Krugman, Trump and Geopolitics

In an article published in the New York Times on 5 September („Trumpism Is Bad for Business“), Paul Krugman sharply criticized the economic sanctions imposed on China. Not only do they cost the consumers of his country dear because it is they who pay the added tariffs, but American agricultural suffers too because China does no longer by its products. The international „supply chain“ cannot be damaged without all those involved suffering severely. The result is already obvious: Instead of making America „great“, Trump is producing the opposite result.

From the perspective of Trump and his voters

things looked quite different at the beginning. America’s industrial landscape was – and still is – marked by rust belts: the ruins of abandoned industries that disappeared in the US because they were relocated to China. Hundreds of thousands of relatively high-wage jobs were either completely destroyed or replaced by lower paid ones. Moreover, polls revealed that a majority of Americans considered China to be the greatest threat to their country. The American population had been seized by a diffuse uneasiness about the policies of the two major parties. Trump brought about a turnaround in that he was clearly aware of this protest. He dared to change direction embarking on the path of protectionism with his own undiplomatic recklessness.

The cause for the dismantling of the United States

as a major industrial power could, of course, already be felt in the late seventies. During the first three post-war decades, the US had still been the world’s undisputed military and economic superpower. The war had bled Europe and Japan to death, and other states had not yet emerged as threatening competitors. But already at the beginning of the eighties the tide began to turn: Germany and Japan became more and more important as serious industrial contestants. In this situation, an epochal turnaround began in the US, which was to fundamentally change both its economy and society and ultimately even threaten its rank as the leading world power.

American companies recognized,

that technologically simple processes could be outsourced to developing countries – even to those with hostile ideologies such as China – thus significantly reducing manufacturing costs. This decision must be called an epochal one because it forced America’s main competitors, Germany and Japan, to follow the US if they wanted to assert themselves on the world market against US products that were soon becoming much more competitive. In other words, since the beginning of the nineties at the latest, all industrialized Western countries had been forced to outsource ever larger parts of their own production – especially to China. This process was further facilitated by the fact that it received its official blessing from renowned economists. At that time Robert Reich wrote his famous book „The Work of Nations“, where this „international division of labor“ was openly recommended.

For the economic development of non-Western world,

especially for China, outsourcing was, of course, a tremendous opportunity. Development aid (which was not granted to communist countries anyway) could never have changed a country, still completely underdeveloped under Mao. But capitalist investors did so within a few years setting up their factories in Shenzhen and along the entire coast of China. China’s rise is even more impressive than that of Germany at the end of the 19th century when it had not only successfully imitated the industrial revolution initiated by England, but had already surpassed its former teacher. Unlike Germany and Japan, the Far East did not need a century for this exploit, but not more than three decades. China managed to copy and digest Western knowledge and skills so to speak overnight. As of now, it can already boast of having overtaken its original teachers in a number of areas or of being on the verge of doing so.

The terrible poverty in China was thereby substantially reduced

– a very desirable development. At the same time, however, the ecological footprint has increased dramatically and will continue to do so in the future – a very dangerous process indeed. China prefers to put on a green coat, pointing out that it has built the world’s largest wind farms on its territory. But this has to do with the fact that everything in China is big – including the addition of new nuclear power plants and more and more coal-fired power stations.

As Friedrich von Weizsäcker and Kurt Biedenkopf once said, the Western industrial model cannot be generalized leading the planet to ecological destruction. This is, of course, what mankind is busy doing at present. Ever larger parts of the world – including now the African continent as well – are being industrialized, and most of the energy needed in this process is being generated from fossil sources.

As far as the USA is concerned,

it was smart businessmen like Donald Trump, who in the eighties eagerly seized the opportunity to outsource production in order to save costs and thereby significantly increase international competitiveness. This fact is mostly forgotten when Trump and his followers blame China for the industrial decline of their country. Yes, it is true that until recently the USA was still the world leader in the fields of information technology and artificial intelligence, both having been mostly invented by Americans in the first place. Today, however, Chinese competitors like Huawei are not only sitting close behind them, they are on the verge of surpassing them. Even Boeing’s supremacy (like that of Airbus) is unlikely to last for much longer.

The trade war launched by Trump is nothing more than an expression of a feeling of panic. Everything indicates that the USA – unlike the Soviet Union under Gorbachev – will not let itself be pushed voluntarily and peacefully from the pedestal of the leading superpower.

We are used by now,

to see players purchased from other countries in most national football teams. World championships tend to be decided by money, i.e. by the financial clout of a national club when buying top athletes from abroad. The outcome of world contests would certainly look quite different if such practices were not possible and common. Likewise, the global economy would look completely different if the global trade chains existing due to outsourcing were to be torn apart. Can Donald Trump’s America really benefit from such a measure?

Certainly not at in the short run

Entire industries can easily be transformed into rust belts within a couple of months, but rebuilding them requires years or decades and the necessary skills must be furthered by a functioning educational system spread over the whole population. But America, though possessing some of the World’s top universities, has criminally neglected lowlevel general education.

Trump wants to get the lost jobs back to his country – a project for which he certainly deserves praise and for which we find no recipe in Krugman’s aforementioned article. Unfortunately, we can be certain that he will not be able to do this in the one or two terms of his presidency.

In the long term too, this project is bound to encounter great difficulties. If jobs were really to return to America, if, for example, Apple were to produce its iPhones only in the American homeland, the company would have to raise prices to such a degree that it would stand no chance against Samsung and other competitors. In other words, those American companies that today still dominate the world would quickly lose their position as globally dominant corporations even if remaining dominant on their home market (since the latter would be protected by customs duties). Even the transition to automated production with a minimum of manpower would not defuse the situation, because jobs would then be performed by machines.

China, on the other hand, would be only marginally

hit by this problem. As it continues to produce cheaper than most other countries, its products remain the most competitive everywhere. But, of course, if other countries follow the American example to protect their industries, China too would have to be more and more content with its home market.

For globally successful corporations

protectionism naturally amounts to a radical shrinkage, which some of them would hardly survive – free trade between the three major economic areas USA, Europe and China is already suffering heavy losses. This trend could intensify over time. Just as free trade in toxic waste from industrial to developing countries is no longer tolerated by the latter, it seems quite possible that more and more nations will no longer accept the dominance of cheap suppliers like China – world trade could then be substantially reduced.

The dominant paradigm,

that is, the accelerated industrialization of the entire globe at a pace that threatens to ruin it ecologically – will then undoubtedly be slowed down. That is the good news; the bad news is that free trade restrictions would particularly affect states like Germany. While American economic output is only twelve percent dependent on exports, the figure in Germany is a staggering forty-eight.

But the paradigm is being shaken in several ways. It is not just outsourcing that has given the top one percent of Americans fantastic riches, while at the same time making most of the rest of the population poorer by losing well-paid jobs of the past. In addition, this process meant that the wealth of Western industrial nations flowed in large streams to Asia because profits there were so much higher.

This is, of course, an old story, the supremacy of the once great English Empire was undermined in just the same way: English capital was looking for investments on the continent because it was attracted by larger profits. In other words, the richest Englishmen were busy eroding the supremacy of their country by financing future competitors. Since the eighties, the top one percent Americans, to whom Trump undoubtedly belongs, followed the same practice but instead of now blaming themselves for their country’s industrial decline they prefer to look for offshore scapegoats. On this point, they could have learned much a lot more from their Communist foe. Lenin once remarked that capitalists would still sell him the rope with which he could hang them.

In the face of the often unconsidered,

not to say stupid anti-Americanism, which is so widespread among European intellectuals, some may perhaps think that an abdication of the US as the world’s leading power is long overdue and even desirable. Shouldn’t everyone looking at American presidents like George W. Bush or Donald Trump necessarily conclude that a future hegemon China could hardly be more frightening even when led by an autocrat like Xi Jinping?

I take the liberty of quite firmly contradicting this objection. Without the military presence of the US, Putin would already have pushed through his cherished project to resurrect the Soviet Union not only in Crimea, but in other countries with strong Russian minorities – in Ukraine, war has been fermenting for years. Moreover, we should not forget that the „Slavic brother peoples“ enjoy Putin’s special attention.

Of course, one can endlessly argue about expansionist desires

In my view, it remains perfectly clear, however, that the departure from the bipolar world of the former superpowers US and Russia holds existential risks for the planet– much greater risks, I think, than during the 1960s when the nuclear confrontation between the two powers was at its height. For the new polycentrism of a growing number of industrialized states amounts de facto to the multiplication of nuclear-filled powder barrels. In the coming decades there will be even more North Koreas – states perfectly able to contaminate entire nations with nuclear radiation or even wipe them out completely. If Iran succeeds in equipping its existing missiles with nuclear heads, Saudi Arabia will, of course, want to follow suit. The situation resembles outsourcing or the purchase of top athletes. As soon as a single state starts the process, others follow it in order not to be left behind. Polycentrism is the worst thing that can happen to our children and grandchildren, perhaps even to ourselves. Not only do we need a United Europe, we even need a United World if we want our species to survive the 21st century. *1*

1 See Peace, War and Climate Change – a Call for New Strategies (Amazon)

The hand on the trigger: How an American president wantonly prepares the next war

The great world powers slipped into World War I without really wanting it. But they had been arming themselves for years, so all that was needed was but a spark – such as the assassination of the Austrian heir to the throne – to detonate a powder keg filled to the rim.

A lot of explosives had accumulated

not only in the arsenals of the military, but in the hearts of the people. In the first moment of the declaration of war, many people throughout Europe were seen to be overwhelmed by enthusiasm. “… the war of 1914… was still serving a delusion, the dream of a better world, a world that would be just and peaceful… That was why the victims went to the slaughter drunk and rejoicing, crowned with flowers and wearing oak leaves on their helmets, while the streets echoed with cheering and blazed with light, as if it were a festival”(Stefan Zweig).

Quite a few military men and politicians at the head of states did, of course, suspect the calamity that the war would bring all of them, but there was no turning back for anyone without losing face. The politicians more or less willingly let themselves be driven and they in their turn were the ones that drove their peoples into annihilation.

Today the world is being driven again,

but nowhere in the world is the impending war greeted with enthusiasm, neither by the United States nor by its rivals. Not even by the American President. It is difficult to believe Donald Trump, because he mixes truth and falsehood at his own discretion, but we may trust that he does not want to start a war with Iran, because until now he has largely kept his promises to his electorate – and one of these promises was the reduction of US-military presence outside its borders. So why is the current American President showing the world such an unpleasant face? Why has the US since George W. Bush ceased to be what it has been for so long, namely a shield for Europe, to which it owed its freedom and prosperity during the second half of the past century?

After completing his ten-volume history

of human civilizations in 1961, Arnold Toynbee remarked that the „American Empire“ had two characteristics that distinguished it from its predecessor the British Empire at that time already extinct for about two decades: abundant military bases and an emphasis on generous economic aid for its allies. In a policy “unprecedented in the history of empires,” America was making “her imperial position felt by giving economic aid to the peoples under her ascendancy, instead of… exploiting them economically.” Yes, the USA was by and large a milder hegemon than all previous great powers.

The Pax Americana created at the end of the Second World War was soon to prove an advantage for most of its satellites in the first three to four post-war decades. US-historian Alfred McCoy notes that “at the end of World War II, the United States invested all its prestige and power in forming nothing less than a new world order through permanent international institutions — the United Nations (1945), the International Monetary Fund (1945), and the General Agreement on Tariffs and Trade (1947), predecessor to the World Trade Organization….“

We should emphasize the role

of the United States as a force for peace and order before we talk about its current president and the danger that he so massively and so wantonly conjures – doing away with the reputation of a great nation in the eyes of world opinion. Immediately after taking office, the new lord of the White House committed the unforgivable stupidity of counteracting almost all of his predecessor’s rulings. Obama had gone to great lengths, with the help of his allies, to negotiate a treaty obliging Iran to use nuclear power exclusively for civilian purposes and to submit to monitoring by the International Atomic Energy Agency (IAEA). Trump tore the treaty apart and, in this way, frivolously gambled away the prestige of the United States as a contracting partner that could be relied upon. How can we believe a state where each president cancels the commitments of his predecessor?

And still worse the incredible naivety

of transferring business practices to international politics! The predominant criterion when concluding commercial deals is the benefit each party derives from it. No competitor, even if seeing a pistol aimed at his chest, will risk his life for a few dollars less.So, the real estate agent Trump believed he could transfer this insight to politics. „They will give in as soon as I scare them to death – and then we’ll make a deal,“ that is the simple philosophy of the currently most powerful man on earth.

The pistol, in this case,

does not just consist in measures to make the Iranian economy collapse. The export of oil, to which the country owes its modest standard of living, is by now largely curtailed, and any embargo breakers must expect heavy penalties. That is why Europe is no longer fulfilling its obligations towards Iran, and has largely broken off its business relations in order not to risk the US boycotting its own companies.

But now, Trump has still gone

one step further. It was not enough for him to choke the economy of Iran. Since the beginning of this year, he uses the military in order to ensure that his message is understood correctly. Two aircraft carriers have recently been stationed off the coast of Iran, plus strategic bombers B-52, together with stealth bombers F-35 and a rapidly growing number of US soldiers. They are currently being relocated to the Persian Gulf.

Only a politically blind, highly egocentric

businessman like Trump could seriously believe that it would be enough to play with aircraft carriers and bombers off the enemy’s coast to make him aware that he was no match for a man like Donald Trump. Militarily, Iran has become the strongest state in the Near East. According to experts, it is quite capable of eliminating in a first strike all American military bases in the Gulf with highly efficient missiles from its own production. The country cannot be compared to Iraq, Libya or Syria. The mullahs are now well aware of their strength, especially since Trump’s approach is once again driving the population into their arms, after having almost lost them. As several previous uprisings have shown, the regime has by no means enjoyed undivided support among its own people. On the contrary, it was only able to maintain its rule with the help of police-state repression.

But just as Donald Trump knew

how to drive once again the people of Venezuela into the arms of their incompetent autocrat Maduro, he now unites the people of Iran behind their leadership – even though the country and its inhabitants have never been as badly off as they are today. Trump is a master at not making America the number one country, as is his avowed intent, but at making enemies all around. Abe Shinzo, the Japanese prime minister, is still a rare exception. On June 13, he tried to putty the broken porcelain, but he had no more success than Heiko Maas, the German exterior minister. Ayatollah Khamenei expressly declined to negotiate with the American President as long as the latter continues economic sanctions and threatens his country with military deployment.

Now the enemies are facing each other

with loaded pistols. No one can retreat without losing face. How is Trump going to recall his aircraft carriers without being ridiculed by the world as a paper tiger? And how can the regime of the Ayatollahs give in without losing the support of the population and being laughed at as a weakling? Unlike business, it is about honor and national prestige that nations are driven to war. These notions have never gone out of fashion between them – neither in the US nor in Iran. Trump steered his country into this stalemate not because he wanted this war, but because he makes rash decisions and is therefore unfit as a responsible leader of the world’s greatest power.

I think that war is inevitable, but that is of course no more than a personal opinion – fortunately history has never allowed prophecies to become true with absolute certainty.

For the time being, each of the two opponents

is still waiting for the stupidity of the other, i.e. for the first act of aggression, so as to have a pretext for striking with unmitigated power: the Iranians with simultaneous rocket attacks on all American bases and ships; the Americans with immediate strikes by their stealth bombers on all Iranian military positions and radar stations. As of now, acts of provocation are already occurring. Today, on 13 June, two oil tankers were fired upon in the Gulf of Oman. We may assume that there are quite a lot of war mongering groups that long for a conflagration and even want to bring it about at any price. After all, we should not forget that many people in countries like Syria, Iraq, Yemen and Libya, which for years were exposed to terrible devastation, have nothing to lose. If war is inevitable let it be transferred to the rest of the world.

America’s military will, of course,

win the war against Iran in a few weeks, but Donald Trump will not be able to win peace. Up to the present day, peace has neither been won in the Near East nor in Libya. Iran has left no doubt as to what will be its first measure after the outbreak of war. It will immediately block the Strait of Hormuz, which could be barred for years afterwards due to permanent terror in the region. In this case, the main artery for oil supplies to Western countries will be severed indefinitely. We should have no illusions about what is really at stake: nothing less than the current prosperity of Europe, Japan and many other countries. But let’s not dwell on our losses only. Iran – like Syria and Iraq another country famous for some of the greatest testimonies of human civilization – will sink into rubble as has already happened in large areas of the Middle East. And this happens for no other reason than that an ill-advised American president is frivolously experimenting in big politics with business practices that may succeed among brokers.

Trump has issued the slogan „America First“

We may find it hard to blame him for that. Every statesman is obliged by his oath to benefit above all his own country. True statesmen, however, always refrained from shouting this intention from the rooftops but wisely concealed it. This is not the current president’s way; in fact, he could do more harm to his country and the world at large than any previous one. Only a miracle may still prevent the fire of war from flaring up in Iran, the Strait of Hormuz from being mined, and Europe from plunging into chaos due to severed oil supplies.

Miracles are not at all impossible,

a kind of miracle is visible even at this very moment as hardly anyone seems to suspect the demons that are ready to pounce on us. Indeed, many will reject these lines as pure scaremongering. Hopefully, these people are right!

Apocalypse – When?

Military competition is certainly no invention of our time, nor is war. We saw that comparatively simple but revolutionary technical innovations such as the use of horses, stirrups and combat bows were able to wreak havoc in the hands of nomads. Apocalypse – When? weiterlesen

The Curse of Globalization

I am living in Puch near Weiz, a small village in Styria. Some tourists who spend their holidays here will describe the place as dreamy, although local people are by no means idle dreamers, but hard-working men and women. The Curse of Globalization weiterlesen

Trump, Putin, Xi – what is it that makes them so similar to each other?

How companies work and what conditions must be met for their proper operation, seems pretty clear. Manufacturing enterprises rely on an infrastructure that allows a constant and reliable supply of energy and raw materials (or primary products). Furthermore they usually require a state-run educational system, which provides the company with the necessary „human material“. Trump, Putin, Xi – what is it that makes them so similar to each other? weiterlesen