Im-Politic: A New, Promising but Still Flawed Form of Conservatism

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abortion, America First, China, Christianity, conservatism, crime, culture wars, Dobbs v. Jackson Women's Health Organization, education, family policy, foreign policy, identity politics, Im-Politic, Immigration, industrial policy, inflation, national conservatism, politics, religion, Roe vs. Wade, sovereignty, Supreme Court, Trade, wokeness

Don’t get me wrong. It’s not like I’m not grateful to have been invited to last week’s third National Conservatism Conference. The interest displayed by this crowd in economic policy ideas that depart dramatically from the right-of-center’s longstanding free market dogmatism was especially gratifying, and there was no shortage of thought-provoking and compelling speakers.

It’s just that my four days at the session left me unconvinced that National Conservatism as it presently seems to be constituted can create or contribute to a winning American political coalition. The main problem: Most of those spearheading the drive to establish National Conservatism as a major national force haven’t recognized which culture wars they should be fighting, and which they shouldn’t — and how this failure to discriminate is endangering other objectives that the movement (and others) rightly deem crucial.  In fact, unhappiness expressed to me by more than a few conference attendees with the stances on social and cultural issues taken by those putative leaders make me skeptical that it’s a movement yet to begin with – or can be if their vision prevails.

The economic dimension of national conservatism, at least judging by the presentations and hallway conversations, is not only politically astute; it’s substantively sound. All the speakers who addressed these issues – including such nationally prominent figures like Florida Governor Ron DeSantis, and the state’s Republican Senators Marco Rubio and Rick Scott (the event was held in Miami) supported smarter, more restrictive trade and other economic policies (especially toward China), reduced immigration inflows and genuine border security, and federal policies to promote strategically important industries and to ease economic pressures on the middle and working classes.

The same goes for National Conservatism’s critique of the overly, and often recklessly, adventurist foreign policies pursued by the mainstreams of both major political parties for decades.

But the conference organizers and another set of speakers seem wed to other goals and measures that are already backfiring among the American electorate and that, intriguingly, clash with other elements of their agenda. The most important by far were near-total opposition to abortion and a determination to tout the United States as a “Christian nation.”

The political folly of these priorities couldn’t be more obvious. As I’ve written, there’s long been a strong national consensus favoring the right to an abortion early-ish during a pregnancy and then favoring broad restrictions later on with significant exceptions (rape, incest, life of the mother, health of the mother). Indeed, that’s why comparable majorities have supported maintaining the abortion policy framework established by the Supreme Court’s 1973 Roe vs. Wade ruling – which was entirely consistent with that common sensical compromise. P.S. Contrary to the claims of the extreme pro-lifers on an off the Court, Roe gave states plenty of latitude to enact all manner of abortion curbs. (The other major misconception or falsehood surrounding Roe comes from the pro-choice movement: It never established an unfettered right to an abortion.)

If you’re skeptical, consider that the day that a draft of the Supreme Court’s eventual decision striking down Roe was leaked to the press (May 3), Republicans held a 4.1 percentage point lead in the RealClearPolitics.com average of polls gauging the public’s preference for control of Congress in November’s midterm elections. The latest figures show Democrats with a 1.1 percentage point lead in the so-called Generic Ballot.

It’s true that abortion isn’t the only reason, that the actual votes determining control of Congress aren’t cast nationally but state-by-state, and that Republicans hold enough built-in advantages in the Congressional map to keep their hopes of prevailing very much alive. But the polls also show that the Court’s Dobbs decision, the enactment of and efforts to enact near-abortion bans in Republican-run states that the ruling has permitted, and GOP talk of more such moves (including on the national level) is increasing Democrats’ interest in voting and boosting the party’s prospects. (See, e.g., here.) And not so coincidentally, Republican candidates and leaders all over the country are backing away from hard-line anti-abortion positions.

Adamant opposition to abortion in practically all circumstances also seems to clash violently with other stated National Conservative positions. For example, many speakers at the conference emphasized their support for individual liberty. But what about the right of women uninterested in becoming mothers to lead the lives they wish? Even if the unborn must indeed be deemed human life very early in pregnancies, should the wishes of those women count for absolutely nothing the minute they conceive – and simply because they failed to take adequate precautions, or because precautions taken failed? According to many, and possibly most, at the conference, the answer is “Yes.”

The repeated references to America as a Christian nation are just as problematic. For reasons like those suggested above, if that’s a rationale for insisting that U.S. policies conform with scriptural teachings (and Section 4 of this “Statement of Principles” by the movement’s leading lights certainly suggests this “Where a Christian majority exists” – i.e. in most of the country), that simply won’t wash with big majorities of voters. But the historical arguments advanced for this view don’t impress, either.

Sure, the Founding Fathers were Christians, and for the most part, observant Christians at that. But so what? The England they came from was overwhelmingly Christian. What else realistically could they be? For similar reasons, the Founders were ovewhelmingly white, too. Does that mean that America should be seen as a Caucasian nation?

And does Christian dogma really deserve much credit for the ideals that make up the American creed of freedom of expression and conscience and other major liberties for the individual; representative, accountable government; equal justice under the law; and the like? Clearly, in most of Christendom at the time (e.g., Russia, Spain, Germany) these notions were unknown or actively rejected. Instead, the great American experiment in self-government is rooted in specifically English thought and practice. And ironically, the major contribution made by Christianity that hasn’t been present outside Europe has been the faith’s willingness to leave big swathes of human life to secular institutions and authorities (as in Jesus’ admonition to “Render to Caesar the things that are Caesar’s, and to God the things that are God’s.”)

Even worse, precisely because they’re so unpopular as well as intellectually feeble, National Conservatism’s focus on these particular culture wars is weakening the ability of the entire conservative movement (except the libertarians) to fight effectively the culture wars that must be fought – specifically, over woke school public curricula; the metastasis of left-wing authoritarianism in so many major, powerful American institutions; and the related spread of divisive identity politics.

I have nothing but respect for those National Conservatives I met – and other Americans – to declare that they’re less concerned with winning politically than with remaining true to their consciences. But their version of the perfect is shaping up as a powerful enemy of the good and formula for defeat – especially if they wish to contend, as they clearly do, in an arena that rightly values the art of the possible.

That’s why I was so encouraged to find out that many of those I met at the National Conservatism Conference agreed that hard-line anti-abortion stances and pro-Christian nation preaching need to be dropped if any of National Conservatism’s other worthy causes are to be advanced.

For me, nothing could be clearer than the following as a recipe for political victory and national well-being: focusing tightly in an America First-type way on  confining U.S. foreign policy to advancing and protecting U.S. sovereignty and core security (especially against foes like China), on taming inflation and building sustainable prosperity; on securing the border; on fighting crime; on removing propaganda from public schools; on preserving a strong voice for parents in their children’s education; and on resisting the intolerant woke and rigid identity politics ideologies being pushed by our most powerful institutions.

National Conservatism as it exists now is close to being on board. If it can go the extra mile, show better judgment politically, and accept a more inclusive, more historically accurate view of “Americanism,” I’ll be happy to join its ranks.

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Making News: New Article on Why I Voted for Trump

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Big Tech, Black Lives Matter, censorship, China, Conservative Populism, conservatives, Democrats, economic nationalism, election 2020, entertainment, environment, freedom of expression, freedom of speech, George Floyd, Hollywood, Hunter Biden, Immigration, industrial policy, Joe Biden, Josh Hawley, journalism, Mainstream Media, Making News, Marco Rubio, police killings, regulation, Republicans, Robert Reich, Russia-Gate, sanctions, Silicon Valley, social media, supply chains, tariffs, taxes, technology, The National Interest, Trade, trade war, Trump, Truth and Reconciliation Commission, Ukraine, Wall Street, wokeness

I’m pleased to announce that The National Interest journal has just published a modified version of my recent RealityChek post explaining my support for President Trump’s reelection. Here’s the link.

The main differences? The new item is somewhat shorter, it abandons the first-person voice and, perhaps most important, adds some points to the conclusion.

Of course, keep checking in with RealityChek for news of upcoming media appearances and other developments.

Im-Politic: Why I Voted for Trump

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Big Tech, Black Lives Matter, censorship, China, Conservative Populism, conservatives, Democrats, economic nationalism, election 2020, entertainment, environment, free expression, freedom of speech, George Floyd, Hollywood, Hunter Biden, Immigration, impeachment, industrial policy, Joe Biden, Josh Hawley, journalism, Mainstream Media, Marco Rubio, police killings, Populism, progressives, regulations, Republicans, Robert Reich, Russia-Gate, sanctions, Silicon Valley, social media, supply chains, tariffs, taxes, technology, Trade, trade war, Trump, Truth and Reconciliation Commission, Ukraine Scandal, Wall Street, wokeness

Given what 2020 has been like for most of the world (although I personally have little cause for complaint), and especially Washington Post coverage of endless early voting lines throughout the Maryland surburbs of the District of Columbia, I was expecting to wait for hours in bad weather to cast my ballot for President Trump. Still, I was certain that Election Day circumstances would be a complete mess, so hitting the polling place this week seemed the least bad option.

Hence my amazement that the worst case didn’t pan out – and that in fact, I was able to kill two birds with one stone. My plan was to check out the situation, including parking, at the University of Maryland site closest to my home on my way to the supermarket. But the scene was so quiet that I seized the day, masked up, and was able to feed my paper ballot into the recording machine within about ten minutes.

My Trump vote won’t be surprising to any RealityChek regulars or others who have been in touch with on or off social media in recent years. Still, it seems appropriate to explain why, especially since I haven’t yet spelled out some of the most important reasons.

Of course, the President’s positions on trade (including a China challenge that extends to technology and national security) and immigration have loomed large in my thinking, as has Mr. Trump’s America First-oriented (however unevenly) approach to foreign policy. (For newbies, see all the posts here under “[What’s Left of] Our Economy,” and “Our So-Called Foreign Policy,” and various freelance articles that are easily found on-line.). The Biden nomination has only strengthened my convictions on all these fronts, and not solely or mainly because of charges that the former Vice President has been on Beijing’s payroll, via his family, for years.

As I’ve reported, for decades he’s been a strong supporter of bipartisan policies that have greatly enriched and therefore strengthened this increasingly aggressive thug-ocracy. It’s true that he’s proposed to bring back stateside supply chains for critical products, like healthcare and defense-related goods, and has danced around the issue of lifting the Trump tariffs. But the Silicon Valley and Wall Street tycoons who have opened their wallets so wide for him are staunchly opposed to anything remotely resembling a decoupling of the U.S. and Chinese economies and especially technology bases

Therefore, I can easily imagine Biden soon starting to ease up on sanctions against Chinese tech companies – largely in response to tech industry executives who are happy to clamor for subsidies to bolster national competitiveness, but who fear losing markets and the huge sunk costs of their investments in China. I can just as easily imagine a Biden administration freeing up bilateral trade again for numerous reasons: in exchange for an empty promise by Beijing to get serious about fighting climate change; for a deal that would help keep progressive Democrats in line; or for an equally empty pledge to dial back its aggression in East Asia; or as an incentive to China to launch a new round of comprehensive negotiations aimed at reductions or elimination of Chinese trade barriers that can’t possibly be adequately verified. And a major reversion to dangerous pre-Trump China-coddling can by no means be ruled out.

Today, however, I’d like to focus on three subjects I haven’t dealt with as much that have reinforced my political choice.

First, and related to my views on trade and immigration, it’s occurred to me for several years now that between the Trump measures in these fields, and his tax and regulatory cuts, that the President has hit upon a combination of policies that could both ensure improved national economic and technological competitiveness, and build the bipartisan political support needed to achieve these goals.

No one has been more surprised than me about this possibility – which may be why I’ve-hesitated to write about it. For years before the Trump Era, I viewed more realistic trade policies in particular as the key to ensuring that U.S.-based businesses – and manufacturers in particular – could contribute the needed growth and jobs to the economy overall even under stringent (but necessary) regulatory regimes for the environment, workplace safety, and the like by removing the need for these companies to compete with imports from countries that ignored all these concerns (including imports coming from U.S.-owned factories in cheap labor pollution havens like China and Mexico).

I still think that this approach would work. Moreover, it contains lots for folks on the Left to like. But the Trump administration has chosen a different economic policy mix – high tariffs, tax and regulatory relief for business, and immigration restrictions that have tightened the labor market. And the strength of the pre-CCP Virus economy – including low unemployment and wage growth for lower-income workers and minorities – attests to its success.

A Trump victory, as I see it, would result in a continuation of this approach. Even better, the President’s renewed political strength, buoyed by support from more economically forward-looking Republicans and conservatives like Senators Marco Rubio of Florida and Josh Hawley of Missouri, could bring needed additions to this approach – notably, more family-friendly tax and regulatory policies (including childcare expense breaks and more generous mandatory family leave), and more ambitious industrial policies that would work in tandem with tariffs and sanctions to beat back the China technology and national security threat.

Moreover, a big obstacle to this type of right-of-center (or centrist) conservative populism and economic nationalism would be removed – the President’s need throughout the last four years to support the stances of the conventional conservatives that are still numerous in Congress in order to ensure their support against impeachment efforts.

My second generally undisclosed (here) reason for voting Trump has to do with Democrats and other Trump opponents (although I’ve made this point repeatedly on Facebook to Never Trumper friends and others). Since Mr. Trump first announced his candidacy for the White House back in 2015, I’ve argued that Americans seeking to defeat him for whatever reason needed to come up with viable responses to the economic and social grievances that gave him a platform and a huge political base. Once he won the presidency, it became even more important for his adversaries to learn the right lessons.

Nothing could be clearer, however, than their refusal to get with a fundamentally new substantive program with nationally unifying appeal. As just indicated, conventional Republicans and conservatives capitalized on their role in impeachment politics to push their longstanding but ever more obsolete (given the President’s overwhelming popularity among Republican voters) quasi-libertarian agenda, at least on domestic policy.

As for Democrats and liberals, in conjunction with the outgoing Obama administration, the countless haters in the intelligence community and elsewhere in the permanent bureaucracy, and the establishment conservatives Mr. Trump needed to staff much of his administration, they concentrated on ousting an elected President they considered illegitimate, and wasted more than three precious years of the nation’s time. And when they weren’t pushing a series of charges that deserve the titles “Russia Hoax” and “Ukraine Hoax,” the Democrats and liberals were embracing ever more extreme Left stances as scornful of working class priorities as their defeated 2016 candidate’s description of many Trump voters as “deplorables.”

I see no reason to expect any of these factions to change if they defeat the President this time around. And this forecast leads me to my third and perhaps most important reason for voting Trump. As has been painfully obvious especially since George Floyd’s unacceptable death at the hands of Minneapolis police officers, the type of arrogance, sanctimony and – more crucially – intolerance that has come to permeate Democratic, liberal, and progressive ranks has now spread widely into Wall Street and the Big Business Sector.

To all Americans genuinely devoted to representative and accountable government, and to the individual liberties and vigorous competition of ideas and that’s their fundamental foundation, the results have been (or should be) nothing less than terrifying. Along with higher education, the Mainstream Media, Big Tech, and the entertainment and sports industries, the nation’s corporate establishment now lines up squarely behind the idea that pushing particular political, economic, social, and cultural ideas and suppressing others has become so paramount that schooling should turn into propaganda, that news reporting should abandon even the goal of objectivity, that companies should enforce party lines in the workplace and agitate for them in advertising and sponsorship practices, and that free expression itself needed a major rethink.

And oh yes: Bring on a government-run “Truth and Reconciliation Commission” to investigate – and maybe prosecute – crimes and other instances of “wrongdoing” by the President, by (any?) officials in his administration. For good measure, add every “politician, executive, and media mogul whose greed and cowardice enabled” the Trump “catastrophe,” as former Clinton administration Labor Secretary Robert Reich has demanded. Along with a Scarlet Letter, or worse, for everyone who’s expressed any contrary opinion in the conventional or new media? Or in conversation with vigilant friends or family?

That Truth Commission idea is still pretty fringe-y. So far. But not too long ago, many of the developments described above were, too. And my chief worry is that if Mr. Trump loses, there will be no major national institution with any inclination or power to resist this authoritarian tide.

It’s reasonable to suppose that more traditional beliefs about free expression are so deeply ingrained in the national character that eventually they’ll reassert themselves. Pure self-interest will probably help, too. In this vein, it was interesting to note that Walmart, which has not only proclaimed its belief that “Black Lives Matter,” but promised to spend $100 million on a “center for racial equality” just saw one of its Philadelphia stores ransacked by looters during the unrest that has followed a controversial police shooting.

But at best, tremendous damage can be done between now and “eventually.” At worst, the active backing of or acquiescence in this Woke agenda by America’s wealthiest, most influential forces for any significant timespan could produce lasting harm to the nation’s life.

As I’ve often said, if you asked me in 2015, “Of all the 300-plus million Americans, who would you like to become President?” my first answer wouldn’t have been “Donald J. Trump.” But no other national politician at that point displayed the gut-level awareness that nothing less than policy disruption was needed on many fronts, combined with the willingness to enter the arena and the ability to inspire mass support.

Nowadays, and possibly more important, he’s the only national leader willing and able to generate the kind of countervailing force needed not only to push back against Woke-ism, but to provide some semblance of the political pluralism – indeed, diversity – required by representative, accountable government. And so although much about the President’s personality led me to mentally held my nose at the polling place, I darkened the little circle next to his name on the ballot with no hesitation. And the case for Mr. Trump I just made of course means that I hope many of you either have done or will do the same.

Making News: National Media Cites on the Virus Vaccine Drive and the Stimulus Package Wrangle

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Breitbart.com, CCP Virus, coronavirus, COVID 19, Heather Long, industrial policy, John Binder, Making News, pharmaceuticals, Seattle Times, stimulus package, The Washington Post, vaccines, Wuhan virus

I’m pleased to announce that my views on two major economic policy issues have just been featured in two leading national news publications.

In his report yesterday on the U.S. government’s efforts to help pharmaceutical companies develop a CCP Virus vaccine, Breitbart.com‘s John Binder included remarks of mine providing perspective on the latest example of what economists call “industrial policy” – team-ups between the public and private sectors to generate technological progress and ensure future U.S. prosperity.  Click here to read the article.

Moreover, last Thursday’s Washington Post piece on the debate over the next U.S. economic stimulus package contained a quote from me urging the Trump administration and Congress to “go big.”  Here’s the link.  The article, by the Post‘s Heather Long, was also reprinted in the Seattle Times on Saturday.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

 

Our So-Called Foreign Policy: A China Fork-in-the-Road Coming for America First-ers?

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allies, America First, Barack Obama, China, deterrence, East Asia, globalism, industrial policy, Marco Rubio, national security, North Korea, nuclear deterrence, Our So-Called Foreign Policy, South Korea, Trade, tripwire, Trump

Something’s been bothering me for some time about the way that the national debate over dealing with China has been evolving.

Don’t get me wrong – it’s been great to see the major shift in the conventional wisdom since President Trump took office toward genuine recognition that the People’s Republic poses major economic and national security threats to the United States, that many of these threats are closely related, and that they have to be dealt with both on the economic and national security policy fronts.

That’s tremendous progress from the pre-Trump – and globalist – consensus that greater U.S. economic engagement with China was promoting more economic and political freedom in China, and more peaceful international behavior (or definitely would in some indefinite future), and that any dangers emanating from Beijing in the national security sphere are best coped with by increasing America’s military presence in East Asia (e.g., former President Barack Obama’s “pivot to Asia,” largely rhetorical though it was), cooperating more closely with the country’s allies in the region, or some combination of the two.

You don’t have to be an avid follower of world affairs to realize that the sharp distinction drawn by this globalist consensus between China economic and China national security policy was already producing a mind blowingly idiotic result: Washington was still resolving to resist any expansionist ambitions of Beijing’s in East Asia while continuing to help send China’s way floods of money and defense-relevant technology bound to turn into formidable military equipment that U.S. and other allied forces would face if conflict broke out.

Further, as I began pointing out years ago, because of the impressive progress made by both China and North Korea in developing intercontinental-range nuclear weapons, the globalist approach was exposing the American homeland to an ever increasing threat of nuclear attack – and mainly because even the U.S.’s wealthiest regional allies refused to field the (admittedly) expensive conventional military forces that could repel aggression from Beijing or Pyongyang without American help.

So everyone should be encouraged by the growing, bipartisan support for limiting the flow of U.S. resources and technology to China – even though many allegedly converted globalists continue hoping in vain that this goal can be achieved without setting limits (like tariffs) on trade and investment between the two economies.

My problem? Many of the new China hawks (and the leading example here is Florida Republican Senator Marco Rubio, who deserves considerable credit for his out-front role waking up other conservatives to the need for changing course on China) apparently believe that new U.S. trade, investment, and technology transfer curbs are mainly needed to shore up America’s decades-long position as the national security kingpin of East Asia. In other words, they’re hoping that America First-type China economic and technology policies can buttress globalist East Asia policies.

Maybe they’re right.  And if they succeed, it will at least become less likely that American troops will be killed in battle by Chinese weapons developed with dollars and knowhow from the United States.

Unfortunately, too much of the nuclear danger to the United States will remain in place – because the free-riding instincts of America’s East Asian allies inevitably will be reinforced. That is, the more confident they stay in America’s determination to protect them, the less military effort they’ll feel the need to make, and the longer U.S. military forces in places like South Korea will be needed to play tripwire roles – deterring aggression due to their vulnerability to attack and the chances that their imminent destruction will pressure a U.S. President to save them with nuclear weapons use that could trigger a similar retaliatory strike on the United States.

As I’ve written repeatedly, because taking every step possible to prevent a nuclear weapon from landing on American soil should be a much higher priority for Washington than protecting free-riding allies, it’s best for the United States to pull its troops back from the front-lines in East Asia and force its allies to defend themselves. And if this means okaying their own decisions to build nuclear forces, fine with me. I’d also sell them any conventional weapons they’re seeking – which would achieve the added benefit of improving American economic growth and employment.

Does this mean that an America First China policy would or should lack any national security dimension? Not at all. For as I first explained in this recent interview, staying ahead of China technologically will stay imperative for the United States to protect itself from the kinds of cyber-attacks Beijing is already capable of waging and has probably been sponsoring. And the threat is hardly limited to the hacking of U.S. government agencies or private businesses that originates from China. The more Americans (including individual Americans possessing valuable knowledge) use Chinese technology products because these goods have become the world’s best or cheapest, the more their privacy will be vulnerable to Chinese surveillance and ultimately blackmail. The advanced telecommunications equipment produced by Huawei is of course the most important example so far.

There’s another technology-based national security issue that purist America First-ers of my ilk need to deal with as well, and one that I haven’t sufficiently thought through. Nothing’s changed my mind about the United States being a big net loser from trade with East Asia, or about how it can retain the clout if needs in the solely from its role as a final consumption market these export-dependent economies will desperately need.

But thanks largely to failed globalist trade policies, most of the world’s semiconductor manufacturing capacity and capability is now located in East Asia – particularly in Japan, Taiwan, and South Korea. It may be tempting to believe that these countries will become more resistant to China’s power if the United States withdraws militarily from the region. But prudence counsels against simply assuming the best.

So as America First leaders start and keep offering these countries all the military hardware they need to rebuff Chinese advances, they will also need greatly to step up efforts to restore U.S. self-sufficiency in these key building blocks not only of high tech industry, but increasingly of all high value manufacturing and services. (To their credit, Rubio and some other new China realists also understand the need for redoubled American industrial policy efforts to achieve these goals.)

Attempts to reorient U.S. foreign and trade policies in America First directions are still at such an early stage that concern about these differing emphases might look premature. But events have a way of forcing major decisions much earlier than expected – either because crises erupt sooner, or because lead-times to implement new strategies can be longer, than is convenient. So all America First-ers should agree at least agree that the earlier this potential division in America First ranks is addressed, the better.

(What’s Left of) Our Economy: A Vital Globalization Lesson from South Korea

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China, Financial Times, industrial policy, Japan, self-sufficiency, South Korea, technology, Trade, {What's Left of) Our Economy

As Americans continue debating the merits of remaining dependent on supplies of key products from China (including state-of-the-art 5G telecommunications technology), a great example of why self-sufficiency can be crucial – along with laying adequate groundwork – has just come from an economy much smaller than the United States’ and capable of standing on its own in many fewer areas: South Korea.

In fairness, never during its remarkable rise from deep impoverishment and war-time devastation has South Korea bought the basic principle underlying the generally open trade (and investment) policies that have shaped the global economy throughout the post-World War II era. That is, its leaders have never been willing to prioritize worldwide efficiency by permitting market forces to determine which of their industries would excel.

Indeed, South Korea has been one of the world’s most hermetically sealed economies and hasn’t even been able to cite legitimate national security concerns for its approach. After all, it’s been staunchly defended by the United States for decades – even enjoying the presence of American military tripwire units aimed at forcing, to the greatest extent possible, Washington to risk nuclear attack on the American homeland in Seoul’s defense.

Recently, however, South Korea encountered an economic threat that it – understandably – concluded posed unacceptable risks to the high tech industries that have created so much of its prosperity. Because of a dispute centering on from compensation for atrocities committed by Japan during its long-time colonial rule over South Korea, Japan in July cut South Korean tech companies off from supplies of three chemicals needed to make numerous key products, including semiconductors and advanced displays (computer and TV screens). Japan also removed South Korea from its list of countries enjoying preferential trade status.

And as the Financial Times reported last week, in response, Seoul has decided not simply to accept that Japan’s curbs would surely reduce the competitiveness of its tech sector, and to leave to the subsequent workings of market forces to determine what types of activity would dominate its economy – and determine its fate. Instead, it’s decided to build up its own capabilities in electronic inputs in order to reduce its vulnerabilities to even broader restrictions that Japan might impose as long as this bilateral trade war lasts – and surely in order to cut its exposure to similar potential threats from elsewhere.

According to the Financial Times, “Seoul plans to invest more than Won 5tn between 2020 and 2022 in research and development, in an attempt to localise about 100 different components and materials in the next five years. South Korea has also said it will provide tax breaks, cut red tape and encourage co-operation between big companies and their small suppliers to accelerate the localisation process.”

Nor is South Korea’s government is unlikely to pay much heed to any whining about short-term cost pain from consumers or companies elsewhere in these high tech supply chains. Its officials “stress the importance of diversification. ‘Cost savings is no longer the best thing for our companies. Risk hedging has become much more important.’”

And Seoul seems completely unimpressed with the warnings from conventional economists, like the one who stated “No country can be fully self-sufficient. Focusing on local substitutes only can bring more negative side effects. They may end up having to buy expensive local parts and materials although they can be easily sourced abroad at cheaper prices.”

For the South Korean government understands that Japan’s cutoffs mean that vital parts and materials may not always, or often enough “be easily sourced abroad at cheaper prices” – or at any prices.

Moreover, although it’s no doubt true, as the article contends, that South Korea is behind Japan technologically, Seoul’s drive for greater self-sufficiency is no pipe dream. For the country has built impressive enough technological wherewithal to endow these policies with a solid foundation. Indeed, there’s considerable evidence that decades of “Korea First” industrialization policies have been keys to the South’s long record of rapid gains in global technological competitiveness.

Not that South Korea has an easy row to hoe, as this piece indicates. But here’s where we come to the lessons for the United States: Despite longstanding and offshoring-friendly trade and globalization policies, it remains the global technology leader and therefore boasts advantages that dwarf South Korea’s – or any other country’s. Even better, it’s developed a tried and true formula for fostering world-class innovation, in high tech industries ranging from pharmaceuticals (think “National Institutes of Health”) to aerospace and software and information technology (think “Pentagon”).

In other words, the United States has more than enough “wallet” to overcome the technology threat posed by China, or any other possible rivals – though the Trump administration’s industrial policy initiatives could stand considerable improvement. But the President’s China trade policies show that, for the first time in decades, the United States has a leader with the will.

Im-Politic: Want to Really Fuel Big Government? Ditch Trump’s Trade Policies

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Affordable Care Act, big government, budget cuts, Congress, conservatives, discretionary spending, entitlement spending, healthcare, Im-Politic, industrial policy, Mick Mulvaney, Obamacare, Republicans, Trade, Trump, USAToday

USA Today‘s editorial yesterday on U.S. trade policy did an excellent job of stating a major objection to tariffs and other measures that interfere with international commerce – and one that understandably resonates strongly in a nation that prizes free market values, and especially among its conservatives: These trade curbs fuel Big Government, thereby preventing the economy from achieving its full potential, and harming the nation’s society and culture as well as the economy by sapping the attractiveness of individual initiative.

The essay also understandably focused on a development that looks like a poster child for trade-fostered Big Government – the process set up by the Trump administration to decide which companies will receive exemptions from recent metals tariffs, based on claims that adequate domestic substitute steel and aluminum products aren’t available.

In the words of the editorial writers:

“[T]he administration has imposed a new tax on imported metals and then put itself in a position to decide who has to pay it and who does not.

“This is Big Government at its worst — arbitrary and capricious, if not outright political, as it picks winners and losers in business. And all this is being done without any new law being passed and while a Republican Congress, which used to stand for free enterprise and limited government, remains supine.”

One obvious rejoinder is the observation that, however cumbersome the exemptions process may or may not be, Washington actually has an impressive historical record of “picking winners and losers in business.” Examples include the information technology hardware and software industries, which were practically launched with public (largely Pentagon sponsored) research and development funds, and critically nurtured by government (again, largely defense-supplied) markets; the world-class farming sector fostered by U.S. Department of Agriculture research findings; the equally world-class pharmaceutical industry aided by the National Institutes of Health; and an aviation and aerospace industry supported by the Defense Department, by the National Aeronautics and Space Administration, and by a NASA predecessor aeronautic agency. (For an excellent summary of this historical record, see this study from the National Academies of Science.) 

But there’s another vital point missed by USAToday and by conservatives who remain devoted to preserving or renewing the expansion of the existing free trade realm: If they succeed, they’re likely to see the kind of Big Government metastasis America has never experienced before. The reason? So many renumerative Americans jobs will be lost, and so much income destroyed, that political pressures for a much more generous welfare state will positively skyrocket.

Another favorite cause of newspaper editorialists like the USAToday writers and many Big Government-phobic conservatives – the return of mass immigration – will bring the same type of outcome, for many of the same reasons.

And if you think that the nation’s leaders will unite to uphold the causes of self-reliance and much smaller government, you weren’t paying attention to the recent fight over abolishing “Obamacare.” For better or worse, the national healthcare system created at the initiative of the former President remains largely in place even though its Republican opponents control the entire federal government and a huge majority of state governments because lots of these Republican politicians recognized that eliminating this latest entitlement would be political suicide.

At the same time, standard-issue conservatives aren’t the only Americans who may need to learn these lessons. Donald Trump belongs on this list, too. Interestingly, he won the presidency after running a campaign that both promised an Americans-First overhaul of trade policy and to protect the nation’s immense middle class entitlement programs – both of which clashed strongly with conservative dogma.

But his biggest first-year push as President involved going after Obamacare – well before he had achieved any of his trade policy goals, and before he even began pursuing them energetically. And he’s so far permitted his budget director, former Tea Party stalwart Mick Mulvaney, to propose numerous deep cuts in discretionary spending and even some entitlement spending that aren’t exactly middle class-friendly, either.

This set of priorities may have been unavoidable politically, reflecting Mr. Trump’s perceived need to establish some conservative bona fides with Congressional Republicans – who mainly still strongly support the party’s old orthodoxy, but whose staunch backing he would need in any impeachment proceedings.

At the same time, a fair number of those donors-friendly, offshoring-happy Congressional Republicans are retiring – largely because they recognize that Trump-ian trade and other unorthodox policies have won over the base. And although Democratic hardliners may indeed push successfully for impeachment proceedings if the party wins the House, it’s likely that, in the absence of a major smoking gun, this campaign could alienate independent voters – who are hardly gung ho to give Mr. Trump the heave-ho. Chances are they’d be even less receptive to an impeachment spectacle dominating Washington if the President distanced himself from meat-axe public spending cuts.

If this scenario unfolds, the loudest voices complaining that Trump-ian trade policies lead to Big Government could be mainstream media editorialists and pundits. But these voices would be less important than ever.

Our So-Called Foreign Policy: Trump’s China Strategy Seems Troublingly Silo-ed

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CFIUS, China, Committee on Foreign Investment in the United States, Diplomatic and Security Dialogue, foreign direct investment, industrial policy, James Mathis, mercantilism, national security, Our So-Called Foreign Policy, Rex Tillerson, semiconductors, Steven Mnuchin, super-computing, technology transfer, Trump, Wilbur Ross

Secretary of State Rex Tillerson and Secretary of Defense James Mathis are meeting with Chinese counterparts today in Washington, D.C. to conduct a “Diplomatic and Security Dialogue” – a stripped down Trump administration version of some of the ginormous official bilateral sessions the two countries have held periodically in recent years.

It’s unclear whether these talks will turn out to be more than the elaborate gabfests their predecessors quickly became. But it’s much clearer that their potential to contribute significantly to America’s security will be limited unless the administration starts taking many more urgently needed steps to move the nation’s Asia grand strategy into the twenty first century. And the major missing piece of this effort continues to be a serious effort to deny China the advanced technologies it will need to continue becoming a more formidable military competitor.

Some promising decisions have been taken, or are being considered. For example, Commerce Secretary Wilbur Ross is thinking of launching a national security review of U.S. trade in semiconductors with an eye toward fending off what he describes as an increasingly dangerous Chinese challenge in this defense-critical sector. Mathis and Treasury Secretary Steven Mnuchin have both publicly called for updating the interagency U.S. government process for screening prospective Chinese and other foreign investments in all defense-related companies (the Committee on Foreign Investment in the United States, or CFIUS). And they along with Ross have strongly suggested that they’re thinking of redefining the relevant statute’s mandate to include economic dimensions of national security. Just as encouraging, prominent members of Congress are drafting legislation along these lines.

And most recently, the administration has announced a big new effort to ensure continued American leadership over China in super-computing (although the semiconductor industry isn’t happy with some other features of Mr. Trump’s stance on federally sponsored research and development).

Moreover, the Trump administration is responding to the Chinese challenge much more promptly than its predecessor, which prioritized this cluster of problems very late in its tenure. Its proposed responses to mercantile Chinese industrial policies in technology industries were especially weak beer.

But as with the Obama administration, Team Trump seems to be paying little attention to the continued outflow of cutting-edge defense-related American knowhow to China – including to entities that are unquestionably controlled by the Chinese government. It’s unmistakably paying much less attention to these investments than to spending billions more to upgrade American military forces in East Asia – which of course could wind up facing Chinese weapons based on U.S. tech advances.

Today’s U.S.-China talks in Washington are due to be followed up later this summer by a session devoted to economics. Maybe by then, President Trump and his advisers will be pursuing the comprehensive, integrated approach that meeting the China challenge adequately requires?

(What’s Left of) Our Economy: So You Think Apple’s Great for America?

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Apple Computer, industrial policy, manufacturing, national security, offshoring, semiconductors, technology, Trade, trade policy, {What's Left of) Our Economy

One of the great joys of my professional life is finding material that makes me exclaim, “I wish I’d written that!” So reading Andrew Zatlin’s new post on Apple Computer’s exploitation of offshoring-friendly U.S. trade policies has gotten my weekend off to a great start. The entire piece is well worth the time of anyone interested in these subjects, so I won’t summarize it. What does deserve more attention is specifying how the Zatlin’s analysis trashes the claims that even though most of Apple’s products are manufactured abroad, the company still generates huge gains for the U.S. economy.

According to the Apple supporters, manufacturing is completely incidental to the company’s fantastic success, and to understanding its role in enriching America. That’s because the real money makers for Apple, and they insist, the nation as a whole, are its professional service operations – research, development, engineering, product design, and marketing. As evidence, Apple’s fans point to numerous studies showing that this professional work, overwhelmingly performed state-side, makes up the bulk of the value of the firm’s products – and that therefore, most of the wealth Apple creates accrues to Americans. And let’s not forget all the company’s immense profits.

One of Zatlin’s key contributions to this debate, however, is making clear that almost none of the domestic wealth Apple has created has trickled down into the rest of the domestic economy – mainly because the company is such an expert tax dodger. I’d add three more points. First, because nearly all of them are very well paid (except of course for the retail workers), Apple’s smallish U.S. employment footprint probably has the same kind of low propensity to spend as other affluent Americans. Therefore, relatively little of these employees’ earnings is circulating throughout the economy. Second, whatever Apple employees spend on imports creates no meaningful benefits or opportunities for their fellow Americans, either. Third, Apple is also keeping more than $150 billion in profits offshore, so they’re not being spent productively in America, either.

The second big contribution made by Zatlin is showing just how much wealth for foreign economies – at America’s expense – has been created by Apple’s reliance on overseas manufacturing foreign-made semiconductors and other high tech components creates. Indeed, the author makes a great case that Apple’s procurement is keeping economies like Korea’s largely afloat, and is significantly buoying China’s remaining growth – which of course in general ain’t what it used to be.

My only quarrel with Zatlin’s post is with its timid policy recommendations. He does recommend adopting industrial policies to create real incentives for domestic high tech manufacturing – largely because, as he correctly notes, the losses in semiconductors and related products fostered by Apple’s practices (and those of so many other companies) undermine U.S. national security. But as long as American trade policies practically invite companies like Apple to supply the high price U.S. market from low-cost and largely unregulated foreign production sites, this corporate “screwing” of America (as Zatlin puts it) is bound to continue.

(What’s Left of) Our Economy: In Case You’re Still Doubting that Manufacturing Matters

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economics, industrial policy, liberals, manufacturing, multiplier, productivity, {What's Left of) Our Economy

Although its proponents have been relatively quiet these last few years, the view among economists and pundits that there’s nothing intrinsically important about manufacturing, and that therefore policy makers shouldn’t especially care about its fortunes, is far from dead.

“Manufacturing doesn’t matter” thinkers can still even be found in the ranks of self-proclaimed liberals, who normally tend to favor government caring about lots of economic specifics, and who see themselves as champions of the working class whose prosperity owes so much to industry. Skeptical? Check out these recent pieces from liberal economists Christina Romer and Joseph Stiglitz, and from journalist Matthew Yglesias.

Fortunately, evidence to the contrary keeps pouring in, and some especially striking data has appeared in just the last week.

First, yesterday, the Labor Department released its revised numbers for labor productivity for the second quarter of this year. These figures are a narrower measure of economic efficiency than the total factor productivity data I posted on August 26, but they’re more up to date. More important, they send the same message – manufacturing is the economy’s productivity leader by a long shot.

The new figures show that between the first and second quarters of this year, manufacturing productivity grew by 3.3 percent, versus 2.3 percent for the entire business sector. And since manufacturing businesses are a subset of all businesses, this means that non-manufacturing business productivity growth was even lower.

Year on year, manufacturing productivity rose by 2.1 percent – more than twice as fast as the 0.9 percent rate for all business productivity, and the consequently even lower rate for businesses outside manufacturing.

So if you don’t care about productivity, by all means be indifferent to manufacturing. If you know something about economics and the ingredients for prosperity, however, you’ll understand why America needs much more of it.

The day after Labor Day, IndustryWeek magazine featured a post arguing that manufacturing leads the economy in the equally important category of growth creation by an even wider margin that official data show. According to Stephen Gold, President and CEO of the Manufacturers Alliance for Productivity and Innovation, the government’s estimate that each dollar’s worth of final demand for manufactures generates $1.48’s worth of output in other goods and services category is too low. Gold cites new academic research that allegedly takes into account a broader and more accurate assessment of the manufacturing supply chain than do government statisticians. The result is a manufacturing multiplier of $1.92. By contrast, the multipliers for the retail and wholesale trade sectors, respectively, are only 54 cents and 58 cents.

So if you don’t care about growth, you can afford to be indifferent to manufacturing, too.

Unlike most of his immediate predecessors, President Obama does care about manufacturing. Or at least that’s what he says. In fact, two years ago, his former senior economic advisor Gene Sperling gave a speech containing the most detailed explanation of manufacturing’s value heard from a federal official in decades. Maybe by the time Mr. Obama leaves office, we’ll actually see actions that match these encouraging words.