The Dive, 6/1/24
Your monthly compilation of what's what on global politics, American society, and an assortment of odds and ends
Quote of the Month
"The green grape, the ripe cluster, the dried raisin; at every point a change, not into non-existence, but into what is yet to be." - Marcus Aurelius, Meditations, 11.35
What I’m Reading:
1. How autocratic governments and illiberal political movements around the world have made common cause
Why you should read it: In The Atlantic, Anne Applebaum details the common tactics and techniques autocratic governments like Russia and China and illiberal movements in places like the United States and Europe use to discredit freedom and democracy.
“Even in a state where surveillance is almost total, the experience of tyranny and injustice can radicalize people. Anger at arbitrary power will always lead someone to start thinking about another system, a better way to run society. The strength of these demonstrations, and the broader anger they reflected, was enough to spook the Chinese Communist Party into lifting the quarantine and allowing the virus to spread. The deaths that resulted were preferable to public anger and protest… Like the demonstrations against President Vladimir Putin in Russia that began in 2011, the 2014 street protests in Venezuela, and the 2019 Hong Kong protests, the 2022 protests in China help explain something else: why autocratic regimes have slowly turned their repressive mechanisms outward, into the democratic world. If people are naturally drawn to the image of human rights, to the language of democracy, to the dream of freedom, then those concepts have to be poisoned. That requires more than surveillance, more than close observation of the population, more than a political system that defends against liberal ideas. It also requires an offensive plan: a narrative that damages both the idea of democracy everywhere in the world and the tools to deliver it.”
“This is the core problem for autocracies: The Russians, the Chinese, the Iranians, and others all know that the language of transparency, accountability, justice, and democracy appeals to some of their citizens, as it does to many people who live in dictatorships. Even the most sophisticated surveillance can’t wholly suppress it. The very ideas of democracy and freedom must be discredited—especially in the places where they have historically flourished… A few autocracies still portray themselves to their citizens as model states. The North Koreans continue to hold colossal military parades with elaborate gymnastics displays and huge portraits of their leader, very much in the Stalinist style. But most modern authoritarians have learned from the mistakes of the previous century. Freedom House, a nonprofit that advocates for democracy around the world, lists 56 countries as ‘not free.’ Most don’t offer their fellow citizens a vision of utopia, and don’t inspire them to build a better world. Instead, they teach people to be cynical and passive, apathetic and afraid, because there is no better world to build. Their goal is to persuade their own people to stay out of politics, and above all to convince them that there is no democratic alternative: Our state may be corrupt, but everyone else is corrupt too. You may not like our leader, but the others are worse. You may not like our society, but at least we are strong. The democratic world is weak, degenerate, divided, dying… The new authoritarians also have a different attitude toward reality. When Soviet leaders lied, they tried to make their falsehoods seem real. They became angry when anyone accused them of lying. But in Putin’s Russia, Bashar al-Assad’s Syria, and Nicolás Maduro’s Venezuela, politicians and television personalities play a different game. They lie constantly, blatantly, obviously. But they don’t bother to offer counterarguments when their lies are exposed. After Russian-controlled forces shot down Malaysia Airlines Flight MH17 over Ukraine in 2014, the Russian government reacted not only with a denial, but with multiple stories, plausible and implausible: It blamed the Ukrainian army, and the CIA, and a nefarious plot in which dead people were placed on a plane in order to fake a crash and discredit Russia. This tactic—the so-called fire hose of falsehoods—ultimately produces not outrage but nihilism. Given so many explanations, how can you know what actually happened? What if you just can’t know? If you don’t know what happened, you’re not likely to join a great movement for democracy, or to listen when anyone speaks about positive political change. Instead, you are not going to participate in any politics at all.”
Why it matters: “Fear, cynicism, nihilism, and apathy, coupled with disgust and disdain for democracy: This is the formula that modern autocrats, with some variations, sell to their citizens and to foreigners, all with the aim of destroying what they call ‘American hegemony…’ Here is a difficult truth: A part of the American political spectrum is not merely a passive recipient of the combined authoritarian narratives that come from Russia, China, and their ilk, but an active participant in creating and spreading them. Like the leaders of those countries, the American MAGA right also wants Americans to believe that their democracy is degenerate, their elections illegitimate, their civilization dying. The MAGA movement’s leaders also have an interest in pumping nihilism and cynicism into the brains of their fellow citizens, and in convincing them that nothing they see is true. Their goals are so similar that it is hard to distinguish between the online American alt-right and its foreign amplifiers, who have multiplied since the days when this was solely a Russian project… One could call this a secret authoritarian ‘plot’ to preserve the ability to spread antidemocratic conspiracy theories, except that it’s not a secret. It’s all visible, right on the surface. Russia, China, and sometimes other state actors—Venezuela, Iran, Hungary—work with Americans to discredit democracy, to undermine the credibility of democratic leaders, to mock the rule of law. They do so with the goal of electing Trump, whose second presidency would damage the image of democracy around the world, as well as the stability of democracy in America, even further.”
2. How Israel came to bear the brunt of Western self-hatred
Why you should read it: Israeli scholar Tomer Persico argues that for many on the alienated, self-loathing left, Israel has become so hated because it stands in for all the perceived sins of modernity.
“Revisiting [French philosopher Michel] Foucault’s romance with the Iranian revolution has nothing nostalgic today, when only two months ago an heir of Foucault as prominent as Judith Butler insisted that the Hamas attack on Israeli civilians on 7th October 2023, which included mass murder, systematic rape, kidnapping of whole families and an attempted ethnic cleansing of more than twenty villages and three cities, was ‘armed resistance’ and ‘not a terrorist attack.’ The infatuation of thinkers in the Western radical left with Islamist terrorism has been more or less a constant… We find here the blueprint for the quest for authentic being through the aggrandizement of violence, though here relating to a more general indigenous nationalist, not specifically the Islamic fundamentalist. But there is something else that is common to all these arguments, which is the target of this kind of ‘authentic’ violence. It is always the West.”
“More than a romantic infatuation with the not-so-noble savage, what we have here is a rejection of the West, condemning it and its offspring, modernity, as inherently violent, oppressive, imperialist, patriarchal, or just plain evil… Right now, however, this strange anti-modern revolt takes aim at Israel. As the most obvious manifestation of ‘West’ in the midst of ‘East,’ as what is considered the last living remnant of colonial rule and of imperialism (however small in scale), Israel acts as the lightning rod for the Occidentalists’ vitriol. Of course much of the criticism of Israel is warranted. Israel is subjugating another people militarily and tragically does not show signs it wants to end that subjugation. But the amalgamation of post-colonialism, post-nationalism, and anti-racism that manifests itself as a celebration for Hamas’s ‘resistance’ signals something deeper than justified objection to military occupation.”
Why it matters: “Moreover, as the West’s original essence, Israel naturally carries the West’s original sin: territorial and cultural colonialism. Making Israel pay for its racist colonialism is not only mandated as a step on the long march towards justice, but serves also as a purgative practice for other Westerners. Burning Israel, the effigy of the West, will cleanse the West itself from its past transgressions. The wish to eradicate Israel is therapeutic, indeed salvific: the sins of all the forefathers, those imperialist, colonialist, slave-holding Europeans, will finally be atoned. The Jewish state is thus set up to be sacrificed, burned as a Holocaust for the redemption of the original sins of the West… Western self-hatred, in certain circles, has become fashionable to the point of banality. The reasons, overtly ‘imperialism’ or ‘white supremacy,’ are in truth much more subtle. It is a rejection, by a whole culture, of modernity itself. We cannot forgive ourselves for becoming modern.”
3. Why China has only itself to blame for a looming trade war with the rest of the world
Why you should read it: Thanks to its an economic model “designed to promote Chinese industry at the expense of the rest of the world,” The Atlantic China columnist Michael Schuman observes that Beijing has only itself to blame for precipitating a trade war with the United States and other nations.
“Yet China’s leaders have no one to blame but themselves. They joined a global trading system and then gamed that system. Biden’s tariffs are the natural response, though not an entirely positive one. Protectionism raises costs, hurts consumers, shields unworthy companies from competition, and punishes worthier ones. Disputes over trade will only intensify the rivalry between the world’s two great powers… Chinese leader Xi Jinping has failed to reform his economy in ways that would have made this trade war less likely. Facing this confrontation with the United States, he is even less likely to make reforms today. The result is trade conflict and heightened political tensions that benefit no one.”
“Biden[‘s tariffs] targeted EVs for a reason. Beijing’s leaders wanted to dominate that industry and threw the weight of the state behind Chinese companies. The program was undeniably successful. China is at the forefront of the EV industry, while the United States, with the exception of Tesla, has barely gotten out of the parking lot. But electrical automotive is also a sector in which China’s government has played such a heavy role, and created so much manufacturing capacity, that other governments believe their own industries are at risk… China simply has too many car companies with too many factories making too many cars. Counting both EVs and internal-combustion-engine vehicles, China’s auto industry now has the capacity to produce almost twice as many vehicles as Chinese consumers are buying, according to the Shanghai-based consultancy Automobility Limited. Although oversupply in the EV sector, where demand is still growing, is not as severe as in the legacy business, Chinese automakers are still adding assembly lines. BYD, for instance, plans to more than double its EV production capacity by 2026… Facing this Chinese onslaught, governments around the world are stepping in to protect their own industries. The European Commission is currently conducting an investigation into China’s subsidizing of electric vehicles with an eye to imposing its own tariffs on their import. Rhodium anticipates that the EU will apply a duty of 15 to 30 percent on EVs, but the group argues that even this may not be sufficient to deter Chinese automakers. The Biden administration’s move to a 100 percent EV tariff no doubt reflects similar thinking. Chile has already slapped tariffs on some Chinese steel products, while Brazil imposed quotas and duties to stave off an influx of cheap steel, mainly from China.”
Why it matters: “The big point is that China is not just exporting too much stuff; it’s also exporting its economic problems. Xi intends to maintain Chinese jobs and factories at the expense of other countries’ workers and companies, to avoid necessary but potentially disruptive reform at home. That means Xi is actually undermining the great hope of China’s rise. A wealthier China was supposed to be an engine of global prosperity. Xi’s version is promoting protectionism and confrontation that threaten that prosperity.”
4. How our sense of economic reality is being distorted
Why you should read it: Financial Times chief data reporter John Burn-Murdoch argues that public perceptions about the state of the American economy are out of whack with both statistical reality and personal experience.
“Data from the US Federal Reserve shows the same tell-tale pattern we have grown used to with crime: people assess their own financial situation to be relatively healthy, and this changes very little from year to year, but their assessment of the national economy has cratered, opening up a huge gulf. It seems increasingly likely news coverage shoulders part of the blame… even as recessions have become far fewer and further between over the last century, news articles written about the economy have been more and more downbeat. Another found that the tone of economic news has further decoupled from the fundamentals in recent years, beginning in 2018, meaning this cannot just be about the pandemic or the recent bout of inflation.”
“The latest piece of the evidence comes from Ryan Cummings, Giacomo Fraccaroli and Neale Mahoney, a trio of economists writing for the US economics publication Briefing Book, whose analysis of 1mn transcripts from six US broadcasters demonstrates a striking negativity bias when it comes to reporting petrol prices… The research tells us several things. First, there is far more news coverage of prices when they are high than low. If it exceeds, it leads, you might say. Second, the price at which this negative coverage takes off has been falling steadily lower in real terms — making negative headlines more and more likely even for the same level of affordability. And crucially, third, the switch into bad-news-about-prices mode happens much more abruptly on subscription-based cable news channels — where the incentives to keep the viewer glued to the screen are strongest — than on network television.”
Why it matters: “All this makes it unlikely that President Joe Biden will get much of the hoped-for boost from the US’s ongoing economic expansion. Charts showing American incomes and wealth rising, inequality falling and unemployment remaining low just can’t compete with easily debunked but very clickable claims that most families are living pay cheque to pay cheque… From news organisations to TikTokers, everyone is now optimising for engagement, and that means we hear more about the bad than the good.”
5. Why foreign agent laws have become the new arena for autocratic whataboutism
Why you should read it: In American Purpose, Abigail Skalka of the National Endowment for Democracy shows how autocratic regimes use foreign agent registration laws to clamp down on dissent at home and falsely accuse democracies of hypocrisy.
“One repressive tool has become particularly prominent, and its enforcement widespread, over the last decade: the so-called foreign agent law… While authoritarian regimes have long imprisoned, censored, and even killed their opponents without any legal pretense, ever-proliferating foreign agent laws provide a pretext to deflect criticism about their practices. And they conveniently open the door to a whataboutism that contends that the practices and objectives of authoritarian regimes are just like those of democracies… Though these types of laws are often associated with unfree or semi-authoritarian countries, it is true that liberal democratic governments also have their own versions of foreign agent laws. The first law designed to keep track of foreign agents was passed in the United States in 1938. Only in recent years have Australia and the European Union, among other democratic locales, begun developing their own versions. These laws are qualitatively different than the ones originating in autocratic or semi-autocratic contexts, however; in rule of law settings, they are principally concerned with democratic integrity. They contain safeguards to limit misuse. The reasoning for these democracies’ renewed interest in this type of legislation is clear: sharp power manipulation efforts by regimes in Beijing, Moscow, Riyadh, and elsewhere are increasingly threatening the world’s democracies. In a context where authoritarian regimes are ever more emboldened to exploit democracies’ openness, laws limiting malign forms of foreign influence have become important tools to safeguard open and often vulnerable institutions.”
“Autocracies rely on moral equivalency. Using go-to whataboutism-style arguments, their leaders seek to obscure their malign intentions by claiming that what they seek to do is the same as what democracies are doing. Autocrats who put forward restrictive foreign agent laws like to draw explicit connections between their laws and those found in democracies, especially the United States’ Foreign Agent Registration Act (FARA). In September 2023, Vladimir Putin defended Russia’s foreign agent law by asserting that it was ‘almost a copy [of FARA], only it’s much more liberal…’ Nevertheless, their intention is to repress and control. Despite the enthusiastic efforts of autocrats to equate their own laws to the laws originating in liberal democracies, there are crucial differences between them. Among the most important is the role of the principal-agent relationship under the law. FARA applies only in the presence of a principal-agent relationship, which ‘is created when an agent “acts as a representative of or otherwise on behalf of another person” and where “[t]he person represented has a right to control the actions of the agent.”’ To qualify as a foreign agent under FARA, a civil society actor must work in the name of, or at the behest of, its foreign benefactor. In contrast, foreign agent laws that are designed to be repressive often apply ‘if a [civil society organization] receives international funding (in any amount) and engages in broadly defined “political activities,” even if there is no connection between the international funding and the political activities.’ Nicaragua, for instance, forced the closure of hundreds of organizations—including a local equestrian center and its national branch of Operation Smile (an international initiative that provides free cleft palate correction surgery for children in need)—despite no indication that the organizations were operating at the behest of a foreign funder.”
Why it matters: “Armed with guiding principles, democratic stakeholders must remain alert to bouts of whataboutism that suggest false equivalency between autocracies and liberal democracies. After all, such autocracies traditionally look to leverage these laws to further tighten their grip, because their stock and trade is political control and suppression of free expression. Democratic systems must be vigilant about safeguarding their own societies from malign intrusions, while staying true to their own principles and standards. This is all the more crucial, given that authoritarian powers are embracing the veneer of transparency and accountability as a justification for clampdowns on the very civil society groups so sorely needed in these repressive countries.”
6. How America spun up the arsenal of democracy and built 300,000 aircraft during World War II
Why you should read it: On the Institute for Progress’ Construction Physics Substack, Brian Potter outlines how the U.S. government and private industry worked together to build some 325,000 warplanes at a cost of some $800 billion in today’s money.
“Creating an aircraft industry capable of producing planes by the hundreds of thousands didn’t happen overnight, and on the eve of the war the industry was a tiny fraction of what it would grow into. In 1937 the U.S. produced around 3,100 aircraft, most of which were small private planes. Prior to the war the value of aircraft made in the U.S. was about one-fourth the value of cans produced, and just 3.5% of the value of cars produced. Despite the continuing escalation of the war in Europe, the U.S. was reluctant to prepare for large-scale mobilization. Existing mobilization plans assumed that any future war would be smaller in scale than World War I had been, and that only half of the already-small existing aircraft manufacturing capacity would be devoted to war production. As late as 1940 the U.S. military had just 2,665 aircraft, around a tenth of what Germany’s Luftwaffe fielded. And the aircraft the U.S. did have were out of date: Though the airplane was invented in the U.S. in 1903, by the late 1930s the most advanced aircraft were being produced in other countries, and there was little urgency to close this gap… Producing the aircraft needed to win the war required a complete transformation of the aircraft industry. Between 1939 and 1944, the value of aircraft produced annually in the U.S. increased by a factor of 70, and the total weight of aircraft produced (a common measure of aircraft industry output) increased by a factor of 64. In 1940, the airframe industry employed just 59,000 people; three years later that reached 939,000, with another 339,000 building aircraft engines. Factories of unprecedented size, enclosing millions of square feet were built; by the end of the war aircraft engine factory floor space had increased from 1.7 million square feet to 75 million, and a single large engine factory encompassed more space than had been used by the entire pre-war engine industry… Not only did the aircraft industry grow in size, but it also adopted entirely novel methods of production, modifying mass-production methods used in cars and other products for the needs of aircraft manufacturing. And while it seems rapid in hindsight, in fact the process took years. In part because the U.S. government and the aircraft industry were unprepared for the requirements of large-volume production, and in part because developing new aircraft and scaling up manufacturing were difficult and time-consuming activities that could only be accelerated so much, even in an emergency. Had conditions been slightly different — if Britain and France hadn’t kickstarted the industry with enormous aircraft orders, or if people like GM President Bill Knudsen hadn’t pushed for early industrial mobilization — the outcome might have been very different.”
“The first push to grow the U.S. aircraft industry came well before the U.S. entered the war. Desperate for more planes to counter Hitler’s territorial ambitions, both Britain and France placed large orders with U.S. aircraft manufacturers in 1938 and 1939… By 1940 Britain and France had together ordered more than 6,000 planes from U.S. manufacturers for roughly $573 million ($12.8B in 2024 dollars), or around seven times what the U.S. aircraft industry produced in 1936 by dollar value. This allowed U.S. aircraft manufacturers to greatly expand their workforces, and industry employment tripled between 1938 and 1940. The orders also enabled manufacturers to build new, larger factories. French upfront payments allowed Pratt & Whitney to build a new facility at its Connecticut factory (dubbed ‘the French Wing’) which doubled its floor space, and a similar French investment allowed Wright to triple its factory space. Altogether, by 1940 the British and French had invested $72 million ($1.6B in 2024 dollars) in U.S. aircraft factories, estimated to have sped up the process of scaling up aircraft production by a year… The next great push for aircraft production came in 1940, after Germany invaded western Europe. On April 9th Germany invaded Norway and Denmark, and on May 10th Germany invaded Belgium, Luxembourg, the Netherlands, and France. On May 16th Roosevelt asked Congress for $1.2 billion in additional defense funding ($26.8B in 2024 dollars) and called for the U.S. to build 50,000 aircraft a year, roughly as many aircraft as the U.S. industry had produced in the entire history of aviation to that point. This was 25 times what had been built in 1939, and more than eight times existing aircraft expansion plans. By July Congress had authorized funds to build 24,000 aircraft, and over the next year Congress appropriated $12 billion in total defense spending, roughly 10 times what the U.S. had spent annually in the 1930s. By 1941, while not planning on building 50,000 aircraft a year (a number Roosevelt had seemingly selected out of thin air), plans were in motion to expand U.S. air forces to more than 63,000 aircraft by 1944, as well as to continue supplying Allied nations with aircraft… It was soon realized that the scale of expansion required was far too much for the existing industry to finance (in part because banks were reluctant to provide loans), and ultimately most new aircraft factories were built by the government as GOCO (government-owned, contractor-operated) facilities. While some factories were built by the War and Navy Departments directly, much of the expansion was financed by the Defense Plant Corporation (DPC), the brainchild of Bill Knudsen, who had left his job as president of General Motors at the request of President Roosevelt to work for free helping U.S. industrial mobilization. North American Aviation, for instance, used DPC financing to construct a new factory in Dallas, and DPC leased the company machine tools to expand its Los Angeles factory. Thanks in part to DPC financing, by the time of the attack on Pearl Harbor, North American had expanded from 3,400 to 23,000 employees, and had enlarged its factory space by a factor of six… Roosevelt’s production targets were far greater than what the existing aircraft industry could handle, even after they greatly expanded their workforces, and manufacturers in a variety of different industries ultimately contributed to wartime aircraft manufacturing. Final assembly of aircraft themselves mostly remained the purview of existing aircraft manufacturers scaling up their operations, though several different manufacturers produced the same aircraft (Boeing’s B-17, for instance, was also made by Douglas and Lockheed). Ford was the only non-aircraft manufacturer that delivered fully assembled aircraft in any appreciable quantity, building roughly 6,800 aircraft during the war.”
Why it matters: “Looking back 70 years later, U.S. aircraft manufacturing during WWII looks like an unqualified success. The U.S. turned itself from a tiny producer of aircraft to manufacturing an unending, overwhelming stream of planes that proved critical to the war effort… But this success was highly contingent. The U.S. was woefully unprepared to expand its aircraft industry. The U.S. didn’t have the proper aircraft developed going into the war, and the medium and heavy bombers that proved crucial to victory couldn’t be produced in large numbers until relatively late in the war. Neither the government nor the industry had the organizational infrastructure in place to handle the scale up, or plans for creating it: Most army mobilization plans implicitly assumed that industrial mobilization was like flipping a switch, and that on ‘M-Day’ the industry would immediately switch to wartime production… World War II aircraft production shows that it's possible for a complex manufacturing industry to grow incredibly rapidly. But it also shows the limits of that scale up; that even in an emergency some things can only be accelerated so much, and success depends on what preparations have been taken beforehand.”
7. How the romantic, inaccurate mythology of the Vietnam anti-war movement fuels contemporary protests
Why you should read it: At Quillette, historian Adam Garfinkle points out that the self-serving romantic mythology propagated by anti-Vietnam protestors has fueled futile left-wing protest movements—including current campus kerfuffles over Israel’s war in Gaza.
“The basic thesis of [Garfinkle’s book] Telltale Hearts is that, contrary to the self-preening myth favoured by those who participated, the antiwar movement did not actually shorten the Vietnam War or lead to US de-escalation and eventual withdrawal from Southeast Asia. It probably had only a minor impact on the skein of politico-military developments, and to the extent it did influence developments, it was probably counterproductive… However modest its impact on the war, the antiwar movement mightily advanced the mainstreaming of countercultural themes here at home, a development with anything but a trivial impact. It wasn’t what the movement demanded that made a difference looking forward, but how and why it demanded it.“
“Plenty of wiser heads understood at the time that the campus protests of the mid-to-late 1960s and early 1970s—especially when they were explicitly anti-patriotic, profane, violent, and disruptive—helped the Johnson and Nixon administrations manage public opinion over the war. Many more Americans loathed the antiwar movement than had misgivings about the war and its managers, which allowed these two administrations to pursue escalation in Vietnam, for better or worse. Ultimately, the failure of that policy became so conspicuously profound that it could not be ignored even despite the blinding blandishments of groupthink… As a generation passed, however, the granularity of wartime political consciousness gave way to selectively amnesic wishful thinking. At the time, predicting how antiwar-movement antics might affect the 1968 and 1972 elections was understood to be a complex business given the ambivalence of public opinion about the war. But all that complexity washed away in the minds of most movement veterans, certain in retrospect that ‘democracy in the streets’ (the title of a characteristically self-regarding mid-1980s memoir) had changed the collective mind of the nation and forced an end to the war… Had the antiwar movement really been as heroically and broadly efficacious as its aftermyth claimed, George McGovern would surely have trounced Richard Nixon in the 1972 presidential election. Instead, Nixon carried 49 states and won over 60 percent of the popular vote. There was no changed mind of the nation. But facts are powerless before egos laden with ideological flapdoodle—especially when those egos, and the heroic stories they told about themselves as the years rolled by, represented the vanguard of a new and enticing countercultural edge promising blameless hedonism and affluent ease to the upwardly mobile scions of the upper middle class.”
Why it matters: “… 2024 is unlike 1968 or 1972 in one important sense—the current protests concern someone else’s war. We saw nothing of this scale on campus in and after March 2003 when the US invaded Iraq, in November 2001 when the US military entered Afghanistan, during the spring of 1999 when the US bombed Serbia, or during the 1991 Gulf War. Yes, America is a close ally of Israel and provides the Jewish State with military assistance, but the protesters are preoccupied by humanitarian concerns not policy issues. So, why have there been no protests over the terrible events in Sudan or, for that matter, over Russia’s pounding of Ukraine? The answer is Jewcentricity, redolent of a double standard so deeply rooted in the American mind that we don’t even know it when we see it.”
8. Why trade surpluses aren’t the result of comparative advantage
Why you should read it: In the Financial Times, Carnegie Endowment for International Peace scholar Michael Pettis elaborates on why trade surpluses like China’s are not the result of comparative advantage but public policy.
“The theory of comparative advantage proposes that the global economy benefits when different countries specialise in products they can produce comparatively more efficiently, exchanging them in the global markets for products that other countries can produce more efficiently… To illustrate, let’s assume a world of two products, textiles and glass, and of two countries, Germany and Spain. In this world, even if Germany can produce both textiles and glass more cheaply than Spain, Germany wouldn’t have a comparative advantage in both… So is it possible for Germany to sell both textiles and glass to Spain while running trade surpluses? Yes, but it turns out that this has nothing to do with comparative advantage, and everything to do with the domestic distribution of income… If German workers receive a low enough share of what they produce — in the form of direct and indirect wages — German businesses will be able to produce both textiles and glass even more cheaply than Spanish businesses, but German households will not be able to consume or import in line with what they produce… Economists who argue that in this example Germany has a comparative advantage in both textiles and glass are confusing comparative advantage with weak domestic demand. To move to a system of comparative advantage would require enough of a rise in German wages that German demand would rise in line with and match German production. In that case Germany would still export, but its imports would increase relative to exports, and the problem of weak demand would be resolved.”
In the discussion about Biden’s recent tariffs on Chinese goods, we have to make the same distinction between low Chinese prices associated with comparative advantage and low Chinese prices associated with weak domestic demand. Chinese workers are much less productive than American workers, so it’s to be expected that they earn lower wages. The problem is that even adjusting for differences in productivity, Chinese wages are low… This would change if China were to raise its wages in line with its productivity, as it has been promising to do for nearly two decades. In that case it would still export products in which it had a comparative advantage, like electric vehicles, but because Chinese households would be able to consume more, it would import just as much as it exported, and so would contribute as much demand to the world economy as it absorbs. Americans would pay for their Chinese imports with exports to the world.”
Why it matters: “This has important political implications. In a famous 1936 essay, Joan Robinson warned about a global trading system in which countries use trade to export weak domestic demand and domestic unemployment. This led to an explosion of trade conflict in the 1930s. No one should be surprised that it is leading to the same today.”
9. Why protests happen mostly at elite campuses
Why you should read it: Washington Monthly writers Marc Novicoff and Robert Kelchen run the numbers on recent campus protests against Israel’s war in Gaza and find they’re mostly happening at elite institutions.
“Many of the most high-profile protests have occurred at highly selective colleges, like Columbia University. But since the national media is famously obsessed with these schools and gives far less attention to the thousands of other colleges where most Americans get their postsecondary educations, it’s hard to know how widespread the campus unrest has really been… Pro-Palestinian protests have been rare at colleges with high percentages of Pell students. Encampments at such colleges have been rarer still. A few outliers exist, such as Cal State Los Angeles, the City College of New York, and Rutgers University–Newark. But in the vast majority of cases, campuses that educate students mostly from working-class backgrounds have not had any protest activity… Protest activity has been common, however, at elite schools with both low acceptance rates and few Pell students.”
“When you separate out private and public colleges, the difference becomes even more stark... At private colleges, protests have been rare, encampments have been rarer, and both have taken place almost exclusively at schools where poorer students are scarce and the listed tuition and fees are exorbitantly high… Protests and encampments have been more common at public colleges. This is in part because these colleges just have more students, and only a few students are needed for a protest. Even at public colleges, though, there is a clear relationship between having fewer Pell students and having had a protest or encampment.”
Why it matters: “What, then, does explain why colleges with large numbers of students of modest means are far less likely to have had protests and encampments? Our best guess is that poorer students are just focused on other concerns… Whatever the cause, the pattern is clear: Pro-Palestinian protests are overwhelmingly an elite college phenomenon.”
Odds and Ends
Check out the twelve best waterfalls in Minnesota, as compiled by the Minneapolis Star-Tribune…
The long-lost Caravaggio painting Ecce Homo—first identified in 2021—goes on display for the first time at the Prado in Madrid…
What a 4,600 year old skull can tell us about how ancient Egyptian physicians treated brain cancer…
How the strongest solar storm in decades gave the world an impressive set of aurora earlier this month…
Elderly Canadians have apparently been getting a little too high and heading to the emergency room after the country legalized cannabis…
What I’m Listening To
“Ice Cream,” Sarah McLachlan’s crowd-pleaser from her breakthrough 1993 album Fumbling Towards Ecstasy.
A cover of the Buffalo Springfield classic “For What It’s Worth” by Hootie and the Blowfish.
The intro theme to X-Men ‘97, performed by the Newton Brothers.
Image of the Month
