Im-Politic: Signs of Less Corporate Money in American Politics

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Big Business, campaign finance, campaign finance reform, Center for Political Accountability, dark money, elections, free speech, Im-Politic, lobbying, money in politics, politics, Standard & Poor's 500, transparency

Although I’m hesitant for free speech reasons to support sweeping bans on corporate (or any special interest) money in politics, like many Americans, I suspect, I’d like to see a lot less of it. So I’m pleased to report some good news on this front: a study purporting to show that many of America’s largest companies (all members of the Standard & Poor’s 500 stock index), are reducing and even actually halting various types of political spending (including on lobbying).

The study, from the non-profit Center for Political Accountability, claims that 14 members of the S&P 500 have adopted “clear policies that prohibited the use of corporate assets to influence elections and asked third parties not to use company payments for election-related purposes.” Among them are some real surprises (at least to me) – like Wall Street giant Goldman Sachs, big defense contractor Northrup Grumman, energy kingpins Hess and Schlumberger, and IBM from the tech sector. (The full list is on p. 56.)

Just as important, the authors state that since 2015, “there has been a steady rise in the number of S&P 500 companies that have placed prohibitions on election-related spending.” Specifically, the study reports, between 2015 and so far in 2021, the number of these large, publically held companies that has stopped what the Federal Election Commission calls “independent” expenditures (spending for or against specific candidates not made in coordination with any such candidates or their representatives or political parties) has more than doubled – from 83 to 176.

As for companies barring non-independent spending on candidates, parties, and committees, they’ve increased from 84 to 136. Companies no longer contributing to “527 groups” (see here for the definition) are up from 65 to 118. Businesses that have had it with spending for or against various ballot measures have increased from 50 to 75. Those not contributing to organizations responsible for triggering the flow of “dark money” into American politics now number 71, versus 31 in 2015, and the growth in the number not even funding trade associations is from 20 to 47.

The Center attributes these trends mainly to business’ mounting reluctance to expose themselves to backlash from customers and shareholders for taking political stances in the current national environment of “unrest and angry political conflict” and “hyper-partisan politics.” The report adds that one reason companies feel more vulnerable is that many have been making public ever more information about their political and policy spending.

That greater transparency is definitely welcome. But I’m happier about the overall pullback in political spending. Not that all such activities are intrinsically concerning (much less should be outlawed). After all, if Big Businesses are being affected by existing public policies, or are bound to be, why shouldn’t they be able to argue their case to politicians and the public (especially when they make such lobbying, and the funding it requires, public)?

As the study also makes clear, however, although fewer Big Businesses are engaged in political and policy spendings, many more keep opening their coffers. Moreover, the report doesn’t say anything about actual corporate spending levels. In theory, although fewer big companies are contributing resources, those that still are may be spending much more. So it’s not like the corporate sector’s influence is going to be eliminated, or even close, any time soon.

But despite the legality and/or legitimacy of corporate money in politics and policy, there can’t be any reasonable doubt that these enormous resources give companies the kind of power that most individuals – and most other interest groups – can’t hope to match.

Therefore, I can’t help but believe that the less corporate actors putting their thumbs on the scales throughout Washington, D.C. and state and local capitols, the fairer and more representative our politics and government will be – and that the Center for Political Accountability’s findings are an especially terrific Thanksgiving gift.

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Im-Politic: Yet Another Weird, Dangerous Turn in Identity Politics

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affirmative action, African Americans, colleges, Congress, higher education, Hispanic Association of Colleges and Universities, Hispanics, historically black colleges and universities, identity politics, Im-Politic, lobbying, minorities, Politico, reconciliation bill, universities

Just what America needs right now – yet another source of identity politics-driven division, right? And one that looks completely bogus. Apparently this is exactly what the Hispanic Association of Colleges and Universities (HACU) thinks.

Politico.com reported last week that the organization is competing with Historically Black Colleges and Universities (HBCU) for funding reserved for “minority-serving institutions” in the big social spending bill (also called the “reconciliation bill”) passed by the Democratic Party-controlled House of Representatives but still still under consideration in the Senate.

And according to Politico, that’s how the measure has been structured – which depressingly indicates that the scramble for power, influence, and government resources has great potential to pit various racial and ethnic minority groups against one another, as well as continuing to foster competition between these groups collectively against whites. (Another example of intra-minority tensions – the pushback by Asian-American groups against affirmative action programs that they claim unjustly discriminate against them and for other “people of color.”)

But let’s say that, for some whacko reason, Americans decide that these battles among minority groups should be encouraged, or tolerated. Let’s also agree for the sake of argument that throughout American history, Hispanics have suffered from discrimination comparable to that which has victimized African Americans. (It’s a completely specious claim, but that’s not the point.) Shouldn’t the organizations involved at least boast genuine levels of legitimacy? If you agree, then the HACU doesn’t have a leg to stand on, even though according to the group’s website, the federal government for decades has formally recognized “campuses with high Hispanic enrollment as federally designated HSIs and [begun] targeting federal appropriations to those campuses.”

After all, the HBCUs were founded because of decades of unquestionably systemic and predominantly officially sanctioned discrimination in U.S. higher education against black Americans. Those days thankfully are gone, but it’s understandable that many African American students still want to attend those colleges and universities for reasons like demonstrating solidarity with them due to their historic role, or to a greater sense of comfort academically and/or socially on majority black campuses.

But the story of “Hispanic Serving Institutions” (HSIs) is totally different from that of the HBCUs. In fact, it’s so totally different that they don’t seem to have a story as such at all. The first big clue comes from the HACU’s own description of its membership: They’re schools “committed to Hispanic higher education success in the U.S., Puerto Rico, Latin America, Spain and U.S. school districts.” Even overlooking the inclusion of non-U.S. institutions in this definition (and, incredibly weirdly, Spain???), evidently the only hard and fast characteristic distinguishing these schools is their domination of Hispanic college enrollment in the United States (allegedly two-thirds).

But a look at the HACU’s membership list (which includes memberships of all types, in addition to institutions it classifies as HSIs) reveals that this criterion is meaningless on two major grounds. First, a very large percentage of these institutions are located in places like California, Texas, Arizona, Florida, New Mexico, and New York. In other words, they’re located in states with big Hispanic populations – along with Puerto Rico. So of course they enroll outsized shares of Hispanic students – especially since so many of those schools are public colleges, universities, and community colleges. And that’s supposed to demonstrate a defining commitment?

Second, perusing the membership list also quickly reveals that this commitment is often pretty weak, at least numerically speaking. For instance, Ball State University in Indiana is a member. Hispanics represents just 6.26 percent of its undergraduate and graduate enrollment. Case Western Reserve in Cleveland, Ohio belongs, too. It’s Hispanic enrollment is just 6.52 percent. For Central Michigan University, it’s a mere 4.89 percent. Duke University, with an overall student body that’s 6.78 percent Hispanic is a member. So is Emory University in Atlanta (8.17 percent), Michigan State University (6.01 percent), Mount Holyoke College (7.61 percent), Northwestern University (8.68 percent), the Univeristy of Alabama-Birmingham (4.42 percent), the University of North Carolina-Charlotte (7.31 pecent), the University of Tennessee (4.75 percent), the University of Chicago (4.54 percent), the University of Michigan (6.51 percent), the University of Pennsylvania (6.74 percent), the University of Pittsburgh (3.70 percent), Villanova University (5.38 percent), Washington University in St. Louis (6.69 percent).

(Note: Many of these figures come from the “Universities” section of the DataUSA.io website founded in part by the international consulting firm Deloitte.  The others come from the websites of these institutions themselves.)

And here’s some vital context: As of the latest available (2016) data from the U.S. Department of Education, the share of Hispanic students at all degree-granting American post-secondary schools was 17 percent. So all the above schools associated with the HACU are serving Hispanic students much less well according to this key measure than the national average. And since figures from the same agency show that the Hispanic share of the American college and university student body has been rising faster than that of any other racial or ethnic group, and since the above enrollment figures are all from well after 2016, arguably their performance has worsened in recent years.

Even more bizarre: The HACU reports that for its own “membership purposes, Hispanic-Serving Institutions (HSIs) are defined as colleges, universities, or systems/districts where total Hispanic enrollment constitutes a minimum of 25% of the total enrollment.” So by its own standards, none of the above schools should be members – or even close.

Moreover, the federal government itself has no official list of HSIs. But for the purposes of determining eligibility for aid, the 25 percent threshhold also seems crucial (though as you will see, HACU acknowledges that there’s no fixed formula.

If Hispanics want to start their own separate higher education system and then seek as much taxpayer-funded assistance as they can get, that’s their God-given right as citizens of this great country. But it’s obvious that no such system has ever existed, that none exists now, and that the idea that Congress should pay any attention an organization even claiming to speak for a significant number of schools with an unusually strong commitment to higher education for Hispanics is a sham.

Moreover, rather than continue to play grievance politics – and with an artificial interest group – wouldn’t it be much better for the nation as a whole, and even for Hispanics specifically, for these institutions reorient their lobbying toward ensuring college affordability for all American students in need who can truly benefit from higher education. And wouldn’t it be nice if on top of seeking additional access to the government funding trough, and thereby indirectly feathering their own nests even more lavishly, they paid at least as much attention to reducing their long-soaring costs – e.g., by improving their performance and their efficiency?

After all, if American higher education doesn’t start helping students think more logically and coherently; receive an accurate, balanced picture of the society in which they live and the civilization that spawned it;  and function effectively in the economy that it’s created, then any lobbying victories it wins will be hollow for those they say they’re championing.       

Im-Politic: What Even Barr Has Missed About the China Threat

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Center for Strategic and International Studies, China, idea laundering, Im-Politic, Jeanne Whalen, lobbying, Mary E. Lovely, multinational corporations, offshoring, Peterson Institute for International Economics, Scott Kennedy, Steven Zeitchik, think tanks, Trump, Washington Post, William P. Barr

As masterly as Attorney General William P. Barr’s Thursday speech about China’s sweeping “whole-of-society” challenge to the United States was – and “masterly” is an entirely fitting description – it still missed one key danger that’s been created by big Americans businesses’ determination to advance China’s agenda. And conveniently, the nature and importance of this danger was (unwittingly, to be sure) made clear by the Washington Post‘s coverage of Barr’s alarm bell-ringing.

The Attorney General’s address was unquestionably a landmark – and a badly needed one – in the history of U.S.-China relations. The decisive break of course was Donald Trump’s election as President. For decades, American administrations had permitted and even encouraged U.S. multinational corporations and their recklessly shortsighted offshoring- and tech transfer-happy agenda to dominate policymaking toward China. (See here for the Bill Clinton-era origins of this approach.) Sometimes raggedly to be sure, the Trump administration has been reversing decisions that had exponentially increased China’s wealth and therefore military to the detriment of U.S. prosperity and national security.

But Barr’s speech indicates the launch of a new phase in this America First strategy – not only spotlighting corporate activities that keep endangering America, but naming and shaming some of the leading perps.

Especially important was the warning about Chinese leaders “and their proxies reaching out to corporate leaders and inveighing them to favor policies and actions favored by the Chinese Communist Party.” As Barr explained:

“Privately pressuring or courting American corporate leaders to promote policies (or politicians) presents a significant threat, because hiding behind American voices allows the Chinese government to elevate its influence and put a “friendly face” on pro-regime policies.  The legislator or policymaker who hears from a fellow American is properly more sympathetic to that constituent than to a foreigner.  And by masking its participation in our political process, the PRC avoids accountability for its influence efforts and the public outcry that might result, if its lobbying were exposed.”

In other words, Barr was talking about a form of “idea laundering” – the practice of pushing proposals that would benefit special interests first and foremost in ways meant to disguise their source of sponsorship and funding.

I identified one variety of idea laundering way back in 2006 – when I testified to Congress about how prevalent it had become for these offshoring-happy multinationals to pay think tanks to create the illusion that their self-serving objectives were also strongly supported by disinterested experts solely dedicated to truth-seeking. Barr has now pointed out that the multinational executives who have been funding idea laundering through think tank studies and op-eds and the like have also begun serving themselves as lobbyists-on-the-sly for China. In addition, he usefully warned them that they risk running afoul of U.S. laws requiring transparency from any individual or entity shilling for foreign interests.

But I wish Barr had mentioned the think tank version of idea laundering because a reminder of its perils came the day after he spoke, in the form of that Post coverage. Reporters Jeanne Whalen and Steven Zeitchik described and cited verbatim most of Barr’s indictment of corporate behavior. They rightly sought and received reactions from some of the companies fingered (Apple and Disney).

But then they played into the hands of the idea launderers when they claimed that “The attorney general’s warnings drew criticism from some economists, who said he at times exaggerated the threat China poses and downplayed benefits American industry has gained by trading with China….”

That’s surely the case, but the two individuals whose views the Post presented were hardly just any old economists. In fact, one – Scott Kennedy – isn’t even an economist, in the sense that he holds no academic degree in economics. Far more important, though, is that both of these authorities work for and get paid by think tanks that are heavily funded by offshoring multinationals – the Center for Strategic and International Studies (which employs Kennedy) in the academic-y-sounding position of “Senior Adviser and Trustee Chair in Chinese Business and Economics” and Mary E. Lovely, who is an economist (at Syracuse University) but who’s also a (academic-y-sounding) “Senior Fellow” at the Peterson Institute for International Economics.

Moreover, it’s crucial to note that both the Center for Strategic Studies and the Peterson Institute are also financed both by foreign multinational companies and even foreign governments with stakes in returning to the pre-Trump U.S. China trade and global trade policy status quo just as great as that of U.S.-owned multinationals. In fact, the Center even lists a contribution in the $5,000-$99,000 annual range from the Shanghai Institutes for International Studies, which, like all Chinese think tanks, is an arm of the Chinese regime. (It receives U.S government funding as well – in the greater-than-$500,000 annual neighborhood.)

To repeat a point I’ve made…repeatedly… there is nothing intrinsically wrong with any of these individual think tankers, the think tanks themselves, businesses, or even foreign governments trying to influence U.S. public policy. But as Barr has noted, there is everything wrong with these activities being conducted deceptively, which is the case with both forms of idea laundering. And the dangers to American democracy and U.S. interests are greatly compounded when journalists who should know better (and the two Washington Post reporters named above are hardly the only examples) help sustain this charade.

Im-Politic: The Mainstream Media Keeps Abetting Think Tank Fraud

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AICGS, American Institute for Contemporary German Studies, Carnegie Endowment for International Peace, idea laundering, Im-Politic, lobbying, Mainstream Media, national security, NATO, Swamp, The Johns Hopkins University, think tanks, Trade, Trump

The following item didn’t even merit a full article in the eyes of Politico editors. But it speaks volumes on how the nation’s journalists continue to do a terrible job of reporting on the vested interests behind much of the opinion and analysis on which they rely to flesh out their coverage of any number of issues.

Here it is in full, beneath the headline “Hopkins Pushes U-Turn on German Trade Policy:

“A new report from Johns Hopkins University advises the winner of the U.S. presidential election to reverse many of the trade and defense policies the Trump administration has pursued with Germany.

“The paper from the the school’s American Institute for Contemporary German Studies [AICGS] recommends redoubling the U.S. commitment to NATO, which Trump has de-emphasized over his term, and pursuing a “safe trade” strategy that would aim for a new U.S.-EU trade agreement to lower tariffs across the Atlantic. It also argues the countries should commit to reform the WTO to counter China’s rise.”

To begin on a personal note, I first encountered the Institute in the mid-1980s, when I was an editor at FOREIGN POLICY magazine. It was newly created, and my reaction to its appearance was probably much the same as your reaction to its mention in this press item: It’s a think tank, it’s connected with a major university, so its work must top some kind of quality threshhold.

Revealingly, this period came before private sector and other special interest donors became so dominant in the think tank world and, more important, began actively and indeed strategically using these institutes to further highly self-interested, specific agendas. (See this history for an excellent account of how and why it changed.)

In other words, many and probably most of them weren’t chiefly engaged in what I’ve called “idea laundering” – seeking to advance these agendas by using think tanks to garb them in the raiment of traditional, truth-seeking scholarlship. So I didn’t ask myself who was funding the Institute. (Full disclosure: The think tank that then published FOREIGN POLICY magazine, the Carnegie Endowment for International Peace, was at that time financed by big bucks provided for its creation by Gilded Age industrial magnate Andrew Carnegie. To my knowledge, that endowment to that point was so big, and managed and invested so smartly, that no outside fund-raising was necessary.)

But precisely because times have changed so dramatically, I not only wondered who pays for the Institute – I investigated the subject. And what I found is that not only is the AICGS financed significantly by large banks and corporations who have had a strong vested stake in restoring what was for them a very lucrative pre-Trump U.S.-Germany economic status quo (one of whose main beneficiaries was China). It’s also financed significantly by the German government – which has at least as strong a vested stake in restoring a pre-Trump status quo that was not only economically profitable, but strategically advantageous. For under President Trump’s predecessors, the United States was willing to subsidize heavily  Germany’s defense because numerous German governments (including today’s) have preferred to free ride militarily and spend public monies elsewhere – or let German taxpayers keep them.

Specifically, the Institute’s donors include the “Transatlantic Program of the Federal Republic of Germany with funds from the European Recovery Program (ERP) of the Federal Ministry of Economics and Energy” the Landesbank Baden- Wurttemberg (a regional-level German central bank), and the German Academic Exchange Service – which sounds non-governmental, but whose budget, its own website tells us:

“is derived mainly from the federal funding for various ministries, primarily the German Federal Foreign Office, but also from the European Union and a number of enterprises, organisations and foreign governments.”

Nor are these government funds trivial. According to the latest information AICGS has provided to the U.S. Internal Revenue Service (as required), in 2016, the organization raised just under $2.61 million in total revenue. Roughly half of this amount came from “contributions and grants” (a category that, oddly, doesn’t include “fund-raising events” income). And of the $1.34 million taken in through contributions and grants, the German economic affairs and energy ministry donated $206,434, and the German Academic Exchange Service gave $113,590. (No Landesbank contributions were recorded, presumably because they fell below the $1,000 level mandated by the Internal Revenue Service for reporting – although there’s no way to know how much this official German financial agency, or the other German government agencies, contributed to one of AICGS’ fund-raising events.),

And there can be no doubt that both the businesses and the German government consider it much more effective and convincing to have a scholarly sounding American Institute for Contemporary German Studies carrying their water than spreading their messages themselves. In fact, Politico fell for this ruse hook, line, and sinker, and indeed reinforced the deception – with a headline describing the study’s results as coming not even from a think tank, but from a leading U.S. university. 

As I’ve argued often before (e.g., the Congressional testimony linked above), there’s nothing inherently wrong with any special interest using a think tank to push its priorities. Nor is there anything wrong with a foreign government engaging in the same practice.

But there’s a great deal wrong with these donors using think tanks on the sly. And when it comes to foreign governments, a legal issue comes up: whether these think tanks should be required to register a foreign lobbyists, as required by law.

As suggested above, AICGS is hardly the only idea launderer in Washington, D.C. and elsewhere in the country, and if you look hard enough – as I did – you can find the information on-line. But why should anyone have to make any significant effort? Why shouldn’t sponsorship information be displayed prominently on all the publicly released products of AICGS and think tanks generally? And since it’s not, why do Politico and other media outlets not report this information routinely?

Oncc the Trump era began, the Mainstream Media began ostentatiously adopting official slogans like “Democracy Dies in Darkness.”  I’m not aware of any references to “Draining the Swamp.”  And these news organizations’ continuing failure to expose idea laundering and similar strategies can’t help but keep feeding suspicions that they’re part of this morass.   

Following Up: Vital Background on “Idea Laundering” — and Washington Corruption

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Bloomberg.com, conflicts of interest, corruption, hedge funds, idea laundering, Im-Politic, James K. Glassman, journalism, lobbying, Mainstream Media, Nick Confessore, special interests, The Washington Monthly, think tanks

Since I’m a great believer in giving credit where it’s due, I feel honor-bound to report that I just learned that a development I thought I first identified (along with a catchy name) wasn’t spotted first by me after all. At the same time, it’s also a pleasure to make this confession, because it creates a golden opportunity to recommend two excellent pieces of journalism that shine much needed additional light on this development – which has tremendously deepened corruption in American policymaking.

The development? “Idea laundering” – which I’ve defined as the now widespread practice of special interests (like corporations) using think tanks to issue materials that push the particular agendas of these funders while garbing them in quasi-academic raiment to create the impressions of objectivity and intellectual respectability. In other words, it’s become practically standard operating procedure in the policy world for outfits with scholarly-sounding names like “The Brookings Institution” to put out reports and articles that flack for the companies and other donors (now including foreign governments) that pay the rent without disclosing the hand that’s feeding them. Just as bad, journalists almost never reveal these conflicts of interest – or even ask about them.

I thought that I was the first to spotlight and name this deception, in 2006 testimony before Congress on Chinese influence-peddling operations in America. But yesterday, while reading a terrific piece on Bloomberg.com on how hedge funds have been using an especially insidious variant of the practice, I learned that it was first described in a 2003 Washington Monthly article by Nick Confessore, who is now a reporter for The New York Times. Interestingly, the individual at the center of both articles is James K. Glassman, a long-time fixture in the Washington, D.C. chattering class scene who Confessore credited with pioneering this deceitful new version of lobbying.

I do believe that I’ve been writing and warning about idea laundering more than anyone else. But I’m glad to acknowledge publicly that I was beaten to the punch when it comes to parenthood. It’s also great to see that more and more journalists are looking underneath the hood of the writings and Congressional and media appearances that so profoundly shape America’s approach to virtually all foreign and domestic issues.

Unfortunately, as made clear by this recent post, we’re a long way from the point at which reporters name the donors routinely, and when editors demand this vital information just as often. Until they do, the idea launderers and their paymasters will keep winning far too many victories at the expense of Main Street Americans.

Im-Politic: A Think Tank-/China-Gate That Should be Investigated?

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China, China-United States Exchange Foundation, Hong Kong, Im-Politic, John Podesta, lobbying, Podesta Group, The Swamp, think tanks, Tony Podesta, Tung Chee-hwa

If you (like me) thought that revelations about the corrupting funding practices of leading American think tanks couldn’t get any worse, we’ve been proven wrong in a jaw-dropping article in FOREIGN POLICY by contributing writer Bethany Allen-Ebrahimian.

Thanks to the author’s work, it’s now known that many of these organizations – on which U.S. policy-makers rely heavily for information and analysis that’s portrayed as the result of dispassionate research – not only receive contributions from a number of foreign governments. They receive contributions from an organization “bankrolled by a high-ranking Chinese government official with close ties to a sprawling Chinese Communist Party apparatus that handles influence operations abroad, known as the ‘united front.’”

The organization is a Hong Kong-based non-profit called the China-United States Exchange Foundation (CUSEF), and was founded in 2008 by Tung Chee-hwa, the former Hong Kong leader who strongly supported maintaining close ties with China following the city’s handover to the People’s Republic in 1997.

According to Allen-Ebrahimian, Tung “currently serves as the vice chairman of one of the united front’s most important entities — the so-called Chinese People’s Political Consultative Conference, which is one of China’s two rubber-stamp assemblies. The body is one of Beijing’s most crucial tentacles for extending influence.”

In addition, CUSEF “has cooperated on projects with the the People’s Liberation Army and uses the same Washington public relations firm that the Chinese Embassy does.”

Allen-Ebrahimian’s entire article is well worth reading – and essential to keep in mind in evaluating any China-related research or analysis from these organizations. But two other related points are well worth mentioning. First, CUSEF is a foreign agent registered with the Justice Department. In other words, it lobbies, which means that organizations accepting its donations arguably should be required to register, and identify themselves as lobbies, too – which think tanks so far haven’t done. Even those who think it’s perfectly for the leaders of an increasingly belligerent China to be perfectly should be free to buy influence in America’s policy-making process would surely agree that Chinese government sponsorship should be displayed front and center on these efforts.

Second, one of the D.C. lobbying mainstays the Foundation had hired to influence Congress on U.S.-China relations was the Podesta Group, which closed down last month after being connected with Donald Trump’s former presidential campaign chair Paul Manafort’s indictment for breaking American lobbying law.

The Podesta Group was founded and run by Tony Podesta and his brother John, former Secretary of State Hillary Clinton’s 2016 presidential campaign chair. And the Senate Intelligence Committee is investigating John Podesta’s possible involvement in the Democratic National Committee’s decision to pay for opposition research on Trump based partly on Russian sources.

So Allen-Ebrahimian’s article is a timely reminder that the Washington, D.C. swamp constantly attacked by President Trump and others entails many actors other than the standard industry lobbyists, that it’s totally bipartisan, and that Russia isn’t the only potentially dangerous foreign country that’s been swimming in it under the radar.

Our So-Called Foreign Policy: Why Opposition to the September 11 Law is Completely Stupid

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Bob Corker, energy, foreign policy establishment, international law, lobbying, Middle East, Mitch McConnell, Obama, oil, Our So-Called Foreign Policy, Paul Ryan, Saudi Arabia, September 11, September 11 bill, sovereign immunity, terrorism

Thanks to foreign policy establishmentarians on the Left and Right, ranging from President Obama to Congress’ Republican leaders, we’ve just gotten a moment when the folks we’ve entrusted to chart our country’s course in world affairs have not only gotten something massively wrong, but literally stopped thinking.

I’m talking about reactions to Congress’ override of the president’s veto of the September 11 bill, which will now enable the families of American victims of terrorism on U.S. soil to seek legal damages from foreign governments found to be responsible. Sure, all or most of the misgivings being expressed by figures like House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell, and Senate Foreign Relations Committee Chair Bob Corker could be resulting from lavish campaign contributions they’ve received from Washington’s big Saudi Arabia lobby. (I have no concrete evidence of this, but the Saudis have always been major Beltway players, and they’re one of the governments sure to be sued under the new law.)

But what’s most revealing about the concerns and outright fears being expressed is their content. For the counter-arguments now being made – and made all along by the Obama administration – reflect jaw-dropping misunderstandings about geopolitics and the role of international law in international relations that have practically defined mainstream foreign policy thinking across the American political spectrum.

Two in particular stand out, and they’re related to the principle objection to the September 11 law: If American citizens can now bring court cases against foreign governments, in violation of the longstanding international legal principle of sovereign immunity, then foreign citizens will feel free to file all sorts of lawsuits against the U.S. government and its representatives at home and abroad.

First, though, does anyone really think that it’s international law that keeps American diplomats and official Washington safe from the reach of foreign legal systems (and the flagrant pseudo-legal systems found in so many countries – including Saudi Arabia)? If they do, they shouldn’t be allowed anywhere near the American foreign policy decision-making process.

What has really ensured these results is the shield that has always been America’s most reliable asset: American power in all its forms. This should be obvious when it comes to countries considered allies – since the United States is so inherently secure and prosperous that it needs them militarily and geopolitically much less than they need America. Indeed, if any allies are now considering or have ever even contemplated legally harassing American diplomats for any reason, that would count as a disgraceful failure of U.S. policymaking.

And P.S., that goes double for Saudi Arabia. In case the foreign policy establishment hasn’t noticed, even leaving aside the abundant support for Al Qaeda and other Islamic extremists influential Saudis have provided for decades, the days when the United States and the rest of the world needed to tremble at the thought that Riyadh might push through a big oil price hike or even shut off the spigots ended long ago. Even better, that’s mainly because of the energy production revolution in the United States.

So although Saudi retaliation for the September 11 bill might unnerve its hired guns in Washington, the United States is fully capable of telling its government, “Enjoy fighting Iran by yourself.”

Second, fears about a new global wave of anti-American lawsuits stupidly assume that most and even all foreign governments will react in the same way. The worrywarts don’t seem to understand that the September 11 bill only permits suits against foreign governments accused of supporting terrorism in the United States. Is this new law really likely to worry the British? Or the Japanese? Or even the Chinese?

The September 11 bill fear-mongers aren’t normally the types to softpedal the differences between America’s friends and foes, or between democracies and dictatorships, or even between ordinary foreign governments of whatever stripe and rogue states. So what’s going on? Simply put, their analytical compasses and even bedrock common sense apparently have been thrown off by the assumption – so crucial to modern international law – that all sovereign governments are created equal and much be so treated legally. Therefore, September 11 bill opponents seem convinced that all sovereign governments can be counted on to act in the same way as well.

Dickens famously characterized the law as “an ass” when, as is the case from time to time, its precepts produce head-scratching decisions. But in countries with legal systems worthy of the name, those bloopers are rightly accepted as one price of seeking and enforcing equitable societies and the common standards of behavior they require.

But the international sphere lacks the ingredients needed for effective legal systems – i.e., consensus about those standards. And no such meeting of an adequate number international minds is remotely foreseeable. Therefore, the ludicrous controversy about the September 11 bill should be reminding us that in the foreign policy sphere, the law is especially asinine – and should have no meaningful influence on American decisions and actions.

Im-Politic: Speech Transcript Shows China Lobby’s Still Got a Friend in Bill Clinton

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2016 election, Bilateral Investment Treaty, Bill Clinton, campaign finance, China, Hillary Clinton, Im-Politic, lobbying

Politico‘s Annie Karni has just gotten a very important scoop with potentially major implications for this year’s presidential election. She somehow got a hold of a transcript of one of the recent speeches that one of the Clintons has given recently to corporate groups in exchange for a handsome ($285,000 in this case) fee.

No doubt, the story will be seized upon by anyone engaged in or following presidential politics for the evidence it provides about questions that have been asked throughout the campaign: Why do businesses – especially big businesses – pay so much to listen to the Clintons in private? What do the former president and his presidential candidate spouse generally tell these corporate leaders behind closed doors? By extension, are the Clintons working to with these companies and industries to advance their agendas? If so, how energetically?

I found this transcript important for a related, but somewhat different, reason: what it reveals about Bill Clinton’s views nowadays about China, which has been an awfully high profile issue in the 2016 elections. Specifically, it sends a clear message that if voters expect a President Hillary Clinton to respond more effectively than her recent predecessors (including her husband) against Chinese economic and national security challenges, they’d better hope that she keeps the new First Gentleman as far out of the policy loop as possible. Because judging from this transcript, his views on the PRC are as dangerously unrealistic – if taken at face value – than when he occupied the Oval Office.

The transcript presents the remarks made by the former president at a “China-U.S. Private Investment Summit” held in Austin, Texas in March, 2015. The event described its purpose as “[bringing] together 50 Chinese Investor Delegates with over 300 US project sponsors, policy makers, entrepreneurs, trade associations, economic development groups, and professional service firms for the most important bilateral engagement program of the year” to “support the public interest through cross-cultural private investment” by deepening “understanding on the human motivations, market trends, deal models and structures, and key areas for growth in the coming year.”

Translation into plain English: It was a gathering of Americans trying to make money by doing business in China, and Chinese trying to promote their country’s investment in America. Nothing inherently wrong with the first aim (although in practice it has too often resulted in the offshoring of valuable American production, technology, and jobs). That second objective, though, is much more problematic, both because China’s government exercises complete effective control over all aspects of China’s finances, including the channeling of capital abroad; and because no one has ever adequately explained why expanding the U.S. footprint of a communist economic system benefits the U.S. economy on net in either the short run or the long run.

And some essential context: As Karni reported, the speech took place a bare two weeks before Hillary Clinton declared her candidacy for president. Indeed, she “was already scouting campaign office space….” As Karni did not report, however, the United States and China at the time were neck deep into negotiations to conclude a Bilateral Investment Treaty (BIT) that the Austin attendees obviously supported strongly, but which is bound to encounter strong opposition whenever it’s submitted to Congress. So it’s anything but unreasonable to suppose that the conferees viewed their payment to Bill Clinton as a great way to boost the odds that a Hillary Clinton presidency would fight for the agreement. (The Wall Street firms that have paid comparable amounts for her speeches love the BIT, too.)

Moreover, given the controversy the BIT is bound to spur simply because China policy has become so contentious, it’s noteworthy that Bill Clinton’s speech mentioned virtually none of it. Nothing about job loss due to offshoring and Chinese protectionism, nothing about the tightening squeeze Beijing is placing on U.S.-owned firms that are invested there, nothing about multiplying Chinese cyber-attacks on American targets, and scarcely anything about China’s intensifying challenges to declared American national security interests in the Asia-Pacific region (which at one point he seemed to attribute to “the rise of Japan” under its current nationalistic Prime Minister Shinzo Abe).

In fact, the former president set the tone art the very beginning: “[W]e all know what the problems are, but I want to talk about the opportunities and why I think it’s so important that you’re here.”

As implied above, Clinton’s appearance at this meeting sent the at least equally important message to the conferees that “he was here” – for them. But his determinedly rose-colored-glasses view of U.S.-China relations and their upside also arguably served another crucial purpose: morale building.

After all, surely Clinton’s audience knew better than most how troubled U.S.-China relations are. And surely Bill Clinton knew that as well. As a result, chances are, like everyone who has a stake in preserving the China policy status quo, these American investors in particular were feeling pretty discouraged even back then, since their road to success had become so much rockier.

As a result, whether or not they believed their own propaganda about possibilities for cooperation or not, the Austin attendees surely needed their spirits lifted. For even many who recognize themselves to be greedy and shortsighted often need reassurance that they’re genuinely devoted to seeking the greater good despite all appearances. It will certainly take the sting out of writing the new series of checks to American lawmakers that any upcoming BIT lobbying campaign will require. And who better to deliver this feel-good message than an engaging, popular former president?

It’s also entirely possible that the emotionally needy Clinton needed to convince himself again that his own China policies, which are now coming under such fire, ultimately advanced the Lord’s work. So much the better to get paid megabucks in the process.

(What’s Left of) Our Economy: If Washington Was Serious About the China Economic Challenge….

Tags

aerospace, allies, Boeing, China, Cisco, cyber-security, Edward Snowden, forced technology transfer, imports, investment, lobbying, manufacturing, multinational companies, national security, offsets, offshoring, South China Sea, subsidies, telecommunications, Trade, Xi JInPing, {What's Left of) Our Economy

However understandable, the intense administration and media focus during Chinese leader Xi Jinping’s U.S. visit on Beijing’s cyber-hacking has overshadowed several other major Chinese threats to American national security and economic well-being – and the need to fix U.S. strategies that are failing badly to cope with them. High on the list is China’s widespread practice of extorting corporate investment and technology transfer by threatening to shut uncooperative companies out of its large and potentially bigger market. And this blackmail deserves special attention this week because two big examples of it have made it into the news recently.

The first involves Boeing, which apparently will build its first foreign factory in China – a move that not so coincidentally coincided with China’s announcement that it would buy 300 Boeing jets. The second was Cisco Systems’ decision to start cooperating with a Chinese server company on projects that reportedly could include developing new telecommunications hardware products. This deal has followed several years in which Cisco has encountered big trouble in China due to fall-out from Edward Snowden’s techno-spying revelations and charges, and to Beijing’s policy of punishing American companies after Congress in effect froze China’s version of Cisco out of the U.S. market due to espionage concerns.

Since aerospace and telecommunications are clearly central to military strength, these American corporate cave-ins could easily endanger national security – unless you believe that they’ll forever remain in their current limited form. So more effective responses are urgently needed – unless Washington wants to face ever more harmful Chinese cyber-hacking (see this article of mine on how American firms have undoubtedly shared advanced cyber-war-related technologies with China), or ever better armed Chinese forces in possible future military showdowns in the South China Sea and other disputed Asian waters.

The companies themselves explain their agreement to China’s trade and investment conditions with the “half-a-loaf” argument, and it’s not completely unreasonable. They’re obviously not thrilled to be helping create likely new competitors (whether they care about American security is another matter entirely), but they point out that any China business they preserve or gain via their cooperation is more than they’d have without the China market. In fact, Beijing has used its leverage to string them along effectively enough that they’re reluctant even to complain about their China troubles to Washington – for fear of becoming targets for Chinese retaliation, and of excessively rocking the boat of bilateral economic relations generally.

But although the companies’ behavior may be justifiable from their own individual standpoints, their unavoidably narrow, self-interested perspectives make clear why they can’t be relied to protect or advance broader U.S. interests. Washington needs to take the lead. But can it do so without imposing heavy costs on these firms? To me, the answer clearly is “Yes” – and not just because China’s economy is slowing down. The key to success is understanding that a case-by-case approach inevitably leaves China in the driver’s seat, and that the United States can and should capitalize on position as an export market desperately needed by China to ensure adequate growth.

Severely restricting China’s access to this American market would grab Beijing’s attention not only for economic reasons. Chinese leaders would begin worrying about their political futures – and their own personal well-being – since their hold on power depends so strongly on delivering jobs and rising incomes to the country’s increasingly restive population. Moreover, even keeping in mind that short-term costs for the U.S. economy are inevitable – because policy shifts of this magnitude are always disruptive, and because it may take Beijing a while to get the message – the most obvious objections are surprisingly easy to dismiss.

Where will affected companies find customers to replace those they may temporarily lose in China? In many cases, in the American market, because the smaller U.S. trade deficit with China that would result from import curbs would spur more American growth overall. Moreover, so much U.S.-China trade nowadays is “head-to-head,” (in which the same goods compete with each other), that many American firms could fill the gap left by missing Chinese imports. And when it comes to U.S. companies that can’t make up China losses this way, government compensation seems appropriate.

Given Washington’s willingness to bail out Wall Street and auto-makers for blunders largely of their own making, subsidies look defensible for firms in the line of fire of whatever trade conflict develops. (One possible caveat: Many larger, multinational companies rely on China business heavily because they lobbied so effectively for the U.S. China trade policies that have created their vulnerabilities – and other major damage to the American economy – in the first place. So there’s also a case for letting them take their lumps, at least to some extent.)

If such subsidies don’t pass muster politically in the United States, another alternative is available to Washington: using the power of the American market to dissuade non-Chinese competitors to U.S. firms from seizing the opportunities created by these new American policies to boost their own China sales. Although the American firms’ China sales would remain lost, they at least wouldn’t lose competitve ground to foreign rivals.

Further, giving these third-party companies and countries the choice of doing business with China, or with the far bigger – and more reliable – United States would have the added benefit of adding international support to American efforts to fight Chinese protectionism and economic predation.  Working with Washington would also aid foreign governments and companies by reducing China’s scope to play trade partners off against one another. 

Finally, it’s true that the kind of jobs and even technology extortion used by China are standard operating procedures – especially in aerospace and in military aerospace – for many foreign governments, including those of U.S. allies. So how could Washington justify singling out China for counter-measures? Yet when it comes to allies and their policies (called offsets), the answer couldn’t be more evident: They’re allies and China manifestly is not. It makes no sense whatever to treat all foreign governments and economies the same when their relationships with the United States are so dramatically different, and this kind of foolish consistency certainly shouldn’t hamstring America’s approach to China’s economic transgressions.

There is, however, one obstacle to this kind of revamp of U.S.-China economic relations that I don’t see being overcome anytime soon – the continued domination of China policy-making in Washington by those aforementioned multinational, offshoring-happy business interests. The China policy status quo has undermined the American economy’s productive core, and increasingly threatens national security. But the offshoring lobby believes it’s worked well enough for its members. So until a critical mass of national political leaders decides to reject their lavish campaign contributions, expect China to keep taking America to the cleaners. And when Chinese actions sting enough, expect a few grumbles from the multinationals – no doubt mainly for show.

(What’s Left of) Our Economy: A Blame-the-Victim Theory of Trade Policy

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consumers, free trade, free trade agreements, lobbying, Mancur Olson, manufacturing, multinational corporations, productivity, retailers, Robert Samuelson, special interests, trade policy, Wall Street

Nationally syndicated economics columnist Robert Samuelson deserves a nice hand for identifying a possible cause for America’s pronounced productivity slowdown that’s been generally overlooked: the relentlessly growing power in national politics and policy of special interest groups. In a column earlier this week, he drew on the ground-breaking analysis of the late Mancur Olson to argue that the numerous successes achieved by smallish but narrowly focused and highly motivated lobbies in securing specialized favors for themselves from government have encouraged countless other interests to pursue the same strategies. The net effect is to diminish the total resources expended by the economy on production, and to increase the resources used for winning and keeping economically unproductive privileges.

I have several big problems with Samuelson’s discussion, though – and in fact with some of the leading examples used by Olson – and they all involve trade policy.

As Samuelson explains it, companies and workers pressing for protection from imports show exactly how the system now functions – and malfunctions. A winning campaign “saves jobs and raises prices and profits. But consumers — who pay the higher prices — don’t create a counter-lobby, because it’s too much trouble and the higher prices are diluted among many individual consumers. Gains are concentrated, losses dispersed.”

The problem is that, however compelling this sounds in theory, at least when it comes to trade policy, it produces a picture that is simply unrecognizable to anyone with any real familiarity with the subject. Perhaps the most important flaw is the implicit assumption that the freest possible trade always results in the best possible outcomes for the greatest number of Americans – and indeed for the economy as a whole – while calls for interfering with such trade flows always result from special interest pleading.

That’s a tough argument to make when you consider that the relentlessly rising trade deficits generated by the standard free trade approach have slowed the growth of this already sluggish recovery considerably. It’s even tough to make given that the income losses that can be blamed on this trade strategy – which were extremely broad-based – spurred Washington to fill the gap with easy money and the mammoth debt it brought, helping to trigger the financial crisis.

The big-small actor aspect of Olson’s theory doesn’t hold up, either in the trade policy sphere. For decades, the biggest winners by far in the nation’s leading trade policy fights have been big, offshoring-oriented multinational corporations and the often bigger Big Box retailers and Wall Street banks with which they’ve worked fist in glove. The ranks of smaller manufacturers were split, but those opposed to free trade agreements and related decisions were most often defeated. And the smaller companies that did indeed seek to throw sand in the fears of trade liberalization in fact were actually the ones trying to promote broader economic and national interests.

And the smaller retailers and other small service companies not directly affected by trade liberalization generally sided with the corporate giants – in order to win a few easy brownie and lobbying log-rolling points with them (as in “You scratch my back and I’ll scratch yours.”) So they were acting first and foremost on their own narrow interests as well.

As for consumers, who supposedly benefited from those lower prices, they have indeed been pretty disengaged from trade policy disputes. But their apathy powerfully enabled decisions that wound up backfiring on tens of millions of them disastrously, as the crisis increasingly cost them their jobs and their homes. So the Olson theory holds up in the sense that the gains from winning trade positions were highly concentrated – they overwhelmingly benefited the limited constituencies that worked so energetically and effectively to prevail. And the losses were indeed dispersed – among workers and especially among apathetic consumers. The results, however, so damaged the entire economy that its ability to recover fully remains in doubt.

There’s an especially crucial productivity angle that needs to be recognized as well: Surely one of the most effective ways to undermine an economy’s productivity growth is to send much of its most historically productive sector – manufacturing – overseas. So in that sense, the political and lobbying dynamics highlighted by Olson have backfired against the broad national interest as well.

In addition, these trends fed on themselves in a widely unrecognized way: The smaller domestic manufacturing’s physical footprint became, in terms of its share of the workforce and of economic activity, the fewer Americans directly experienced the damage caused by its shrinkage – and the clearer the path to victory for the offshoring/trade liberalization lobby. The latter also benefited from the increased concentration of manufacturing in smaller cities and towns and semi-rural areas. So factories and their workers literally became harder for the rest of the population literally to see and interact with.

Since I’m much less familiar with the lobbying and politics of numerous other economic issues, I don’t feel comfortable commenting on how well the Olson theory describes their workings. But if its tenets are as off-base in these areas as they are in trade policy, it’s easy to see how these ideas would be prized by business, political, and media elites with such a strong stake in blaming the victims for their own grievous policy blunders.