Our So-Called Foreign Policy: U.S. Companies Keep Feeding the China Tech Beast

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AI, artificial intelligence, Bloomberg.com, China, hacking, Karen Weise, Microsoft, national security, Our So-Called Foreign Policy, Paul Mozur, technology, technology transfer, The New York Times, Trump

Wow! This was quite the revealing – and disturbing – nugget buried in a recent New York Times article about American tech companies’ trials and tribulations in China! According to reporters Paul Mozur and Karen Weise, Microsoft’s “long-established research and development center has turned out valuable products and launched the careers of a generation of artificial-intelligence experts who have started important new companies in China.”

Mozur and Weise mentioned this Microsoft activity in order to make the important point that even companies, like the Seattle software giant, that have bent over backwards to remain viable in China by keeping Beijing happy in various ways seem to be fighting a losing battle. For even these firms are falling victim to China’s persistent desire to replace them in the country’s huge market with Chinese rivals.

But the reference to Microsoft’s artificial intelligence operations could well matter more to the United States because it underscores a point I made several years ago in a Bloomberg.com op-ed that bears on American national security: For decades, U.S. tech companies have been transferring to Chinese entities cutting edge knowhow that has greatly strengthened Beijing’s ability to endanger key American interests. It’s the price they need to pay to keep playing in the Chinese market. But whatever the commercial justification, and whether these transfers are voluntary, coerced, or somewhere in between (including the training of China’s tech workforce), they’ve too long been neglected by American policymakers.

My Bloomberg piece focused on technologies related to cyberhacking – where transfers ironically were coming back to bite the U.S. tech firms themselves. Since then, in several posts for RealityChek, I’ve covered tech transfer that’s handing China more conventional advanced defense-related knowhow. (See, e.g., here and here.)

But artificial intelligence-related operations push the threat to an entirely new level. For these capabilities will likely be the biggest game-changers in national security for decades, and Washington is already so alarmed by the progress China has made that many specialists worry that Beijing could soon forge ahead. Nearly as troubling: The more such tech American companies keep handing over to the Chinese, the closer China gets to self-sufficiency – the point at which it won’t need American assistance anymore.

The Trump administration rightly keeps calling attention to China’s growing technological prowess and the resulting dangers to the United States, and even many long-time supporters of the reckless pre-Trump China engagement policies are starting to agree.

But tariffs to punish predatory Chinese policies aimed at building tech dominance, and curbs on Chinese tech investments in the U.S. economy are necessary, not sufficient responses. The above linked Financial Times article indicates the administration now recognizes need to staunch the flow of advanced knowhow to China by American companies. But every minute new curbs are delayed, the United States will keep feeding the beast.

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(What’s Left of) Our Economy: A Pundit’s China Policy Delusions

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2016 election, artificial intelligence, big government, China, Holman Jenkins, incomes, Jobs, Jr., national security, offshoring, tech transfer, The Wall Street Journal, Trade, Trump, Welfare State, {What's Left of) Our Economy

Holman Jenkins, Jr. did make one important and useful point in his Wall Street Journal column yesterday on U.S.-China trade policy (which puts him far ahead of most of the punditocracy): He’s absolutely right to call on President Trump to “lay out for the American people just how thoroughly [he] intends to shake up the hugely important U.S.-China economic relationship.”

For weeks, I’ve offered Mr. Trump exactly the same advice – to explain his China end game comprehensively to the American people in a prime-time Oval Office address (though unlike the free trade-obsessed Jenkins, I believe such a speech would boost public support for the Trump China agenda by describing the compelling long-term stakes of what I view as an effort to disengage economically from the PRC – and why they’re more than worth short-term sacrifices).

As for the rest of his column? It’s useful only for reminding Americans how internally contradictory and dangerous (not to mention downright ditzy) the case remains for retaining most of the pre-Trump China policy status quo. Just a few key examples:

>Jenkins insists that rather than pursue a “shakeup” that would amount to “following [Chinese leader] Xi Jinping down the path of seeking foreign scapegoats for failure and heavy-handed intervention at home,” the United States should be “building up our military and alliances.”

But what would be the point of sending more troops and equipment to East Asia while Washington returned to trade policies that have transferred literally trillions of dollars to the Chinese state and helped fuel a rapid military buildup, and investment policies that have ignored the massive export of advanced defense-related knowhow to Chinese entities, and for too long overlooked Chinese acquisitions of similar assets in the American economy?

>According to Jenkins, “China’s avid pursuit of artificial intelligence” shouldn’t worry Western experts because it’s “likely to be employed mainly in destroying the creativity and initiative of its own people.” But capabilities even remotely that massive won’t threaten any major U.S. strategic interests?

>In Jenkins’ view, central to strengthening the U.S. economy sufficiently to meet the Chinese threats he doesn’t laugh off is “dealing with the fiscal challenge of our welfare state.” But good luck with the politics of shrinking social safety nets under an American approach to globalization that kept sending valuable opportunities to earn middle- and even living-wage working- class incomes to China and other penny-wage and regulation-free production and export platforms.

Jenkins isn’t entirely wrong in his overall conclusion that “American prosperity is still made at home.” But the impact of purely domestic reforms is bound to be seriously diluted after decades of Jenkins and his crowd at the Journal (along with most of the rest of the nation’s punditocracy, the pre-Trump Republican party, and the Clinton-ite Democrats) focusing like laser beams on building a truly globalized economy.

And finally – about that headline calling for a “vote on a China Cold War”  (even though the article’s body only glancingly mentions the point): During his successful White House run, President Trump made no secret of his determination to overhaul America’s China trade policy. From the standpoint of democratic legitimacy, the Trump 2016 election victory was all the mandate his administration’s China policy measures need.

Our So-Called Foreign Policy: Now the Establishment Media is Praising the Perps on China Policy

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artificial intelligence, Barack Obama, China, Eric Schmidt, Evan Osnos, Financial Times, Google, Jake Sullivan, John Reed, Our So-Called Foreign Policy, tech transfer, The New Yorker, Tom Mitchell, Trump

As RealityChek‘s slogan surely makes painfully clear, the interlocking worlds of politics and policy and media are so shot through with outright hogwash that producing it now looks like standard operating procedure. But every now and then, I come across items that, even by the debased standards of our time (which, contrary to establishment conventional wisdom, loooong predated the Trump era) belong in a class by themselves. And in the last week alone, that category has grown by two statements.

The first came in a January 3 Financial Times report on China’s growing power and influence in Asia and around the world. Authors Tom Mitchell and John Reed seemed bent on making the case that President Trump’s policies and statements had created or threatened to create vacuums around the world that Beijing is (brilliantly) moving to fill – an allegation that’s fact free but now so commonplace that it’s no longer newsworthy or comment-worthy.

Here’s what is – and jaw-droppingly so: letting a former senior Obama administration foreign policy adviser get away with making a statement like this: “There is a sense in Asia that Trump’s election may portend a dramatic power shift.”

The aide, Jake Sullivan, was not only a foreign policy adviser to Hillary Clinton’s presidential campaign and to Obama’s Vice President Joe Biden. He was the head of the State Department’s policy planning staff under Obama. So surely he had something of a hand in making U.S. policy toward China during the Obama years.

And what were the hallmarks of this policy? Doing nothing of consequence to halt the predatory Chinese trade policies that helped Beijing stockpile literally trillions in hard currency that have come in awfully handy for financing a major military buildup and government-sponsored research into advanced defense-related technologies. Doing nothing of consequence to stop China from stealing this knowhow from American companies, or to stop U.S. tech firms from handing it over voluntarily, in exchange for favorable treatment by Beijing. Doing nothing of consequence to stop China’s expansionism in the South China Sea. And doing nothing of consequence to halt or even slow North Korea’s drive to develop state-of-the-art nuclear weapons – including nuclear-capable missiles capable of striking American territory, and thereby of undermining Washington’s commitments to the defense of major allies like South Korea and even Japan.

And Sullivan has the nerve to insinuate that say that Trump’s election is responsible for tilting power balances in China’s favor? That’s like Neville Chamberlain blaming Winston Churchill for giving Nazi Germany the confidence to invade Poland.

The second example concerns the aforementioned U.S. corporate tech transfer to China, and comes from a ballyhooed January 8 New Yorker piece devoted to the same mission (#amazing!) as the Financial Times piece – blaming Mr. Trump for giving away the global store to China.

Catching my attention in particular was author Evan Osnos’ decision to quote the former chairman of Google follow-on company Eric Schmidt’s warning that (in Osnos’ words) “reductions in the funding of basic-science research will help China overtake the U.S. in artificial intelligence (AI) within a decade.” Osnos also let Schmidt speak for himself: By 2030, they will dominate the industries of A.I.”

I have no problem with Schmidt’s opposition to the funding cuts. In fact, I strongly agree. I also take especially seriously his prediction about China’s rapid tech progress. Why? Because under Schmidt, Google was a prime China tech enabler. As I wrote in a Bloomberg View column in 2012, Google products have helped China perfect its (highly effective) internet censorship programs, and its “China University Relations” program had by then established relationships with no less than 15 Chinese institutions. In addition, in 2005, it set up its own research and development center in Beijing.

In other words, Google (and most of the rest of Silicon Valley) has been actively helping China develop the tech capabilities about which its former head is now ostensibly worried.

But it gets much better: Somehow, Schmidt forgot to tell Osnos – and somehow the latter’s own wide-ranging reporting in China missed the fact that – Google has just decided to set up another research facility in China. And its focus? Artificial intelligence. According to its director,

“Besides publishing its own work, the Google AI China Center will also support the AI research community by funding and sponsoring AI conferences and workshops, and working closely with the vibrant Chinese AI research community.”

You’ve heard of “blame the victim?” These two articles could reveal a growing media tendency to “praise the perp.” And evidently if the result is to exalt the establishment, and discredit its critics (especially Trump-ian), so much the better.

Our So-Called Foreign Policy: A Narrow-Minded Wake-Up Call on China’s Tech Drive

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artificial intelligence, Barack Obama, budget, China, mercantilism, National Science Foundation, Our So-Called Foreign Policy, research and development, technology, technology transfer, Trade, trade surpluses, Trump

“#SMH” (Shaking My Head) is one of my favorite Twitter hashtags, and it’s the perfect reaction to a new post on FOREIGNPOLICY.com on the growing technological challenge being posed to the United States by China, and on its frightening national security implications. The post has me shaking my head, and should have you shaking yours, because for all the useful information it contains on this critical subject, it completely misses the much bigger, much more important picture. And it misses it because the authors are so transparently determined to lionize former President Obama’s record in this regard, and vilify President Trump’s – though few of the facts warrant this conclusion.

The post is useful mainly for calling attention to China’s intensifying effort to establish global superiority in artificial intelligence, and to the Trump administration’s budget policies, which look oblivious to China’s efforts because they don’t provide adequate resources for federal research efforts capable of keeping the United States ahead.

I say “look” because the budget situation may not be as dire as strongly suggested by the authors. Specifically, it’s true that the administration has proposed cutting funding for the National Science Foundation’s artificial intelligence programs by 10 percent. At the same time, as made clear by the source they relied on, “the proposed budget does call for more spending on defense research and some supercomputing.”

Much more misleading is the post’s portrayal of the Obama administration as nothing less than Churchillian in sounding the tocsin. After all, the Obama reports the authors cite as evidence of his foresight on the subject came out at the very end of his presidency. At least as important, they gloss over major non-budgetary developments crucial to understanding China’s progress.

As they themselves admit, for instance, Chinese tech companies have established presences in Silicon Valley because they believe that “by rotating Chinese staff to Silicon Valley and American staff to Chinese campuses, they can accelerate the timeline for reaching parity with the United States in AI technology and depth of talent.” Under whose administration do the authors believe this practice started? And why do they think the Chinese were confident they were so free to proceed?

Also completely ignored: Throughout his presidency, Mr. Obama did absolutely nothing as American companies continued their longstanding efforts to transfer advanced technologies to Chinese partners voluntarily, or were forced to share this knowhow due to Chinese threats to shut them out of its market. Nor did he move to prevent these firms from investing in Chinese companies working on tech products and services with clear defense implications, or to help them cope with Beijing’s demands that they pony up or else.

And let’s not forget: The Obama administration made only the most token efforts to combat the predatory Chinese practices that enabled Beijing to amass immense trade surpluses with the United States; therefore to further fuel the growth of its market and make it that much more difficult for American companies to resist tech extortion demands; and to finance its own multi-billion technology development efforts with these handsome trade profits. Indeed, Mr. Obama staunchly opposed Congressional efforts to punish China for its most important mercantile policy:  currency manipulation.  

So I share the authors’ view that federal research and development efforts have been crucial to establishing America’s intertwined global technology and military leadership, and their hope that President Trump will reject the conservative anti-government dogma that justifies virtually every type of budget cut outside traditional defense or law enforcement spending. But the idea that America’s approach to the Chinese tech challenged was remotely up to snuff before Mr. Trump’s election not only fails the test of historical accuracy. It has blinded them to all the other policy changes needed to ensure that the United States stays Number One.

(What’s Left of) Our Economy: Will Tech Kill Too Many Jobs?

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Alan Turing, artificial intelligence, automation, Financial Times, Gillian Tett, Jobs, Paul Wallace, Reuters, robots, tech, technology, Turing Test, work, {What's Left of) Our Economy

One of the biggest issues facing our whole human species is one that I have (uncharacteristically!) written on little: whether or not the latest and future generations of technology will kill off way more jobs than they will create. One big reason: I’m still trying to bone up on this question, and I’m still very much in the learning phase about the future of work – and especially work that will pay a living wage..

But despite my limited knowledge, I’m pretty sure that two recent articles on the subject are especially valuable for shedding light on dimensions that demand a lot more attention.

The first is a recent column on the Reuters site presenting a case for optimism that the new robots and artificial intelligence will turn out to be big net new jobs creators. Author Paul Wallace, a former editor at The Economist magazine, definitely makes some strong points. For example, he argues that too much of the research underlying the case for pessimism wrongly assumes that all positions in sectors considered highly vulnerable are equally vulnerable.

Indeed, Wallace spotlights a study finding that a focus on tasks rather than occupations can dramatically reduce the numbers of workers at risk – at least, it seems, for the time being. One big reason? Many seemingly vulnerable positions allegedly involve “crucial social interactions” that no hardware or software or combination (on the horizon?) can replicate.

Yet those possible qualifications I just mentioned point to one major potential vulnerability in Wallace’s argument – and in the study he cites. Both seem to assume that the technologies in question won’t advance much more – and possibly that they will never, or not for decades, reach the stage where they can interface adequately with human customers or colleagues. You don’t need to be a science fiction buff to understand the implausibility of that scenario.

In fact, recall that pioneering computer scientist Alan Turing displayed unmistakable confidence that such progress was at least theoretically possible. Why else would he have developed his famous test of whether machines could be genuinely intelligent, and even, by extension, conscious?

“Turing put forward the idea of an ‘imitation game’, in which a human being and a computer would be interrogated under conditions where the interrogator would not know which was which, the communication being entirely by textual messages. Turing argued that if the interrogator could not distinguish them by questioning, then it would be unreasonable not to call the computer intelligent, because we judge other people’s intelligence from external observation in just this way.”

The article also raises big questions about the quality of the jobs that Wallace (and other optimists?) are confident won’t be robot-ized out of existence. Some definitely seem desirable – like “designing smartphone apps that have only just sprung into existence” – although I still wonder whether sooner rather than later apps won’t be designing themselves much more efficiently.

But the other examples of safe jobs sound a lot like dead-end jobs – e.g., restaurant jobs, personal trainer positions, and tour guides. And I continue to struggle understanding why they’re thought to be especially safe, either, over any meaningful stretch of time.

Gillian Tett, the managing editor for U.S. news at the Financial Times, seems fairly upbeat about employment and automation, too, and also cites research purporting to undercut techno-alarmism. Like Wallace’s examples, it’s worth considering. Her summary of the message: “[P]eople are also working with robots in new roles.” But also like Wallace’s examples, it raises the question, “For how much longer?”

Much stronger is this point made by Tett: “[T]here is a burning need for policymakers to obtain much better data on what is really happening in the American workplace. Anthropological studies are small scale, while the macro-level data are surprisingly weak, partly because the Bureau of Labor Statistics tends to collect data through traditional channels.”

My contacts with the Trump transition team convince me that upgrading American government statistics bearing on trade and offshoring are due for a big rethink. The clearly surging importance of the latest actual and potential labor-saving technologies means that their actual and likely impact on the world of work demand the same treatment.

(What’s Left of) Our Economy: Be Careful What You Wish For on Labor Day

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AI, artificial intelligence, executive compensation, Jobs, Labor Day, productive investment, robotics, stock buybacks, technology, workers, {What's Left of) Our Economy

What better time than the run-up to Labor Day to lament the state of the American job market – including not just still-disturbingly high rates of un- & underemployment, but all the subpar indicators on the Federal Reserve dashboard? And what better time to blame corporate America’s recent splurge on unproductive spending of all kinds for the sorry state of so much of the nation’s workforce?

But here’s the funny (not “funny ha-ha”) thing about it. There does seem to be little question that unproductive uses of corporate resources are abundant. Two columns this week – from Harold Meyerson in The Washington Post and Paul Roberts in The Los Angeles Times — show that convincingly. The percentage of companies’ profits devoted to financing buybacks of shares of their own stock is especially outrageous, given how heavily executive compensation these days depends on stock prices.

But it could be seriously misguided to assume, in Roberts’ words, that a major answer, and probably the major answer, to U.S. workers’ woes is to “restore a broader sense of the corporation as a social citizen” and thereby encourage business to view “workers, communities and other stakeholders” as assets much more worthy of investing in.

I’m not doubting that more corporate spending on plant, equipment, technology, and worker training would expand employment. But given the continued rise of labor-saving technologies, it’s far from clear that such behavior would expand high wage employment by anything close to leaps and bounds – at least in the manufacturing and tech companies that Meyerson and Roberts obviously are thinking of first and foremost.

In fact, for what it’s worth, the academic and policy classes in America seem far more worried today that the current generation of business equipment and software, characterized by advanced robotics and artificial intelligence, will break the historic pattern and wind up displacing on net many more good jobs than it creates.

So let’s definitely use Labor Day as an opportunity to spotlight the need to make America’s economy much less of a casino focused tightly on enriching the already wealthy, and much more of an engine of healthy growth and rising living standards for the rest of the nation. But let’s not forget that, with so many massive demographic, social, and cultural as well as technological waves breaking over the economy, not to mention the (often but not completely policy-driven) globalization of production and investment, bashing the usual villains is bound to yield dramatically diminishing returns.

(What’s Left of) Our Economy: Media Misses Jackson Hole Trade and Jobs Angle

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artificial intelligence, automation, Federal Reserve, Jackson Hole, Jobs, machines, Mainstream Media, middle skill, polarization, robotics, Trade, wages, Yellen, {What's Left of) Our Economy

It’s been completely taboo in the national economic policy establishment to acknowledge that the freest possible trade flows might not always benefit the U.S. or global economies over significant stretches of time – so maybe it represents progress that one paper commissioned for the big Federal Reserve Jackson Hole conference mentioned the possibility prominently. But when you look at Fed chair Janet Yellen’s keynote speech to a gathering focused on employment issues, and in particular to the Mainstream Media’s coverage of the study, it’s clear that the progress has been minimal.

At least if Yellen’s treatment of the subject was confined to a single mention, it departed from the conventional wisdom. Research, she observed “suggests that the decline in real unit labor costs may partly reflect secular factors that predate the recession, including changing patterns of production and international trade….” That’s anything but a ringing endorsement of Washington heading further down the trade liberalization road, as President Obama and Congress’ Republican leaders seem determined to do with their pursuit of a Trans-Pacific Partnership agreement in particular.

The media’s treatment of MIT economist David Autor’s study of forces shaping labor markets in recent decades ignored the subject even more studiously. It’s true that Autor’s subject was the impact of technological change. It’s also true that his skepticism about the employment effects of recent advances in robotics and artificial intelligence contradicted the reemerging conventional wisdom in a newsworthy way. But what virtually no reporters told their readers was why Autor was skeptical that the latest stage in automation deserved so much blame in particular for destroying middle-skill American jobs, and for leaving labor markets polarized between very high-wage and –skill jobs and very low-wage and-skill positions.

As he stated in his conclusion, these developments seem “more closely associated with two other macroeconomic events. A first is the bursting of the ‘dot‑com’ bubble, followed by the collapse of the housing market and the ensuing financial crisis, both of which curtailed investment and innovative activity. A second is the employment dislocations in the U.S. labor market brought about by rapid globalization, particularly the sharp rise of import penetration from China following its accession to the World Trade Organization in 2001.”

Economists are often – rightly — accused of clinging to outmoded or just plain wrong theories long after the facts debunk them. But today’s Jackson Hole reporting makes clear that the Mainstream Media can be even more blindly dogmatic.