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Entries in China (496)

12:14PM

North American energy boom attracting Chinese investment

Per the recent Wikistrat online crowdsourced simulation on the North American Energy Export Boom, one of the summary conclusions was that China should aggressively invest in the US fracking industry (tight oil, shale gas). While the US attracts only a tiny share of China's total global FDI (foreign direct investment), when you look just at investments in oil and gas, recently North America has become the biggest Chinese target ($20B or so since onset of global financial crisis).

The key to overcoming US political concerns:  keeping it to a minority investment.

Most estimates have Chinese shale gas reserves as equal to that of the US and Canada combined.  Canada is #7 in the world and the US is #2.

The quintessential deal in the works:

Chinese firms now are attempting to negotiate partnerships with FTS International, a Fort Worth, Texas, company that specializes in hydraulic fracturing, a process used to extract energy from shale, according to one person familiar with the matter. FTS, which is owned by Chesapeake [already in deals with Chinese firms] and a consortium of Asian investors, would use proceeds from any deals to expand internationally, this person says.

That is right out of the win-win scenario ("Cooking with Gas") from the Wikistrat sim: encourage Chinese investment so super-energy hungry China can dramatically upgrade its capabilities and tackle its own shale gas challenge, but do so in a way that accelerates the internationalization of the US fracking technology via US firms.

8:55AM

WPR's The New Rules: Assad's Ouster Best Chance to Stave off Israel-Iran Conflict

The debate among U.S. foreign policy analysts over the wisdom of an Israeli attack on Iran’s nuclear facilities -- and whether or not America should allow itself to be drawn into an ensuing conflict with Iran should Israel strike -- has largely taken place parallel to the debate over whether to pursue an R2P, or responsibility to protect, intervention in Syria. It bears noting, however, that forcing Syrian President Bashar al-Assad’s departure may be the best near-term policy for the U.S. to avoid being sucked into an Israeli-Iranian war.

Read the entire column at World Politics Review.

1:48PM

China nuclear protests grow

FT story.  Fukushima is the cause.   People see smart countries like Germany and Japan basically ditching nuclear power and they’ve got to wonder about China building so many so fast.  China has 15 running, 26 under construction, 51 in the planning stages and 120 proposed.

China is the biggest energy consumer in the world, and gets just 2% of its power from nukes – a tiny dent in its massive use of coal for electricity generation.  Overall, on energy (electricity, transpo, etc.), it’s still 71% coal, 18% oil, and natural gas on 4%!  The renewables/water/nukes are about 8%. 

But here is where the fracking revolution can be huge, as Wikistrat just explored in its multi-week sim on the North American Energy Export boom (just finished report and taped brief on that).  China has the biggest shale gas reserves in the world – something on the order of almost 20% of all known reserves and 50% more than #2 America.

As the shale revolution eventually takes off in China, it’ll be interesting to see what happens with China’s quiet ambition to take over the global nuclear supply industry from a fading Japan.  Maybe attempting to be the biggest producer of shale gas will do the trick, but I’m better China tries to master both domains.  It just needs that much more energy over time.

10:22AM

WPR's The New Rules: A Positive Narrative for U.S. Foreign Policy

Where is the positive vision for U.S. foreign policy in this election? President Barack Obama and on-again, off-again “presumptive” GOP nominee Mitt Romney now duel over who is more anti-declinist when it comes to America’s power trajectory, with both slyly attaching their candidacies to the notion that “the worst” is now behind us. On that score, Obama implicitly tags predecessor George W. Bush, while Romney promises a swift end to all things Obama. 

Halftime in America? Indeed.

Read the entire column at World Politics Review.

12:35PM

WPR's The New Rules: U.S. Needs Chinese Partners in Asian Century 

While America has begun an economic recovery of uncertain strength and staying power, we Americans nonetheless face a far longer-term and more substantial national rebuilding project. This daunting task has placed us in a contemplative space, in which we nervously toggle between bouts of renewed self-confidence and crippling self-doubt. But the same thread runs through both cycles of this national bipolar disorder: the assumption that we must bear this burden alone.

Read the entire column at World Poliics Review.

9:11AM

WPR's The New Rules: The Coming War With Iran

While the debate over whether Israel will strike Iran ebbs and flows on an almost weekly basis now, a larger collision-course trajectory is undeniably emerging. To put it most succinctly, Iran won't back down, while Israel won't back off, and America will back up its two regional allies -- Israel and Saudi Arabia -- when the shooting finally starts. There are no other credible paths in sight: There will be no diplomatic miracles, and Iran will not be permitted to achieve a genuine nuclear deterrence. But let us also be clear about what this coming war will ultimately target: regime change in Tehran, because that is the only plausible solution.

Read the entire column at World Politics Review.

1:00PM

Ben Shobert on Wikistrat's look at China-->Africa FDI dynamic

Find the post at Cross the Rubicon.

The bit I found interesting:

Dr. Barnett several years ago made a prediction that I imagine some rolled their eyes at, if for no other reason than it seemed outlandish at the time.  He suggested that as China’s presence in Africa grew, they would be greeted as a new colonial power, admittedly different in form and context, but none-the-less viewed as an outside power interested only in extracting resources from lowly Africa.  This would ultimately, as he saw it, create situations where African extremists would target Chinese operations in Africa, kidnap workers, etc.  It is worth noting this is precisely what has been happening, with a handful of other people asking the question, as Stan Abrams did earlier this week, what the world would think if China were to drop its equivalent of a Navy SEAL Team into Africa to get its people out.

If you want to participate in this business and do it well, your work will constantly be on the edge of outlandishness, otherwise you'll be trailing the pack and just picking up the conventional wisdom (like the increasingly regurgitated debate on state-capitalism-ruling-all versus America-in-decline-or-not?) as it's beaten to death.  

Spending my time, as I have for nearly a decade now, exploring the future reality of Chinese and US co-management of the world, puts me on the edge of most people's plausibility. After all, we got that "Chimerica" definition from Ferguson just as the global financial crisis killed the long-running model he was describing, so OF COURSE we now shift into a long-term rivalry between types of capitalism (strategic pivot et. al) and the "resumption of history" and so on.

But, of course, none of the larger structural dynamics in the world system have changed. We're just seeing the elite's perceptions begin to catch up, and when they do, they naturally package the undeniable reality into old boxes - like containment and superpower rivalry and AirSea Battle Concept (a painfully unimaginative retread from the 1980s with the Sovs).

However, for those of us who stick to their stories (scenarios), tomorrow's superpower interdependence will have less to do with the promise of shared death (MAD) than the promise of shared wealth - and the commensurate challenges of a world ruled from the middle for the first time in history.  That world, dominated by the C-I-A troika of China, India and America, is the subject of my next book, which I'll simultaneously crowd-source within the Wikistrat community over the next several months.

1:08PM

Obama says US wants Chinese FDI, but East Asia needs AirSea Battle Concept too!

What's wrong with this picture?  It comes from a WAPO article that says China is still wary of putting FDI in US, even though Obama claims he wants it for job creation.

Hmmmm.

Where to begin?

AirSea Battle Concept?

New national security strategic guidance that says US military force-sizing should be toward high-end warfare requirement in East Asia - namely China specifically?

Gosh, you wonder where the Chinese feel like we let national security fears trump economic opportunities.

I mean, shouldn't we be able to take their money AND target them for great-power war down the road?  What's so weird about that?  According to Kagan, everything you need to know about China and America is told in the fable about the frog and the scorpion.

This is not the world America made; these are merely the fears we prefer over change - and it's fairly pathetic.

9:44AM

Wikistrat post @ CNN/GPS: What Comes After Chavez?

Editor’s Note: The following piece, exclusive to GPS, comes from Wikistrat, the world's first massively multiplayer online consultancy.  It leverages a global network of subject-matter experts via a crowd-sourcing methodology to provide unique insights.


This Sunday, the historically disorganized Venezuelan opposition movement is holding its first-ever presidential primary to decide upon a single candidate to challenge long-time strongman Hugo Chavez. With regional governor Henrique Capriles expected to prevail, the aging Chavez faces a younger version of himself: namely, a dynamic rising star promising to transform the political landscape. This time, however, the figure is moving it away from the heavy-handed populism initiated by Chavez after he swept into office in 1998.

Over the course of his tenure, Chavez’s pursuit of “21st century socialism” in Venezuela has propelled him to self-declared “president for life” status. Among his accomplishments are the systematic and brutal persecution of political opponents and critical journalists, the stacking of parliament with his supporters, various cash-payment programs to the voting poor to ensure his popularity, and - in a related dynamic - the general undermining (aka, looting) of the country’s primary economic engine, the national oil company known as PDVSA. Chavez has also turned Venezuela into one of the most crime-ridden nations in the world with the annual inflation averaging close to 30 percent.

Still, El Comandante has inspired copycat Chavista leaders in Bolivia, Ecuador and Nicaragua, and has reinvigorated Cuba’s communist dictatorship - all the best friends that money can buy.

But with the de facto dictator mysteriously seeking cancer care in Havana last year, widespread talk has surfaced that this election may well be Chavez’s last. Taking that hypothetical as our starting point, this week’s Wikistrat crowd-sourced analysis looks at what just might lie ahead for a post-Chavez Venezuela.  Here are five pathways to consider.

Read the entire post at CNN's GPS blog.

11:08AM

From a Wikistrat crowd-sourced simulation: North American Energy Export Boom meta-scenarios

 

These are the four master narratives that got fleshed out in the first week of the Wikistrat simulation looking at an unfolding/future North American Energy Export Boom.

We went into the exercise with the four implied "bins" of the X-Y:

 

  1. The lose-lose of North America getting the revolution "wrong" by getting the rule-set wrong (too restrictive out of environmental fears or too loose out of greed) and the Rest of the World either contributing to that outcome or exploiting it for their own equally short-term mindset.
  2. The lose-win of NorthAm getting it "wrong" and the ROW drilling ahead anyway, "winning" on terms they find acceptable enough, even if NorthAm might define them as a loss.
  3. The win-lose of NorthAm getting it "right" but doing so in such a way as to set off a destructive global competition toward that end; and 
  4. The win-win of North-Am getting it "right" and triggering a virtuous QWERTY effect where the world benefits similarly.

 

The Wikistrat crowd came up with about two dozen scenarios, each filled out to the tune of several hundred words spread across about ten fields that explored their up- and down-sides, uncertainties, risks, etc. At the end of that first week, I thereupon read through everything (after commenting all the way during the week) and binned the two dozen into plausible pathways (roughly the order portrayed above in the bullets per bin). Then, taking all those precursing, in-situ and downstream scenarios in hand, I rethought the original notional master narratives, naming them thusly:

 

  • The lose-lose lower-left scenario becomes What the Frack??#*!, suggesting a rude surprise and significant disappointments and a sense of having one's dream destroyed by circumstances beyond one's control. As a stream, it involves a Euro crash delaying investment flow, thus delaying development and allowing negative environmental evidence (water contamination and seismic activity chief among them) to mount. Then you get the environmental counterattack, as the Not In My Backyard Types declare their opposition (Build Absolutely Nothing Anywhere Near Anything). The "Erin Brockovitch" fights thus begun, foreign competitors swoop in to both steal the technology and complicate its local application through "lawfare" campaigns designed to keep the fracking revolution bogged down in courts for years. By the time all the legal dust settles, what the energy industry can actually exploit in terms of resources is far less than originally imagined, yielding a "red queen" sort of outcome (running in place) where the additional supply tapped is quickly swallowed up by growing domestic demand and the fabled export boom never quite occurs.
  • The lose-win master narrative is dubbed, The Gas is Always Greener on the Other Side of the Fence, suggesting that, no matter how if unfolds in NorthAm, it seems to go better elsewhere in the world. In NorthAm, a compromise emerges between industry and enviros: short-term regulations allow for a fairly permissive situation but mid-term data collection ensures a legal/regulatory showdown down the road. This situation creates an overall market uncertainty that allows a certain amount of macro-questioning to unfold: Are we trading gains in CO2 emissions (coal to gas on electricity) that are just ruined by releasing more greenhouse gases instead? The NorthAm effort diverges as Canada, less fussy and more greedy in its mindset, moves aggressively to connect its unconventional reserves to Asia and NorthAm industry players decide it's easier to experiment more aggressively abroad, leading to a quick global spread of the technologies. Over time, we witness more desperate Europe (fearing Russian dependence) and Asia (fearing dependence on EVERYONE!) actually moving ahead more successfully with the revolution, with the latter suffering exacerbated water difficulties as a result. In the end, the US, desperate at the lost lead, moves toward national energy companies (public-private partnerships) to try and catch up.
  • The win-lose scenario is called, Fits of Peaks, suggesting both more great-power contentiousness (fits of pique) and destabilizing shifts in global energy profiles (akin to the imagined "peak oil" in supply, but here in terms of demand). In this narrative, the US is especially creative in setting up enclaved experiments (the example of letting Native American reservations do things that states cannot) that get around the usual environmental rule-sets. Here, Mexico becomes its own big NAFTA experiment, as the political system there, desperate over PEMEX's decline in oil, sets up a sister national energy company to pursue the fracking revolution and that entity becomes a magnet for investment and aggressive experimentation. Sensing a way to push the Free Trade of the Americas idea, the US uses the lure of cheap energy cooperation to reach out to Latin America in a geostrategically defensive move (good-bye Carter Doctrine focus on the Persian Gulf, and welcome back Monroe Doctrine's historical ambitions regarding the Western Hemisphere's economic and political integration). Yes, OPEC tries to fight back by keeping oil prices low, but the fracking revolution's main impulse (natural gas) still takes off magnificently, giving America a newfound geostrategic confidence that allows it to press China all the more on the negative aspects of its rise in East Asia. The Middle Kingdom, in turn, sensing that America is aggressively organizing the Western Hemisphere to its long-term economic advantage, attempts the same in East Asia. Thus, in an attempt to stave off one sort of strategic vulnerability, the US amplifies another, making this the "be careful what you wish for" scenario.
  • The win-win scenario is called, Now We're Cooking with Gas!, which is actually the old marketing catch phrase used in late-19th century America when pushing natural gas stoves as an ungrade to old wood-burning ones. More generally, the phrase has come to refer to a process that has experienced a significant increase in efficiency. Here we talk about the US and Canada coming together to finesse the environmental challenges in a responsible manner, allowing their companies to promote the technology worldwide to their own market advantage. As a result of the long-term boom in incredibly cheap natural gas, King Coal is dealt a death blow first in NorthAm and thereupon globally, as there's now no economic reason for not building gas-fired electricity generation plants almost exclusively (raising the question of what happens to nukes?). Over time, natural gas becomes so plentiful and cheap globally, that a portion of shale gas is siphoned off to gasoline production, so that even the gas-combustion half of hybrid cars are sourced by natural gas - in addition to the electricity part. This development proves a boon for the swapping out of pure gas-combustion automobiles with hybrids and natural-gas fired mass transportation vehicles. Over time, the explosion of cheap energy redefines the North American economic scene, leading to an industrial renaissance and a rebuilding of America's manufacturing industrial base. It also boosts NorthAm's competitive advantage in agriculture, befitting an increasingly voracious global middle class as global climate change stresses crop production in many of the world's emerging economic regions. In the end, all that academic speculation about looming "resource wars" proves to be just that, and the fracking revolution, well-played by North America, is the primary reason why.

Now, with the first week's scenario drill completed, the community moves on to brainstorming and competing their ideas regarding how this range of master narratives could impact the strategic interests of our six main characters: US (NorthAm), EU, China, India, Russia and Brazil.  Naturally, the fate of OPEC will loom throughout the proceedings.

The simulation thereupon unfolds over a third week that focuses on generating strategic options for the six pack of players.

11:27AM

WPR's The New Rules: Slouching Toward Great-Power War

Arguably the greatest strategic gift offered by America to the world over the past several decades has been our consistent willingness to maintain a high and hugely expensive entry barrier to the “market” that is great-power war: first by deterring outright war with the Soviet Union during the Cold War, and then by maintaining a lopsided and unipolar military superiority in the post-Cold War period. However, a case can be made that in recent years, the greatest threat to this enduring component of global stability arises from within the United States itself -- namely, a national security establishment intent on pressing the boundaries of this heretofore rather sacrosanct responsibility.

Read the entire column at World Politics Review.

11:53AM

Wikistrat's chief analyst quoted in Reuters piece on cyber struggle landscape

Disagreements on cyber risk East-West "Cold War"

Fri Feb 3, 2012 11:32pm IST

LONDON - With worries growing over computer hacking, data theft and the risk of digital attacks destroying essential systems, western states and their allies are co-operating closer than ever on cyber security . . . 

But many Western security specialists say the evidence against both nations -- particularly China -- has become increasingly compelling.

"China is currently engaged in a maximal industrial espionage effort that it justifies internally in terms of a catch up strategy (with the West)," says Thomas Barnett, chief analyst at political risk consultancy Wikistrat and a former strategist for the U.S. Navy. "The key question here is: can China assume the mantle of intellectual property rights respect fast enough to avoid triggering economic warfare of the West... If it can't, then this is likely to get ugly."

Read the entire column at Reuters.

10:06AM

Wikistrat's chief analyst quoted in Reuters piece on great-power rivalries in the Mideast

 

Here's the intro and my section:

Global "great power politics" returns to Mideast

LONDON | Tue Jan 31, 2012 7:28am EST

(Reuters) - With Russia sending warships to discourage foreign intervention in Syria, and China drawn more deeply into Iran's confrontation with the West, "great power" politics is swiftly returning to the Middle East . . .

Chinese officials might be willing to use sanctions to negotiate better oil prices from Iran, but there seems relatively little prospect that they will stop buying even if Tehran's rival Saudi Arabia makes up the difference in output.

"Each time the West tightens the leash, Beijing quietly avails itself of the slack," says Thomas Barnett, a former strategist for the U.S. Navy and now chief analyst at political risk consultancy Wikistrat. "The more explicitly Washington bases its global strategic military posture on the perceived Chinese threat, the more Beijing will welcome - and even overtly encourage - these diversions" . . . 

Read the entire article at Reuters.

11:24AM

Chart of the day: Flat-liners versus climbers on L.T. energy demand


From an otherwise regurgitating Economist special report on state capitalism, a wonderfully clear chart on primary energy demand, aggregated as billion tons of oil equivalent.

Not amazing: semi-flat growth for Russia, given its demographic slide.

Impressive for US and EU: the efficiency angle keeping growth flat, despite modest economic growth and significant demographic growth for US.

Curious is Brazil's capacity to keep its curve semi-flat.

So that leaves only the two great risers as demand climbers: China's stunning trajectory and India's late-blooming-but-likely-to-skyrocket-from-that-point-on curve (India surpasses China in labor around 2030 and then grows 50% larger, suggesting it will replicate China's trajectory on some level, understanding that its energy profile could be dramatically different in those future decades).

To me, this is a great example of why the military containment strategy (keep the PLA boxed-in in East Asia is dangerous - and counterproductive.  China needs to go so incredibly global due to its energy demand that it's only natural that it build up power projection and become more contentious on the issue of energy security. America can address all that or go super-unimaginative and make it all about an arms race in East Asia, believing that we'll temper China's behavior by doing the same things we did with the Sovs in the Cold War.

But making China feel nervous at home makes it harder for it to address its growing overseas dependencies in the very same regions where the U.S. is becoming less interested in providing stability and more focused on just killing bad guys. Conceivably, our willingness to go anywhere we want, when we want, to kill anybody we want, would make the Chinese feel better about their interests in these regions. But this thin-green-line approach, augmented with the transparent encirclement strategy in East Asia, essentially works to keep China nervous on both scores by insinuating that growing Chinese military capacity is automatically bad - both at home and extra-regionally, unless, of course, the Chinese become "transparent" in the direction of the very same superpower that threatens them in their home region with its world-class military (the same one that's just declared China to be its primary force-sizing threat from here on out).

Bit much, huh?

 

7:06AM

WPR's The New Rules: China’s State Capitalism Faces ‘Teddy Roosevelt Moment’

The American political discourse is rife with fear-threat reactions regarding rising China, embodied most saliently in the Obama administration’s strategic pivot to East Asia and GOP presidential candidate Mitt Romney’s repeated promise to hold “currency manipulator” China responsible for its economic sabotage of the U.S. economy. Eagerly cashing in on the hype, last week’s Economist greeted us with the most lurid of covers heralding -- yet again! -- “the rise of state capitalism.” We are immediately informed by the subtitle that this is “the emerging world’s new model.”

Read the entire column at World Politics Review.

10:22AM

Charts of the day: US debt and petroleum

From Business Insider (via Zakaria's GPS site) comes the following listing of who holds US public debt.

  • Hong Kong: $121.9 billion (0.9 percent)
  • Caribbean banking centers: $148.3 (1 percent)
  • Taiwan: $153.4 billion (1.1 percent)
  • Brazil: $211.4 billion (1.5 percent)
  • Oil exporting countries: $229.8 billion (1.6 percent)
  • Mutual funds: $300.5 billion (2 percent)
  • Commercial banks: $301.8 billion (2.1 percent)
  • State, local and federal retirement funds: $320.9 billion (2.2 percent)
  • Money market mutual funds: $337.7 billion (2.4 percent)
  • United Kingdom: $346.5 billion (2.4 percent)
  • Private pension funds: $504.7 billion (3.5 percent)
  • State and local governments: $506.1 billion (3.5 percent)
  • Japan: $912.4 billion (6.4 percent)
  • U.S. households: $959.4 billion (6.6 percent)
  • China: $1.16 trillion (8 percent)
  • The U.S. Treasury: $1.63 trillion (11.3 percent)
  • Social Security trust fund: $2.67 trillion (19 percent)

The Global Post's Tom Mucha writes the post as revelation: See! China doesn't own the U.S.

Okay, so China doesn't own the US anymore than we get all our energy from Saudi Arabia, but China is the single biggest foreign holder - more than 3 times the long-time historical champ UK and more than recent historical champ Japan.

And yes, we do get a picture sort of like our oil situation, where our biggest supplier remains ourself (here, in various forms, accounting for roughly 2/3rds) and other big suppliers remains long-time friends.

But what's also been clear when we've floated large amounts recently is that China is the one great foreign buyer out there who can soak up our surges, so it does play a bit of a Saudi Arabia-like role in things, and that's not to be dismissed.

Then also via Zakaria' site comes the following US Energy Information Agency chart:

The clear long-term trend here, per the North American energy export boom in the works (Wikistrat's next community simulation to begin shortly), is the declining role of petroleum imports, dropping from the high in 2005 (60%) to under half today (49%) and down to just over a third (36%) by 2035.

Things you note:

 

  • Flatness of demand curve!
  • Significant rise in production - part of the fracking revolution!

 

The combo yields America's resumption of its role as a net exporter of petroleum products for the first time in over six decades!

Compare that picture to China's and ask yourself if you'd switch energy challenges with them.

Of course not.

But back to the first point: China is the big saver in the system of the last two-three decades. That means it's not only our great release-valve source of money for things like our national debt. It plays that role increasingly around the globe - to wit, the recent Wikistrat sim on "China as the de facto World Bank for Africa."

My point in the pairing: excitement over our improved energy picture, yes, but realism on the future of money - especially given this fear-threat reaction embodied in Obama's strategic "pivot" to China.

8:57AM

Time's Battleland: Would Assad’s Fall Limit the Nuclear Menace in the Middle East?

As Bashar Assad looks more internationally isolated by the day — and far more vulnerable to Western economic sanctions than uber-bad boy Iran — it behooves us to think through what general advantages accrue with his eventual fall. To date, most of the thinking has focused on Iran’s loss of its right-hand proxy in transmitting terror to Israel via Hamas and Hezbollah.

Read the entire post at Time's Battleland blog.

11:22AM

Deficit myths: it's still all about healthcare, so Obama was right to work it. And yet, I want him gone in 2013 [WITH ADDENDUM]

 

Got asked in Belvoir this last week about the present situation in US and what must be done.  I answered by citing my own household economy as microcosm:

 

  • Far more competitive world means earning potential is harder to achieve;
  • That income "haircut" means past debt patterns unsustainable, thus the deleveraging that continues (done better by individuals, families, firms, everybody but the Fed Gov!);
  • Housing is key (our move to short sale old house was big financial achievement of 2011), and curing that is key to allowing workers to move (that's why we did it this year, while the right constellation of circumstances presented themselves, in preparation for eventual 2014 move back East for job-related purposes);
  • Education is key (I pay 7 tuitions: 2 preschool, 2 grade school, 1 HS, 1 undergrad and 1 grad) to maintaining future possibilites, so investment trumps damn near everything; and yet,
  • Healthcare is huge drain (I pay my own now and the pre-tax cost, by my estimate, is between $30-40,000, meaning that's how I gotta earn to cover it all from stem to stern).

 

So larger reality for US not unlike my family: we had to scale back everything to preserve what matters, which is healthcare and education; we had to solve the housing situation to allow for renewed labor mobility; we haven't really seen our standard of living go down at all, and yet we've made wrenching changes to be able to live on a much smaller consumption footprint. All tough adjustments, but incredibly worthwhile.

But again, healthcare is huge and seemingly unassailable from my perspective. We are exceedingly careful about how we spend those dollars, even as that's the last thing - besides education - that we want to scrimp on.

Of course, if we don't have six kids, then my life is dramatically simpler on all scales, but there again, what keeps America strong?  Demographics, so that's worthwhile too.

Citation here is Alan Blinder op-ed in WSJ.  Great stuff.

"Four deficit myths":

 

  1. Americans now demand deficit reduction like never before. Not true.  Jobs matter far more now, as does healthcare and housing. Just understand, polls on this subject are no more definitive than they were 20-30 years ago.  This is not our current obsession.
  2. Our deficit is so bad right now that massive cuts are required immediately. Also not true. We have no trouble selling debt in this global economy. Yes, long-term deficit issue is acute, but key is setting in place conditions for long boom that takes care of that. See Europe for austerity approach.
  3. The ten-year reduction focus makes sense. Bad thinking. Little can and will be accomplished in any 10-year plan. The problem if far longer in scope - see demographics, and thus the solutions must be similarly gauged.
  4. America has a generalized problem of runaway spending. Very untrue. The only part of the Fed budget that's really exploding is Medicare and Medicaid, so it's still mostly about healthcare.

 

In short, "we have a humungous healthcare problem."

Anybody familiar with the US defense budget has long said the same thing: we don't have operations or acquisition or training or personnel crises. The "imperial overstretch" argument remains complete academic bullshit.  We primarily have a healthcare crisis that is extended into pension system. Everything else pales.

In my family right now, the biggest short-term threat, now that we're mortgage free and successfully deleveraging across the board, is healthcare. Huge drain.  Big uncertainty. Encourages self-defeating avoidance behavior on many levels (which we try desperately to be smart about). Leaks into everything.

When GOP says Obama went off deep end on healthcare because country didn't want that or didn't elect him for that, they miss the mark.  It is clearly the biggest internal challenge we face - short and long term. It is the hidden villain on everything. Saying it was a diversion is - itself - a diversionary election-centric tactic.  

But still, I would trust a Romney to finesse its implementation better than an Obama, whose political and negotiating skills I no longer respect, and whose stunning ignorance of, and antipathy toward, business has become an unacceptable leadership flaw - given the tough adjustments still to come.

And yes, I LOVE that Romney did it first in Massachusetts - and did it intelligently. That is a huge credentializer in my mind.

Americans' distrust and anger toward globalization and big business is stunningly misplaced. Globalization has made the world so much better, but it now challenges us in ways we've long gotten used to avoiding because of our long-term privileged position in the global economy, which itself reflected gross historical injustices stemming from colonialization, WWII, socialism in the East, etc. None of those things were our fault, and we took the lead in overcoming them all, but we did live in a pretend world of superiority on that basis across the second half of the 20th century.

That world is gone, and good riddance, say I, because it was supremely unfair to the majority of the planet, and I don't want to live in this world by exploiting others unnecessarily.

So our succees in spreading American-style globalization now comes back to haunt us, demanding we adjust. That's not about demonizing business, even as it is about cleaning up some incredibly bad form on Wall Street (a regular task, just bigger this cycle). It's also not about demonizing China, who is our biggest ally in the global economy going forward - like it or not.

Romeny will say stupid things on China to win the GOP nomination. Obama is already doing stupid things. On the business, it's clear who's hostile and who's not.

Looking ahead, I want a dealmaker, a difference-splitter, a realist on business who acts based on experience and not sterile theory. I also want somebody who can rationalize our military budget and global presence without resorting to idiotic, default targeting of the Chinese.

Romney is far from ideal on all those scores, but he does beat Obama, in my mind, on every one of them.

I stil maintain Obama was the best choice of the two in 2008. I would still vote for him all over again, given the repeated chance. I do think America, however, would have been much better served by a Hillary presidency (I voted for her in the primary), and since I can't get that this time around, I'll make do with the alternative, who I think will have a far better chance of working with a Republican House and Senate than Obama will - given overall Boomer political proclivities (most Boomer politicians are just above cartoon-grade in their motivations, skills and intelligence).

No, I would take Obama over the two jokers (Santorum and Paul) and the complete wild card (Gingrich). And yes, this would be my first vote for a GOP presidential candidate in my entire life.

And my logic on all this if decidedly unemotional (can I toss in that I'm the father of two African-come-to-America daughters, just to be safe?).

This isn't personal in the least; this is strictly business.

LATER ADDENDUM DUE TO MIKE RUSSELL'S COMMENT ABOUT GOP'S CHARGE THAT OBAMA IS "ANTI-BUSINESS":

I don't use that political term of art (anti-business), because I don't think it's true. I don't think his policies have been particularly anti-business.

I think he doesn't understand business (ignorance) and on that basis tends to vilify and scapegoat business (antipathy) for our continuing poor recovery. The silliness over "taxing millionaires and billionaires" is, to me, just rhetorical nonsense. Those people pay plenty, but no matter how much more we tax them (I am indifferent on the subject), it won't change our fundamental issues. So, to me, rolling with political gamesmanship like that says serious change isn't what he's looking for, otherwise he would have gone with Bowles-Simpson and not ignored what everyone said were sound recommendations.

I also cite the ignorance issue for what I consider to be generally bad-for-business-but-bad-for-everybody-else-too policies in combating the crisis. The administration just hasn't done enough to encourage deleveraging throughout the economy, instead preferring stimulus spending to cure a financially-driven overhang crisis, which, per Rogoff, is the wrong medicine chasing the wrong disease.

I won't claim to have tracked the US economy enough to have said, I told you so way back when, because I most certainly did not. But it's hard for me to accept that a guy as smart as Obama couldn't find enough people around him who were smart enough to realize that stimulus splurging after a financial crisis only gets you a follow-on fiscal crisis without actually improving the financial hang-over/debt overhang. They still don't seem to get that, and as long as they don't, I think business will hold off on investment and hiring because consumers are forced to keep their spending low (I certainly am).

So all I am left assuming is that he doesn't know business (ignorance) and made patently bad choices out of some antipathy to business (it is hard to advise the guy who's certain he's always the smartest guy in the room). I say that because business has largely argued for a far stronger deleveraging focus versus the path Obama has taken. That path did include bailouts for Wall Street firms (not sure history will be kind there) and Detroit (am certain history will be kind there and have said that throughout in posts and speeches - but there I cite the global car industry, which is something I have tracked).

Finally, if Obama were both smart on business and less into his business-can't-be-trusted mode, I think he would have pursued opening up the US economy to Chinese investment instead of staying stuck on the RMB's value and this bizarre strategic "pivot" to East Asia, where apparently our weaponry and national "will" is going to keep us economically engaged in the region despite openly targeting the biggest economy there, a country, by the way, that we expect to finance this military buildup in the Pacific. But that's just me saying I don't trust how he views or understands global business.

In general, I do think Obama is a smart guy, but he's displayed enough dumb/antipathy WRT business for me to want him swapped out versus keeping him another four years. The global economy right now is in fairly precarious shape, and I don't see his administration being able to work with a GOP congress over the next four years any better than he has the past 3. We can say it's all GOP hostility but Bill Clinton managed that, and Reagan did with the Dems. Obama is just not that guy. He matches the GOP's Manichean view with too much of his own, along with a pride and self-confidence in his supreme intelligence that I think is his biggest weakness.

We've have world-class brain presidents (Hoover, Carter, Obama) and they manage to have attract hard economic times. I have come to greatly prefer emotionally intelligent presidents (FDR, Reagan, Clinton) or incredible dealmakers (Johnson, Nixon). That's why I will take Romney and his blandness and his difference splitting and flip-flopping and non-agenda. I want a manager who moves the process along for the next four years, rather than the perceived/actual ideologue who attracts more fight than he's worth and isn't clever enough to realize when he needs to bend instead of stand proud.

9:55AM

Wukan protest leader gets his moment in the big seat

 

WSJ Blog piece noting that Beijing appoints the local rebellion leader the new local party boss in Wukan.

One thing to lead the mini-revolution against party corruption and land stealing, another thing to get a crack at running things yourself. 

As noted before, the ceremonial sacking of the corrupt local leader is a Chinese tradition - a release-valve approach to angry ground-floor populism.  But yes, this incident crossed many lines: scaring off the local police, taking control of local government - all the while pledging adherence to single-party rule (sharp).

Since Lin Zulian has been running the place for a bit, the party elite felt it easier just to let him stay in place, assuaging the implied throw-the-bums-out impulse that exploded weeks ago. Local elections, typically hotly contested, soon follow, and we'll see what's allowed, but this one is moving past differences in degree to differences in kind.  It's not just certain factions up high wanting to address the land-grabbing issue; it's some of them willing to test the waters here on different responses to processing the populist anger.

This is both the start of something truly big and something truly long. No, we won't see a spring-like wave sweep over the place, but the longer ordinary Chinese witness these gives on the part of the Party, the more demanding they'll become, with the "social harmony" part being everybody's commitment to incrementalism.

From my perspective, this all moves along quite nicely and reasonably on schedule. I know, I know, "Nixon went to China four decades ago and the Chinese are still Chinese!" But remember my frequently-offered observation about authoritarian regimes - especially Asian ones - opening up to globalization and taking about 4-5 decades of single-party rule before the flowering middle class steps into the fray with great earnestness.  China remains, in Deng years, only about 30 years old, meaning my democratization zone lies at some depth in the 2020s but consummates circa 2030, when the sixth generation of leadership (my contemporaries) is wrapping up their rule. This generation, unlike Xi Jinping's 5th Gen, comes of age after the Cultural Revolution, so the journey both begins and will end differently, because it can - and it must.

China in 2030 features a per capita income level of about $20,000. No major polity has ever made it that far, especially having embraced state-led capitalism, without succumbing to genuine democratization vice single-party rule dressed up as it.  Happened to Japan, South Korea, Philippines, Indonesia. Happening to Malaysia and Singapore. The crew that came online in the 1980s, China chief among them, will constitute the "spring" class of 202X. That deal, driven by all sorts of irresistable forces - demography and income growth being most crucial - has long been in the works. Our job is simply to observe, nudge and not screw it up by giving the center excuses to delay.  Left to its own devices, the competing philosophies and moral principles will emerge, with the competing party wings to follow. The fracturing that follows will be completely natural: we can agree to disagree; we can agree to try one path/party for a while; we can accede to the public's desire for change on a reasonably regular basis.

China already has a firm and predictable rotation of generational leadership. The competition within the party for the top slots is real, as are local elections. The pieces of this puzzle are coming into place - just not on our desired schedule.

Only the Chinese can make these choices, to include the all-important timetable.  All we can do is create friction along the way.

Unfortunately, the strategic "pivot" to East Asia is exactly that.

Our man in Wukan, you have done well.

6:05AM

China as Africa's De Facto World Bank - the Wikistrat video

This is a recorded briefing that I generated from the recent Wikistrat internal training simulation entitled, "China as Africa's de facto World Bank." It summarizes the points I gleaned from the wide-ranging simulation (dozens of wiki pages filled with all manner of brainstormed ideas, strategies, options by several dozen analysts) and summed up in an 8-page report.

This was the first major video production in the set-up I have constructed - after excruciating testing and accumulation of equipment - in our new rental home, which, in various parts, doubles as my work environment. Fortunately for me, virtually everyone else in my family is in school, with youngest Abebu starting within months. So during the day I have the house completely under control, meaning I can meticulously set up the gear, test at length, and pursue recordings and subsequent processing/production in peace.

Ah, the life of the bootstrapped start-up!

Naturally, comments and suggestions are welcomed on content, presentation choices (there are many ways to skin that cat, given the tremendous volume of ideas generated by any one simulation), and video capture.

One correction already accomplished: on this taping I set up a flatscreen for video feedback (I can see screen's content and myself in foreground) just to the right of the camera.  That gives me a slight off-camera eye orientation, which I thought was fine for simulating an audience interaction. But in retrospect, we decided that a straight-into-the-camera style would be better.  That is accomplished in an improved set-up that involves a smaller feedback screen being place just below the came - as in, within a couple of inches. That way I can look directly into the feedback and be, for all practical purposes, looking directly into the camera. The feedback screen is crucial because all of these briefs will be screen-content heavy and first-and-one-time briefs on my part, meaning I can't possibly memorize every click like I do on my regular brief. In that way, it is a LOT like doing the TV weather: lots of data/info to get through and you need to position yourself in front of the screen while not blocking it.  I do fairly well on this first try, but can obviously get smoother - trick being the feedback presents itself in a mirror image.

Another fix in the works: I lost my clip for my clip-on mike and therefore had to wear below the camera line because my substitute clip ain't so elegant.  That meant I picked up the clicking sound from my remote controller a bit too much - for my taste. New one is in the mail, so next time I'll wear the mike far higher and hopefully not pick up that sound.

Overall, pretty happy with the effort. At first, I repeat the text too much, but I warm up over time and get more extemporaneous and relaxed as I got more comfortable with moving myself around. This is far different from me being tracked by a cameraman on a big stage, because I go completely unconscious on my style and let the camera-guy deal with all that.  Here, with a fixed camera, I have to adjust my style somewhat. So a bit stiff at first, improving throughout, and clearly something I will grow more easy with it as I repeat the process.

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