Trump - Asia - Putting Fake News On the Road

Are  Chairman Xi Jinping and Prime Minister Shinzō Abe Glued to Trump's Twitter?

Are these two really ready to believe anything Trump says?

In more normal times these foreign heads of state would be meticulously "gleaning" through the President's every word as they diligently attempted to ferret out every possible nuance, but that would be in "more normal times." This time around for this foreign excursion the President will be dragging plenty of baggage.

Anyone expecting these foreign heads of state to be "unaware" of Trump's embarrassingly castrated political catastrophe would need to be either an optimistically naive Pollyanna without an Internet connection or an alarmingly, typically un-formed Trump supporter. The Trump base is, at this moment, frantically attempting to "breathe some sort of credibility" into the relentless right wing media efforts to pack the "Uranium One" story or the "sold out DNC" story down their throats.

Even when served with lots of candles and a thick coat of white sugar frosting, these stories still remain both uninteresting and unappetizing to any American not infected with a "total Hillary" nutritional obsession. Dangerously, while this scheme has produced some results to date, its days of "digestible relevance" are clearly numbered.

What could possibly go wrong? [image]

So, we find Donald Trump, a very visibly crippled US President, face to face with "actual" heads of state who are ruthlessly aware of the fact that his days in the Oval Office are, as mathematicians might describe, very likely "double digit integers." On the other side of the table in China, Japan and South Korea are individuals who were actually elected -- all without Russian GRU assistance.

We may quite comfortably assume that the well educated and well informed citizens of these respective countries selected -- each, of course, through its own, individual process of national representation -- notable, exceptional men to direct the course for their corresponding national interests. 

These are exceptional, smart individuals. That part is quite normal. What is abnormal sits on the US side of those negotiating tables. Trump is uneducated, unstable, uninterested, narcissistic and, importantly, impulsively bellicose. Unhappily, for the world, Trump is also well armed.

The point here is a simple one. The leaders of these powerful Asian nations all know that President Donald Trump is thoroughly invested in all these mortally lethal "developmental failings." They run through his geriatric blood at a genetic level. His arcane behavior reinforces this conclusion every time he lurches into the next Twitter tirade, and every one of these foreign leaders has seen every one of the tweets. Over and over, these foreign leaders have sat with their best analysts discussing every word the President has tweeted, assessing every word included in the content of every embarrassing tweet.

Believe me.

The leaders of these powerful Asian nations also all know that President Donald Trump can no longer credibly "sign checks" for national US policy decisions from a convincing position of Presidential power. The leaders of these powerful Asian nations all know that President Donald Trump has become a dangerously temporary "voice" for nothing more than 30% of "peculiarly irrelevant" American voters and a handful of avariciously greedy American billionaires.

One final reminder -- not one of these Asian leaders has any interest in another round of trusting avariciously greedy American billionaires. These meetings with Trump will not be "their first rodeo." Not even close. Every one of these Asian countries still bears the scars of past dealings "with America."

An Apple Reader - iPad$, iPhone$ and iWorker$

Big Profits Bring Out All the Advice

Of course, total failure also tends to bring out plenty of advice, too.  

However, Apple's announcement of startling profits, possible dividends and even a big pile of cash in the bank didn't really catch anyone by surprise.  The iPad and iPhone stories seem to be the newest addition to Adam Smith's Wealth of Nations. Dr. Smith's central arguments of division of labor and industrial advantage have matured remarkably since his death in 1790. (From Wiki: The Wealth of Nations)

Although this MeanMesa post is not specifically about the corporation's good fortune, the proposition presented here still requires a glimpse at the "big picture" of current conditions.  The volume of recent "news" about the business is predictably large.  With corporate profits in this scale, every analyst is infatuated with the possibility of breaking out with some new "cleverly expanded subtlety" which had been overlooked by his competitors.

In keeping with the "Primer" idea in the title of this post, we can review a little of three interesting accounts of this business phenomenon.  

1. CNN - The CNN article outlines the general story concerning the announcement of profits and dividends.

2. A very nice, scholarly paper (from the University of California, Irvine & Berkeley, and Syracuse University) titled "Capturing Value."

3.  A quick "taste" of the public image problems Apple Corporation has encountered with respect to working conditions in its supplier factories in China.

1. The CNN Story

Take a look at a few excerpts of the CNN report about the company. (Read the whole article here.)

Apple announces dividend and stock buyback

NEW YORK (CNNMoney) -- Apple on Monday announced plans for much of the $97.6 billion in cash it has accumulated from massive iPod, iPhone, iPad and Macintosh sales.

The company said it would begin giving shareholders a quarterly dividend of $2.65 per share sometime its fiscal fourth quarter, which begins in July. Apple last offered a dividend in 1995.

Apple (AAPL, Fortune 500) will also buy back $10 billion of its own shares over three years, beginning in October.

"We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure," Tim Cook, Apple's CEO, said in a prepared statement. 

- ... -

The company said it expects the dividend to cost the company $2.5 billion per quarter, making it one of the largest dividend payers in the United States. Combined with the repurchase program, Apple said it will likely utilize $45 billion of its domestic cash through 2015. 

It's significant that Apple is using its domestic cash, rather than the much heftier stockpiles it holds overseas, because foreign cash would be subject to a sizable "repatriation tax" if brought back into the United States. Cook said the company didn't want to pay that tax.

- ... -

"Investors have been wresting with the question of, 'Who is left to buy the stock?'" said Alex Gauna, tech analyst at JMP Securities. 

Cook said he hopes the dividend will open up Apple's stock to a new investor base. 

Apple's dividend yield -- the percentage of a company's share price that it pays out in annual dividends -- is currently 1.8%. That's higher than the dividend yields of other technology giants, such as IBM (IBM, Fortune 500), Cisco (CSCO, Fortune 500) and Oracle (ORCL, Fortune 500), but it's lower than the yields of more direct rivals like Microsoft (MSFT, Fortune 500) and Hewlett-Packard (HPQ, Fortune 500).

Apple's dividend yield is nearly twice the average for the tech companies in the S&P 500, but a bit less than the 2.1% average for the overall S&P 500.

2. Capturing Value in Global Networks:
Apple’s iPad and iPhone

This very readable and scholarly paper analyzes the distribution of Apple's costs and profits with respect to iPad and iPhone sales.  (Read the whole paper here.)  The entire paper (8 pages) is fascinating!  While reading through this remarkably objective economic analysis of Apple, the iPhones, the Apple supplier, FOXCONN, the wages of Chinese workers, the sources and destinations of Apple profits and even the wide spread of Apple costs, a very new picture emerges.

Capturing Value in Global Networks:
Apple’s iPad and iPhone

Kenneth L. Kraemer, Greg Linden, and Jason Dedrick
University of California, Irvine, University of California, Berkeley and Syracuse University

It is unexpected, but this is not the picture that MeanMesa and many other Americans had developed about Apple's business practices.  You are encouraged to spend a few minutes with this paper.

Here are a few excerpts from the paper.

from page 3:

Who captures the financial value?

Like the iPod, the iPad and the iPhone are big money makers for Apple. While other companies are thrilled to be part of the supply chain for these highly successful products, their benefit in dollar terms pales in comparison to Apple’s. Among countries, China’s economy continues to play a surprisingly small role in comparison to the U.S., Korea, Japan and Taiwan.

In the case of the iPad, Apple keeps about 30% of the sales price of its low-end $499 16GB, Wi-Fi only model (and more if the unit is sold through Apple’s retail outlets or online store). We estimate that Apple keeps a healthier 58% of the sales price of the iPhone 4. In both cases, these are far greater than the amounts received by any other firms in the supply chain.

- ... -

The iPhone also benefits from the fact that the price received by Apple, at least until the recent availability of “unlocked iPhones”, is not paid directly by the consumer because of a subsidy offered by the carrier in exchange for a contract. This brings us to the question of whether carriers exert market power over handset suppliers as we anticipated. Our analysis [5] of the smartphone value chain showed that carriers in fact earn gross profits over the life of a typical 2-year contract several times those earned by handset vendors. This suggests (and industry analysis further supports) that the carrier’s primary market power is exercised over its subscribers. The carrier then negotiates over the distribution of the resulting profits with handset suppliers that can help it to attract and retain subscribers.

After Apple, the next biggest beneficiaries in the iPad and iPhone supply chains are Korean companies such as LG and Samsung, who provide the display and memory chips, and whose gross profits account for 5% and 7%, respectively, of the sales price for the iPhone and iPad.3 U.S., Japanese and Taiwanese suppliers capture 1-2% each. But overall, the story remains the same, with Apple’s success benefiting its shareholders, workers, and the U.S. economy more generally.

The two charts below show the breakdown in detail. In each case, we provide the geographical distribution of the gross profits received by the first-tier suppliers. We break down the remaining cost of inputs into materials and labor.

The main difference between the two charts is that the iPhone, shows no amount for “Distribution and retail” because Apple is paid directly by a cellular company, such as AT&T or Verizon, which then handles the final stage of the sale.

The role of China

It is a common misconception that China, where the iPad is assembled, receives a large share of money paid for electronics goods. That is not true of any name-brand products from U.S. firms that we’ve studied. The breakdown of value in these two iconic Apple products shows why.

First, our assignment of profits (which exclude wages paid) to first-tier suppliers is based on the location of their corporate headquarters. There are no known Chinese suppliers to the iPhoneor iPad. The iPhone and iPad are assembled in mainland China factories owned by Foxconn, a Taiwan-based firm.

That means that the main financial benefit to China takes the form of wages paid for the assembly of the product or for manufacturing of some of the inputs. Many components, such as batteries and touchscreens, receive their final processing in China in factories owned by foreign firms. Although hard facts are scarce, we estimate that only $10 or less in direct labor wages that go into an iPhone or iPad is paid to China workers. So while each unit sold in the U.S. adds from $229 to $275 to the U.S.-China trade deficit (the estimated factory costs of an iPhone or iPad), the portion retained in China's economy is a tiny fraction of that amount.

3. Dividends Emerge in Pressing Apple 

Over Working Conditions in China

Even before Apple's profit statement, iPad and iPhone consumers were beginning to be concerned about working conditions in the firm's supplier factories.  These are excerpts from a New York Times, "Business Day,"  article reviewing protests focused on working conditions in a major Apple supplier, FOXCONN, in PRC.  (Read the entire article here.)  

Dividends Emerge

in Pressing Apple Over Working Conditions in China

By EDUARDO PORTER

Published March 6, 2012

 

Beck Diefenbach/European Pressphoto Agency

A protester, Dana Johnsen of Santa Clara, Calif., outside Apple's shareholder meeting last month in Cupertino. 

The American sweatshop opposition movement was born the day we discovered how our Nikes were stitched together. Two decades later, we are discovering how our cherished iPhones are made, giving Apple a “Nike moment” of its own.  

Worker suicides at Apple’s main Chinese supplier, Foxconn, in 2010, followed by reports of forced overtime, child labor, minimum wage violations and unsafe working conditions at its suppliers, have contrasted with Apple’s status as creator of hallowed devices and its spectacular $13 billion in profit — 30 percent of sales — in the first quarter. 

The reports have fueled a budding protest among students and labor unions who call for Apple to compel its suppliers in China to improve the conditions for hundreds of thousands of workers who assemble its products — workers whose wages contribute a mere $10 to the cost of a contract-free $549 iPhone 4. 

But if the troubling conditions at Foxconn’s assembly lines raise anew fundamental questions about the responsibility of corporations in this age of global capitalism, the outcry raises a basic question too. Does pressure by consumers and governments in the West to improve multinationals’ behavior in poor countries do more harm than good? 

Sweatshop opposition in the past offers limited hope. But Apple is different in some ways than the garment and shoemakers of earlier campaigns. Its high profile and deep pockets suggest that consumer pressure might indeed effect change for workers at Apple’s suppliers in China. 

- ... -

This poses a quandary for would-be activists in the West. They see their task as convincing multinationals like Apple that whatever the cost of improved working conditions at its suppliers’ plants, it is less than the potential cost to its reputation of allowing workers to toil in sweatshop conditions. But they must not forget that the No. 1 priority for most of Foxconn’s workers is to keep their job. While outside pressure might improve their lives, it could also persuade Foxconn to replace them.  

- ... -

Consumer pressure and bad publicity have already led Apple to make some big changes. In 2005 it created a code of conduct for its suppliers, monitored regularly. Last month it became the first electronics company to join the Fair Labor Association, a group set up in 1999 by companies, universities and nonprofit groups to monitor working conditions at garment makers in the third world. Over the last two years, Foxconn has announced repeated wage increases at its plant in Shenzhen. 

These are early days. Who knows, if activists keep up the pressure, they might help lead to significant improvements in the lives of Foxconn’s workers and make us feel better about how our iPhones are made.

 A MeanMesa Suggestion for Apple

Today, a profit reserve of almost $100 Bn, plans to distribute some of that profit as dividends to shareholders and long range "buy back" policies fill the picture of Apple as a corporation.  Considered from the point of view of an executive strategy for the company, all these factors practically glow amid a still dismal national economy which is still only tentatively parked in the hall way outside the ICU.

At first glance, it looks very much like the "rising tide is, in fact, lifting all boats," at least all of the boats tethered close within the ownership of the company.  But, it is right here that a remarkable opportunity can also be found, an opportunity for "boats" tethered a little further from the corporation's board room.

A cursory look at the numbers reveals a little more about the "opportunity."

Let's say that there are 10,000 China workers at FOXCONN and other PRC Apple supply chains.  10,000.  The corporate management has already indicated that they are prepared to "utilize" $45 Bn of its domestic cash reserves between the dividend and the buy backs.  Looking closer at the $45 Bn figure,

$45,000,000,000

we can see that it represents 45 thousand million dollars.

If Apple, partly out of decency, partly out of the hope of inspiring supply chain workers to even more efficiency and partly out of trying to calm the growing "sweatshop" criticism were to write a check for $500 to every one of those factory workers, a solution to a number of looming problems and another collection of intangible, but possible, future benefits might materialize over night.

10,000 workers X $500 each = $5,000,000 

Now, although this sum certainly seems like a lot of money to MeanMesa, Apple's check book [for dividends and buy backs] balance would still remain at $45 Bn - $5 Mn, or

$44,995,000,000

or, 44 thousand 995 million dollars plus a quieter consumer market and a string of corporate suppliers with an eager, energetic work force.

Get the idea?

Solidifying Syria

Looking Again for Syria-Libya Similarity

The American public didn't do too well in perceiving Libya.  In fact, we revealed a very nasty co-dependent streak.  We kept insisting that until we knew all about the "replacement regime," we just couldn't really help out much beyond bad mouthing Gaddafi.  Of course, as the overly righteous bunch that we are, we hardly broke a sweat with the dutiful "bad mouthing" assignment.

The premise was simple enough.  "We are so good that you can't possibly be good unless we like you."

Someone had to take the political risk of acting on ideals rather than craven, petrogarchic capitalism or our usual psychopathic fear of anything happening anywhere in the world which unfolds beyond our control.  Happily, our President took the risk.

However, it was in the "behind the scenes" action with Libya where the similarity to Syria can be found.  In order to survive the predictable onslaught by the domestic wing nuts who would blame him for a rainy day, a few details had to get kicked into order before even Obama could proceed.  These are precisely similar to the "loose ends" prevailing in Syria.

Rent-a-General, retired (image source)

The wing nut mantra was familiar.  No exit strategy.  Endless quagmire.  A third war in the Middle East.  The fear mongers barely had to even do so much as change the country name.

Someone to Answer the Phone

"Good afternoon.  This is the United States calling. With whom am I speaking?"

The usual talking heads immediately took up the challenge.  The preachers, coaches and retired generals marched out in lock step to tell Judy Woodruff about all the horrible things which were about to happen thanks to the incompetent and inexperienced professor in the Oval Office.  When the nightmarish military failure had been robustly described, the rant moved on to being fooled by none other than al Qaeda itself masquerading as Libyan freedom fighters.

Ben Ghazi didn't help much.  It seemed to take forever for the new government to reassure the West that they really were good guys, and all the while Gaddafi's tanks were warming up in the suburbs for some real meat grinding.  Ask anyone in Misrata.

Well, Ben Ghazi then -- and still, even now -- faced the traditional problem of a suddenly successful insurgency.  Unlike the other side where a heavy handed autocracy had long ago "homogenized" all disparate interests which could be useful and eliminated all those who were simply problems, the insurgents were composed of all sorts of elements united primarily by their consolidated determination to oust the last guys.

Typically, these various parts of an insurgency had spent little time imagining a unified state once their work was complete.  All the rough edges of centuries of tribal conflicts, religious animosity, wealth disparity and the rest were alive and well, set aside only for the task at hand.  This was the case in Libya, and this is the case in Syria.

Let's take a look at the various interest players in the conflict and the corresponding obstacles each one brings for solution.

The Syrians

Syria isn't quite as bad as Iraq in terms of pre-existing tribal divisions.  After all, there was a place called Syria even in the time of the Roman Empire, although this isn't to say that all the factions had ever particularly mastered to art of getting along.  The important point here is that each of these factions has its own priorities which must be satisfied in the end result.

Further, at some time through the long history of the place, most of these factions had attacked others, winning or losing, and creating very durable animosities. In the naive view of American Sunday School graduates and other policy Pollyannas, these difficulties should, reasonably, be simply swept away in favor of uniting under common cause.  The idea that what exists is an historical equivalent of Lutherans declaring open war on Presbyterians for a couple of decades completely escapes them.

The conclave of interested parties at the Syrian Opposition has worked to form what is loosely named the National Council outside the country.  With uncertain ties to the Free Syrian Army of defectors and regional insurgents around the country, the National Council is still being disrupted by factional priorities and questionable affiliation with the hundreds of thousands of Syrians still protesting on the streets.

Arab Spring Measure:  The Syrians are in their Arab Spring.

The Iranians

Syria has long been a "jewel" in the Islamic Republic's structure for regional dominance.  In the Sunni Shi'ite violence during the sectarian phase of US occupation in Iraq, the Iranian client state provided large numbers of "volunteers" to move across the common border to Iraq.  Currently, a large part of the Iranian military shipments to Syria cross the Eastern regions of Iraq against UN arms embargoes.

Syria supplies military equipment to both the Lebanese Hezbollah and the Palestinian [Gaza] Hamas against the UN arms embargoes in place for both destinations.  Syria, itself without much capacity for arms manufacturing, acts as a forwarding agent in these cases. 

Iran's worst nightmare is to become isolated.  Without access to its client states in Syria, Lebanon and Palestine, Iran's capacity to create and sustain irreconcilable hostilities would be gravely reduced, leaving the Islamic Republic with only far more direct alternatives for expressing its influence in the region.  Tehran has no appetite for face to face conflict, although accomplishing its nuclear ambitions might mitigate some of this reluctance.

Arab Spring Measure:  Iranians are more than half way into their Arab Spring.

The Chinese

The catastrophic Security Council failure on Syrian issues was orchestrated by the Russians and the Chinese.  China's motive is slightly more passive that the Russian Federation's. Politically, China has little hegemonic interest in non-adjacent territories. The Chinese clearly valued Iranian oil supply and general "coziness" with Middle Eastern dictatorships who have survived the Arab Spring.  The PRC took a much more troubled glance at the Arab Spring than was presented in domestic US news because something similar could easily contest the State Council's total control inside China.

Arab Spring measure:  Rural areas, ethnically diverse areas and acquired provinces such as Tibet and the Uighurs are ready to begin their Arab Spring.

The Russians

The Russian Federation, however, has a much more direct interest in the survival of the Assad regime in Syria.  For one thing, Syria is saturated with Russian military products -- everything from the SAM's Syria has installed to prevent another Israeli air threat to Damascus to the smoke belching tanks which were unable to prevent the Israeli incursion into Golan.  If the Assad government, as a military client, were overthrown by street protests and the Free Syrian Army, global Russian arms sales would suffer.

However, Russia's stance with the Security Council VETO squarely places its traditions of revolutionary thought on the examining table for the world to see.  Russia might have appeared to be dealing with Syria, but it was concentrating on rebellious satellite countries where Arab Spring ideas were taking root. 

Arab Spring measure:  Many of the Federation's satellite states are ready to begin their Arab Spring.  Urban citizens inside Russia proper are getting closer, freaked about the heavy hand of the Putin oligarchs.

The Americans

This administration has set its own high bar in American policy for direct intervention.  The Libyan expedition was made legitimate by NATO participation, Security Council validation and Arab League approval.  This should not be surprising for a President with such a legalistic outlook in such matters.  It should also introduce the idea of a limit in the successful operation in the case of bin Laden.  Obama will do it, but Obama will feel the full burden of what he's doing while he does it, not the least of which derives from his own idea of legitimacy.

Obama's ideals will be in play if he decides to act on the Syrian pogrom, but those ideals will not be gaseous niceties about poorly defined ideas of liberty and progress.  Instead, they will be much more akin to the South Chicago street realities we saw in Pakistan.  Bold, decisive and direct.

Pentagon and Congressional policy wonks will predictably offer up the same types of heavy handed, Cold War solutions enumerated with naval blockades, ground troops in the tens of thousands, saturation bombing and the like.  The Pentagon will be looking for the next career opportunity, the Senate will be fiddling while the slaughter continues and the House will be consumed only with the happy, wet dream prospect of a military disaster for the Commander in Chief  months before the election.

Although reasonably compassionate folks might wish for some "middle of the road" path forward, those in the government aspiring to the status of "war making expert" will be locked, as usual, in their tragically unsuited, out dated set of false choices.  MeanMesa doesn't think that Obama sees it this way at all.

He has military technology which has never been available to past Presidents as they contemplated such questions.  He matches this technological advantage with a steady pragmatism and steely will -- both of which represent unsettling, essentially unknown attributes to the stodgy remnants of the Bush military establishment.

Arab Spring measure:  The Americans may be further into their Arab Spring than they are willing to admit.

The "technology?"

Drones

Of course there are a few "loose ends," but the military element is straight forward enough.  US drones are a perfect match for tanks firing randomly into civilian areas and convoys of troops and military supplies rolling along Syrian highways to their next killing field.  Coupled with no longer particularly secret satellite intelligence, the combination would castrate the dictatorship's and his terror squads' fire power advantage in days.

Low Hanging Fruit (image source)

We would then be at a very familiar foreign policy place.  The codependent side of American life would be screaming the predictable questions about "Who are we helping?" and probably moaning the now over worked, road weary lament about an exit strategy.

Libya has shown us that the "exit strategy" hobgobblin has no teeth if there has never been an "entrance."  As for Syria, flatten a few tanks actively engaged in the act of civilian murder, and level enough convoys so that the remainder start taking the threat seriously enough to begin keeping their heads down. 

The plan would be to "plow the road" for a bit, then let the insurgency run its course.  With the tanks and convoys more or less out of the picture, it wouldn't take long.

Loose Ends

We can address this issue best with a few questions.  Imagine an irate Russian Federation Foreign Ministry staffer in a closed meeting with Secretary of State, Hillary.

"You had no right to attack the Syrian government.  What makes you think you can just fly in there are start blowing up tanks?"

"The tanks were murdering the legitimate Syrian government."


"The US didn't even have a treaty with the Syrian opposition government!  You had no legal basis for this unprovoked attack."


"Okay.  We haven't heard any requests about stopping from the legitimate Syrian opposition government, but you have a point.  We'll stop the attacks right away, although it will probably take a few days for the order to move through the Pentagon."

"Al Qaeda and the Iranians are going to move in there and take over.  The US can't trust the terrorists and foreign insurgents to 'play nice' with the US after they take power."

"We don't think so.  We're willing to take the risk.  It's not likely that the new Syrian government is going to be interested in keeping the same friends as the old one.  We expect to just help out a bit, then slip away and let things take their course."

"You're going to recklessly unleash chaos and instability throughout the region."

"If you haven't noticed, there is a tidal wave of chaos and instability in the region already.  We're determined to not be cynical.  Instead, we'll be optimistic.  We're trying to work on our control issues.  You have shown the world which side of things you favor with your VETO vote.  We're showing the world which side of things we favor. After this, everyone will pretty much know everything."

The drones make US involvement truly "casual."  The particular drones selected for the mission should be among the cheapest, simplest choices.  The devices were designed to be expendable, and Syrian SAMs will inevitably shoot down some.  There are no particular treaty obligations to be met.  The collateral damage will be very limited -- tanks sitting out in the open firing on a Syrian city are pretty much "low hanging fruit."

When the drone attacks suddenly cease and no invasion follows, the message to the Syrian people will be clear.  "Now it's your turn.  You're in charge."

Part One - China and Western "Free Trade" - Opium for Everyone!

The first of a three part posting concerning the current dilemma in the U.S. economy - "cheap labor."

Where did it come from?  What can we do about it now?

MeanMesa would like to introduce this posting with sufficient humility to at least attempt to tag it for what it is.  What can be found here is a heady mix of selected  history, echoes of a traditional international economic conspiracy and a bit of foreign relations paranoia -- all topped with our infamous, yet delicious, cynicism.  Even with all that said, we may still have a point that our visitors might wish to consider.

So, with that inflated, self-aggrandizing disclaimer parked squarely in the light, let's take a cold look at what may be our national future.

A Gushing Historical Apology

Now, Wiki begins its abbreviated time line of Chinese history around 8,000 BC (BCE for the politically correct...).  Around that early date the Chinese had begun a remarkably stable type of royal kingdom/war lord governmental structure.  The culture was doing the things that a culture must do -- domesticating farm animals and field crops, building the Chinese version of a fairly impressive Paleolithic infrastructure of roads and cities and beginning to look at its neighbors with that "wouldn't it be nice to own that property" sort of imperial avarice.

The written account of Chinese history after that date would over fill a  dozen, modern Mid-Western city libraries.  Consequently, the exact part of all this history MeanMesa would like to emphasize in this posting becomes quite selective -- and, of course, unavoidably incomplete.  Still, perhaps even this truncated glimpse can serve as a viable foundation for our point.

Please do your very utmost to generously indulge us as we begin.

A Brief Account of the Recent History of China

The Portuguese were apparently the first Europeans to  actually begin trading with the mainland Chinese around 1500.  In no time, literally flocks of western "free market" types from a variety of countries -- the usual suspects, parties to civil wars in such matters -- had "discovered" that Chinese goods could be very popular and profitable in European markets.  Porcelain, silk, tea and many other commodities developed a market rush in post Renaissance/pre-industrialized which led these earliest capitalists to an even greater international trading frenzy.

From Wiki:  (Read the entire article here.)

Official British trade was conducted through the auspices of the British East India Company, which held a royal charter for trade with the Far East. The EIC gradually came to dominate Sino-European trade from its position in India.

Low Chinese demand for European goods, and high European demand for Chinese goods, including tea, silk, and porcelain, forced European merchants to purchase these goods with silver, the only commodity the Chinese would accept. In modern economic terms the Chinese were demanding hard currency or specie (gold or silver coinage) as the medium of exchange for the international trade in their goods. From the mid-17th century around 28 million kilograms of silver was received by China, principally from European powers, in exchange for Chinese goods. Britain's problem was further complicated by the fact that it had been using the gold standard from the mid 18th Century and therefore had to purchase silver from other European countries, incurring an additional transaction cost.

In the 18th century, despite ardent protest from the Qing government, British traders began importing opium from India. Because of its strong mass appeal and addictive nature, opium was an effective solution to the trade problem. An instant consumer market for the drug was secured by the addiction of thousands of Chinese, and the flow of silver was reversed. Recognizing the growing number of addicts, the Yongzheng Emperor prohibited the sale and smoking of opium in 1729, and only allowed a small amount of opium imports for medicinal purposes.

Of course, these hardy Europeans quickly "discovered" that opium would practically market itself!  After all, it seemed that everyone liked it!  Not only did the silver which had previously constituted an early version of the "balance of trade" problem for these Europeans come flowing back into European coffers, but the new product's sudden success actually became a formidable "cash cow" in its own right.

Bayer Aspirin?  Not exactly ... Source.

A great deal of history unfolded rather quickly, at least for China and its Imperial government.  The 1729 effort to make opium illegal in China failed.  However, the problem grew worse and worse, leading to two serious wars -- the Opium Wars of 1839 and 1858 -- in which the tactical advantage of modern European armies effectively wrecked the old Imperial structure.

The Chinese humiliation was without quarter.  Even the United States joined in the fray, sending warships and military.  Essentially no one in Europe was troubled in the least by the rampage inflicted on China so long as the immense opium profits -- by now protected by occupation armies from Europe and extracted from entire provinces which had been forcibly ceded to European interests -- continued to arrive in Western banks.

A few interesting, more contemporary notes concerning the catastrophe may be in order:  (Courtesy of FactsandDetails.com -- Read the entire article here.)

In the early 19th century Napoleon said, "Let China sleep --  when she wakes the world will be sorry."

In 1900, the future Russian revolutionary leader, Vladamir Lenin, said, "The European governments have robbed China as ghouls rob copses." A descriptive 1898 French lithograph showed Queen Victoria of Great Britain, Kaiser Wilhelm II of Germany, the Japanese emperor Mutsuhito and Czar Nicholas II all sitting around a giant pizza, inscribed with China, dividing it up with butcher knives. 

“This inferiority complex has been institutionalized in the Chinese mind." Orville Schell wrote. “In the early 20th century China took up its victimization as a theme and, and it became a fundamental element in its evolving collective identity. A new literature arose around the idea of bainian guochi—‘100 years of national humiliation.’ After the 1919 Treaty of Versailles gave Germany’s concessions in China to Japan, the expression wuwang guochi—‘Never forget our national humiliation’—became a common slogan.” 

And when Communist China was founded in 1949 Mao declared, “Ours will no longer be a nation subject to insult and humiliation.”

We can accept this little snippet of Chinese history as an adequate foundation for the intentions of this series of postings.  Although the history lesson may be over, the ramifications of this part of the story are far too central to be neglected as we consider the more modern dilemma we face with China.

Just a few more important dates for the events of China's more recent past may help. 

Roughly fifty years after the crippling -- and humiliating -- concession to the British in 1860, the Qing Dynasty failed in 1912.  In 1921, the Communist Party was founded, and by 1927 a full scale civil war had begun between the nationalist Kuomintang and the Communists.  The Communists prevailed in the civil war, and Mao Zedong began to rise as the accepted autocrat of the country.  The United States continued to support the losing Kuomintang until that insurgency relocated to the island of Taiwan.

In China, the Communists founded the Peoples' Republic of China (the PRC) in 1949, and the country began a decade long "association" with the Soviet Union until around 1960.  Part of that "divorce settlement" resulted in a million man Peoples" Liberation Army in China and 160 divisions of Soviet tactical nuclear forces permanently stationed just north of the Sino-Soviet border.  The newly separated partners had, well, "trust issues."

A decade after that, US President Nixon met with Mao Zedong and Chou Enlai in Beijeng to initiate rapprochement.  In practically no time, we arrived at where we are now. 

So, do we think that China "learned its lesson" from all of this?  The answer is a resounding -- and, resounding -- "yes."  China learned this lesson from top to bottom, from its skin to its very core, in every cell of its immense body, with every beat of its gigantic heart -- you get the idea.  However, perhaps the more interesting question is whether or not all us Westerners learned our lesson.

This old cultural echo lives and breathes in the modern Peoples' Republic, and it serves to explain some important facets of our current, puzzling relationship with that country.  As is always the case when "reality becomes real," we can either collapse into a comfortable illiteracy as we face our challenges or we can, equipped with more understanding, gentrify our predicament with the prospect of at least doing the best we can.

Quite predictably, the US domestic news pundits are currently introducing the idea that the Peoples Republic of China will soon surpass the Japanese as the second largest economy on the planet.  The "fear mongering" aspect of this "threat" is rather lackluster in that its approach can't rely incite the hill billies to some desirable, politically irrational, terror response.  The inevitability of such a development is too similar to the inexorable advance of a glacier to be of much use as the latest frightening torment.

Finally, although the historical treatment of China served to incite the country's current infatuation with self-defense capacity, the situation still enjoys a common thread with the US treatment of Iran.  In the case of Teheran, the toothless threats of the autocrat, W, and his servants succeeded in erecting a snarling, frightened nuclear power.  China, on the other hand, enjoyed far too many resource assets of money and troops.  The response designed by the Western powers took on a different course.


More about that alternate scheme later in this series of postings.

A Cold War Reorganization of Adversaries

Of course, we are all familiar with the Nixon/Kissinger courting of Maoist China, but how much sense can we make of events after that?  "Smilin' Hank" Kissinger successfully "separated" the PRC from its previous close friendship with the Soviet Union.  A few details of "secret negotiations" with the Peoples Republic finally emerged in 1971.

In no time, our two nations were playing ping pong.

Information challenged Americans believe that the Soviet Union finally buckled under the  bankrupting cost of competing with Reagan's Strategic Defense Initiative -- the "Star Wars" of the 1980's.  Of course, MeanMesa visitors understand that many other geopolitical economic realities were in play.  China, however, was not so eager to "take the bait." 


That country developed its own nuclear deterrent at an affordable scale, once again demonstrating traditional Chinese frugality.  With a few dozen (the U.S. still has thousands) credible warheads on its Long March ICBM series, the Chinese autocracy met this unavoidable challenge without emptying its treasury of cash resources sanely allocated for use in infrastructure and manufacturing development along with  conventional (and, usable) military procurement.

Part Two of this series of posts will describe the course of economic relations between the West and China which have emerged from this historical beginning.


Please "stay tuned!"