Sunday Cutdown XXXIX (25 August 2024)
Clearing my inbox of stories I want to document
1) Here comes the handoff
NYT: Global Trade Needs a China Alternative. India Needs Better Ports.
Stubborn Xi Jinping, untrusting of his party’s control over a populace that truly embraces its domestic consumption potential (Who knows what they might demand next?), continues to drive hard on export-driven growth when all signs in the system say the great demographic dividend “train” has left that station and is now winding its way through SE Asia and on to India.
SE Asia’s demographic window is tight, sandwiched as it is mentally in the minds of global business between behemoths China (which drove all for a good long stretch) and next-up India (which we all hope will take up that growth mantle). SE Asia is also aging at a stunning rate right now, so perceptions are correct: the region is a mere historical placeholder between the giants.
The irony of this headline, though, caught my eye: India needs ports! Guess who’s building mega-ports the world over?
Awkward …
India is now pursuing an aggressive campaign to catch up, readying plans for new ports while expanding existing docks. Whether those designs come to fruition and how quickly could shape the results of one of India’s grandest aspirations: swelling into a full-fledged manufacturing and export colossus.
Now, the US-centric geostrategic explanation that completely neglects the underlying demographics:
That prospect is increasingly imaginable as multinational retailers that have long leaned heavily on factories in China to make their goods seek alternative venues, spooked by trade hostilities between Washington and Beijing and the supply chain disruptionsof the pandemic. That effort is intensifying as businesses absorb the expectation that trade relations between the world’s two largest economies will remain unsettled regardless of who wins the U.S. presidential election in November. Many major brands are exploring factories in India.
This was always going to happen. Focus on ultimate causes, not proximate ones. Don’t confuse the superstructure for the base.
The story also neglects to mention the obvious answer of India seeking greater cooperation with China, which really HAS to happen on some level.
The telling quote:
“The world doesn’t want total dependence on China,” said Unmesh Sharad Wagh, chairman of the Jawaharlal Nehru Port Authority. “Definitely, the best alternative is India. Now, people are shifting their base to India.”
This is the opposite of broad framing and reflects the usual Western need to totally decry the past so as to mentally unlock the future. The world never totally depended on China, and the world will never totally depend on India.
We need to stop trafficking in these mental absolutes (with “winning” being the worst). They’re unrealistic — even silly, and they discourage true strategic thought.
2) Coming to a workplace near you
AP: Sensors can read your sweat and predict overheating. Here’s why privacy advocates care
The most obvious and granular adaptation response to the dangers of global warming: turn every human into a sensor.
I keep waiting for the NFL to come out with these sensored helmets that time you out in a game for too many concussive dynamics (however small and accumulating).
This should be less controversial and yet, now one needs to surrender their vitals to the boss. Then again, your break stops being a bone of contention if the system demands it, yes?
We can hope.
One thing is clear: businesses tend to resist and vulnerable workers tend to gut it out, and both tendencies are becoming more and more dangerous.
So we wait … for the equivalent of the Triangle Shirtwaist Factory Fire.
And the ruleset reset it will invariably trigger.
3) China tries to mount a second shock to the system
ATLANTIC COUNCIL: Why the next trade war with China may look very different from the last one
Continuing with the stubborn-Xi theme (which has an almost Trumpian feel to its willfulness in the face of economic logic), this is a really good piece to review.
As part of its strategy to unleash “new quality productive forces,” Beijing has shifted its focus to technology-led growth. Since 2017, China has more than doubled its exports of high value-added products, such as electric vehicles, batteries, semiconductors, and solar panels. Weak domestic demand means this increased production is redirected to foreign markets while strengthened domestic capacity to build high-tech products has reduced China’s need for importing them.
This time around, though, the world is ready to push back, in part because this is just such a bad call on China’s part. Instead, it should be pushing domestic demand as it climbs the production ladder.
The cutthroat prices that Chinese firms can offer are making it difficult for emerging markets to move up the global value-added supply chains themselves. During the first “China shock,” many emerging markets rode the wave of China’s growth by supplying it with the food and energy commodities it needed to sustain its rise as the world’s factory. They are unlikely to benefit similarly from China’s move up the value chain this time. This new transition will demand advanced technology such as semiconductors, auto parts, batteries, and 5G infrastructures—among other products that emerging markets typically don’t produce.
Point being, China’s attempted re-rise, being so weighted toward exports and so dismissive of the need to increase domestic demand, will be met with fierce resistance this time on both North and South fronts: the North naturally sees the shift to competition in the high-tech sector as threatening (particularly given China’s surveillance bent), while this time the South will feel cheated in its development opportunity (which it will be). The combined opposition will just make this current Chinese effort that much harder to pull off.
All because of Xi.
China’s move up the value-added chain was expected to create demand for low-value-added goods from low- and middle-income economies. But weakness in China’s domestic demand and Beijing’s emphasis on retaining low-tech manufacturing jobs has not only reduced export opportunities to China, but also intensified Chinese firms’ competition in low- and mid-tech sectors.
And so the response begins:
Governments within the Group of 20 (G20) and beyond are becoming wary of a “China shock 2.0.” Policy interventions targeting imports from China of electric vehicles, batteries, and solar panels have surged in the last four years.
China was accommodated the first time around but cannot be, per market logic, this time around: there is just too much loss for the world and too much selfish (and stubborn) gain for Beijing. China does not deserve our forbearance this time around. China should be pumping up its domestic demand and living with that political outcome. But the Party fears that path to no end, and so is sticking with what got it to this point in the first place, even as that option no longer structurally exists in the global economy.
Duh!
The system has moved on and China should be moving up according to the normal model.
You get on the globalization train. It punches your demographic ticket. And then you learn to live with where it takes you. Your ideology is not an independent variable; it must adapt and evolve along the journey.
China is now going to be policed by the world system in a manner it never has been before. This will be a tense learning experience, and Taiwan may eventually join that combustible mix as a scenario wild card.
But this system pushback is inevitable and right, and so it will unfold.
Our job is simply not to lose our minds in the process. It is not really us-versus-them. It’s really the Party versus the people.
Again, a great piece. Very smart, good framing.
4) Same old, same old
ECONOMIST: If a China and America war went nuclear, who would win?: After 45 days of conventional fighting nukes would be tempting, wargamers suggest
The Pentagon has been gaming conventional warfare between two nuclear powers for decades, always with the same concern: What happens when the stalemate forces one side to consider using …?
And guess what?
Each and every simulation comes to the same conclusion: when push comes to shove, somebody pulls out a nuke and it’s Game over man! Game over!
That enduring streak has, yet again, been confirmed, reports the newspaper.
Big whoop, say I. Nothing has changed regarding MAD, despite a lot of strategists wishing to make it so over the decades.
Thank God, say I also.
Apparently, it is a lesson that every generation must explore and then learn on its own.
5) Another glimpse of the Military Singularity
NYT: Russia Said It Repelled a Large Ukrainian Drone Attack on Moscow
The future of Fly! My pretties! Fly!
When every raid is a Doolittle Raid …
Dual drone assaults away from the front lines have become a feature of the war in Ukraine, with both countries targeting each other’s military complexes and energy infrastructure. Russia, in particular, has hammered Ukrainian civilian centers with barrages of aerial attacks mixing missiles and attack drones.
The largest military incursion since Barbarossa in 1941, and then this on top of it.
Humiliating.
Manned conventional warfare is dying before our eyes.
It will not be missed, despite the pleading of the dearly departed.
Act accordingly.
6) Vger must join with the Creator!
US SUN: DEAD INTERNET Virtual ‘inbreeding’ risks sparking AI doom where bots get ‘progressively dumber’ as expert warns of ‘irreversible’ harm
The dreaded GIGO effect (garbage in, garbage out) looms over AI’s future, says many. It’s a lot like what happens to huge mutual funds: they simply run out of good investments for all that money and so their returns regress to the mean (become very average).
AI needs big data, and when you run out of good raw material (once you’ve conceivably exhausted the web), then you snack on crap, and that makes you dumber over time.
That is one version of the deep fear. The answer? Some point to AI generating big data for other AI to feed on, but that sounds even more incestuous, right? Snake eating its tail?
The irony: AI needs humans in the loop to keep growing.
Call it the “Vger Paradox” from Star Trek: The Motion Picture.
I finally get that pioneering AI movie!!!!
7) Speaking of a reduced gene pool
VISUAL CAPITALIST: Ranked: America’s Top Crops by Acres Harvested in 2023
Not enough (?) eggs in one very important (for the world) basket.
8) At the risk of beating a dead dragon
MILKEN REVIEW: China’s Out of Sync Transition: Xi Jinping’s New Growth Model Struggles for Traction
WSJ: Why China Is Starting a New Trade War: Faced with stagnating growth, Xi Jinping decided to go all in on manufacturing—and much of that production is destined for export
A great bit from MR:
China, in short, is switching to a new playbook while remaining firmly reliant on the old. Its leaders muddle through, invoking a new era while deploying familiar but problematic tools to both stimulate growth and control the socioeconomic consequences. The central contradiction is that of market and state: how can the invisible hand allocate resources efficiently while the government’s heavy hand is poised to nullify outcomes it doesn’t foresee?
The warning signs:
The headwinds are external as well as internal. The foreign reception to this tortured transition does not resemble the benign welcome offered to China upon its accession to the World Trade Organization in 2001…
Internally, excesses of the “build it and it will sell” spirit haunt the economic landscape in the form of unfinished ghost towns and falling asset prices.
Mirroring my argument in America’s New Map, MR notes:
Egged on by the United States, the advanced economies of Europe and East Asia seem to have changed their minds about China. Chinese exports are often viewed as Trojan horses, concealing everything from software hacks to fentanyl, that are being shoveled into foreign markets by job-busting subsidies.
This can only end badly for Xi and the CCP. To the extent Xi stubbornly sticks to this path, he essentially kills China’s bid to become the 21st century market-maker of globalization.
For that dream to come true, the Party must die, and balance must be restored to the Force of globalization.
9) The mother ship finally arrives
NAVY TIMES: Aircraft carrier Bush gets first-ever Stingray drone control room
Been writing about this one for two decades.
Anticipation, my friends, it’s making me wait.
10) Right this way, ladies and gentlemen!
AAA: Putin Signs Decree Granting Residency to Foreigners Who Share ‘Traditional’ Russian Values
H/T Jeffrey Itell.
President Vladimir Putin on Monday signed a decree allowing foreign citizens and stateless individuals to apply for temporary residency in the country if they share “traditional Russian spiritual and moral values,” even in cases when a person does not speak Russian.
The decree states that those who oppose the “destructive neoliberal ideological agenda” in their home country can seek “humanitarian support” from the Russian authorities by applying for a temporary residence permit.
It also tasks the government and Foreign Ministry with creating a list of countries Moscow considers to be “pursuing a destructive neoliberal agenda” within 30 days.
I don’t know about you, but I feel vaguely insulted.
Nothing pathetic here folks, move along!
11) One thousand people? That’s not a village. That’s a family!
CNN: China’s one-child policy hangover: Scarred women dismiss Beijing’s pro-birth agenda
That’s actually the punchline of an old Chinese joke, reflective of their several millennia of having huge families.
All gone, thanks to modernization. And it’s never coming back.
Never.
12) This is only going to get worse
FOREIGN POLICY: Climate Change Is Making the Middle East Uninhabitable It’s been a brutal summer for the region—and the effects are spreading to the rest of the world.
The Middle East is a wild spread of urban-v-rural. Some states have negligible rural populations, others are predominately rural.
What climate change will do is easy enough to imagine: make farming far too hard, driving farmers off the land and into cities — historically, a Marxian pathway of revolution or at least unrest.
Dubai’s heat index hit 144 degrees Fahrenheit last month. Mecca hit 125 during a Hajj that featured 1,300 deaths from heat. Egypt has stood above 100 degrees since May.
The unrelenting heat this season exceeded the “wet-bulb temperature” at which humans, if exposed for six hours, can no longer cool themselves off, leading to heat-related illnesses and death.
Add the predicted water shortages of coming years and this becomes a very hard place for ordinary people to live.
As I noted in America’s New Map, let the hydropolitics begin, per FP:
Water stress in countries such as Egypt is exacerbated by the upriver flow of the Nile being restricted because of the construction of the Grand Ethiopian Renaissance Dam. Syria and Turkey have been at odds over many years because the Turks have built dams along the Tigris and Euphrates rivers, cutting the flow south. And among the many issue that divide Israelis and Palestinians is water and who has the right to tap into the Mountain Aquifer of the West Bank.
The article wisely begs off any “climate conflict” argument and focuses on the obvious result: people being put on the move.
No mystery where they go: north to the EU.
Not America’s problem, nor that of Russia, India, or China. So, the solution here will be overwhelmingly European.
As I state in the book, pain prioritizes.
