Saturday, April 19, 2014

Tensions in Asia

The biggest news story in the world today might be the growing tension between China and Japan.  Chinese military spending is second only to that of the U.S., and is just less than double that of number 3, which is Russia.  Japan is number 5, but growing.  Today Japan began its first military expansion in 40 years with a radar station on a disputed island.

China and Japan both spend fairly small percentages of their GDP on defense.  Japan, at 1%, spends less as a fraction of GDP than any other country in the top 15.  China, at 2%, has a defense/GDP ratio less than half that of the United States.  Both have extra economic capacity, so continued tensions could easily  lead to increased defense spending, and defense spending spirals can end in conflict.

Journalists sometimes wonder why the U.S. doesn't do more to ease tensions.  After all, President Theodore Roosevelt won a Nobel Peace Prize for negotiating the end of a war in eastern Asia, so maybe President Obama could win a second prize by facilitating agreement between China and Japan over disputed islands and other issues.

But the U.S. has bigger concerns than winning gold medals.  The primary strategic imperative for the U.S. is to prevent any Eurasian country from attaining a level of security that would allow it to concentrate on building a navy that could challenge U.S. Navy.  Whenever a Eurasian country appears to be ascendant, the U.S. will support its rivals.  If any of these rivals gain the upper hand, the U.S. will switch sides.  The best possible situation is constant Eurasian tension and conflict.  As George Friedman of Stratfor put it last week:
U.S. national strategy must be founded on the control of the sea. The oceans protect the United States from everything but terrorism and nuclear missiles. The greatest challenge to U.S. control of the sea is hostile fleets. The best way to defeat hostile fleets is to prevent them from being built. The best way to do that is to maintain the balance of power in Eurasia. The ideal path for this is to ensure continued tensions within Eurasia so that resources are spent defending against land threats rather than building fleets. Given the inherent tensions in Eurasia, the United States needs to do nothing in most cases. In some cases it must send military or economic aid to one side or both. In other cases, it advises.
Establishment media refuse to think about such possibilities.  A Washington Post writer recently dismissed the idea, thinking that it was so absurd that producing evidence to the contrary was not necessary:
there is an assumption in China that the black hand of America benefits from bad blood between the two neighbors. That is not the case, but if a conflict erupts in the East China Sea, truth will be the first casualty.
France became the most powerful country in Europe by strategically encouraging Germany to destroy itself in the Thirty Years' War.  The strategy was managed by Father Joseph, perhaps the most pious statesman Europe has ever known.  Britain survived for centuries in a bad neighborhood by playing the same game.

It is hard to argue with the strategy.  The last Asian power with hegemonic ambitions and a free hand attacked the U.S.  With modern weaponry China could make Peal Harbor look like a production of the Barley Townswomen's Guild.  Better that they fight over there than attack us here.

Saturday, April 12, 2014

A Theory of the New York Times

I pay a ridiculous amount of money to have the New York Times delivered to me in the wilds of Iowa.  Since I disagree with most of their editorials, columns and guest opinion pieces, and find their news coverage biased and condescending, I often wonder why I bother.  It struck me this week that the reason might be that the paper is actually aimed at Park Avenue conservatives, not poor liberals crammed into tiny apartments on the Upper West Side.

The first clue is the advertisements.  Pulling a random paper from my recycle bin, April 4, 2014, the advertisements were:

Tourneau
Watches
Canali
Clothes
Stribling
Condos
SalvatoreFerragamo
Shoes
Graff
Jewelry
Air France
Airline
Ermenegildo Zegna
Shoes
PWC
Consulting
Pillow.com
Bedding
Tod’s
Shoes
Frontgate
Furnishings
The Bridges
FL condo
Tiffany
Jewelry
Caravan
Vacations
NYT Prem
News
Dior
Luxury
NYT Jrny
Vacations
Cartier
Jewelry
Belstaff
Clothes
Borro
Pawn


These are all high-end products.  Even the pawn shop specializes in loans to rich people - they advertise loans from $1,000 to $2 million.  The condominium sellers offer units as low as $600,000, but most are in the millions.  Pillow.com sells pillows for $90, but doesn't show the price in the ad - their customers care about quality, not price.  The back page of last Sunday's magazine advertised condominiums "from $7.6 million."

The next clue is the paper's obsession with wealth.  Only rich people worry about whether they qualify as "ultra-rich," ($30 million net worth is the cutoff) or read special sections on "wealth and personal finance."  The paper runs an endless stream of articles about private jets, private schools, and high-end restaurants, vacations, and real estate.  As Studs Terkel used to point out, there is a section for capital (the business pages), but no labor section.

The final and more subtle clue is the editorial slant.  Rich people want to know how to better exploit their employees and obtain more tax breaks.  The Times shows them how, while at the same time cluck-clucking about how evil it all is.  Reading the Wall Street Journal in a suit marks you as a plutocrat, but reading the New York Times makes a person seem sensitive and kind, while still delivering the information capitalists need to extract rents.   

For example, last week in the Times I learned that the extenders bill, which would extend a collection of expiring tax breaks, including a couple that I use in my businesses, is "expected to sail through Congress later this year."  This new information was presented in an editorial headlined "Hypocritical Tax Cuts."  On Monday Paul Krugman warned me about new justifications for higher inflation rates.  On Wednesday there was a helpful guide to the arguments for a financial transactions tax, so that Wall Street traders can think of responses, plus a warning about the new emphasis on income inequality at the IMF.  Thursday's lead editorial contained an explanation of exactly which employers are and are not covered by the executive order on pay transparency, and on Friday business people who regularly contribute cash to Albany politicians carefully read the editorial describing the dismantling of an anti-corruption commission.

I have written many times about curious logic in New York Times editorials.  But the reason their reasoning is so poor might be that it is only intended as a smoke screen.  Poor reasoning sells papers to some of the quarter of a million liberals who subscribe, but the real audience is investment bankers with wives who hate seeing them read the Wall Street Journal.  They cut through the claptrap to the information they want, just as Soviet readers of Pravda used to sift through propaganda to find clues about shifts in party policies.  And when they buy their wives Prada handbags and Mikimoto pearls, and their wives buy them Tourneau watches, everyone wins.

Even when they divorce after she sees credit card bills for items from Dior that she didn't receive, he can pawn the watches at Borro to pay her settlement.

Saturday, April 5, 2014

Does America Have It All Wrong?

The American ideal is a society where everyone has an equal chance to succeed.  Everyone is "created equal" according to the Declaration of Independence, and so it is believed that all it takes to do well is honesty and hard work.  Honest workers, it would seem, deserve to keep what they earn and do what they like.  Americans think that free public schools and a social safety net give everyone the tools they need to prosper.

Inherited wealth used to be the greatest internal contradiction in the American Way, since the ideology suggests that the wealthy should be free to dispose of their money as they see fit, but inherited wealth gives some children advantages over others.  The contradiction has been resolved with the uneasy compromise of a 40% tax rate on estates, but with many loopholes and only on very large estates.

Today the greatest challenge to the American Way is the growing realization that we are not all created equal.  Cognitive and other abilities have a significant heritable component that cannot be overcome with free pre-natal care, preschool, public school, college tuition, or job training.   The genetically gifted always rise to the top of society.

A recent book by Gregory Clark argues that the rate of social mobility is essentially constant.  Whether he looks at medieval England, Sweden, the United States or communist China, the children of successful people tend to be more successful than the average person.  The great-grandchildren of the elites under the Qing emperors are disproportionately represented in the leadership of the Chinese Communist Party, for example, in spite of the upheaval of the Cultural Revolution. Clark believes that genetics helps to explain this regularity.

American conservatives and liberals both believe in the myth of equality.  Conservatives think the poor have the ability to succeed, but have chosen idleness and sloth.  Liberals believe that unfettered capitalism holds the poor down.  If the poor are simply incapable of making significant contributions to a modern economy, then both sides need to rethink their basic principals.

Clark thinks his findings provide support for the welfare state.  If the poor are incapable of improving their position, it can be argued that they must be taken care of, regardless of whether wealthier people caused their misfortune or not.  A pure propertarian, however, might argue that one's genetic endowment is property, and the fruits of that endowment should not be taken away from anyone.

My guess is that eventually Democrats will take the propertarian position, and Republicans will take the welfare state position.  Democrats have embraced meritocracy as an alternative to inherited privileges, but the newly empowered clever and educated will be reluctant to relinquish power simply because they learn that they didn't really earn it.  Republicans will combine a reactionary fondness for the days of noblesse oblige, Christian concern for the poor, and populist desire for wealth redistribution to support the policies it now opposes.  Political labels will change, but as always, it will be Harvard against the hayseeds, and the rich against the rabble.

My position is that government amplifies genetic advantages by creating monopolies and rewarding people who can navigate regulatory complexity.  A libertarian society would be more equal because genetic elites would compete away some of their advantages.  Political arguments might be beside the point, however, since technological changes will probably have more impact than political changes.  It isn't clear whether technology will level genetic differences or enhance them.

Saturday, March 29, 2014

Ukraine and Realism

One of America's assets is that some people are still gullible enough to believe what our leaders say.  The U.S. rationally exploits this asset by making ridiculous statements such as this one from President Obama yesterday:
He [Putin]'s certainly misreading American foreign policy. We have no interest in encircling Russia and we have no interest in Ukraine beyond letting the Ukrainian people make their own decisions about their own lives.
Statements like these, equivalent to 2+2=5, influence American public opinion, weakening an obstacle to a vigorous assertion of American interests, and apparently help to undermine distrust of the U.S. around the world.

In fact, U.S. foreign policy was centered around encircling and containing Russia for much of the 20th century.  It only changed because the U.S. saw an opportunity to push back and possibly destroy Russian power.  Now that Russia has stabilized and strengthened a bit, the U.S. seems to be moving back to containment and encirclement.

It is normal for governments to see "people make their own decisions" through elections, not mob action.  The elected president of Ukraine was ousted by a violent mob because of disagreement about a legal action taken by the president, a closer union with Russia.  When the people of Crimea overwhelmingly voted to become Russian, this was described by Obama as illegal, even though the U.S. obtained a ruling from the International Court of Justice in 2010 stating that international law does not prohibit regional declarations of independence.  The U.S. sought the ruling because its military attack on Russian ally Serbia led to Kosovo declaring independence.

I am not disagreeing with U.S. policy - containment, encirclement and confrontation might be in the interest of the U.S., and hypocrisy is a useful diplomatic tool.   I am only expressing surprise at how easy it is for Obama to get away with saying that black is white, something I think a Republican president would find more difficult.

There are two fundamentally opposed views of U.S. foreign policy, which can be called libertarian and realist.  Both are logically consistent and plausibly true.  I honestly don't know which would be best for the U.S.  Libertarian foreign policy works well for Switzerland, but perhaps that is only true because Switzerland free rides on the realist foreign policies of other countries.

The libertarian view is that foreign intervention is expensive and counterproductive. In this view, it isn't clear that any important long-term humanitarian, strategic or economic goals were achieved by any U.S. military actions.  Wars like Iraq and Vietnam cost more than they came to.  The USSR would have fallen eventually without a U.S. military challenge because of the inherent weakness of the Soviet economic system.  In WWII, allowing the USSR and Nazi Germany to destroy each other in a war of attrition might have been a better outcome than the Soviet victory that actually occurred.  A negotiated settlement in WWI that did not involve the complete humiliation and defeat of Germany might have avoided the rise of Nazis and WWII.  The Spanish-American war saddled the U.S. with expensive, useless colonies.  Gradual purchased emancipation would have been preferable to the destruction of the Civil War.  The Indian and Mexican wars were immoral land grabs, and the Canadians demonstrated that the Revolutionary War was unnecessary.

The realist view is that weak countries are eventually invaded and subjugated by the strong.  Minimizing the odds of this happening is the primary goal of foreign policy.  Neighboring countries must be weakened and divided, and rising regional powers around the world must be squashed.  Above all, no single power can be allowed to dominate the center of the world, which is the Eurasian land mass.  Ideology doesn't matter; any country with a possible path to Eurasian domination must be weakened.  Of course, the U.S. can't invade and conquer everyone, but it can use a combination of trickery, propaganda, threats, sanctions, and military force to achieve its objectives.

Republican or Democrat, in peace or in war, the American deep state is relentlessly realist.  Mistakes are sometimes made, but the U.S. has dominated the world and achieved a level of security unmatched since the height of the Roman Empire.  Of course, as my grandfather used to say, look at what happened to them.

Sunday, March 16, 2014

Caribbean

Cayman Islands last week, Virgin Islands this week, so no posts for a while. Just two quick observations: 1. Good things happen in a place with no income or property taxes. 2. The US position on Crimea is laughably inconsistent.

Saturday, March 8, 2014

Times a-Changin'

The revolution that some expected in the 1960s didn't happen in the United States.  Why not?  One possibility is that writers and comedians of the 1970s laughed the revolutionaries out of the room.

Harold Ramis' recent death prompted me to rummage around the Internet for clues about the relationship between comedy and politics. I discovered that Ramis was associated with the group that produced a 1973 National Lampoon show called Lemmings, a spoof of the 1969 music festival Woodstock, featuring John Belushi, Chevy Chase, and Christopher Guest.  The show was a harsh, and funny, rejection of the far left. Ramis was clearly what we now call a liberal, which today puts him on the left end of the American political spectrum.  But in the 1960s, the left end of the spectrum was far more extreme.

A running gag throughout the show is mass suicide (like lemmings) by gullible followers of leftist causes.** The most striking part of the show is a Joan Baez impersonator, who is introduced by the show's host, John Belushi, as follows:  (here, at 35:30)
We've got a bummer coming up next. She started out as a bummer in the early sixties, she was a bummer all through the sixties, and she's a bummer today.  So Joan, you wanna come out here and bum us out?
The song she sings, Pull the Triggers, N******s, encourages black revolutionaries to take action, saying "we're with you all the way, just across the bay."  An earlier recording contains this verse:
Just because I can't be there doesn't mean that I don't care, so next time, brother, off a pig for me.
Baez's boyfriend, Bob Dylan, had recently released a song in praise of George Jackson, a San Quentin inmate convicted of armed robbery, who was radicalized in prison and killed three guards in an escape attempt.***

Joan Baez was later the target of a Saturday Night Live skit titled "Make Joan Baez Laugh" and  SNL cast member John Belushi attacked (literally) folk music in the Harold Ramis directed movie Animal House.  Folk music was also mocked in the 2003 movie A Mighty Wind, directed by the same Christopher Guest who was featured in Lemmings. This year's movie, Inside Llewyn Davis, presents a largely negative view of the folk music scene of the 1960s.

Baez was also the target of Andy Capp, creator of the comic strip Lil' Abner, through a character called Phony Joanie, portrayed as a limousine liberal.  Baez's response in her memoirs was that she felt guilty about having so much money, and that Capp's caricature "stung" her.  In fact, she goes on to say, once while trying on expensive dresses after an Yves St. Laurent show in Paris, "I started to cry and couldn't stop until I had taken it off."  She seems to recover quickly, however, and in the next paragraphs describes how much fun it was to tour Austria and Italy wearing nice clothes.

Another skit from a National Lampoon album contains the following:
I'm Barbara Streisand.  It takes so little to off a pig, and it means so much.  Won't you help?
Leonard Bernstein was another wealthy musician who was taken with radical causes.  He held a party in his Park Avenue apartment for society friends to meet members of the Black Panther Party.  A New York Times reporter was there, and wrote:
"If Business won't give us full employment,"he said slowly, "then we must take the means of production and put them in the hands of the people." "I dig absolutely," Mr. Bernstein said.
Donald Cox, a Black Panther Field Marshal,
attempted to assure a white woman that she would not be killed even if she is a rich member of the middle class with a self-avowed capitalist for a husband.
The wife of a Panther on trial for plotting to kill policemen and dynamite midtown department stores turned around and added:
You sound as if you're afraid.  Now there's no reason for that.
The article went on:
She asked if there were any good capitalists and Mr. Mitchell [a Panther defense captain] said he didn't think so.
Tom Wolfe piled on in New York Magazine several months later, coining the term "radical chic."

Folk music, with roots in the radical politics of the 1930s, advanced the causes of the far left, but lost favor as it was mocked in a country that was moving to the right.  Highbrow musicians toying with radical politics saw that they might be even more quickly and ruthlessly mocked.  Rock music, where the real money was, didn't need this kind of discipline, often mocking and rejecting the far left on its own.

Swept up by a series of events, such as the rapid success of the civil rights movement, widespread opposition to the military draft during the Vietnam War, and the existence of powerful enemies of the United States, such as the USSR and China, many Americans in the 1960s toyed with the idea of real revolution.  Riots, crime, and the thuggery of leftists scared people, and comedians, writers and musicians began to tell them that it was acceptable to reject the extreme left.

The result is what we have today:  a veneer of social liberalism, but underneath, acceptance of the basic structures of capitalism and American imperialism.  I think that Rush Limbaugh is wrong to say that the liberal elite is still socialist.  The last of the influential dilettante revolutionaries were ridiculed into insignificance by the early 1970s.


**Belushi:  "Just because it's a free concert doesn't mean you can do whatever you want - it means you gotta do what you're told.  Now all you people who are into macrobiotics, I want you to off yourselves in the south 40 to be used for organic fertilizer."
***Oddly enough, Jim Jones, the leader of the largest mass suicide in modern history in 1978, was an admirer of George Jackson.

Saturday, March 1, 2014

Ukraine

Recent events in Ukraine are surprising and hard to understand.  A freely elected government was violently overthrown, and Western observers called it a step toward democracy.  East and West are battling for the right to bail out a country deeply in debt and poorer than El Salvador.

Can this struggle really be about ideology or economics?  I don't think so.  I think it is about the range of a Leopard tank without refueling.

From the Ukraine-Russia border near Hlukhiv it is 322 miles to Moscow on the M3 highway, only 263 miles to the third ring road.  The difference in elevation is less than 100 feet, and there are no significant natural obstacles other than the Ugra River, which is less than 300 feet wide at the crossing.  Russians held off the Tatars at the Ugra in 1480, but the Tatars didn't have the M60A1 AVLB.  A German-made Leopard can travel 340 miles on a tank of gas, and it could get to the ring road in less than 6 hours.

The Leopards might be joined by columns from Latvia (already a NATO member, 9 hours from the border to Moscow, but trickier terrain), others coming by different routes, even cross-country, with M1 Abrams tanks lumbering behind them.  If Kazakhstan was ever flipped it would open another invasion route, but the drive from the Kazakh border is at least 16 hours, and the terrain is tougher than along the European routes, although not impossible.

These new NATO capabilities might give the Russians a few things to think about, such as:  How good is NATO ABM technology?  Is NATO capable of hacking Russian nuclear installations?  How reliable are Russian missile crews?  Would an officer who ordered a nuclear strike be tried in The Hague after a successful NATO invasion?

Consider the Ukrainian government snipers operating last week against demonstrators.  Used effectively, they could easily have ended the demonstrations.  But someone lost his nerve when crowds and the world reacted angrily.  The snipers were quickly withdrawn, and the mob won.  Nuclear retaliation might work in the same way.  Crews that disabled their weapons could be promised rewards, while crews that turned the keys might be threatened with execution after the war.  NATO countries would cook up a convincing rationale for an invasion, which might further demoralize parts of the Russian military.

The reason none of these things are likely to happen is that if an invasion became even a remote possibility, Russia would scale back its ambitions in order to reduce the threat.  Competing for Ukraine is NATO's way of creating the possibility, however slight, of a successful invasion of Russia in order to convince President Putin to back off in several areas:  Syria, providing refuge for American dissidents, cyber attacks, cyber spying, cyber crime, Central Europe, Georgia, Venezuela, Cuba, the Pacific, Alaska, and even the Gulf of Mexico.

A Western capture of Ukraine would defang Russia, but Russia appears to be willing to fight to prevent this from happening, judging from current events in Crimea.  Crimea has been strategically insignificant ever since Turkey joined NATO in 1952, and is becoming even less important with the construction of a new Russian base on its own  Black Sea coast at Novorossiysk.  While the Black Sea fleet was useful to Russia in the Georgia War of 2008 and recently in Syria, Russia is striking back in Crimea as a tactic to maintain influence in all of Ukraine, not because it would be satisfied with a Western dominated Ukraine and a Russian Crimea.

It is possible that we are witnessing the beginning of a third attempt by the West to dominate the world by invading Russia, following Napoleon in 1812 and Hitler in 1941.  A more likely outcome, however, is Russia finding itself checkmated, and gradually joining the West against the last holdout of illiberalism, which would be China.