Bannon’s dark valley

Former White House chief strategist Steve Bannon offers a perspective on the great geopolitical issue of our time:

But what he really wanted to discuss what how the obsession with Russia was a giant red herring from the bigger looming threat of China’s economic dominance. He pointed to Australia as ‘an object lesson to Great Britain and the United States’ for what happens to a country when it lets itself be dominated by China’s economic might.

He said: ‘The people in Australia thought they were playing by the rules, and what they found out ten years later is that the Chinese had gone in and bought minority stakes in companies and bought natural resource companies – next thing you know, with the investments they made in real estate and real assets et cetera, they took control of companies. Next thing you know they’ve got political power – they’re being politicians. And now Australia is in a situation of creeping control by an independent Republic like China – it’s dangerous. That’s happening in the United States and it’s happening in Britain.’ […]

But Russia, he argued, is distraction from the great evisceration of America, Britain and Europe’s power, which is down to the ‘axis of the 21st century’– China, Persia, Turkey, or ‘the Asian landmass’ and China’s one belt one road.

Is it too late for the west, though? Has China’s economic power now grown so great, and our economies so weak, that the Chinese takeover is inevitable?

‘Up until Donald Trump came on the scene, we were told by everybody in the city of London and on Wall Street that the inexorable rise of China is the second law of thermodynamics. It is the physics of the universe.’

But Trump, he insisted, through the threat of tariffs, and the aggressive limiting of Chinese investments in western countries, can reverse the advance of China’s economic advance: ‘If we were to go full on, and pull the trigger on that, you bring ‘em to their knees.’

What are the chances of America actually doing that, even with Trump? ‘Low,’ he says, ‘but the stakes are too great not to try.

‘We are going through a dark valley. People say I’m apocalyptic – I just look at facts, and I’ve been saying this for years and now it’s all coming to fruition. That’s why with Russia, the kleptocracy are not good guys, but eventually, we have to end the Cold War and we have to bring Russia into some sort of alliance or rapprochement with the west.’

If the west allows Russia to partner ‘with this [China-led] axis, the 21st century will be quite different.’

Even if you’re not inclined to agree with Bannon, it’s a fascinating interview and I recommend listening to the whole thing.

Bill Browder

Bill Browder

From the NY Times:

President Vladimir V. Putin of Russia made a surprise offer to Robert S. Mueller III, the special prosecutor investigating Moscow’s meddling in the 2016 presidential election, at the news conference on Monday concluding the summit meeting between him and President Trump.

The Kremlin, Mr. Putin said, would allow Mr. Mueller and his team to travel to Russia and be present at the questioning of 12 Russian military intelligence officers the special counsel indicted last week for hacking into the computer systems of the Democratic National Committee and the emails of Hillary Clinton’s campaign chairman.

In exchange, however, the United States would have to permit Russian law enforcement officials to take part in interrogations of people “who have something to do with illegal actions on the territory of Russia.” He singled out one man: William F. Browder.

A London-based financier who led a global human rights crusade against the Kremlin that has resulted in sanctions being leveled against numerous Russian officials, Mr. Browder, 54, is a source of deep frustration for the Kremlin, which has gone to great lengths to shut him down. In May, he was arrested and briefly detained in Spain by officers acting on a Moscow-issued Interpol red notice, the sixth the Russians have filed against him. […]

“Business associates of his have earned over $1.5 billion in Russia,” Mr. Putin said. “They never paid any taxes. Neither in Russia nor in the United States. Yet the money escaped the country. They were transferred to the United States. They sent huge amounts of money, $400 million, as a contribution to the campaign of Hillary Clinton.”

Additionally, Mr. Putin declared, “we have solid reason to believe that some intelligence officers accompanied and guided these transactions.”

Mr. Putin offered no evidence to support his claims about money moving to the Clinton campaign, let alone with assistance from intelligence officers. […]

It was not clear from where Mr. Putin derived the $400 million figure, or whether he was referring to the Ziffs or possibly other donors as well. Former Clinton campaign officials did not respond to requests for comment.

Here’s Browder’s full response to the press conference.

What did Putin have in mind by making such an extraordinary allegation — the only really surprising aspect of the event? I expect we’ll find out.

The rare earths Achilles’ heel

Rare earths production in Russia

Nice rare earths you’ve got there. Be a shame if something… happened to the supply chain:

Despite an abundance of minerals reserves, America has become increasingly dependent on imports to meet demand. The U.S. Geological Survey reports that America is now 100 percent import-reliant for 21 minerals, and at least 50 percent import-reliant for another 29. Most troubling is that the U.S. is now 100 percent import-dependent for all of the 17 minerals that constitute the rare-earth minerals group. And China, which controls more than 95 percent of global rare-earth minerals production, has a monopoly.

Whether it’s cellphones, electric motors, batteries, aircraft, wind turbines or MRI machines, rare earths play an essential role. But it’s not just commercial manufacturing assembly lines that are vulnerable to an embargo; it’s also military hardware.

Whether it’s the advanced electronics and control systems in F-22 and F-35 aircraft, night vision devices, guidance, targeting systems, or dozens of other critical defense technologies, they’re all built with rare earth components. While the U.S. has a small strategic reserve of some of these minerals — to provide a short-term supply for our military supply chain — we have allowed ourselves to become unnervingly comfortable in China’s vise.

The executive order President Trump signed Friday ordering a government-wide review of America’s defense industry aims to help fulfill Trump’s promise to “rebuild” the military, a top U.S. trade official says.

Just a few decades ago, the U.S. was the world’s largest rare earths producer. The erosion of our production and its shift to China is a complex story, but the common thread across our growing minerals-import dependence is a regulatory approach to mining that has seen investment flee despite world-class resources. For example, the U.S. possesses 13 percent of global rare-earth minerals reserves, with significant deposits in California, Alaska, Idaho, Montana and Missouri. Yet increased import reliance has become a national security issue.

This needs to be fixed ASAP. It’s really not that hard. Some ideas from a previous article:

The first step to a whole-of-market approach to spur innovation in minerals production is removing regulatory hurdles that dissuade would-be investors. Most notably, the United States must accelerate its mine permitting process. The current seven to 10 year timeline is simply untenable. Australia and Canada adhere to similarly stringent environmental guidelines, yet maintain permitting processes that average just two years. […]

The Pentagon must also focus on existing Department of Defense programs designed to support the U.S. defense industrial base. Each branch of service has a ManTech program intended to improve the productivity and responsiveness of the industrial base and to enable manufacturing technologies. In the president’s fiscal 2019 budget request, the Army, Navy, and Air Force are only requesting approximately $60 million each for ManTech. Furthermore, the Pentagon only requested $38 million for Defense Production Act (DPA) purchases—a defense-wide program focused on expanding and restoring domestic production capacity. This is down from the $63 million requested for DPA in FY2018. With a $700 billion defense budget, dedicating just 0.025 percent of the budget to the next generation of manufacturing technologies is nowhere near enough to catch up to China and shore up domestic capabilities.

Pathetic, is it not? This goes back to what I was saying about the need for an industrial policy. Securing the minerals supply chain should be one element (heh) of a technology-focused economic strategy designed to restore American self-sufficiency and maintain America’s military edge.

Stepping back from the brink?

The economic dispute between the US and China is heating up:

Chinese officials are warning that they are prepared not only for trade war, but for financial, diplomatic and limited military confrontation with the United States, in response to American demands for fundamental changes in Chinese economic policy.

The dispute between the world’s two largest economies has moved beyond narrow issues of trade or specific areas of prospective conflict: Washington now views China’s technologically-focused economic strategy as a challenge to America’s world position, and China views Washington’s demands on China as the equivalent of a “new Opium War,” as a senior Chinese official told Asia Times last week.

Helped along by the US Senate’s torpedoing of a carefully crafted agreement with telecom giant ZTE:

A critical turning point was the Commerce Department’s ban on sales of American chips to power ZTE’s mobile handsets, sourced mainly from the American semiconductor giant Qualcomm. ZTE had violated sanctions on sales of high technology to Iran and North Korea. China’s President Xi Jinping intervened personally with President Trump to rescind the decision. Trump’s Commerce Department negotiated an unprecedented $1.9 billion fine as well as direct American controls over ZTE management, only to have the US Senate vote to reinstate the crippling ban on chip purchases. Trump’s Republican opponents united with Senate Democrats to embarrass the US President. The Chinese official commented, “That is Trump’s problem, not our problem.”

Thanks guys!

The US needs to address any Chinese trade abuses. But no amount of punitive trade actions will save the US economy from corkscrewing into irrelevance, if America does not launch its own “technologically-focused economic strategy,” rather than trying to somehow shut down China’s.

Goldman has some suggestions:

First, do what the Eisenhower administration did in 1957 – shift federal resources toward science and technology and starve the universities of all other forms of aid, including student loans.

Second, restore federal R&D spending to the levels of the Reagan years (when we spent 1.3% of GDP on basic R&D vs. about 0.7% now).

Third, begin Manhattan Project-style programs under the aegis of the Defense Department to force breakthroughs in critical technologies: quantum computing, semiconductor manufacturing, drone technology, artificial intelligence, missile defense (including space-based systems), and anti-submarine warfare to start.

Fourth, as I noted above. organize a brain drain out of China: Identify and recruit their most inventive and creative tech people.

Fifth, get together with the Japanese and organize an alternative to China’s One Belt, One Road program. The fulcrum of this program is the 600 million people of Southeast Asia, most of whom would welcome an alternative to Chinese dominance.

US revolutionizes North Korea policy; haters hate

AP Photo/Ahn Young-joon

An insightful article in the left-wing Jacobin magazine analyzing the Western media’s bizarre reaction to last week’s US-North Korea summit:

On Tuesday, as Donald Trump and Kim Jong-un shook hands for their much-anticipated summit in Singapore, one Korean reporter observed a curious episode. Koreans watching the scene unfold on a TV screen at a railway station in Seoul began applauding. Meanwhile, some nearby Western tourists, perturbed by this development, scratched their heads in confusion.

“I am actually baffled to see them clapping here,” said one British tourist.

There’s perhaps no better symbol of the gulf in worldwide reactions to the summit than this episode. While South Koreans cautiously celebrated a historic step in the thawing of hostilities that have hung over them for almost seventy years, the Western media seemed to look on with alarm — even anger.

What could be more infuriating than a historic meeting that might — might — lead to peace on the Korean peninsula after 68 years?

Hostility to the summit, much of it from Democrats and liberals, had been a staple of press coverage in the months leading up to it, often from commentators who just a few months earlier had been panicking about exactly the opposite outcome. But it reached a fever pitch over the last few days.

There was, for example, the collective hyperventilation over a symbolic arrangement of North Korean and US flags. There was MSNBC’s Nicole Wallace, who warned that the whole summit was actually a “Trumpian head fake,” a mere artifact of Trump’s “midterm strategy” and his “get out of sitting with Bob Mueller strategy.” Sue Mi Terry of the defense contractor–funded Center for Strategic and International Studies cautioned that “a peace treaty is not okay” and should “come at the end of the process” because it “undermines the justification of our troops staying in South Korea.”

I don’t think I’ll ever get over the fact that the CSIS publicly said that.

You wouldn’t know it from the vast majority of Western news coverage (with some notable exceptions), but South Koreans greeted news of the agreement’s signing with optimism — often cautious optimism, to be sure, but optimism nonetheless. Which isn’t surprising — 81 percent of South Koreans wanted Trump to meet with Kim, though that was not much higher than the 70 percent of Americans who felt the same.

Based on this coverage, you probably wouldn’t have learned that the agreement was backed by the UN secretary general, who urged the international community to support its objectives. You wouldn’t have heard, for example, from the residents of a Chinese city on the North Korean border who expressed quiet hope about the negotiations to come. And you certainly wouldn’t have heard that the summit was considered a great success by South Korea’s extremely popular president, Moon Jae-in. […]

Reading non-Western media reports on the summit, you’d be forgiven for thinking you had dropped into another reality. […]

More here. Particularly amusing in this context are the claims that Trump is “normalizing” North Korea and the Kim regime. One wonders if these critics are aware that the Kim dynasty has ruled North Korea since Trump was two years old. Or that North Korea has been a UN member state since 1991 and has had nukes for over a decade. It’s simply not up to Trump — or anyone else for that matter — to “normalize” the North Korean state. It exists, and it’s not going away anytime soon, barring a US-led invasion of North Korea. Would the critics like that? Or are they just dumb? I’m seriously asking.

Reality is that which, when you stop believing in it, doesn’t go away. -Philip K Dick

* * *

Here’s an intriguing behind-the-scenes story from Nikkei, though I would take the information with a grain of salt:

The battle between Washington and Beijing over influence on North Korea has already moved into its second round. And it was Trump’s own words of on Friday that startled the Chinese leadership.

“How are you going to celebrate Father’s Day?” the president was asked in an impromptu appearance on Fox News, broadcasting live from the White House lawn.

“Work. I’m going to work,” Trump told the conservative channel. “I’m going to actually be calling North Korea.”

After the Fox appearance, the president stayed on the lawn to take questions from other reporters. “I can now call him,” he said of Kim. “I can now say, ‘Well, we have a problem.’ … I gave him a very direct number. He can now call me if he has any difficulty.”

The establishment of a “hotline” between the two leaders, however spontaneous the exchange was, will be an extremely powerful tool for Trump. It is a luxury that Chinese President Xi Jinping, who has met with Kim only twice, does not yet have. […]

A hotline between Washington and Pyongyang inevitably alters the balance of power between the U.S. and China. Trump may feel that China is no longer indispensable in negotiations with North Korea. He can talk directly. This was not on Xi’s radar.

And here’s an opinion from the indispensable Korea observer Michael Breen, published back in March:

The previous inter-Korean summits were requested by the South. (Indeed, the first one, it later transpired, was bought — for around half a billion dollars — and the second was treated by them as unimportant.)

But this time, it is the North that wants to talk. Why? Love him or not, Trump has done what no predecessor has done since the North’s nuclear weapons program became an issue 25 years ago and that is to issue a credible threat of military action. This was language the North Koreans understand. Until then, when they heard a White House condemnation of their nuclear weapons program, they thought, “Yeah, that’s what you said to the Chinese and the others, and, you know what, we do that too — dust off old statements. It saves time.”

But Trump came at them like a punch in the face.

Not only did he scare the North Koreans, but he convinced the Chinese and the Russians that he was serious and they came on board for the first time with effective sanctions that are now hurting.

He has also, it must be said, scared the South Koreans, who knew that North Korea’s threats to strike American soil were empty and that if its nuclear weapons were going to land anywhere it would be on South Korean cities. […]

And last and perhaps most important, the big difference is that Washington is prepared to talk. In the light of the standard attitude of previous U.S. leaders to North Korea, Trump’s agreement to the summit with Kim is nothing short of revolutionary. […]

In that regard, his historic willingness to both bomb and talk may achieve a resolution that could open up a way to bring North Korea in out of the cold. At least that is what we in South Korea now hope.

And on the topic of bringing North Korea in out of the cold, here’s an excellent commentary on the summit by Tyler Cowen. Of note:

4. As I tweeted: “Isn’t the whole point of the “deal” just to make them go visit Singapore? The real spectacle is not always where you are looking. And I hope someone brought them to the right chili crab place.”

The goal is to show the North Korean leadership there is a better way than playing the Nuclear Hermit Kingdom game. We won’t know for some time whether this has succeeded. Here is good FT coverage on this point. There are in fact numerous signs that the North Koreans are considering serious reforms. Of course those could be a feint, but the probabilities are rising in a favorable direction. Economic cooperation with South Korea is increasing at an astonishing pace.

It’s possible that Kim wants to be a Deng Xiaoping-type figure who reforms the economy while opening North Korea to the outside world. It’s even possible that he agrees in principle with the clever video that his American counterpart played for him during the talks:

Of course, these are all possibilities — not certainties. I agree with Cowen that we should be agnostic about what happened last week. But I think we’re also entitled to a bit of cautious optimism.

Sonic terror

More troubling cases of American diplomats being evacuated for medical tests after hearing weird noises — this time in China:

A crisis over a mysterious ailment sickening American diplomats and their families — which began in Cuba and recently appeared in China — has widened as the State Department evacuated at least two more Americans from China on Wednesday.

The Americans who were evacuated worked at the American Consulate in the southern city of Guangzhou, and their colleagues and family members are being tested by a State Department medical team, officials said. It is unclear how many of them are exhibiting symptoms, but a State Department spokeswoman said Wednesday evening that “a number of individuals” had been sent to the United States for further testing.

For months, American officials have been worried that their diplomats have been subjected to targeted attacks involving odd sounds, leading to symptoms similar to those “following concussion or minor traumatic brain injury,” the State Department says.

If this is a form of psychological warfare, it’s cleverly deniable while being very creepy and effective. That said, it’s not at all obvious to me what is going on here. It would not shock me to learn that that a non-state actor is responsible, or even that this is nothing more than mass hysteria.

A detail that strikes me as potentially very significant is buried in the last paragraph:

Mr. Lenzi [a security engineering officer at the consulate, who was evacuated] worked for the diplomatic security department, and he believes that his work could have made him a target. Before joining the Foreign Service in 2011, he worked with the International Republican Institute, funded by Congress, promoting democratic reforms in Ukraine and Georgia — two countries where Russia has denounced American involvement.

Russia is not the only country that has denounced American involvement in those two countries, or expressed its opposition to “color revolutions” in general. Hint, hint.

Shut down Confucius Institutes in the US

Why I gave up my academic freedom

This really isn’t that hard:

I’d been invited to give a keynote speech and accept an award at Savannah State University’s Department of Journalism and Mass Communications. In a description of my background, I’d listed the self-governing island as one of the places where I’d reported. But in the printed materials for the event, the reference to Taiwan had been removed.

The department had given the award annually since 1975. But in the past few years, finances had dwindled and organizers struggled to find the resources to cover the expenses of bringing in a speaker from out of town.

Enter the Confucius Institute, a Chinese government-affiliated organization that teaches Chinese language and culture and sponsors educational exchanges, with more than 500 branches around the globe. The branch at Savannah State, founded four years ago, agreed to sponsor the speech.

On campuses across the United States, funding gaps are leaving departments with little choice but to turn to those groups with the deepest pockets — and China is keen to offer money, especially through its global network of Confucius Institutes. But when academic work touches on issues the Chinese Communist Party dislikes, things can get dicey.

Indeed. Confucius Institutes are controlled (de facto) by the Communist Party of China, as part of a lavishly funded global propaganda effort. And the rationale for hosting these things always seems to boil down to money:

Savannah State University does not have a well-funded Asian studies department, and as university administrators told me when I was there, its students and members of the surrounding community have few opportunities to travel abroad. The young man working at the front desk of my hotel in Savannah told me he was going to China this summer with a dance troupe, on a trip sponsored by the Confucius Institute. Without institute funding, the dancers would probably never see China.

And so, schools like Savannah State must walk a fine line. “Often the American co-director is interested in supporting academic freedom and trying to manage the Confucius Institute in a way that is constructive,” says Peterson. Each Confucius Institute has two co-directors, one American and one Chinese. But that’s “really hard to do. And in some cases, well near impossible.”

Australia is even more willing to compromise on this issue:

In the US, Republican Senator Marco Rubio has led the charge against Confucius Institutes. In February, he wrote to four universities in Florida, urging them to terminate their agreements with Hanban in Beijing. Texas A&M University closed its Confucius Institute in April following a bipartisan recommendation from two congressmen. […]

Australian universities are different from their American counterparts, not least because of our tertiary sector’s greater dependence on Chinese international students. Rubio’s approach should have no sway here.

Strange. The county’s Confucius Institutes are designed to teach Australians, not Chinese. The large number of Chinese international students on Australian campuses is hardly relevant in this context, unless of course the implication is that Australia should be careful not to hurt those students’ feelings. In other words: “Nice $22 billion international education sector you’ve got there. Be a shame if something, you know, happened to it.”

In my China Matters brief I outline seven policy recommendations for Australian universities. Above all, those that host a Confucius Institute need to consider more stringent safeguards. Transparency is important to combat propaganda and will help assuage public concerns about Confucius Institutes.

I heartily agree that transparency is important, but the emphasis on combating propaganda and helping assuage public concerns is odd here. The purpose of transparency is more about preventing abuses and violations by the organization in question.

But university autonomy must be maintained, and Australia must avoid the precedent set in the US. The decision whether to extend or terminate an agreement with Hanban is a university’s alone to make. To uphold academic freedom means to safeguard campuses from undue government influence – be it from the PRC, the US, or even the Australian Government.

But shielding universities from US or Australian government influence evidently means exposing them to Communist Party influence. There is no neutral ground here and no way to avoid choosing sides.

Australians need opportunities to learn Mandarin, and Confucius Institutes provide classes taught by trained native speakers. Successive governments have committed to improving Asian literacy among Australians. But they have not – and in the foreseeable future will not – commit the needed millions of dollars to alternative Mandarin education.

For the time being, Confucius Institutes are an imperfect solution to help fill that need.

In other words: money, money, money.

Here’s three more words for you:

Shut. It. Down.

Odds of the Apocalypse: 37%

Only somewhat more likely than your house getting flooded

A hydrologist walks us through the cold mathematics of revolution and chaos:

While we don’t have any good sources of data on how often zombies take over the world, we definitely have good sources of data on when the group of people on the piece of dirt we currently call the USA attempt to overthrow the ruling government. It’s happened twice since colonization. The first one, the American Revolution, succeeded. The second one, the Civil War, failed. But they are both qualifying events. Now we can do math. […]

Stepping through this, the average year for colony establishment is 1678, which is 340 years ago. Two qualifying events in 340 years is a 0.5882% annual chance of nationwide violent revolution against the ruling government. Do the same math as we did above with the floodplains, in precisely the same way, and we see a 37% chance that any American of average life expectancy will experience at least one nationwide violent revolution.

This is a bigger chance than your floodplain-bound home flooding during your mortgage. [I.e. 26%]

It’s noticeably bigger.

And here’s a factoid that should give you pause for thought:

Since the fall of Constantinople in 1453, there have been 465 sovereign nations which no longer exist, and that doesn’t even count colonies, secessionist states, or annexed countries. Even if we presume that half of these nation-state transitions were peaceful, which is probably a vast over-estimation, that’s still an average of one violent state transition every 2.43 years.

Maybe the Silicon Valley billionaires, Hollywood celebrities and politicians who are secretly building apocalypse bunkers have rational reasons for doing so and are not completely nuts.

A generous offer

Thailand elephants

America: what could have been

In which Abraham Lincoln declines a most generous offer from a country far, far away:

I appreciate most highly Your Majesty’s tender of good offices in forwarding to this Government a stock from which a supply of elephants might be raised on our own soil. This Government would not hesitate to avail itself of so generous an offer if the object were one which could be made practically useful in the present condition of the United States.

Our political jurisdiction, however, does not reach a latitude so low as to favor the multiplication of the elephant, and steam on land, as well as on water, has been our best and most efficient agent of transportation in internal commerce.

“America hand”

Wang Qishan fire brigade chief

Wang Qishan is known in China as the party’s “fire brigade chief”

Fascinating nuggets from a recent FT article about Wang Qishan’s appointment as vice president of the PRC, just five months after he “retired” as China’s anti-graft czar (and the country’s second most powerful official):

The Chinese Communist party’s most trusted crisis manager has returned to front-line politics just in time to face one of the biggest challenges of his long career — managing the fallout from what is likely to be the most dramatic deterioration in Sino-US relations in 30 years. […]

“Wang Qishan has forgotten more about our country than many of our senior people know,” said Steve Bannon, US President Donald Trump’s former political adviser who met Mr Wang in Beijing in September. “The level of detail he knew about the US was stunning — the economics of regions, the economics of cities, American infrastructure, the workings of the American economy.” […]

But with the recent departures of Mr Cohn and Mr Tillerson, there are very few senior Trump administration figures to argue for moderation in dealing with China. “Trump is going to be quite confrontational,” said Mr Bannon. “But the Chinese absolutely think the American establishment is going to bail them out and why wouldn’t they, it did in the past.

“The Chinese are going to play for time, engage in dialogue,” he added. “They owned us in Mar-a-Lago, no doubt about it. The globalists were in the ascendancy then, agreed to two ‘strategic’ dialogues [with China] and nothing got done, just more talk.”

I noted the FT piece about Wang’s meeting with Bannon here.