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Thursday, May 23, 2019

Trade War Commentaries











































































Trump walkout marks point of no return Trump's strategy of torching a meeting, turning on his heel and raising the stakes is familiar from his life as a real estate magnate. But there is increasing evidence that walking away for the table doesn't work as well for a President as it can for businessmen........ He tried it with North Korea, and the Stalinist state still has its nuclear weapons. He did it with China, and a trade war is deepening........ "The President is, frankly, taking a position that no other president in history has ever taken, which is that somehow if you are being investigated by the Congress you can't do anything else," said Clinton's former chief of staff Leon Panetta........ The result of Wednesday's angry exchange is a Washington facing the prospect of a prolonged period of complete breakdown between the Congress and the White House.

Trump's golfing has cost taxpayers more than $100 million, by 1 estimate. That's not really the hinky part.

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Wednesday, May 22, 2019

One Million Uighurs

compared Trump on China to Ronald Reagan on the Soviet Union—ahead of his time in confronting its malevolence...... The Chinese Communist Party may worry about its ability to preserve its control. Otherwise, why would it need to build a surveillance state, to put 1 million Uighurs in “reeducation camps,” to ostracize and imprison human-rights lawyers, or to “disappear” the head of Interpol? But it doesn’t appear to be anywhere near actually losing that control.......... Previous American presidents theorized that China would see the advantages of becoming rule-abiding. Trump theorizes that the American economy is strong enough to force Chinese submission. Those different approaches portend very different kinds of relations for the United States with China: The first would make them partners in prosperity; the second would reveal them supplicants........ Treasury Secretary Wilbur Ross thinks not only that the U.S. will win the trade war, but that it may result in social unrest that challenges Communist Party control in China. So we are back to regime change, but this time by threatening penury rather than luring with prosperity.




China Isn’t Cheating on Trade Democrats and Republicans echo Trump’s anti-Beijing rhetoric, but escalating tensions could leave Americans far worse off. ......... in the coming weeks, the United States and China will sign an agreement that repeals the tariffs the two nations have been levying on each other’s goods for the past nine months. If past behavior is any guide, Donald Trump will call it the greatest deal ever, and global markets will breathe a sigh of relief. ......... Trump has already begun to renege on commitments made as part of the United States–Mexico–Canada Agreement, which he hailed as “incredible” in October. ......... Politically, Beijing is growing more authoritarian, as evidenced by its Orwellian domestic-surveillance policies, its mass internment of Muslim Uighurs, and the cult of personality now developing around Chinese President Xi Jinping. Militarily, China increasingly dominates the South China Sea. .............. “a new consensus”—that only a far tougher U.S. trade policy can prevent Beijing from continuing to rip off America—“is rising across America.” .......... top Democrats have scrambled to out-hawk Trump on trade. .......top Democrats and Republicans in Congress are warning that Trump’s China trade deal won’t be tough enough...... Complaints like these have come to dominate Beltway discourse not because the evidence underlying them is particularly strong. It isn’t. They have come to dominate Beltway discourse because Democrats and Republicans both believe that Trump’s anti-China message helped him win Pennsylvania, Ohio, Michigan, and Wisconsin, and that the path to the presidency runs through those states again in 2020. The political incentive to be tough on China over trade today is blinding politicians to the risks of an escalating conflict that could leave Americans poorer, less free, and—perhaps—even at war. .......... Beijing’s economic policies are actually quite typical of a country at its stage of development. Like many regimes in the developing world, Beijing fears the “middle-income trap,” in which rising wages undermine its advantage as a center of low-cost manufacturing before it develops the capacity to produce higher-value goods. China worries that unless it moves from assembling iPhones to inventing them, economic growth will stagnate and popular unrest will follow. ....... China therefore erects tariffs to protect industries it hopes will help it make that leap. So did the United States when it was industrializing. ......... China has a lower trade-weighted average tariff than Argentina, Brazil, India, South Korea, Indonesia, South Africa, Turkey, Russia, Saudi Arabia, and Mexico. ........ ranked countries on how well they protect the intellectual property of foreign companies, China scored fairly well among developing nations: just below Mexico and Malaysia but above Turkey, Brazil, South Africa, and the Philippines ........... A 2017 study of cases in which foreign companies sued for patent infringement in Chinese courts by Renjun Bian of the University of California at Berkeley School of Law found that foreign companies actually prevailed at higher rates than did Chinese litigants. ........... Beijing pours money into promising companies in ways the United States and most European governments do not. But this isn’t unusual among developing economies either. ...........China actually intervenes less than India, Vietnam, and Brazil, some of America’s best friends in the developing world. .......... “unlike many of its [developing economy] peers, China is making concrete progress in building a 21st century national IP environment.” ....... a “natural evolution. Countries tend to be slapdash about IP until they get sophisticated enough to have a lot of their own IP to protect.” ........ National Counterintelligence and Security Center last year admitted that, while China still hacks into American companies (something the United States has also allegedly done to Chinese companies), such activity occurs “at lower volumes than existed before the bilateral September 2015 U.S.-China cyber commitments.” In other words, diplomacy worked........ the best way to accelerate China’s transition is to build alliances with other governments concerned by its economic practices, and to use that common leverage to press Beijing. That was part of the strategy behind the Trans-Pacific Partnership, through which the United States and 11 other Pacific nations would lower their barriers to trade and investment. When the TPP’s prospects looked bright, China reportedly began considering joining itself, which could have compelled it to make some of the very changes Trump is demanding now. But in 2016, Trump, with the help of progressive Democrats such as Sanders, made TPP politically radioactive........ rather than making common cause with Canada, Japan, France, and other democracies aggrieved by China’s trading practices, his administration has slapped tariffs on them. All of which has isolated the United States and left it seeking concessions from China that would be easier to secure were the Trump administration not working alone........ Historically, the United States has been one of the WTO’s most successful plaintiffs. But according to Simon Lester of the Cato Institute, the Trump administration has brought only two new cases against China at the WTO. And Trump officials, in keeping with their general hostility toward international organizations, regularly trash the organization........ But it’s not Xi who is crippling the WTO. It’s Trump. ....... “China does a reasonably good job of complying with WTO complaints brought against it.” The Trump administration, by contrast, has systematically blocked the reappointment of judges on the WTO’s dispute-settlement body and thus, according to Reuters, has “plunge[d] the organization into crisis.”.............

the self-destructive absurdity of Trump’s behavior

......... If Chinese companies forge high-tech collaborations in Europe and Chinese students forge scientific breakthroughs at laboratories in Australia, American politicians—in their effort to quarantine China from global innovation—may end up quarantining the United States instead....... the United States has a long history of anti-Asian bigotry, especially during periods of conflict with Asian governments........ Since 2009, according to a 2017 study by the Chinese American Committee of 100, Asian Americans have been twice as likely as other Americans to be the subject of bogus prosecutions (prosecutions that don’t result in a conviction) under the Economic Espionage Act. Trump himself in August reportedly claimed that “almost every student that comes over to this country [from China] is a spy.” .......... The more trade hawks decouple America and China economically, the less incentive the two countries will have for mutual accommodation, since, as the Rand Corporation’s Ali Wyne has observed, “there are few factors … besides trade interdependence that compel the United States and China to exercise mutual restraint.” ....... The “painful adjustments” that America must make to accommodate China are more painful because the United States government has done so little to cushion Americans from the dislocation caused by China’s economic rise.

If Americans who lost their jobs didn’t also lose their health care; if they had access to generous government wage subsidies, retraining programs, and even guaranteed federal jobs; if paying for college didn’t plunge them and their children into debt—then the political incentive to scapegoat Beijing might not be as great. Over the past two decades, American politicians have not proved weak and inert in responding to China’s real and imagined misdeeds. They have proved weak and inert in responding to their own citizens’ needs. The reckoning Washington requires is not with China. It’s with itself.
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The Mighty Dollar

The starting point is the dollar’s status as a global reserve currency and international monetary standard, and the US current account deficit is the only mechanism through which the global supply of dollars can be increased. This is why a global economic boom often coincides with a higher US current account deficit, while global recessions often see the US current account moving in the opposite direction............ the expected surge in Chinese imports would almost close up America’s entire current account deficit and this would lead to a global dollar shortage. As a result, market forces would likely drive up the dollar to such a level where US exports to other parts of the world would be reduced, thus “re-creating” a trade or current account deficit. ...... In the end, either higher short rates or a stronger US dollar or both would act to slow down the US economy and ensure that America’s trade balance is more or less unchanged. ...... a Sino-US trade deal could simply amount to a zero-sum game in the short term: a gain for the US, a loss for the rest of the world, and indifference for China ..... a net efficiency loss in the world supply chains. ........ To avert or minimise the adverse impact of a China-US trade deal on the rest of the world economy, the Sino-US trade deal should focus on Beijing’s protective trade and investment policies rather than bilateral trade imbalance. The China-US trade imbalance is the natural result of global supply-chain evolution, and eliminating this imbalance is too disruptive for every country involved. ....... making sure that Beijing plays by the rules and levels off the playing field for foreign businesses and suppliers would represent a net gain for the world economy, benefiting all.
A US-China trade deal won’t be a win for global markets if Beijing shifts its trade surplus to other countries

A little good news could go a long way. If the US and China are shrewd enough, between them they can clinch recovery with a trade compromise that convinces investors that the future remains bright.
The world is taking leave of its senses and falling down the rabbit hole of a deepening global trade war, economic shocks and political instability. The post-war world order is breaking down, multilateralism is giving way to national self-interest and the political forums for peaceful debate are failing.......It’s time for someone to step forward and show stronger leadership before the world sinks back to where the 2008 financial crisis left off. Right now, the world is in self-harm mode and deeply vulnerable.
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India 2019: Looks Like A TsuNAMO

90 minutes into the vote counting, and it is beginning to look like a massive victory for Narendra Modi. If he pulls a hattrick and wins again in 2024, he joins the rank of the Congress Party's Nehru. This is happening after a long time in India that a party with a majority is winning another five-year term. He should be able to give India double-digit growth rates before he goes to the people again in 2024.





3:30 AM EST Update



My Projection Puts Modi At 300-350

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2020: The Year Of The Social Democrat

2020 is going to be the year of the Social Democrat. The New Democrat reign lasted from 1992 to 2016. Now the mainstream talk inside the Democratic Party is that of the Social Democrat. The most popular ideas are those pushed by the Social Democrats.

Inequality And Climate Change Are Existential: A Blueprint For Survival

The New Democrat claimed to have moved to "the center," wherever that was, whatever latitude and longitude. The Social Democrat has a strong, uncompromising focus on human capital and the environment, is unapologetic about tackling inequality. But the Social Democrat also must have an energized sense of the role of tech entrepreneurship in the solutions of tomorrow. In that sense, the Social Democrat occupies the revitalized center. The Social Democrat is not giving a leftward lurch to the party and abandoning all hopes of victory.

Inequality And Climate Change Are Existential: A Blueprint For Survival

The Universal Basic Income that Andrew Yang is talking about only truly works the way it is supposed to work when new technology has given the economy massive increases in productivity. In one projection the US starts seeing annual growth rates of 50%. You can not talk down those tech entrepreneurs. They are part of the solution.

Inequality And Climate Change Are Existential: A Blueprint For Survival

The wealth tax that Elizabeth Warren is talking about is the saving grace for capitalism. Inequality is as much an existential threat as climate change. 


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Andrew Yang: Universal Basic Income, Elizabeth Warren: Wealth Tax

Andrew Yang is not a one trick pony, although he almost exclusively talks about the Universal Basic Income. His website has the richest policy proposals of any candidate with the possible exception of Elizabeth Warren. Elizabeth Warren's central idea is the idea of the wealth tax. I fully support. These are two ideas that can not lose, no matter if Andrew Yang and Elizabeth Warren win or not.

That is why the presidential campaign is so important. That is why the debates are so important. These two ideas have to be hammered into the political discourse.

Bernie Sanders, similarly, talks about Medicare For All. Many candidates do. But Bernie has been the most vocal. He was talking about it also in 2016. This is also an idea I like. Obviously, three people are not going to win. There will eventually be only one winner.

But all three of these ideas must win.

And there is the Green New Deal. It is not a specific idea right now. It is more of a conversation. It is more the outlines of a paradigm. And the face associated with it is not even running, can't run. But it is the biggest idea of all. And it also must win. All four ideas must win.

The one who will win will win. But the campaign has to be conducted in such a respectful way that all the candidates together build a platform that includes these wonderful ideas.




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Trade War: Intellectual Property

It is easy to see why the US gets so passionate about IP, but it is not the “existential” issue so many Americans claim. IP may be central to the US’ view of itself as the world’s technology leader – but it is also a massive earner. The US may have a miserable trade deficit in manufactures, but it has a handsome surplus in services exports, and right up there is the money it earns from royalties in payment for IP rights....... In 2017, this amounted to US$128 billion – second only to earnings from tourism and education services (US$211 billion), and well ahead of financial services (US$109 billion) and transport services (US$89 billion). A tighter deal on IP protections would mean a significant boost to services exports........ Flying in the face of claims that China abuses IP rights is the reality that China pays more to the US in royalties than any other economy. Wanting to sell more IP to China is, just like wanting to sell more beef or soya, a perfectly reasonable aspiration. So is selling legal services – and there can be no bigger beneficiary of negotiating IP arrangements than the US’ army of IP lawyers. ...... China is not wrong to try to keep the cost of royalty payments at a manageable level, so there is a perfectly reasonable negotiation to be had over rules for royalty payments. There is no place for electorally pungent claims that China is in some way “stealing its way up the economic ladder”, as Christopher Wray at the FBI puts it....... The relative market calm suggests that no one believes this breakdown will not be resolved.
No trade deal? Why China should walk away and hit back at the US, in the sectors where it really hurts

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Trade War Endgame: Other Scenarios

Scenario 1: The tariffs the US and China have placed on each other becomes permanent. China's currency devaluation holds. That pushes both economies to move away from each other and export and import much more to and from other countries.

Scenario 2: But scenario one is too much like saying global warming means temperatures might get warmer by a degree but everything else will stay the same. Not true. Scenario one is an attack on the very foundation of world trade. These tectonic shifts are bound to have impacts on the financial markets, almost all of it negative. The dollar will get expensive. Investing in the US, thus, will be disincentivized. 

Scenario 3: The two powers don't stop at the tariff increases. They actively attack each other. For example, the US tries to "destroy" Huawei. China responds in kind. And all this action will sit on top of hundreds of millions of consumers in the US now paying higher prices on pretty much everything. They might not understand geopolitics. But everybody understands grocery bills. The Trump tariffs will be seen as a massive tax on the lower middle class and the middle class in America. 

Scenario 4: A bi-polarization of the world and a new Cold War with a few hot flashpoints. This is an extreme scenario. And I don't think very likely. To suggest that the world might end up here is to not understand how complex the supply chains of the world are today. But one does have to make room for irrationality and incompetence. 

The most likely scenario, though, is scenario zero. Nothing happens and Trump claims "victory." People will get tired of winning. Next month Trump might make "the biggest deal in history."


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Trade War Endgame Scenarios: Look At Canada, And North Korea For Hints

Trump creates a crisis where there was none. The trade deal with Canada costs "us billions and billions of dollars and must be torn apart," or something along those lines. People get worried. Because, I guess, you do need trade. Jobs are at stake. In this day and age, how do you walk away from trade with your neighbor? Step two is he sends the top negotiator in the world to the negotiating table. As per Donald Trump, that would be him. Step three is, you end up with more or less the same deal that you had before, with slight tweaks. He claims victory. And that is the key point. That "victory" is important to him. There was no victory. You negotiated more or less the same deal that was in place before. What victory!

That was also the playbook on North Korea. He creates a crisis. He goes to the UN and threatens to wipe out North Korea from the map of the earth. There are newspaper articles about how long it might take a North Korean missile to hit Los Angeles. Step two is he sends the top negotiator in the world to the negotiating table. As per Donald Trump, that would be him. You get the drama in Hanoi. Nothing happens. He claims victory. And that is the key point. That "victory" is important to him. There was no victory. The whole world could see in real time there was no victory. No, North Korea did not agree to denuclearize. The whole world saw that part on live television. But then the difference between a bullshitter and a liar is a liar knows he is lying.

If this is the playbook also on China, and one is hard pressed to think any other playbook is even available, then we are in the first phase. We are in crisis. There might be a 2008 repeat if this goes too far. We might see a prolonged recession. Prices might shoot up. Entire sectors of the economy might get wiped out. Rember the missile hitting Los Angeles? We are in that territory right now. But do not be surprised if Donald Trump pulls a rabbit out of the hat when he meets Xi Jinping next month in Japan. You never know. We might have a "victory" on our hands.

This is what international relations given the reality TV spin look like. There is drama. There might not be suspense. But there is drama.





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Tuesday, May 21, 2019

Biden's Lead Is Name Recognition

Biden announced and quickly shot to the top. I believe his lead is name recognition. It is called being on national television for eight long years. I expect the lead to quickly come down after a few debates. He might still be among the top five for a few months. But Iowa and New Hampshire might winnow him out. In short, I don't expect Biden to become the nominee.

2020 is the year of the Social Democrat. The New Democrat had two and a half decades. That run is over. There is no middle of the road way to tackle climate change. There is no middle of the road method to tackle health care for all.

But the Social Democrat will only offer a losing proposition if he/she does not make it absolutely clear they expect tech entrepreneurship and entrepreneurship, in general, to play a central role in the biggest problems today. In fact, their very positions on health and education have to be sold in market terms. They are investments in human capital. They are about putting human capital front and center.

I have no idea who will be the nominee. It is a good thing there are many good names in the fray. Bernie Sanders and Elizabeth Warren are the two seniors. They have done much to shift the spectrum of political choices. Bernie is good at emphasizing a few key points. Whereas Warren keeps churning out policy paper after policy paper like the professor she is.

Kamala Harris has great symbolism. She is surprisingly skillful. Her cheerfulness masks her pragmatism. She has taken clear positions. So many women are running. This might be the first election when a woman running is not news. I hope this is the new normal.

Andrew Yang and Pete Buttigieg are the two truly fresh faces. They are the wonks. Andrew Yang is famous for his Universal Basic Income idea, but his website is full of ideas on every possible policy topic. There is a part of me that even wants the two on a ticket.

I see Beto running for Texas Governor and finally flipping that state.

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The US And The Chinese Economies Are Super Well-Connected

The US and the Chinese economies are super well-connected. It costs less to send a package from Shanghai to Los Angeles, than it does to send it from Los Angeles to any other destination in the US, no matter how close. China is not some distant country.

Not only are the US and Chinese economies super well-connected, but the two are also super well-connected to the rest of the world. If the two escalate this trade war, the global economy itself suffers. Every country will be impacted to various degrees.

The US and the Chinese economies are not only super well-connected at the level of consumption. That is there. But that is only the surface of it. China exports raw material to the US that the Chinese manufacturers use to produce and export to China which some Chinese producers use to build even more complex goods which they then export to the US, among other places.

That is why when the trade war started, the Trump administration started jacking up the tariffs, first on some imports, then on more, then larger tariffs on even more imports. That gradual increase might have been as much in consideration of the trade talks as to test the resilience of the US economy itself. China, of course, retaliated in kind. But so far it has been theatrics. Soon the trade war is about to hit the average consumer in the US in the form of higher prices. People who by and large did not much gain from the Trump tax cuts are about to start paying more at their local stores. This is going to be widespread. The trade war is no longer some remote thing impacting farmers in Iowa.

But then there is Huawei. The US intends to hurt Chinese companies like Huawei. Ends up Huawei imports things like computer chips from some American companies. But then also ends up China is the source of something like 90% of the supply of rare earth metals that are do or die for the high tech industries. The US might block the chips. China might block those rare earth metals. You are looking at constipation scenarios in the global supply chains.

But then China has been the hub of low tech industries. It produces goods that go to the Walmarts of the world where the working class, the lower middle class, the middle class go shopping. Ends up those working class, the lower middle class, the middle class are by now emergent classes in most parts of the world.

The US is not about to get back its lost manufacturing base. But it is already seeing the industries of tomorrow all over the horizon. It is automation, not China. China is also losing manufacturing jobs to automation.   

Yes, free speech is an issue. Yes, mass surveillance is an issue. Yes, freedom of religion is an issue. But white supremacy is also an issue. At some level, the trade war is white supremacist thinking taken from the Mexican border to the ports of China.

The FBI is on public record having asked Facebook and Apple for information on individuals. One thing Wikileaks revealed is the US spied on the German Chancellor. I don't doubt the US and Chinese intelligence agencies do their best to snoop in.

Cybersecurity is a major issue. But it is for the tech companies of the world to come together and set standards. It is for the governments of the world to make the policy moves.

5G is going to be a game changer. Too bad the two leading economies cannot get their act together.



Trade War Endgame Scenarios
US China Trade War: A Meeting Of The Hot And Cold Fronts
New Twist In The Trade War: China Devalues Its Currency

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Trade War Endgame Scenarios






Looks like the two sides have been talking past each other in the so-called trade talks. Each side has been stating its positions, again and again, basically repeating what they said earlier. Another round of talks might not ameliorate that situation. But by now the fallouts have become serious for the two economies. Widespread damage will soon be seen. Those on the US side will be much more visible.

Donald Trump thinks he is this amazing dealmaker. That is his whole thing. You create a crisis where there was none. Then you negotiate and try and get a better deal. Well, if that is the script, does it work? There are liars, and there are bullshitters. A liar knows he is lying. A bullshitter doesn't. It is hard to negotiate with a bullshitter.

Do I buy that he is doing this for the cause of democracy? Look at the track record. He is the biggest fan of dictators around the world. He loves that dude in the Phillippines, an elected dictator. The guy is a white supremacist. He is not a democrat. He has fascist tendencies. He talks about "the press," the way presidents in the US never did before him. He wants his supporters to get physical. Donald Trump Brown Shirts.

No, I don't believe this trade war is about democracy.

I fear the US economy is going to end up like one of his casinos. Worse, the contagion might be global. Donald Trump is America's Brexit. British hubris decided to take the plunge where British interests might not have.

These trade wars are casino wars. Trump's "negotiations" with the North Korean dude should work as a warning sign. We all know how unprepared Trump was for that. He came back saying he was so charming North Korea agreed to denuclearize. Not true. The Bullshitter-In-Chief did what he does best: he bullshitted. Only now he is talking to China. China finds itself negotiating with vapor.

A fascist fantasizes for a Great Depression.

A trade war has two losing sides. So, of course, China will lose.



US China Trade War: A Meeting Of The Hot And Cold Fronts
New Twist In The Trade War: China Devalues Its Currency
5G And The Trade War
The US China Trade War Escalation Is Primarily Political
The US China Tension: Creative Or Destructive?

Huawei is said to have been stockpiling US components for months in preparation for such a situation and even has an alternative operating system on the shelf.
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India And Reforms



When Indira Gandhi nationalized banks across India, she called it reforms. When Ronald Reagan orchestrated large scale privatizations across sectors of the US economy, he called it reforms. I guess you want to be seen reforming.

In Germany, they have this concept of lifelong employment. You go to work for a company early in your life, and you stay with that company for much of your working life. And Germany is a top performing economy. It beats the US economy by a wider margin than does the Chinese economy.

There are people who argue for US-style hire and fire policies in India. They call it labor reform. That hire and fire can work. But in India, for many people, or maybe most, if you get fired, you face a certain financial cliff. You might not be able to go grocery shopping in a week. In such a scenario hire and fire might be a catastrophe.

In Japan also they have this concept of lifelong employment. I am not arguing for it. All I am saying is there is no magic pill. Too many people argue if only India were to put in place easy hire and fire, the economy would rocket past the Chinese economy. Not true. Stop looking for magic pills.

A great Indian example was Indian Railways when Laloo Yadav was Railway Minister. Indian Railways is state owned. It is the largest employer in the world. And rule number one for Laloo was, do not fire anyone as we attempt to increase our revenues and profits. Rule number two was, do not raise railway ticket prices. Because "I am a man of the people." Within those two parameters, Laloo managed to usher bumper profits. He managed to slash prices on railway tickets.

So it is not true state-owned companies are always a bad idea. When Modi was Chief Minister of Gujrat he did not nationalize a single state-owned company in his state. Instead, he granted each of them autonomy. The major thing he did was he brought political interference to a halt. They all became profitable.

State-owned companies can work. Private companies can work. Collect data. Assess data. Engage in evidence-based decision making. Do not blindly follow this or that ideology. The proof has to be in the pudding.

When Laloo took over Indian Railways that was in the red, the number one piece of advice was, fire a bunch of people. If you want to turn a profit, fire a bunch of people. Indian Railways is "bloated," he was told. But Laloo knew better. I can not fire people, Laloo said. "I am a man of the people."

He turned Indian Railways around.

Another buzz phrase is land reform. Basically, the idea is it should be much easier for industrialists to buy land. Maybe the idea does not work in India. You are mostly talking about small farmers. That small piece of land is their entire world. They depend on it for their basic food. It is not that they are against industrialization, but what will they eat the day after?

Land pooling is a better idea. You turn those landowners into shareholders in your proposed company. Why will you not look at alternate ideas like these? Chandrababu Naidu successfully implemented that idea as he started work on his dream city Amaravati. And the farmers who participated are happy. Akhilesh Yadav used something similar as he acquired land for the Delhi Lucknow expressway.

The very phrase land acquisition is problematic. It sounds like robbery. Land pooling is a friendlier phrase.






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Monday, May 20, 2019

US China Trade War: A Meeting Of The Hot And Cold Fronts

At some level, it feels like the current US-China trade war was inevitable. It would have happened no matter who had been president. It is as if a hot front and a cold front that were moving towards each other finally met. It has been a tectonic shift perhaps, and not the whim of a whimsical president.

Donald Trump ran for president as a white supremacist. A white supremacist is not attempting to be fair. He is attempting to establish or retain supremacy, or hegemony. The migrant on the Mexican border might not have the power. But China is a similar size economy. White supremacist thinking, meet China!

It is true the US has lost a big chunk of its manufacturing base. But then there was a time when the US also lost a large chunk of its agricultural jobs. Absent sound analysis and a vision for a transition, the blame game fills the vacuum. China did it! Something fundamental is happening. The solution lies along the lines of what Andrew Yang and Bernie Sanders are suggesting. You have to give everyone a Universal Basic Income. Because, if anything, automation is about to accelerate. Retraining is not going to do it. You have to make health care universal. You have to invest in human capital. But all this is Spanish to Donald Trump. He started by blaming Mexican immigrants and ended up at China. Well, looks like China is no pushover.

If the US is running trade deficits not only with China but also Germany, maybe one has to point out that Germany is a democracy like the US, it is a market economy like the US. What's going on? The US trade deficit with Germany is wider.

Almost 160 million people from outside visited China last year. And over 120 million Chinese went abroad and chose to come back. That proves China is not North Korea. On the other hand, obviously, China lacks free speech. They say you are free to speak your mind on most things, just don't challenge the political monopoly of the Chinese Communist Party.

Every surveillance opportunity modern technology throws in the air, the Chinese police jumps at it. There is no counterbalancing force to question that tendency.

There are reports that close to a million ethnic Muslims in the west of China might have been detained for "retraining" purposes. These are likely not vocational training camps. At vocational training camps, you are free to move in and out. China goes unchallenged when it does something like that. Challenging China on trade is perhaps an indirect way of challenging China on the ethnic Muslims. At some point it was inevitable it was going to happen.

The South China Sea is a sore spot. That is where China's exports and imports pass through. And so it is understandable China is paranoid about the South China Sea. But that is why you cooperate on freedom of navigation. But China talks like the South China Sea were a Chinese province. Talk about clashing worldviews. This tension could have been contained in the South China Sea for only so long. At some point, it was going to spill over into something like trade. And now we have it.

And it is also just competition. The two leading economies are competing. Instead of killing the World Trade Organization, they could help reimagine it. Trump's white supremacist fantasy to bark at China to scare the smaller trade partners into submission is not healthy for world trade. And he might not even be around in 2021. The word is, winter is coming. The US is expected to see a recession by 2020. Recessions are not known for reelections.

New Twist In The Trade War: China Devalues Its Currency


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