The Dive - 6/1/21
Your monthly compilation of what's what on global politics, American society, and an assortment of odds and ends
Quote of the Month
“For it is not as exiles that men fear to say what they think, but as men afraid lest, from speaking, pain or death or punishment or some other such thing will befall them. Fear is the cause of this, not exile. For to many people, nay to most, even though dwelling safely in their native city, fear of what seem to them dire consequences of free speech is present. However, the courageous man, in exile no less than at home, is dauntless in the face of all such fears; for that reason also he has the courage to say what he thinks equally, at home or in exile.”
- Musonius Rufus, Lectures, 9
My recent scribblings:
1. How global corporations have succumbed to Stockholm Syndrome in their relations with China
Why you should read it: Financial Times Asia editor Jamil Anderlini surveys the corporate response to China’s crackdown against Hong Kong and finds that Stockholm Syndrome - the putative psychological condition where captives come to identify with their captors - “much of the corporate world and some governments”
“I was recently invited by a group of Hong Kong-based international business executives to discuss Beijing’s moves to crush the last vestiges of democracy and free speech in the territory. Several of these executives from democratic societies said they viewed the free press as their greatest enemy. To them the problem was not the erosion of rights and freedoms in what was one of the world’s most dynamic financial centres. The problem was pesky journalists who dared to report on these developments, thereby convincing head office to stop investing in the city.”
“Because Beijing has punished so many companies and countries for a range of perceived political slights — from quoting the Dalai Lama in marketing campaigns, to shunning cotton allegedly harvested by slave labour — many international companies in China do feel like hostages. But they tend to blame politicians, media or human rights groups in their home countries for antagonising their captors. Companies such as Volkswagen, Apple, Starbucks, Nike, Intel, Qualcomm, General Motors and H&M are all reliant on the huge and growing Chinese market. Various western companies, including several of these, have lobbied in public or in private on behalf of the same government that holds them to ransom in China.”
Why it matters: “Unfortunately for companies heavily reliant on China, it is no longer enough to stay quiet about human rights abuses, unfair business practices or political interference. If you want to make money in modern China you have to toe the Communist party’s line, engage in ostentatious displays of fealty and assist in its propaganda efforts globally.”
2. Why China is really a “paper tiger”
Why you should read it: The Atlantic columnist David Frum writes that for all the talk about competition with China in Washington these day, it’s important to remember that Beijing may in fact be weaker than it looks.
“The claim that China will ‘overtake’ the U.S. in any meaningful way is polemical and wrong—and wrong in ways that may mislead Americans into serious self-harming mistakes. Above all, [Tufts University professor Michael] Beckley pleads with readers not to focus on the headline numbers of gross domestic product. China may well surpass the United States as the largest economy on Earth by the 2030s. China was also almost certainly the largest economy on Earth in the 1830s. A big GDP did not make China a superpower then—and it will not make China a superpower now, or so Beckley contends.”
“Americans need to hear this perspective of confidence. The self-doubt that afflicts so many Americans is pushing this country to wrongheaded policies, most especially trade protectionism, and even outright trade war. Biden had it closer to right back in 2019, when he dismissed overwrought fears of China: ‘China’s going to eat our lunch? C’mon, man.’ Since then, Biden has been pushed by political necessity to a more confrontational approach—pushed not only by a Trumpified Republican Party, but also by his own party’s turn against trade and markets.”
Why it matters: “China’s language and behavior is assertive and provocative, for sure. China’s power is rising, yes. Its behavior at home and abroad is becoming more oppressive and more brutal; that’s also tragically true. But as Americans muster the courage and will to face Chinese realities, that reckoning needs also to appreciate the tremendous capabilities of this country, and the very real limits besetting China: a fast-aging population, massive internal indebtedness, and a regime whose worsening repression suggests its declining popularity.”
3. What trade deals really do
Why you should read it: University of Arizona professor Jeffrey Kucik argues in Foreign Policy that trade agreements like the recent post-Brexit deal between the UK and EU promote market stability rather than trade itself.
“The underappreciated value of trade deals isn’t that they promote trade. It’s that they aim to promote market stability. Trade deals are designed to harmonize economic policies and prevent the introduction of new trade barriers among the members. The upshot is that a more stable policy environment should lead to smoother, more predictable trade.”
“The five years since the Brexit referendum show what happens when the rules break down and uncertainty reigns. When the referendum cast doubt over the future of economic cooperation, the impact on British traders was immediate and significant, leading to a sharp drop in exports from the United Kingdom in 2016. Over the subsequent five years, firms struggled to adapt. In turn, there was much more volatility in British trade relations than in recent decades, marked by shorter, sharper fluctuations in trade flows. More recently, UK exports to the EU were down markedly in the first months of 2021—and not simply because of the COVID-19 pandemic.”
Why it matters: “None of this is to say that the old trade rules were perfect. There is a growing consensus that global trade rules need updating—if not a full-scale overhaul. At the same time, doubts about the enforceability of many CTA provisions are nothing new. Enforcement problems are endemic to most areas of international law, including trade. Just ask the EU and the United Kingdom, which have both faced their fair share of trade litigation to iron out disagreements over the rules… Long, costly disagreements are precisely what most trade deals aim to avoid. However, given current tensions, there may be many more disputes before we see the greater stability.”
4. Why Wall Street wants massive public infrastructure investment
Why you should read it: In the New York Times, Cornell professor and former private equity manager Daniel Alpert contends that financial markets show Wall Street to be “practically begging for a major infrastructure investment from Congress, one even larger and more sustained than what President Biden is proposing."
“Just look at the mechanics: Demand for interest-bearing Treasury bonds — safe assets that are issued whenever the government creates more debt — remains very high, meaning that interest rates are near historic lows and inflation expectations are mild. For now, there’s no hint of the currency debasement feared by inflation hawks… Congress might do well to limit bean-counting over the bill’s each and every revenue stream and instead go much further in beefing up the Biden plan’s ‘buy American’ provisions.”
“The United States has suffered for decades from low levels of private and public investment in innovative plants and equipment and in public goods. As a result, instead of assisting in organizing needed capital for such investments, U.S. markets have devolved into self-described investors trading existing shares of companies among themselves… It’s a function of two decades of an ever-growing volume of excess capital in an ever-shrinking number of private hands. The U.S. government has tried for roughly 40 years to chiefly use tax incentives to entice the private sector to invest in domestic production. But business leaders have largely passed on the invitation — in part because manufacturing goods abroad just remains so cheap. Investment pours into low-regulation, low-wage countries, while suppressing American workers’ real wages. The China Shock, which many academics in recent years implied had come to an end, has only broadened.”
Why it matters: “All of which brings us back to the global bond markets — the part of Wall Street most relevant to gauging sentiment about public finances — which near term are clearly signaling, with ultralow U.S. federal borrowing costs, that there is ample fiscal room for the government to act… Today, a long-term program to rebuild, expand and maintain public infrastructure, in the broadest of senses, is within reach. It could fuel U.S. competitiveness and improve household living standards for decades to come.”
5. How autocrats have launched a war against exiled dissidents
Why you should read it: Taking the recent example of a Ryanair flight forced to land by the Belarusian government to seize two traveling dissidents, Freedom House research director Nate Schenkkan details in Foreign Affairs the ways autocratic governments have extended their reach against dissidents abroad.
“[Belarusian President Alexander] Lukashenko’s methods were novel; state-sponsored hijackings are rare. But [dissident Raman] Pratasevich’s arrest represents just the most recent example of a trend toward transnational repression, as authoritarian regimes increasingly seek to apply the brutal tactics they use at home to exiles and members of diasporas elsewhere in the world. In February, my colleagues at Freedom House and I released a report compiling 608 cases of such treatment around the world since 2014, including deportations, detentions, renditions, assaults, and assassinations. Authoritarian governments in every region and of every stripe have increasingly turned to such methods to combat what they see as an intolerable threat from increasingly networked, visible, and influential critics who hail from their countries but have found refuge elsewhere.”
“Behind all acts of transnational repression is a presumption that the targets ‘belong’ to the state from which they hail and a bet that their host countries—the places where they live, work, raise their families, and maybe even enjoy citizenship—will not risk a fight over someone who is not ‘native.’ The only way to put a stop to this ugly trend is to make that gamble far riskier by hitting back hard against perpetrators—including Lukashenko—and demonstrating to autocrats that they will pay a steep price for carrying out such crimes.”
Why it matters: “This points to the difficulty of grappling with transnational repression. The tactics that authoritarians use to hunt down their critics abroad are carefully adapted to take advantage of globalized systems of travel, data sharing, migration, and law enforcement. Such systems involve a great deal of international cooperation and coordination and rely on a high degree of mutual deference among governments. They also involve tradeoffs for both parties; European states benefit from the ability to fly aircraft over Belarus, so trying to cut off Belarusian airspace will harm them, as well. Authoritarians have learned how to take advantage of such interdependence, and there is no cost-free way for democratic countries to respond to transnational repression.”
6. How Iraqi activists cope with intimidation and murder from Iranian-backed militias
Why you should read it: New York Times Baghdad bureau chief Jane Arraf reports on the roughly 80 Iraqi activists who have been murdered at the hands of Iranian-backed militias since late 2019.
“The demonstrators (publicly) and Iraqi officials (privately) say they know who killed many of the activists: Iran-backed militias that have essentially crushed a grass-roots anti-corruption movement that blames Iranian influence, and the militias, for many of Iraq’s ills. In a country where militias — nominally a part of the security apparatus — operate with impunity, the killers have gone unpunished… A year after taking power, Prime Minister Mustafa al-Kadhimi has largely failed to deliver reforms he promised in response to the 2019 protests, including reining in Iran-backed militias, which are also blamed for attacks on the U.S. Embassy and military installations.”
“Activists who have been killed include protest leaders in the holy city of Karbala, a doctor in Basra, and a prominent Baghdad security analyst, Hisham al Hashimi, who advised the prime minister. Many of them were shot dead in the streets in view of security cameras or the police, some in the middle of the day… In addition to those assassinated, more than 560 protesters, the vast majority of them unarmed, have been killed by security forces and gunmen during the protests themselves since 2019. Most were shot with live bullets or killed by tear gas canisters that became lethal projectiles after being fired directly into the crowd.”
Why it matters: “The assassinations have had a chilling effect on the political campaign. The grass-roots movement that began in 2019 aimed to end the corruption-ridden system of government in place since 2003, where government ministries have been carved up between powerful political blocs and militias… Activists originally saw the upcoming elections as a chance for a fresh start with new faces, but now they appear likely to return the same factions to power.”
7. How a crackdown on Saudi dissidents spurred new activism
Why you should read it: Wall Street Journal reporters Stephen Kalin and Summer Said relate how Saudi government crackdowns on dissidents like women’s rights activist Loujain al-Hathloul have created a more permissive atmosphere for the relatives of those jailed to speak out.
“Public pressure from the family of a Saudi women’s rights activist who was jailed is emboldening the relatives of other detainees to speak out, swelling the ranks of critics of Crown Prince Mohammed bin Salman’s crackdown on perceived opponents… Cable television appearances by Ms. Hathloul’s family and opinion pieces in American and British newspapers elevated her profile; President Biden praised her release on parole in February. Her siblings said that pledges she had to sign before leaving prison had muzzled her, but that they were maintaining pressure from overseas… They are a core part of a new group of activists who are leveraging international media and lobbying Western governments to try to influence policy in Riyadh. Many were previously apolitical, but no longer see value in navigating government backchannels to extricate loved ones. Since 2017, at least 10 people who have had family members detained have become activists, according to a Wall Street Journal tally. Most of the new activists live in relative safety abroad.”
“After entering the line of succession six years ago, MBS suppressed outspoken voices in local newspapers and on social media… Activists say he closed off traditional avenues for negotiating detainees’ releases. The 2018 killing of former royal insider Jamal Khashoggi, who lambasted the prince in Washington Post columns, invigorated Saudis previously cowed into silence. A U.S. intelligence report implicated MBS, who has denied he ordered the killing but said he took ultimate responsibility as the kingdom’s de facto leader.”
Why it matters: “After steadfast support from the Trump administration, [President] Biden has set about revamping policy toward Saudi Arabia, though MBS has said there is agreement ‘on more than 90%’ of bilateral issues. Mr. Biden has ordered a review of relations with the kingdom that includes arms sales, the Saudi-led military campaign in Yemen and an assessment of whether the U.S. has done enough to hold Saudi officials responsible for the Khashoggi killing."
8. Why dogecoin represents the latest in a serious of speculative cryptocurrency frenzies
Why you should read it: Wall Street Journal reporter Caitlin Ostroff observes that dogecoin - the joke cryptocurrency touted by SpaceX and Tesla founder Elon Musk - amounts to the latest in a long line of vehicles for financial speculation and wonders what this frenzy portends for the future.
“A more than 12,000% rally this year in dogecoin, a cryptocurrency that was set up as a joke and serves no purpose, sent its price to a record 69 cents per token this week…The jump from one speculative asset to another is indicative of the broader frenzy that has driven up prices for a range of assets including stocks, commodities such as silver and cryptocurrencies. It also shows how new investors with savings bolstered by stimulus checks and who are spending more time at home during the Covid-19 pandemic have become a volatile new force in financial markets.”
“In the late 1990s, investors’ frenzied bets led to a massive boom-and-boost cycle in dot-com stocks. Illustrative of the broad euphoria of that time, a craze developed for Beanie Babies: sold in toy stores for about $5, some of the stuffed animals were valued at about $5,000 by collectors. When the fad faded and supply grew, the bubble imploded… Investing in such altcoins is particularly risky as cryptocurrencies are relatively new investment products that are harder to trade and don’t have the same level of oversight by U.S. regulators as stocks and bonds. That can make these assets prime ground for fraud and theft.”
Why it matters: “Smaller cryptocurrencies also tend to be even more volatile than bitcoin, which frequently jumps up or down over 10% in a single trading session. This can lead to steep and fast losses for investors… At least for now, some traders see that volatility as an opportunity to make money, or to just have fun with markets."
9. Why Britain’s Labour Party needs to rebuild itself
Why you should read it: Former British Prime Minister Tony Blair worries in the New Statesman that Britain’s Labour and Liberal Democrat parties face existential challenges, ones that could lead to their marginalization if not outright extinction.
“Joe Biden’s victory in the United States apart, progressive politics across the globe is badly placed: four election defeats for the UK Labour Party and no one betting against a fifth; the German SPD placed behind a moderate Green Party; the French Socialists, who won the presidency in 2012, now polling at 11 per cent; the Italian left imploded and divided; the Spanish and Swedish socialists hanging on to power, but way below their earlier levels of support… In short, leave to one side Joe Biden, and around today’s Western world there are only flickers of a progressive agenda with deep majority support.”
“The progressive problem is that, in an era where people want change in a changing world, and a fairer, better and more prosperous future, the radical progressives aren’t sensible and the sensible aren’t radical. The choice is therefore between those who fail to inspire hope and those who inspire as much fear as hope. So, the running is made by the new radical left, with the ‘moderates’ dragged along behind, uncomfortably mouthing a watered-down version of the left’s policies while occasionally trying to dig in their heels to stop further sliding towards the alienation of the centre… The thinking of the new left radicals across the West – which is really the rediscovery of 1960s Marxist-inspired left policy by a new generation – is largely redundant to answering the challenge. Public ownership of industry, ‘free' university tuition, much heavier regulation – all of these traditional solutions, as well as being politically challenging, will not materially impact people’s lives in anything like the manner of technological change, and may be regressive if they reduce the power of social mobility and social aspiration. They seem ‘radical’ because they come from a traditional left which presented them as such, but politically they are mostly now museum pieces, lingering relics of outdated ideology.”
Why it matters: “It isn’t that the traditional issues don’t matter; it is just that they’re second-order compared with those accompanying the revolution. Of course, we have to determine levels of taxation and spending, appropriate regulation and what the state does and doesn’t do. And there will be political choices and trade-offs that democracy will decide. But all of these pale into insignificance beside the question of how we handle the all-encompassing vastness of the impact of modern technological change. So, we can and no doubt will require more public spending on the NHS. But a bigger reform challenge is how we use technology to alter diagnostics, prevention and public health… You can literally go through the policy catalogue, from crime to defence to the environment, and in every case the potential of technological change is enormous and revolutionary. This is the future. But you can’t organise the future with a playbook from the past.”
Odds and Ends
How the dating “market” has gotten worse - and is ruining romance to boot…
How a bankrupt car racetrack became Wold-Chamberlain Field and then Minneapolis-St. Paul International Airport…
Where your watermelon came from, evolutionarily speaking…
Inside the Norwegian Arctic satellite station at Svalbard…
How NASA got a car to the Moon with Apollo 15…
Music of the Month
“You All Over Me,” a from-the-vault song from Taylor Swift’s recent re-recording of her 2008 album Fearless.
“Elsewhere,” from Sarah McLachlan’s 1993 album Fumbling Towards Ecstasy.
“Givin' 'Em What They Love,” a 2013 track from Janelle Monáe’s album The Electric Lady featuring Prince.
Image of the Month
