take time off to improve their skills unless their employers allow it and, frequently, they don’t.

Their spouses have their own jobs tether families down. It’s no accident that Americans are less mobile than we used to be.

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The Talking Donkey

In an amazingly pro-Trump editorial, the editors of The New York Times laud the president for putting a freeze on new tariffs to give the U. S. and China three months in which to arrive at an agreement:

Not long after claiming victory in the midterm elections in which his party lost at least 39 House seats, President Trump kept up his winning streak this past weekend, this time on the world stage.

At the Group of 20 summit in Buenos Aires, he called a temporary truce with President Xi Jinping of China in the nearly yearlong trade dispute between the two countries. The United States will continue to impose a 10 percent tariff on up to $250 billion of Chinese goods but will hold fire on threats to boost that duty to 25 percent in January. China, which has countered with $110 billion in tariffs on American goods, will reportedly lower some tariffs on American-made autos and resume buying soybeans and other agricultural commodities that had been priced out of the market by the countervailing duties.

“It’s an incredible deal,” the president claimed, and yet it is not, in fact, even a deal. The two countries have given themselves 90 days to find a framework from which to construct a new trade agreement — something they haven’t been able to do over the past two years. Nor has China given an indication that it will make any big concessions in 2019.

I would remind readers of the story of the caliph, the grand vizier, and the donkey. It’s possible that President Trump will wrest concessions from China. It’s more likely that the Chinese authorities will announce reforms that remarkably never materialize and that President Trump will seize on even the tiniest motion in our direction and declare victory.

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A Constitutional Convention?

I’m not sure that John Dingell, the Democrat from Michigan who is the longest-serving Congressman in U. S. history, having served from 1955 to 2015, realizes it:

As an armchair activist, I now have the luxury of saying what I believe should happen, not what I think can get voted out of committee. I’m still a pragmatist; I know that profound societal change happens incrementally, over a long period of time. The civil-rights fights of the 1950s and ’60s, of which I am proud to have been a part, are a great example of overcoming setbacks and institutional racism. But 155 years after the Emancipation Proclamation and less than two years after our first African American president left office, racism still remains a part of our national life.

Just for a moment, however, let’s imagine the American system we might have if the better angels of our nature were to prevail.

Here, then, are some specific suggestions—and they are only just that, suggestions—for a framework that might help restore confidence and trust in our precious system of government…

but he’s calling for a constitutional convention:

The conduct and outcome of the 2016 presidential election have put the future of our country in mortal peril. After a lifetime spent in public service, I never believed that day would come. Yet it has. And we now find ourselves on the precipice of a great cliff. Our next step is either into the abyss or toward a higher moral ground. Since before the Civil War, we’ve been told that “Providence watches over fools, drunkards, and the United States.” Yet the good Lord also granted us free will. The direction we choose to follow is ours alone to make. We ask only that he guide our choice with his wisdom and his grace.

It’s up to you, my dear friends.

I know of no one who doesn’t believe that doing so would open an enormous can of worms.

It’s hard to write this without it sounding snarky but one of my priorities in a constitutional convention, higher than any of the measures he proposes, would be to prevent tenure in office of the sort that John Dingell enjoyed.

But I’d also divvy up big states like California into smaller chunks and institutionalize that process and force the number of representatives in the House to grow with the population.

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The Numbers Don’t Add Up

I don’t read or cite the Daily Beast very frequently but this piece there from Brian Riedl is well worth reading. His message is that we cannot pay for a single-payer system, a federal jobs guarantee, student loan forgiveness, free public college, and a big infrastructure spending plan just by taxing the rich:

In reality, spending like Europe requires taxing like Europe. This means, in addition to federal and state income taxes, a value-added tax (VAT)—essentially a national sales tax—that affects all families. CBO data estimates that raising 15 percent of GDP would require imposing an 86 percent VAT rate, or hiking the payroll tax from 15.3 percent to 56.5 percent. No wonder many spenders prefer the “just tax the rich” fairy tale.

Read the whole thing. To his analysis I would add the following observations.

  1. We cannot pay for all of the things we may want just by issuing ourselves credit, either. Most of these proposals are for operating expenses and they are operating expenses that are rising in cost fast—much faster than incomes, generally. Paying operating expenses by issuing credit is a very bad practice. There is no perpetual motion.
  2. Most educational spending and health care spending is consumption not investment.
  3. Taxing like Europe would not be enough. We’d need to pay like Europe, too. On average physicians in Germany earn a third of what American physicians do. The highest wage that can be earned by a primary school teacher in Germany is about $62,000 per year. In Chicago elementary school teachers start at $50,000 and most earn $80,000 or more.
  4. We’d need to live like Europeans as well. A lot less personal consumption.

IMO we need to set our sights differently. We should trim health care spending to something much more like public health—a limited palette of services much more equitably divided among the population, much greater emphasis on palliative care for terminal patients than at present. Education should be targeted more narrowly at producing good workers and citizens. We need an educational system for the population we have not the population we’d like to have.

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