Enabling China’s Totalitarian Government

Mighty American companies, one after the other, bow down and sell their soul to China in exchange for a fistful of dollars.  The latest being the NBA’s acquiescence to China’s demands as noted in The New York Times, “American Basketball,”  October 13.

How sad it is that American companies are so hungry for ever greater profits from ever greater sales that they will sacrifice their principles in order to please the Chinese Communist government and thus have access to the huge Chinese market.  

The Chinese government is not evil on the scale of Nazi Germany or Stalin’s Russia or Mao’s Cultural Revolution.  But they are every much as totalitarian.  Anyone in China who dares to buck the Chinese government is treated like a criminal and taken into custody by the government with no rights.  

The fate of a democracy activist, or a religious activist, or a persecuted minority such as the Uighurs, is not that different in today’s China from what it was in fascist Germany or Russia.  They perhaps don’t fear death, but imprisonment at will is the norm.

Our opening up to China has in retrospect been a huge mistake.  We thought that exposure to Western products and ideas and increased prosperity would slowly bring a soft revolution in China; that people would demand not just economic freedom but political freedom.  

But while China has embraced a type of capitalism, our role in the economic transformation of China has created a monster that threatens our economy and our geo-political interests around the world.  American companies and farmers have become enablers of China’s totalitarian government.

It is past time to rethink our engagement with China, not for the reasons given by Trump, but because we are enabling a totalitarian government.  The dream of a soft revolution is just that.   What to do at this point is a huge question that requires careful and knowledgeable thought, so I am not going to make any suggestions, except to say that Trump's trade war is not the answer.

Tariffs 101 - The Big Trump Lie

Trump is fond of saying, in support of his trade war tariffs, that as a result China is paying billions of dollars directly into the U.S. Treasury.  That is blatantly and categorically false.  Either Trump knows the truth and is lying, or he is just dumb about how tariffs work, which is certainly possible.

What really happens when tariffs are imposed is that the producing country, here China, does not pay a penny.  The tariffs are instead paid by the company importing the product into the U.S., typically an American company.  It is they who are paying the billions of dollars into the U.S. Treasury.

And guess what the importing company then does?  They pass the cost on to their consumer, whether it is a business or the American public.  

So at the end of the day, the billions of dollars in tariffs are in fact paid by the American consumer, not China.  China is only hurt by the tariffs in so far as the increase in the cost of their products to consumers because of the tariffs causes sales to decline.

And that, as Edith Ann (the Lily Tomlin character) would say, is the truth.

* Note:  Prior to publishing, this post was sent to the New York Times as a letter to the editor.  When a few days later they published an editorial making this very point, I was free to publish my post.

It’s the Trade War, Stupid!

It was no surprise that Donald Trump is clueless about what’s happening in the stock market, because the blame falls directly on him and he never accepts responsibility for anything.  But recent reports in The Times ("Stocks Extend Their Slide," December 24) indicate that Treasury Secretary Mnuchin is similarly clueless.

Investor unease has nothing to do with the liquidity of banks or the underlying strength of the U.S. economy.  They are both strong and investors know it.  (Although Mnuchin’s reassuring statement about liquidity could make them nervous about something that isn’t an issue.)  It’s true, investors don’t like the Fed’s increase in interest rates, but that’s not the big problem either.  

The big problem is Trump’s self-imposed trade war.  This has created huge uncertainty for investors as to the future strength of not just the U.S. economy but also China’s and the world's.  Secondarily, his erratic behavior on all subjects, including his recent actions in the Mideast, add to the dynamic of uncertainty.  And then, his ego-driven Twitter feeds that routinely undercut any reasonable action his administration takes compounds investor uncertainty.

Given that no one has the ability to sit Trump down and explain the facts of life to him, this does not bode well for the future. Investors will probably shrug off the latest jitters and the market will rebound, but volatility will remain. The market’s only real hope is that his mania for self-preservation will force the conclusion, hopefully soon, that he must end the trade war for the market to regain its strength.

(A shortened version of this post has been published by The New York Times as a Letter to the Editor.)

Trump’s Tariff Talk - Lies, Lies, Lies

As Trump has been selling his use of tariffs to punish those, especially China, who he feels, with some justification, do not play fair in the trading game, he makes two statements.  First, he says that he is punishing them so that they will come around and give the U.S. a better trade deal.  Second, he talks about the billions of dollars that China is paying into the U.S. Treasury’s coffers because of the tariffs.

As to the first argument, tariffs have been used traditionally to protect local industry from foreign competition.  Since the external goods weren’t needed, making them more expensive, by imposing tariffs, made them less competitive and reduced their sales.  

In the current situation as pertains to China, Trump is trying to improve the balance of trade by reducing U.S. purchases of Chinese goods.  The difference now is that Chinese product is needed; there isn’t a domestic replacement.  Whether it’s product that U.S. industry needs or that consumers purchase, there really isn’t an alternative.  The impact of globalization has destroyed that.  Therefore, industry pays more for the product making their end product correspondingly more expensive and less competitive.  Or the U.S. consumer pays more for the Chinese product or perhaps goes without if it can’t be afforded.  

In both cases, the parties who are made to suffer by the tariffs are Americans … industry and consumers … not the Chinese.

It must be said that this method was more effective in dealing with the E.U. because the European countries on the one hand need us more and on the other we need them less.  We both are in a similar globalization status; we produce similar goods. 

As to the second argument, China isn’t paying anything into the U.S. Treasury.  That’s because tariffs are imposed when a product comes into the U.S. and they are paid by the importer.  The importer is never China.  It is a U.S. or other company that is importing the product and is therefore paying the tariff.  Again, it is American business that is suffering, not China.

And then there’s the suffering China’s retaliatory tariffs and actions are causing American exporters, particularly farmers.  For example, China has stopped purchasing American soybeans.  And so the government is spending billions in subsidies to protect farmers from what would otherwise be catastrophic losses.

That Trump has been able to control the message on this, as with many other issues, is beyond frustrating.  Yes, there have been many articles in newspapers, and I assume on the news and internet, regarding how American companies, farmers, and consumers are paying the price of this trade war.  But there is no personage, no presence, to effectively counter Trump’s bluster and lies.

Some august group of personages from both the Republican and Democratic parties must come together to issue statements as needed that put the truth before the American public.  A bi-partisan Truth Commission must be formed to keep the public informed.  Nothing will change Trump’s method, but the public can be protected with an appropriate countervailing force.

The Problem Isn't Capitalism, It's Our Society

People often rant against the evils of capitalism … exploitation of workers, people in general, and the environment.  But the problem is not so much capitalism as the social structure in which capitalism has operated. 

In the United States. the structure has been one which exalted individualism and correspondingly had a laissez faire attitude towards business.  It was a conservative social context in which each person was pretty much out on their own.

It was only after the turn of the 20th century, when the excesses of the industrial robber barons became egregious to society, and during the Depression, when capitalism clearly failed to provide for the people, that the government stepped in.  It regulated private enterprise, became an employer of last resort through efforts such as the CCC and WPA that produced lasting accomplishments, and provided various forms of assistance to those in need.  

Those actions indicated a partial change in the social context … what’s been termed the progressive movement … into one where it was felt that government had to play a role to stop the excesses of private enterprise, to level the playing field between employer and worker as well as between producer and consumer, and to help those in need.  All for the common good, in keeping with the Declaration of Independence's dictum that all people have the right to life, liberty, and the pursuit of happiness.

We still had a capitalist system.  But now there was an overlay of government regulation and action because it was realized that the profit motivation that lies behind all actions in a capitalist system would frequently not operate to protect the common good, meaning the wellbeing of all in society.   It is worth noting that corporations are a creature of the law and are granted their license because of the benefit that society as a whole should derive from their operation, not just for the accumulation of wealth by their owners.

In the years since the Reagan administration, however, the progressive movement has receded and the individualistic, laissez faire society has come to the fore again.  Most recently we have seen the Radical Right push to dismantle most of what the bipartisan progressive movement built to improve our society over the previous 100 years.

But even at its broadest expanse, the progressive movement was not all-inclusive.  We were never a community, except perhaps for a brief period during the Depression.  The difference between a communal society and an individualistic society is that in the former, every person has a role to play and every person is valued.  No matter how simple or mindless their role.  And if someone cannot play a role due to physical or mental infirmity, they are still valued as human beings who are part of the community.

Conservatives used to point almost with glee to the failure of Communist systems, not just economically, but especially as relates to the abuse of their own citizens.  But this is just further confirmation of the point made initially in this post, that it is not the economic system but the social structure that determines whether people and the environment are valued.

The experience of both the Soviet Union and China show, for example, that although ownership and the political/social structure changed dramatically, one elite just replaced another.  While the Soviet Union did in a limited sense live up to its Communist underpinning and provided for all the people, in both countries the political/social structure valued neither people nor the environment; both were exploited, just for a different end … not profit but state power.  Not surprisingly, the introduction of socialist capitalism in China hasn’t changed that.

In our society, and in every country around the world - for there are no communal countries - there are millions of people who are not valued.  Who do not have a place at the table.  And even most of those who are at the table, who help produce the product and are paid for their work, are not valued in any humane sense of the word.  They are just viewed as expendable cogs in the machine.

In short, we live in a society in which, while people may rant about the value of life in certain contexts … abortion, death with dignity, when human action collides with God-given directives …  they really place no value on life.  They have no concern or feelings of responsibility for the welfare, the quality of life, of their fellow citizen.   There is no sense of community.  The social contract is in tatters.

The problem of poverty and homelessness in the US is not due to a lack of resources.  The problem of racism and other discrimination is not one that is inherent in man.  The social problems we face are a direct result of the social system we have built.  And thus the answer to our social problems lies in rebuilding or redirecting our social system and reinforcing the role of government in advancing the common good.

I’m not talking about a utopia.  I’m just talking about a society that is humane, that values the life of everyone who is a member of the society … at a minimum everyone who is a citizen, but ideally everyone who lives here regardless of their status.  And finds a way to implement that humaneness by making everyone feel valued rather than feel like refuse, whether it’s through the educational system, housing, social services, whatever.  

Capitalism and a humane society can coexist and support each other.  They are not mutually exclusive.  But it implies capitalism with a social conscience, not unbridled capitalism such as was evidenced recently by several in-name-only pharmaceutical companies that bought existing low cost name drugs and then raised the price dramatically to an exorbitant amount, endangering people's lives.  It implies capitalism where maximizing profit is not the sole operating goal.

Bottom line, everyone … child and adult … deserves to feel like they are a human being and are valued and respected by others, whether it’s immediate family, peers, or the broader society.  So many people are broken because they have had life experiences that do not make them feel valued and respected.   And so they come not to respect or value themselves.  That not only harms them, it harms society; it is a drag on society.

This is a failure of society.  And only society can fix it.