Handling China

Handle’s epic walk-through of Edward Luttwak on the rise of China is simply magnificent. If the Chinese foreign policy establishment doesn’t put it on a study list, the world is a more dangerous place than it needs to be. It says impressive things about Luttwak that his work is able to prompt commentary of such astounding quality. (Yes, it’s long, but you have to read it.)

As a Sinophile, and even (far more reservedly) a sympathizer with the post-Mao PRC regime, it’s disturbing to me how convincing I find this analysis. China really could blow itself up, along with a big chunk of the world’s sole truly dynamic region, by mis-playing its excellent foreign policy hand (in pretty much exactly the way Handle lays out). In particular, its ability to avoid the disastrous course of Germany’s rise is the most pressing question of the age, and the signs so far are not remotely encouraging. Having dug itself quite unnecessarily into a trap of increasingly embittered anti-China balancing, 2013 looks very clearly to have been the worst year since the beginning of Reform and Opening for Chinese geo-strategic decision making.

Reversing course is hard. The important thing for the Chinese leadership to understand is that challenges to global hegemony are almost inevitably catastrophic. There has not been a single case in modern history where such a transition has succeeded, except through close strategic alignment with the preceding hegemon. Holland passed the torch to the UK, which passed it on in turn to the USA. If China envisages an alternative path for itself — rooted in basic antagonism — it is shelving the lessons of modernity, and turning to something else, where ancient cycles lose themselves in the fog-banks of myth. Such deep historical precedent is far too poorly understood to offer anything like helpful advice. The atavistic popular feeling it rouses, however, is certainly strong enough to drive developments over a cliff.

US global hegemony has lost the Mandate of Heaven. The only way it could trawl it back is through the unforced errors of its enemies — which is to say, those who have blundered into being positioned as its enemies. On present trends, these foul-ups are all-too-likely to be made. That would mean world war, naturally tending to thermonuclear ruin, and the end of civilization. China would be finished as anything beyond a broken warning about what non-submission to the democratic zeitgeist leads to (having done to political sanity what Germany did to bio-realism). Through this climax of idiocy, the human species would have melodramatically disqualified itself from any significant historical agency going forward. Military robotics (aka ‘Skynet’, emerging from the war) would be the only intelligent prospect left.

December 20, 2013admin 46 Comments »


46 Responses to this entry

  • Alrenous Says:

    he only way it could trawl it back is through the unforced errors of its enemies

    Disagree. It’s hardly impossible for there to be no hegemon, leaving only a squabble of siblings. America has thoroughly murdered the base of its hegemony, not only dooming its megalomaniacal self-esteem, but destroying its own ability to un-murder that base.

    You are correct that America couldn’t go to the moon anymore; indeed, it can barely muster wanting to go to the moon, and it’s quite the milestone that neither is true of China. While Lesser Bull is correct that letting a state go to the moon is a colossal waste of stuff, it is still an indication of desire and will. America has squandered its desire and will, and it would take desire and will to restore said resources.


    Posted on December 20th, 2013 at 5:28 pm Reply | Quote
  • spandrell Says:

    If I may paste this rebuttal from a Chinese reactionary who posts sometimes in Steve Sailer’s:

    Duke of Qin said…
    Steve, as much as I appreciate your rare forays into geopolitics, in this instance you are wrong.

    The reigning Western liberal consensus on China, as you have amply demonstrated vis-à-vis its own domestic weltanschauung, is a nonsensical inversion of reality. I will demonstrate as to why it is here.

    Luttwak makes three fundamentally flawed assumptions that undermine his entire thesis. One, that China is pursuing geopolitical “aggression”, and that aggression is somehow self-defeating, and finally that China’s potential enemies can successfully bandwagon against her.

    Luttwak is neither a historian nor sinologist and his amateurish grasp of Chinese history and contemporary Chinese society shows. One cannot describe the contemporary political culture of America today in terms of the Missouri compromise or the conflict between Slave holding Virginia agriculturalists and Yankee industrialists. Or argue that the modern European peace is a mere ruse based on the previous centuries long historical enmity of Protestants and Catholics. The Netherlands must constantly be on guard against Spanish domination! As ludicrous as those scenarios sound, every idiot under the sun is willing to apply the same type of illogic when drawing comparisons between historic imperial China to a contemporary China ruled by an ahistorical vanguard Marxist-Leninist party.

    The first error that Luttwak is making assumes Chinese aggression because China has apparently been “mean” to her neighbors. What does being “mean” constitute? Apparently re-iterating long-standing claims to maritime resources that were previously made before but unenforceable that have long been similarly contested by others is the new Sudetenland. Creating an air defense-identification zone in the same vein as the US and Japan is now Poland. As others have mentioned, the American elites have complete domination in shaping the information sphere and what counts as acceptable discourse in the prestige press. The whole air-defense identification zone issue has seen wholesale lies republished and go unchallenged from the Western media. Nothing short of suicide will convince elite Western opinion of otherwise. Steve you of all people should know that the truth lies in the numbers and that when innumerate journalists ignore them in lieu of ever more adjectives, something stinks. Chinese military spending is not particularly high and the growth is less than it seems. Officially Chinese spending is only about 1.5% of GDP which is less than most major powers today barring Japan and even the higher end estimates (again excepting the Pentagons fever dreams) only end up placing spending at around 2%. This is basically the floor that NATO recommends on defense spending which only the UK and France are presently even bothering to meet. Chinese defense spending increases which on paper seem high are just nominal figures which do not factor in inflation. A 15% year on year growth in defense spending is only 9% if you figure in a 6% inflation rate and in reality; Chinese defense spending increases has been tracking real GDP growth.

    12/18/13, 4:50 PM
    Duke of Qin said…
    The second error is his counter-factual assumption that aggression is counter-productive for a would be hegemon. It is absolutely not. No nation has ever risen to the top of the pile by playing nicely and following the instructions of their rivals and enemies. Not the US, not the Soviets, not the UK, not the Germans, not the French, not the Romans, not the Macedonians, nor the Chinese dynasties of old, not anyone. Aggression and the willingness to push existing boundaries is the essential ingredient for anyone who wants to challenge an obsolete status quo which no longer mirrors the present balance of power. Anyone who insists otherwise is being a) an idiot or b) a propagandist for the existing order (refer to the previous paragraph about the propagation of the elite Western worldview). This point shouldn’t even really be debatable were it not for the ability of the West’s liberal elites to turn black into white and down up. Only semantically of course as reality has the nasty habit of not so easily being overturned.

    The final error that Luttwak makes is drawing an incorrect analogy between China and Wilhemine Germany and again ignoring the math. German economic and industrial strength, while substantial and greater than that of any of her individual rivals was not excessively greater than that of the UK. France and the UK together combined had a larger economy and larger population than Germany as of 1914. At most Germany could be described as the primus inter pares in Europe then as she is today. China, as of 2013 has a population that is almost as large and an economy larger than (depending on what the exchange rates are in 2 weeks) all of her immediate would be rivals combined. Divided; China’s enemies are outmatched. United; they are still outmatched and the imbalance of risk (those on the potential receiving end of a land invasion) will force defections in any would be counter-balancing alliance. The only peer competitor of China in the long term is the United States (and vice versa) and it is the very same United States that will be the crux of any security arrangements in the Western Pacific. Many Americans I’ve come to realize truly do not realize how absolutely dominating of a strategic position the US has and how steep the fall it is from number one. Barring China, America’s economy is three times greater than that of the next immediate country Japan and larger than that of Japan’s, the UK, France, Germany, and Russia combined.

    My HBD point of view is that Southeast Asia is a bunch of poor barbaric countries so they don’t count. China and Japan will never be friends because there’s no benefit in being so. It seems to me China has no will of supremacy, and is quite content with sitting down with the US and setting each zones of influence, and jointly bully any small country who tries to upset the balance.
    Handle’s analysis of internal factions in the US looks quite accurate. If the Treasury is pro-China, and the Pentagon is anti-China, both for obvious reasons, the actual pivot is the US State Department, which could swing to any side. To the extent that State is a (the) communist organ, the Chinese strategy of stressing the old leftist romance of the China hands looks smart.


    VXXC Reply:

    Don’t ignore that the instant there is any combat by Americans even as a few advisers that State will instantly and brilliantly sabotage the entire effort at the outset. See George Ball’s Diem Coup Vietnam, Jerry Bremer’s De-Baathfication in Iraq, this list all inclusive. If the Pentagon is at war, State defaults to the enemy.


    Handle Reply:

    It’s important not to focus too much on the purely military aspects of power. What Luttwak is really advocating (as he has in many other places for many years) is to squeeze China’s economic growth. This can happen in two ways.

    In the short term, Luttwak wants the rest of the world to stop absorbing China’s trade surplus. Importing countries, many in Europe, but most especially the U.S. could insist on trade balance. If China is unwilling to stop undervaluing its currency and keeping domestic capital hostage under negative real interest rates, then we can unilaterally force the issue through various means, but most likely imposing something akin to Warren Buffet’s suggestion of import-certificates. Voila – zero trade deficit, and it’s arguably legal under WTO rules. That alone would slow down China’s growth a lot.

    Of course, for those in the financial sector (which owns Treasury), China growth, if the Chinese are willing to cut you in on it (which they are to the extent they need the capital and influence over U.S. policy) is where the big emerging market money is being made, because Western growth is too slow and sclerotic. The growth of your adversary is usually not in your own long-term national interest, but it may be to the short term benefit of your financiers. Yeah, yeah, go ahead blame the Jews. Financiers of every origin everywhere do this in every country though.

    The second way, more long-term or crisis-contingency based, is to choke off the supply of core commodities and raw materials. China gets a lot of this stuff from Southeast Asians which may, as Cochran claims, be a vast sea of intellectual nullity, but still can decide to stop feeding the beast. The imposition of such actions will not necessarily make the Chinese economic machine grind to a halt, but it will probably cause severe consequences and at very least it will pressure the growth rate to stagnation as long as the crisis persists.

    Luttwak is insistent that major conventional battles on air, sea, or land are a thing of the past because everything quickly escalates to nuclear war since every country involved is either a nuclear power or a client of one. So, instead, matters will proceed ‘geo-economically’.

    The U.S. military has no intention of even thinking about preparing for a possible conventional war with China. The conventional armed forces exist to push over countries like Iraq in instances when other great powers are unlikely to interfere. On the other hand, there was a study out of RAND on how super-critical-node centric China’s society is. It just doesn’t take that many conventional bombs on railways, bridges, ports, refineries, fertilizer synthesis facilities, roads, power plants, telecommunications facilities, and dams to unleash a truly apocalyptic scenario an order of magnitude worse than WWII. I’m sure the Chinese are well aware of their vulnerability in this regard.


    Posted on December 20th, 2013 at 5:47 pm Reply | Quote
  • Giacomo Says:

    The function of shamanism is to implement what is forbidden, exactly and comprehensively as and why it is forbidden, but in specially segregated compartments of the socius, where it provides a metacoding apparatus, meticulously quarantined against ‘the transmissibility of taboo’ with its ‘power of infection or contagion’. It enables the codes of the primitive socius to operate upon themselves, to monitor and adjust themselves, according to a secondary regulation that is repressed in general even whilst it is encouraged in particular.


    Posted on December 20th, 2013 at 6:47 pm Reply | Quote
  • VXXC Says:

    Duke of Qin has some points, but I’m gonna go with Handle and Luttwak.

    Mind you they can have the coveted title of Global Slumlord. We need to disengage then sort ourselves, followed by UP into space.


    Posted on December 20th, 2013 at 8:06 pm Reply | Quote
  • Orthodox Says:

    Without China, the entire emerging world looks much less attractive because they’re riding Chinese coat tails. Take out the Chinese and the future will be a Western dominated world for even the not so foreseeable future because once China is out of the way, the developed nations can impose resource scarcity on the world. It will be San Francisco local government policies applied to the world.

    The only country today that is an existential threat to the United States is Russia.


    James A. Donald Reply:

    The only country that is an existential threat to the US is the US.

    China will inevitably become world hegemon. The US will inevitably cease to be world hegemon. One might fear that the US, refusing to give up the role of world hegemon, might blow everything up, but that would take will and unity. Instead, the state department will fight the Pentagon.

    Reflect on the last days of the Byzantine empire, when time and time again, mighty armies were raised, vast treasures expended, by Byzantines to fight Byzantines, while they ignored the armies of Islam.

    An empire needs both soft power and hard power. The Pentagon has both, but mainly hard power. Its soft power is in the form of unofficial and not quite formal relationships between military officers that transcend official borders and official chains of command.

    The state department regards soft power as a state department monopoly, but it also has hard power in the form of the CIA.

    The American empire splits into the red empire of the bases, and the blue empire of Gay Pride Parades. Should actual combat ensue, chances are that the outcome will be similar to that combat between the veteran Roman legions of Sulla and the army of freed slaves of Marius. CIA drones take out leading officers of the Pentagon, but the Pentagon destroys the state department. While this is happening, no one pays much attention to China.


    bob sykes Reply:

    I agree that the US will gradually cease to be a world hegemony, but China will not and cannot replace US. The key is demographics. Right now China’s young population is decreasing and within a few years its labor force will begin decreasing. At the same time its elderly population is increasing. This is the European dilemma but without immigration. As the ratio of dependents to workers increases the disposable resources needed for military expansion and excursions declines. In that regard, this is exactly the US problem and it is why we will not remain a world hegemony (or go the moon, etc).

    So on the eve of 2014, we are looking at world that appears to be more like 1914. Many regional hegemons and a couple of world-wide but vulnerable empires. So, another era of balancing alliances is at hand, with all the instabilities that implies. Hopefully world war is avoidable, but the proposed strategies to contain China, AirSea battle and choke point control, are likely to cause it.

    The Roman scenario leading to civil war is almost impossible. But a military dictatorship or a totalitarian socialist dictatorship is possible and might even be cause by our relative decline.

    On the other, re predictions, wasn’t Japan supposed to be the world hegemon right about now.


    Lesser Bull Reply:

    The incessant Roman civil wars of the Late Republican period didn’t lead to Rome’s end as the world hegemon. Instead, they further catalyzed it.

    While it’s likely that Rome’s relative strength vis-a-vis the rest of the classical world declined during that period, it was already so far beyond them in strength that it didn’t matter. Instead, the internal institutional decay of that period eroded the internal checks that had limited Rome from fully using her strength for self-aggrandizement.


    Posted on December 20th, 2013 at 9:03 pm Reply | Quote
  • Igitur Says:

    > trapped by the paradoxes of the logic of strategy, which imposes its own imperatives …”

    Speculative idealism? Really?

    This reads like Anatoly Karlin — except that AK is trying to impress us with the outsideness of Russia, while this is failing to acknowledge that there’s anything to the world dynamics in what relates to China that isn’t reducible to the hegemony dynamics of Westphalian states.

    I haven’t read anything that impresses me as insightful about China yet. Not anything that realizes the particular relation that ethnic Chinese seem to keep having with the mainland generations after they’ve drifted; nor the tendency to breed abroad, as seen in every african country where they’ve put a large mining operation.

    I have a vague impression, the fluttering of an idea, that there might be something a lot more “Catholic” to China’s arc.


    Posted on December 20th, 2013 at 9:37 pm Reply | Quote
  • George Says:

    – Handle and Luttwak seem to be off the mark; Duke of Qin and Spandrell have the more accurate view here.

    – Luttwak seems to have never heard of the prisoner’s dilemma.

    – Luttwak misunderstands or misrepresents realism.

    – There’s really nothing China could do short of committing suicide that would get The New York Times and the rest of the elite Western media that decides what “world opinion” is to portray China positively and not as an aggressive military threat. That’s not even an option.


    admin Reply:

    Recent history doesn’t seem to square with that — (bracketing the Tiananmen incident) Western media coverage of China was far more positive under the Deng and Jiang governments, dropping markedly under Hu (who didn’t care about / couldn’t do global PR). Just the name ‘Thomas Friedman’ should set off some clangorous bells about the necessary relation between the NYT and Chinese global self-promotion. If China was in anything like the trap you suggest, how have things been able to go so rapidly downhill this year? Ummm, Myanmar anybody?


    spandrell Reply:

    Myanmar was a massive screw up, but it happened because China outsourced the diplomacy to its petty traders. Millions of Yunnan fuckers on the ground in Mandalay are bound to make the natives angry. They overreached.

    Still USG isn’t going to feed Myanmar, global corporations don’t seem too keen in investing there given the regulatory environment, and Myanmar still needs to export wood and gas to China if it wants to pay the bills. China hasn’t made much of a fuss because whatever happens SEA is still their backyard. You don’t need a Monroe doctrine when your backyard has nobody else to sell their stuff to.


    Posted on December 20th, 2013 at 10:13 pm Reply | Quote
  • VXXC Says:

    The new CNO has it covered.

    “In the course of her career, Howard said she encountered “individuals who didn’t want me at the command, or didn’t want me in a particular position,” according to an interview she gave Ebony magazine in September 1999. “And the issue either revolved around my gender or my race.”

    Have at it.


    Posted on December 20th, 2013 at 10:20 pm Reply | Quote
  • George Says:

    I wouldn’t say the Dutch, UK, and the US are examples of successful transitions.

    Remember Napoleon invaded the Dutch Republic and turned it into a French satellite and then later installed his brother as King of Holland. It was only with Napoleon’s defeat at Waterloo that the UK could ascend to hegemony.

    The UK essentially lost hegemony with the rise of Nazi Germany, which was going to beat them without the US or USSR. The US and USSR beat Nazi Germany so they inherited hegemony.

    In both cases it took war.


    admin Reply:

    It took war, certainly, but with both generations of world hegemony on the same side. That’s the crucial modern structure.


    Posted on December 20th, 2013 at 10:27 pm Reply | Quote
  • zhai2nan2 Says:

    >Southeast Asia is a bunch of poor barbaric countries so they don’t count.

    Southeast Asia is a barbarian wasteland?


    Have you been using any hard disks made in Thailand lately?

    >China and Japan will never be friends because there’s no benefit in being so.

    To the contrary, there are many potential benefits. However I think you’re right in that both the governments and the peoples of China and Japan have many obstacles to friendship.

    Japan is inherently isolated, geographically and psychologically. Japan already benefits from trade with China, and the Chinese mob is willing to burn down places of business that trade with China just to vent some rage.

    The Chinese mob needs many scapegoats. The Chinese government is more rational, but still far from utopian.


    Handle Reply:

    Thailand is just the place where the manufacturing takes place because the labor is cheap. The intellectual work in terms of storage device research and development, and design of the production process, occur outside the country.

    The U.S. does the same thing. State of the art auto manufacturing facilities are developed and designed in the U.S. Even the giant machine tools and robots are invented and built here. And then Chrysler puts all that hardware on a train that take it just across the border to a maquiladora in a NAFTA free trade zone where a bunch of cheap Mexicans put the cars together that are sent back to the U.S. market.

    In fact, a great amount of intellectual work goes into designing the process to be as un-intellectual as possible, so that putting the cars together is so automated and foolproof that it requires very little training or supervision. The minute that robots become most cost-effective than Mexicans is the minute we have fully-automated factories pumping out car after car without the needs for more than a handful of human beings. Those facilities will be built as close to the customer as possible, so, like the UAW Detroit workers that got laid off before them when the jobs went South, the border Mexicans will also find themselves out of luck.


    Posted on December 20th, 2013 at 11:31 pm Reply | Quote
  • Murmur Says:

    One of the things that Luttwak’s analysis of how China should proceed does not seem to take into account (at least from Handle’s description of it) is China’s coming demographic crisis – as Mark Steyn is so fond of pointing out, if China is to dominate it will need to do so quickly before its rapidly aging population sinks its ambitions; so we should expect it to become ever more aggressive over the next decade or so.


    admin Reply:

    True — but an important element to the solution is technological-industrial revolution, which should also be the tight focus on the geo-political front.


    Sviga Lae Reply:

    We shouldn’t forget the work at the Cognitive Research Lab at BGI. I think China has its sights set (cognitively, genetically) upwards, and that the surplus ageing population will be taken care of expediently and thriftily, somewhere along the Solution F spectrum, with a fraction of the economic returns from the cognitive elite.


    Posted on December 20th, 2013 at 11:54 pm Reply | Quote
  • georgesdelatour Says:

    I like Luttwak’s analysis. But I think things are not quite as bleak for China as he makes out. It’s all to do with that German analogy.

    Before the USA emerged as dominant world nation, European nations were pre-eminent, with Britain the most pre-eminent. The thing is, in Europe, distances are relatively small. And this matters.

    When Wilhelmine Germany built up its navy it was threatening the British homeland with the possibility of direct invasion. At exactly the same time, Japan and the USA were also building up their navies. Both threatened Britain’s overseas colonies, but, crucially, not the British homeland. The Brits didn’t want any country challenging their dominance of the sea. But when several countries were challenging all at once, the Brits were bound to prioritise the country threatening their homeland. The German army had occupied Paris in 1871. It was reasonable to assume that, if they made it across the Channel, they could occupy London just as easily. Not so the Japanese or the American armies – at least not in 1914.

    China is currently pissing off various Asian countries, often over tiny pieces of rock of very marginal strategic value. But none of these represent a mortal threat to the American homeland the way the pre-1914 German build-up did to Britain. So things are nowhere near as intense as in 1914.

    There’s another crucial difference with the German example. Germany grew rich and powerful as industrialisation spread eastward from Britain. But German planners expected industrialisation to eventually spread even further eastwards, to Russia. In other words, they sensed that German preeminence had a clock on it. It was a passing moment of greatness. They couldn’t afford to just wait. If they waited, Russia would industrialise, and with so much greater physical and human resources at its disposal, Russia would inevitably eclipse Germany. This made many German planners actually seek a war sooner rather than later, while they still had the advantage.

    It’s not like that for China. The longer things continue, the richer and more powerful it will become. There’s no sense it will be eclipsed by India or Indonesia if it doesn’t act now.


    admin Reply:

    “The longer things continue, the richer and more powerful it will become.” — I agree. So why are they being stupidly provocative and rocking the boat?


    DB Reply:

    I don’t really get it either, so I’m scared of what might happen; several recent Chinese diplomatic moves (the revised passport maps also come to mind) really have been Caplan-level “autistic”, so more such moves may happen in the future. Are there key members of China’s leadership who have lost sight of the fact that their military is currently several decades behind the US’s (and that the US is losing relative power over time)?

    The most commonly cited reason for haste, the demographic situation, is not too big a deal if excessive entitlements are avoided.


    Posted on December 21st, 2013 at 12:14 am Reply | Quote
  • George Says:

    Recent history doesn’t seem to square with that — (bracketing the Tiananmen incident) Western media coverage of China was far more positive under the Deng and Jiang governments, dropping markedly under Hu (who didn’t care about / couldn’t do global PR). Just the name ‘Thomas Friedman’ should set off some clangorous bells about the necessary relation between the NYT and Chinese global self-promotion. If China was in anything like the trap you suggest, how have things been able to go so rapidly downhill this year? Ummm, Myanmar anybody?

    You have to consider the context. Of course it was relatively more positive during the 80s and 90s. China was “opening up” from when it had just been a “closed society.”

    The NYT has by no means been uniformly positive about China. It’s been relatively positive about its economic growth and development with the view that this will and must lead China to better conform to its social and political agenda. Its failure and reluctance to conform is the subject of negative coverage. That’s the real reason for negative coverage: China has gotten wealthier but is not conforming fast enough to the NYT’s satisfaction.


    admin Reply:

    There’s definitely something to that, but it’s a very partial story. One clear problem — it serves to excuse the PRC regime for its patently incompetent new millennium diplomacy.


    Posted on December 21st, 2013 at 1:54 am Reply | Quote
  • George Says:

    There’s another crucial difference with the German example. Germany grew rich and powerful as industrialisation spread eastward from Britain. But German planners expected industrialisation to eventually spread even further eastwards, to Russia. In other words, they sensed that German preeminence had a clock on it. It was a passing moment of greatness. They couldn’t afford to just wait. If they waited, Russia would industrialise, and with so much greater physical and human resources at its disposal, Russia would inevitably eclipse Germany. This made many German planners actually seek a war sooner rather than later, while they still had the advantage.

    Similar logic may apply. The US dominates the world. The only states capable of resisting US hegemony to any significant degree are Russia and China. Currently, both states are ruled by regimes that oppose US global hegemony. But if one of these states acquiesces to and goes along with US global hegemony, then the other is screwed. The other state would be completely surrounded. It would be game over. The US would then have total global hegemony. We would then really see “global governance” i.e. world government.


    RiverC Reply:

    Now that is a very clear way to put it, which also puts it in a Prisoner’s Dilemma type framing (though not quite entirely.)

    Also, it seems like Russia may prove resistant to the liberal virus that has made Western nations so dependent on volatile levels of foreign person importations.

    Does China sense, the way that Germany sensed, that Russia will eventually ripen as the new Hegemon unless they are sufficiently aggressive, to the point of actually risking a better future position? Are they trading a shoo-in for VP for a chance at the Presidency?

    I wonder what the adjudge the odds to be, and moreover, I think it would be poor to suppose they don’t have some concept of damage control if this aggressive strategy doesn’t give them what they need to overpower/outmaneuver Russia….


    Posted on December 21st, 2013 at 5:17 am Reply | Quote
  • spandrell Says:

    The Yuan is 6:1 to the dollar, to claim that it is undervalued is also blatantly false. A decent meal in a big city today costs more than its equivalent in Europe or Japan, let alone the US. China exports more because it has a cheaper and more productive labor force, and a very complete industrial ecosystem. No cheating involved.

    And rich countries buy from China because they want to, nobody’s forcing them, least of all the WTO. Global corporations have made untold fortunes with Chinese imports. Europe today is making zillions exporting to China. Poor countries in Europe are all rushing to sell their passports to rich Chinese so they can raise some money. Rich countries are making millions selling wine and cars. Why would anyone touch that?

    Because of the Spratlies? Who gives a shit? China seizing the South China Sea is only a threat for Japan’s trade routes. Nobody else gives a crap, and Europe has been very clear that it doesn’t.

    The idea that the US is has grown to be adversarial with China because nasty China bullies its neighbours is purely undistilled crap. The Pentagon needs to scaremonger about a huge rival in order to get money to make stuff, and China just happens to be there. It would have happened anyway, even if China had made a Cathedral reservation with 500 million Africans and WASP women to tend for them in Shenzhen.

    The only question here is why, oh why did Hillary Clinton find it useful to start a confrontation with China. It seems Kerry doesn’t actually care that much about it. My hunch is that China has started to push foreign corporations out, squeezing the regulatory framework, making life exceedingly difficult for expats there, and the trends seems towards getting all whites out as far as possible.


    Handle Reply:

    Nope. Meal prices at restaurants is not a proxy for this. If the currencies could float on an open market, the Yuan would rise and everybody knows that. And Chinese prices would go up even more, and while it would raise household wealth in the short term, it would make them less competitive and slow their economy. Which is why the Chinese government doesn’t allow it to happen. They need it for classic Solow catch-up growth and wage-suppression in the name of maximized employment and productive-factor-capital accumulation.

    Currencies either float or are controlled (‘manipulated’ in international legal speak). The Yuan:Dollar exchange rate is controlled by the PBoC. It is controlled in such a way so as to produce consistent trade surpluses. (Same goes for Japan). Those surpluses are absorbed not by the coincidental aggregate of uncoordinated actions of private actors in contractual debtor-creditor relationships with different rate and maturity preferences, but instead purposefully by the government. And to a degree an order of magnitude larger than is possibly justifiable under ‘need to maintain a liquid foreign exchange reserve’ rationale. That’s ‘undervaluation’ by definition.

    The PBoC prints extra Yuan to buy up all the dollars which accumulate, and it takes those dollars and sterilizes them by buying bonds directly from the Treasury (though it seems it probably owns a lot more less transparently that it buys through shell trusts on the open market through British financial intermediaries). It nice for the Chinese that we don’t ask them to pay any capital gains on the interest from those bonds, or ask for the right of the Fed or Treasury to buy and hold Chinese bonds.

    If the PBoC wasn’t able to buy and hold these bonds then the exchange rate would fall below 5. If it tried to spend the dollars it had already accumulated it would fall below 4. It may end up doing these things anyway one day if domestic supply gets tight while domestic demand continues to grow. That will cause inflation and higher interest rates in the U.S.

    Countries can adjust nominal interest rates, but they can’t also manipulate foreign exchange rates without some form of capital control. (The exception that proves the rule is Japan, where people will keep buying Japanese government bonds no matter what even though they could get better returns abroad – which is kind of self-imposed capital control on the individual level). So China institutes an increasingly defense-in-depth regime of capital controls to support the manipulation, and trying to get around those controls and other taxes is the Chinese national past time. Which is why they interrupted the play-nice experiment with Bitcoin.


    spandrell Reply:

    First Japan forces its banks, especially the postal service, to buy their treasuries, it isn’t the spontaneous patriotism of the common Japanese. China could do exactly the same, and when debt starts spiraling outr of control my guess is that they will.

    Also the US doesn’t seem troubled by Chinese buying treasuries, no matter Pettis’ protests. Nobody even remotely wants interest rates to rise.

    If the yuan rose to 4:1, most wages in China would be higher than most places in Europe or the US. They’d just cut them. China isn’t that cheap anymore; that’s not why they export more. They’re just more productive. Thailand agreed to a trade agreement with China looking to sell them food, instead it was Chinese food who ended up being sold at half the price of local produce in Chiang Rai’s markets.

    There are tons of ways that the West could stop Chinese imports, but we just don’t bother. Because there’s no real interest in doing so. Japan does, and that’s why it always had a nice trade surplus with China. I can see Japan benefiting from a Chinese slowdown, but no one else. Why does Luttwak think it’s in the US national interest?


    handle Reply:

    All counties force their own banks to buy their debt. That’s how the modern financial system works. And China does this more than anybody, with some of the highest reserve requirements in the world. The while Chinese shadow banking system exists to try and get around those requirements, but the amount of forced bond buying as the only tier 1 collateral institutions are allowed to hold by law is still huge.

    But no one has to keep their money in deposits, which have artificially depressed negative real rates of return. In China, capital controls give households little other choice, but Japanese could (and should) diversify and get foreign accounts to get more interest. But they don’t, who knows why, could be bias or habit.

    Luttwak thinks it’s in the national interest if China doesn’t catch up too fast. He just wants the main emerging rival to stay substantially weaker. That’s pretty basic strategy.

    Posted on December 21st, 2013 at 5:33 am Reply | Quote
  • George Says:

    There’s definitely something to that, but it’s a very partial story. One clear problem — it serves to excuse the PRC regime for its patently incompetent new millennium diplomacy.

    I’m not sure what the PRC could do diplomatically to get positive press in the NYT.

    The NYT and Western media have been covering and lionizing the Ukraine protests because it’s anti-Russia. At the same time it’s been largely ignoring the pro-royalist protests in Thailand and casting them in a bad light. You can’t win with these people. You can’t get a fair hearing.


    Posted on December 21st, 2013 at 5:33 am Reply | Quote
  • George Says:

    Have you read Mearsheimer’s take? He describes this as “the tragedy of great power politics”, also the title of one of his books.


    I—China—want to be the Godzilla of Asia, because that’s the only way for me—China—to survive! I don’t want the Japanese violating my sovereignty the way they did in the 20th century. I can’t trust the United States, since states can never be certain about other states’ intentions. And as good realists, we—the Chinese—want to dominate Asia the way the Americans have dominated the Western Hemisphere.”

    [T]he “central aim of American foreign policy” is “to be the hegemon in the Western Hemisphere” only, and to prevent the rise of a similar hegemon in the Eastern Hemisphere. In turn, the proper role for the United States is as an “offshore balancer,” balancing against the rise of a Eurasian hegemon and going to war only as a last resort to thwart it. But better to try buck-passing first, Mearsheimer advises, and come into a war only at the last moment, when absolutely necessary.

    Such thinking is prologue to Mearsheimer’s admonition that a struggle with China awaits us. “The Chinese are good offensive realists, so they will seek hegemony in Asia,” he tells me, paraphrasing the conclusion to Tragedy. China is not a status quo power. It will seek to dominate the South China Sea as the U.S. has dominated the Greater Caribbean Basin. He continues: “An increasingly powerful China is likely to try to push the U.S. out of Asia, much the way the U.S. pushed European powers out of the Western Hemisphere. Why should we expect China to act any differently than the United States did? Are they more principled than we are? More ethical? Less nationalistic?” On the penultimate page of Tragedy, he warns:

    Neither Wilhelmine Germany, nor imperial Japan, nor Nazi Germany, nor the Soviet Union had nearly as much latent power as the United States had during their confrontations … But if China were to become a giant Hong Kong, it would probably have somewhere on the order of four times as much latent power as the United States does, allowing China to gain a decisive military advantage over the United States.


    Posted on December 21st, 2013 at 5:50 am Reply | Quote
  • VXXC Says:

    We only have to really worry about the Western Hemisphere. No compelling US national interest.

    meanwhile on the subject of compelling national interest…and yet Unz moves…to 12$ minimum wage in CA.
    His motion may well carry.


    Anything that NRO, Tyler Cowen and Byran Caplan hate is probably good.


    Posted on December 21st, 2013 at 5:26 pm Reply | Quote
  • spandrell Says:

    That’s pretty basic strategy.

    That’s the other eerie thing about the Germany analogy. Yes Britain made sure Germany would not contest Britain’s position. At the same time it also lost its supremacy, pretty much killed the supremacy of European Civilization, and in 3 short decades lost the whole of its empire, soon to lose its industrial base, and is now an outpost for Pakistani demographic expansion. Awesome strategy.

    The US might contain China and fuck its economy because of “pretty basic strategy”, i.e. no benefit at all. Western investment and interests in China dwarf those of all surrounding countries combined. China is not ideological, not proselytizing, surely not invading anyone (which sometimes I hope they did. Imagine the Philippines with more Amy Chuas and less hookers). All it wants is resources and to be called “boss”. So let’s kill the world economy.

    But hey the guys at the Pentagon gotta eat.


    Handle Reply:

    You’ve identified the problem exactly.

    China is not very good at getting anyone to trust it as harmless.

    If it wants to head the coalition off, (which it should!) then the CCP should really, really think hard about building positive perceptions. It had an unbelievable window of opportunity, when it looked like the peacefully rising strong horse that everybody wanted to cozy up to as they pivoted away from the declining U.S.

    And China screwed up that opportunity royally completely on their own. It’d be great if the U.S. and State has been actually crafty and clever with diplomacy, but in fact they’re not very competent and all they really know how to do is give away money. Mostly it’s China’s absurd own-goals that have pissed off or frightened all those countries, who turned back to the Americans. Why, and for what?

    What does it makes the leaders of the governments of those other small countries think? “Whoa, WTF? Pointless aggression over nothing? What’s next? These guys are scary. Better to pick the devil we know.”

    If China’s nothing to worry about, then everybody’s got the wrong impression and the CCP needs to win some hearts and minds and very quickly get off its ass and send its ambassadors everywhere and let everyone know they can chill out because they have nothing to fear. They need to build trust fast.

    If they have even ever cared about attempting to accomplish that goal, then they have either abandoned it, or failed miserably at it. Maybe someone over there will read my blog post and/or pick up a copy of Luttwak’s book and think, “Uh oh, lots of people are getting the wrong impression and that’s very dangerous. Quick, let’s clear the air before this gets out of hand.”

    On the other hand, maybe these countries aren’t all confused and China’s not actually ‘nothing to worry about’. I guess we’ll see.


    spandrell Reply:

    Of course China is something to worry about for its neighbours. If it could, all of SEA would become Mandalay in 2010.

    The point is that’s nobody’s business really. Stopping China from eating up its neighbours is like decolonizing Africa and hand it over to black rule.


    Handle Reply:

    Before I say anything else on the subject, I just want to thank you for being such an excellent partner in this conversation and countless others. You are consistently among the best debaters around these parts: civil, logical, insightful, and creative. I wish there were more of you.

    The actual point is that if the Chinese government wants to eat up its neighbors it should be better at anticipating the reactions to its actions, and thus be more clever and subtle, and less aggressive and provocative, in its methods of achieving that goal. It has behaved incompetently.

    What nations, China, the US, or whatever, ‘ought’ to be doing, or what their ‘proper’ business ought to be, is a nice game of theoretical morality. Real world strategy is about getting what you want as efficiently as possible by correctly understanding how your counterparties actually perceive their interests and how they will actually react to what you do. Does the USG perceive its interests in at least a partially asinine way? Certainly! But that’s no reason to excuse the CCP’s failure to account for it.

    If you want stern and intelligent Chinese rule over as much as the world’s surface as possible and see it as a kind of unalloyed good – analogous to Victorian British rule I suppose but with an HBD rationale – and if you also want to see the US pushed out, as a kind of corrupting influence, then nothing anyone says is going to convince you that anyone has any right or interest, ‘properly conceived’, at standing in the way of such ‘progress’. The things the USG wants – like to preserve the option value of free navigability of the Sea LOCs as insurance against being excluded from the region in the event of a crisis – can never be seen as ‘legitimate’ or ‘justifiable’ from such a perspective. Nothing can be.

    spandrell Reply:

    The pleasure’s mine. I really enjoy this and I hope it shows.

    I’m not talking about my personal preferences. As it happens I live in the only country to which China is a real threat, and which has all the incentives to screw with China for good. I also have grown to dislike Chinese society, so I don’t fancy Chinese rule at all, unlike our gracious host here.

    But I do think that the USG has no real interest in the area, besides keeping open sea lanes it doesn’t use itself.
    Now if the Pentagon manual says that having access to any part of the globe under any circumstance is an unnegotiable national interest of the US, well of course nothing short of utterly crashing any country functional enough to rival the US military is going to work.

    Given US decline, if, say, achieving 40% of US power is the threshold for the Pentagon rushing to annihilation, the US will have to annihilate every country on earth eventually. Unless they decline at the same rate. Maybe that’s the rationale behind pushing immigration to all functional countries?

    Handle Reply:

    ‘Now if the Pentagon manual says that having access to any part of the globe under any circumstance is an unnegotiable national interest of the US, well of course nothing short of utterly crashing any country functional enough to rival the US military is going to work.

    That’s pretty much what it says. It’s in chapter 3, ‘Top Priority Nonnegotiable Imperatives of Global Military Domination’ Chapter 1 is ‘Really Important and Useful Stuff’ with a blurb about ‘Global Domination’ which points you to Chapter 3 with a reminder that it excludes non-allied powers with thermonuclear ICBMs, which is considered in Chapter 4.

    The PLA has the same chapter in their own manual. Except there’s a little asterisk that sends them to an appendix, “How to get to Chapter 3 if you don’t presently have enough power” It’s currently in revision. Or it should be.

    Posted on December 21st, 2013 at 6:19 pm Reply | Quote
  • James A. Donald Says:

    the Roman scenario leading to civil war is almost impossible.

    The government lacks cohesion. The politicians are not in charge. The bureaucrats, who are in charge, are many, and increasingly do not like each other. The Pentagon and the state department have been fighting a cold war with hot proxy wars for some considerable time.

    The underlying cause of the out of control deficit and the absence of a budget is to reconcile irreconcilable demands.

    The pentagon is acquiring soft power, the state department is acquiring hard power – actions which suggest that they are preparing themselves for a war of the empires, blue empire versus red empire.


    RiverC Reply:

    It is worth noting that the most recent phase of this war of BlueGov vs. RedGov has been the firing of numerous generals and the imposition of various intentionally hampering policies (i.e. identifying devout Christians as terrorists but refusing to identify Muslim extremists – the very definition of modern terrorism in our context – as terrorists, within training materials) These policies are simply counter-productive and probably, given the internecine conflict, one form of this cold war.

    The NSA’s actions also make me wonder if the NSA has not become actually a fourth player in this… some of their actions make me wonder if they haven’t been hedging their position between Pentagon and State…


    VXXC Reply:

    Gee River, good question. 😀

    We The People have no compelling interest in war with China to protect …anyone. Perhaps Australia. The CommonWealth could defend Australia [remember England has nukes], it has aggregate ships and planes to do so. I also think attacking Australia would bring us in, and it should. Same for New Zealand.

    I think this is extremely unlikely, the Chinese have no designs on either.

    Japan could defend itself.

    The analogy for the US and especially the hegemony is probably the Sea Version of Austro-Hungary.

    Thunder at Twilight was a most excellent book.


    SOBL Reply:

    Jim’s right on State acquiring hard power, but it’s not State but entire BlueGov as the IRS, federal biologists, DHS and others all have been buying ammunition and other weapons. The problem for BlueGov is the private army that has bought more ammunition than BlueGov since 2008.


    Posted on December 21st, 2013 at 7:56 pm Reply | Quote

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