Every day it gets worse

Little did we know that during the golden 1990s we were complaining about things that would look utterly trivial in retrospect. The sheer stupidity of the 21st century is so mind-boggling it leaves me almost speechless.

But not quite.

Consider the “problem” of currency manipulation. Let’s start with the fact that currency manipulation is a strange term to apply to a hodgepodge of government policies that may or may not impact the current account balance. For instance, you might say that “currency manipulation” is almost the sole purpose of having a central bank.

There are some smarter economists who do worry about currency manipulation. But when you read their work, it’s pretty clear that what actually concerns them is “saving manipulation”—when countries enact policies that boost the national saving rate. These policies can “improve” the current account balance. And not all such policies, rather they worry most about a subset of relatively ineffective policies, such as swapping domestic assets for foreign assets. (I’m not saying these policies have no effect; I just don’t see how it could be very large.)  They tend not to worry as much about far more effective pro-saving policies, in the fiscal/tax area.

The Netherlands and Switzerland have CA surpluses of 10% of GDP, while Singapore’s is 20% of GDP.  Does anyone seriously believe those are due to “currency manipulation”?

Even the economists who do worry about currency manipulation find the criteria set by the US government to be absurd:

Congress’s criteria to assess if a country is interfering in its currency are: A minimum $20 billion trade surplus with the U.S., a current account surplus in excess of 3 percent of gross domestic product, and repeated intervention in currency markets.

I’ve got an idea!  Instead of labeling countries “currency manipulators” when they accumulate $20 billion surpluses with the US, how about labeling then “currency manipulators” when they, umm, manipulate their currencies?

I’ll tell you why not.  Because that would force us to actually define currency manipulation in a way that could be measured.  And that would expose the fact that what really concerns us is saving manipulation.  No, not even saving manipulation, it’s current account surpluses in other countries that actually concern us.  No, not even that, it’s bilateral deficits with other countries that concern us.  And of course bilateral deficits have nothing to do with currency manipulation in any meaningful sense of the term. Indeed they have nothing to do with anything meaningful at all.   What’s the bilateral trade deficit between New York and New Jersey?

Trump took office saying he would label China a currency manipulator from day one.  He’s failed to deliver on that promise, just as he’s failed to repeal Obamacare, secure the border, reduce the trade deficit, or stop the rest of the world from laughing at us.  He failed because the Trump’s own Treasury department wasn’t able to find evidence that China is a currency manipulator, despite using a silly set of criteria that are strongly biased toward finding China guilty, such as the provision that it’s not OK to run a $20 bilateral surplus with the US.

But it’s even worse.  Not satisfied with the fact that the Treasury’s own criteria show that China is not a currency manipulator, they are thinking of changing the criteria so that the evidence will match the predetermined verdict—guilty as charged:

Treasury Secretary Steven Mnuchin is open to changing how the U.S. determines which nations are gaming their currencies, a move that could give President Donald Trump the chance to officially brand China a foreign exchange-rate manipulator as he seeks leverage to redefine trade terms between the world’s largest economies.

One method Mnuchin would consider: Using a 1988 trade act with a broad definition of currency manipulation to designate a country a manipulator, even if the label isn’t warranted by specific tests under a 2015 law, he said. The other would be to change the criteria that help establish whether a country is engaging in competitive devaluation of its currency, according to Mnuchin.

Treasury applies three tests to measure whether a country should be labeled a currency manipulator. The framework of the criteria is provided by Congress, but the specific thresholds in the tests are at Treasury’s discretion.

Again, foreign current account surpluses are not a problem for the US.  But if you disagree with me and agree with those pundits who do worry about current account imbalances, you should be focusing on the Eurozone and Japan and Switzerland, which really do have big CA surpluses, not China, whose CA is nearly balanced.

Trump seems determined to launch a cold war against China, a country with an economy that will be twice as large as the US economy by 2035.  In the old days, militaristic countries would engage in warfare by inventing some silly pretext—say demanding that a smaller neighboring country apologize for some imagined slight.  Trump wants a cold war with China, and demands the federal bureaucracy find some sort of fig leaf to justify it.  Why not point to China’s bad human rights record in Xinjiang?  Unfortunately, mentioning human rights would simply highlight Trump’s embarrassingly friendly relationship with the Russians and the Saudis, despite their war crimes in the Ukraine and Yemen.  So Trump needs to seek out an economic rationale for war with China.  In this post-truth world, currency manipulation is as good as any.



31 Responses to “Every day it gets worse”

  1. Gravatar of Benjamin Cole Benjamin Cole
    21. October 2018 at 17:27

    Interesting post.

    The Singapore Monetary Authority pegs the Singapore dollar to a basket of currencies, which is held confidential. The policy of Singapore is to seek current-account trade surpluses, and I guess they are very successful at that.

    Singapore per capita GDP PPP is about 50% higher than that of the United States.

    But I don’t think Singapore is an example to follow. I think it is just a well-managed city state, endowed with a population that has a work ethic, can do things that larger countries cannot. Nevertheless, Singapore is an example of a managed economy that prospers.

    Watching Trump on China will be one of the best shows of his administration. The multinationals obviously have huge stakes in China. And not just manufacturers. BlackRock, a money manager with $6.2 trillion under its belt, has huge investment stakes in China— and they are just one of hundreds of firms.

    Yet China’s record on human and civil rights becomes more appalling with each passing season. It is difficult to determine the facts, but it appears the Communist Party of China is reasserting its dominance in all areas of the China society, including the economy.

    What happens if there is a Khashoggi-type celebrity event in China?

  2. Gravatar of Matthias Goergens Matthias Goergens
    21. October 2018 at 17:44

    What makes you think the policy of Singapore is to seek current account surpluses? The MAS seems much more concerned with inflation in their official communications.

    The basket is officially confidential, but banks routinely recwrse engineer it for arbitrage. (And Scott woudd be happy to note that this very arbitrage is having the Chuck Norris effect.)

  3. Gravatar of Christian List Christian List
    21. October 2018 at 21:31

    Trump’s embarrassingly friendly relationship with the Russians and the Saudis, 

    Trump’s surely not more embarrassingly friendly than Obama and his fan media few years ago. It’s hard to top the NYT articles that were pro Obama and pro Putin and against GOP politicians like Romney.

    Also: Last time I checked the sanctions on Russia were way tougher than under Bush and Obama. Not to mention that there are exactly zero political sanctions on China so far. Your definition of “friendly relationship” seems arbitrary and partisan.

    In the old days, militaristic countries would engage in warfare by inventing some silly pretext

    Sounds like China invading Taiwan, as soon as China feels strong enough. But that’s the new days, not the old days. Funny that you mention Yemen and Ukraine but not Taiwan and Tibet.

    they are thinking of changing the criteria so that the evidence will match the predetermined verdict—guilty as charged:

    I thought for a second there, that you were talking about the deep state witch hunt.

  4. Gravatar of Christian List Christian List
    21. October 2018 at 21:37

    Trump just declared that he wants to leave the INF Treaty because Russia is cheating so much. Again your definition of “friendly relationship” is arbitrary and partisan.

  5. Gravatar of Benjamin Cole Benjamin Cole
    21. October 2018 at 23:39

    Matthias Goergens:

    The view that Singapore operates a dirigeste economy is not my view; it is taken as obvious by accredited Singapore economists published in the peer-reviewed Singapore Economic Journal.



    School of Economics, Singapore Management University

    90 Stamford Road, Singapore 178903
    Centennial Asia Advisors Pte Ltd, UEN 200203905Z
    79 Anson Road #11-03, Singapore 079906

    Published 22 July 2015

    This paper looks at how government intervention shapes the evolution of the Singapore economy and accounts for its successes and failures over the past 50 years. Compared with other dynamic Asian economies, the Singapore government’s approach to intervene in the economy is both more extensive
    and more intrusive, but with a narrow focus on GDP growth and surplus accumulation as the primary objectives. The ruling government’s near complete dominance in politics has enabled it to mobilize resources to create the preconditions for strong GDP growth and high savings.”



    Note the words “surplus accumulation.”

    How Singapore ever got the reputation as a free-market citadel is beyond me. I could deliver paragraphs on various non-free market foundations in Singapore, such as all the land is owned by the government; and all the hospitals too; and 80% of the housing is built by the government; and Singapore Airlines is owned by the government, which owns the airports, and owns oil refineries too. Gee, do you suppose Singapore Airlines get the best gate assignments and maybe cut-rate fuel? I could go on, but you get (a small sliver) of the picture.

    I suspect Singapore’s exalted status at Cato and elsewhere is due to their high living standards, and pro-business attitude, and a resolution by Western scholars that only free-markets are successful, ergo Singapore must be a free market.

    I happen to prefer free markets for large economies. A city-state might do better with central planning, and Singapore seems to have done so.

    There is a problem with all small economies, in free markets. If your economy specializes and thus devolves into a one-trick pony, then you are vulnerable when that trick plays out for whatever reason.

    It may make sense for small economies to use central planning to build a sturdier model.

  6. Gravatar of ssumner ssumner
    22. October 2018 at 08:04

    Christian, I was talking about invading other countries. Taiwan is not a separate country from China, at least if you believe the Taiwan constitution. It’s a province.

    As for Trump not being cozy with Putin—is that a joke? He likes Putin more than he likes our own allies.

  7. Gravatar of Christian List Christian List
    22. October 2018 at 11:20


    Taiwan is not a separate country from China

    Funny, someone said the same thing about Austria, and the Sudetenland, and Czechoslovakia, and Poland, and then the whole world.

    Your position on Taiwan is well-known and really embarrassing. Count me among the people who doubt that the majority of Taiwanese people want the totalitarian regime from Mainland China to invade their country.

    As for Trump not being cozy with Putin—is that a joke?

    I never said that. I said his rhetoric is not more embarrassing than the rhetoric of Obama and Bush jr was. At least not in a relevant way.

    Because of TDS you are also breaking your own rules again. You correctly found out several times before that Trump’s rhetoric is not very reliable (to put it mildly). So we need to look at his actions.

    And unlike his rhetoric, Trump’s Russia policy has actually been a dramatic improvement over that of his predecessor. Trump expelled 60 Russian diplomats, approved arms sales to Ukraine (something Obama never did), continued the deployment of NATO forces to the Baltic states, posted troops to Poland’s border with Russia and levied new sanctions against Moscow.

    During his first year in office, he got NATO allies to increase their defense spending by billions (something Obama never did) and twice bombed Putin’s ally, Syrian President Bashar al-Assad. If Putin was looking for a more pro-Moscow policy from the United States, his election interference backfired in a big way.

  8. Gravatar of mbka mbka
    22. October 2018 at 19:56

    Benjamin Cole,

    you’re all over the place with Singapore, as usual. As Scott pointed out, the point of the government policy is savings and reinvestment / capital accumulation – not CA surpluses per se. The point of Singapore’s monetary policy is to balance exchange rate, inflation and interest rates and the point of the currency basket is to be trade-weighted, for the purpose of balance. As for state ownership – in Singapore the government tends to have large stakes in major industries but save for Changi airport, these are mostly publicly traded private companies, e.g. Singapore Airlines. (btw, ever looked at who owns airports in other countries? That’s right – mostly government, say, the City of New York for JFK airport etc).

    You seem to suggest that government linked companies get an easier life than private companies in Singapore. Actually, there is quite an opposing logic at work. Ever wondered why Singapore successfully operates government linked companies, while government influence in the economy in other countries usually doesn’t work so well? It’s because in Singapore everything runs by private sector KPIs. Government entities have to compete like everyone else, emphatically not getting a free pass. Maybe that’s why Changi airport tops a lot of lists, from customer satisfaction to sheer size and volume.

  9. Gravatar of Mike Rulle Mike Rulle
    23. October 2018 at 05:06

    It feels like you are cherry picking. Not that what you are saying is wrong, just incomplete. It is hard to believe your cavalier statement about Taiwan. Hong Kong knows what its like to be a province or protectorate, or whatever they are, of China and they do not like it. If I could wish upon a star I would wish humans were angels, but we are most certainly not. China has gone neo-Maoist, and your concern is Trump has no clue about trade theory. I agree with the latter but worry much more about the former.

  10. Gravatar of P Burgos P Burgos
    23. October 2018 at 07:17

    If China’s economy is going to be twice as large as that of the US, and if it is true that China blatantly and routinely engages in anti-competitive practices against foreign firms (i.e. firm not owned by the CCP, CCP elites, or not politically under the thumb of the CCP), isn’t the time to start a trade war against China to constrain those practices like 2006, and if not 2006, today? Is it possible to have free trade that is fair with a country that doesn’t come close to having a free economy? A trade war with China is one of those things where Trump is taking a stance that actually isn’t crazy or stupid. A broken clock and all.

  11. Gravatar of ssumner ssumner
    23. October 2018 at 08:55

    Christian, You said:

    “Count me among the people who doubt that the majority of Taiwanese people want the totalitarian regime from Mainland China to invade their country.”

    I never said they did. It’s really hard to take you seriously.

    Mike, You are attacking a straw man. Obviously I think the US government is vastly superior to the Chinese government, even under Trump. I don’t tend to do blog posts on the obvious, rather what attracts my attention.

    You seem to believe that you can figure out a person’s views on the relative merits of two countries by comparing the number of posts that are critical of the two countries.
    That’s now how things work.

    To see why, imagine comparing the number of articles on the National Review that were critical of Obama’s policies, with the number critical of policies in China during 2008-16. Which number is larger? Does that mean the NR prefers China?

    As for Taiwanese independence, it would be nice if they were free to decide on their own whether they want to be independent. But as the Catalans advocating independence who were recently arrested in Spain recently discovered, even many democratic countries don’t allow regions to become independent just because they want independence. You and I may not like that, but it’s how the world works. Like it or not, Taiwan is stuck being a part of China, as is HK and Macao. And again, that’s also Taiwan’s official position.

    Burgos, You asked:

    “Is it possible to have free trade that is fair with a country that doesn’t come close to having a free economy?”

    For the past 200 years, the economics profession has overwhelmingly agreed that the answer is “yes”. And I think they are correct.

  12. Gravatar of P Burgos P Burgos
    23. October 2018 at 09:47

    Let me be more pointed; is it possible to have free and fair trade with a country that forces technology transfer and sometimes has a local ownership requirement for market access? Or with a country that uses its military capacity to conduct industrial espionage to benefit local firms?

  13. Gravatar of E. Harding E. Harding
    23. October 2018 at 12:33

    “embarrassingly friendly relationship with the Russians”

    Hitler sure had an “embarrassingly friendly” relationship with the Jews. Which country is Trump arming and which one is he sanctioning again, moron?

    Also, Russia is an exemplary protector of human rights (cf., Krim referendum, Snowden).

  14. Gravatar of E. Harding E. Harding
    23. October 2018 at 12:36

    “He likes Putin more than he likes our own allies.”

    Even if you take Trump at his word (which only a moron could do), this statement is false. If you don’t take Trump at his word (always the right option), this statement is about as true as you are Egyptian.

  15. Gravatar of Christian List Christian List
    23. October 2018 at 16:49


    I never said they did.

    I never said that you said they did. I said: “Count me among the people who doubt that the majority of Taiwanese people want the totalitarian regime from Mainland China to invade their country.” Not more and not less.

    What I also say is that you constantly cherry pick facts regarding China and Russia. China is one of the biggest bullies in the world today and you constantly downplay that fact. China and Russia play on the same bully-level right now, but China seems to be even more dangerous because it’s like you said: China’s influence is growing, and growing, and growing.

    You and I may not like that, but it’s how the world works.

    That’s the lamest argument ever. It’s not even an argument. You can say this about any malady in world history ever. We speak truth to power because we believe in change. Why all those TDS posts? Next time just write: “That just how the world works. Get over it, silly.”

  16. Gravatar of mbka mbka
    23. October 2018 at 18:21

    Christian List,

    “China is one of the biggest bullies in the world today”

    Come on. The biggest bully is the US, handily. It’s just that until Trump, there was usually a benefit for the rest of the world because the US mostly bullied for causes that were useful for all. So no one complained. With Trump now, the US bullies exclusively for its own benefit, hence the complaining.

    China doesn’t have much bully power so far. So China buys friendships, from Belt and Road to its inroads in Africa.

    Russia can at best bully its nearest neighbors, if at all. For the rest of the world, they rely on sowing discord and disrupting others’ businesses.

    If you doubt my representation, just ask yourself – Which country can bully another country into, say, a trade or defense pact?
    – US? Most certainly, we see it done before our eyes
    – China? I don’t see past or present evidence it is even trying, but thanks to generous loans around the planet, Taiwan has few embassies left
    – Russia? Couldn’t even bully its neighbor Ukraine into a pact with itself and had to start a civil war there to slow down the inevitable.

  17. Gravatar of Christian List Christian List
    23. October 2018 at 19:35


    Firstly, don’t get so nationalistic all of a sudden. I heard China got some inhabitants, too. And Tibet. And Hong Kong. And Taiwan.

    Secondly, I don’t mean “bully” in the wrong sense you seem to apply. What are you thinking of, a school yard bully? Better think of all the actions that a tyrant and oppressor would do. You even named some of them.

    The US is usually not a bully. It’s usually only a bully for First World kids who never experienced what a real bully is and does.

    Okay the US probably looked like a bully for some Iraqis, and so on, who were “democratized” by Bush junior. But even in this case I (honestly) assume he did this “with the best of intentions”. So I guess to be a real tyrant you have to act in consciousness that you are one.

  18. Gravatar of Pyrmonter Pyrmonter
    24. October 2018 at 00:04

    A comment about one of the premises: how confident are you that Chinese growth will continue? I imagine it may, but that’s no more assured than that, say, Argentina’s or Venezuala’s did: both were fairly large, fairly sophisticated, and comparatively wealthy countries whose economic institutions more or less imploded (in one case, in response to the Great Depression and the Ottawa Treaty among parts of the British Commonwealth; in the other, for largely internal reasons). Why should China continue to grow, especially if its leadership has taken a turn for the less liberal?

  19. Gravatar of mbka mbka
    24. October 2018 at 00:50

    Christian List,

    what sophistry on the bully definition. You tell me that the US didn’t just bully Mexico into a trade deal that curtails its ability to strike a separate deal with China? Clearly, a much stronger agent blackmailing a much weaker one for the stronger’s benefit, and that’s as good a definition of bullying as any. Recent examples of US bullying include the strongarming of countries into the US’s ludicrous financial regulations and disclosure requirements, and the secondary sanctions policies where the US forces sanctions upon anyone that doesn’t follow in the US’s idiosyncratic vendettas against certain countries.

    Waging war goes way beyond bullying of course. Then again… I can recall a great number of US wars and military interventions in the last decade or two – practically non stop in fact. Can you name a single recent act of war by China? Just one, please. Even Hong Kong was re-acquired after the UK’s legal lease ran out – perfectly following the rule of law here, China as a model international citizen.

    I feel like I’m in some weird parallel universe. As a libertarian / classical liberal, I get to defend China – because there are a lot of things it just didn’t do wrong. And while I should love the US for its constitution and general model of a society, there are certain things the US certainly IS doing, which clearly are wrong. By the US’s own standards.

  20. Gravatar of LC LC
    24. October 2018 at 07:44

    I do have one point of slight disagreement with Scott:

    Trump seems determined to launch a cold war against China, a country with an economy that will be twice as large as the US economy by 2035.

    It’s not just Trump. The American society (by which I am referring to the political establishment, military and large portion of the general populace) are determined to launch a cold war against China. The debate is no longer whether China’s rise is good for us but we don’t like China’s rise so let’s inflict as much pain as possible. We will do this at the expense of a neo-liberal international order which was championed and built by America. Ironic that we seem to lose our nerve and courage to defend this international order when it’s on the verge of a great triumph- the rise to middle class of the majority of the world’s population.
    On the other hand, Beijing seems to be unsure and fumbling as well, because it will have to choose to either get out of its comfort zone and embrace international liberal order and become more free, or harden in its shell and become more nationalistic. Both choices have downsides for Beijing.
    Perhaps this is what the beginning of end of Pax Americana looks like.

  21. Gravatar of P Burgos P Burgos
    24. October 2018 at 09:01


    I don’t think that a US cold war with China is inevitable; as of right now, I don’t think that China’s leadership even thinks it is all that probable. However, assuming the China’s leadership starts to take the threat of a cold war seriously, they might well decide that a cold war isn’t in their interest and put on a full court press to improve China’s image in the US. To successfully do that, they would have to have a vision of a positive sum relationship between the two countries that would acceptable to the populace of both countries. Given that the stakes are the location of manufacturing supply chains vital to China’s economy, I think that they will take this pretty seriously. Also, as their economy grows and moves into a more middle-income status, I suspect that they will be okay with ceasing forced technology transfers and cessation of state-sponsored corporate espionage, and with letting the yuan float. If it does all of those things, I think that it can sway public opinion in the US just enough to prevent a cold war. However, I don’t think China will do those things unless prompted.

    Also, Iraq, Syria, Yemen, Ukraine, and the Daiyu islands are what the beginning of the end of Pax Americana looks like. Regional powers around the world have realized that the US doesn’t actually have the capacity to police the entire world, especially smaller conflicts that don’t upend the neo-liberal international order. So Regional powers are going to continue probing just how far they can push before the US will in a decisive way. So far, it looks like those powers would have to go very far to get a reaction that make testing the waters prohibitively dangerous.

  22. Gravatar of Martin Mertens Martin Mertens
    24. October 2018 at 09:18

    Christian List: “I never said that you said they did.”

    Scott never said that you said that he said they did.

  23. Gravatar of ssumner ssumner
    24. October 2018 at 12:40

    Christian. OK, you win. China is just as evil as countries like the US and Spain, which do not allow regions to secede without permission from the central government.

    Pyrmonter, Well, I’ve been predicting continued growth for 38 years. My critics have been consistently wrong, and I’ve been consistently right. Someday my prediction will be false, but right now continued growth seems the safest bet.

    Note that China continues to implement many market reforms, even as it backtracks in some areas. I’m actually not all that optimistic on China; I see them remaining poorer than many other East Asian countries. But Mao held them down so much that they have a lot of catch-up growth to do.

    Burgos, There is nothing China could do to improve its image in the US on economic issues (politics is obviously a different story.) Look, they just got rid of their huge 10% of GDP current account surplus and literally no one in the US even knows or cares. And that was the big issue 10 years ago. Whatever they do in economic policy, we’ll still treat them like a scapegoat.

  24. Gravatar of ssumner ssumner
    24. October 2018 at 12:43

    Burgos, You asked:

    “is it possible to have free and fair trade with a country that forces technology transfer and sometimes has a local ownership requirement for market access? Or with a country that uses its military capacity to conduct industrial espionage to benefit local firms?”

    Yes. If US firms don’t want to transfer technology, don’t do it. If they think the gains are worth the costs, do it. Espionage is a bad thing, as are trade barriers, Two wrongs don’t make a right.

  25. Gravatar of mbka mbka
    24. October 2018 at 18:52

    Just an add-on and a general considerations on the ability to bully.

    Why is the US even able to bully countries into changing the way they are conducting their internal affairs? And why isn’t Russia really able to bully, and China to a much lesser degree? Bullying would include things like compliance with sanctions that the US has invented, compliance with US rules on finance, refraining from signing international treaties that the US wouldn’t even be part of etc – power and influence short of military pressure.

    My answer is, because the US has such a large market, and access to that market is so important. Russia doesn’t have much of a market to offer, so no ability to bully, and China’s market, while large, is so far not as easily accessible.

    The conclusion is that the worst thing that can happen to the US is a China that keeps on increasing its economic power (larger market) AND giving unfettered access to those markets. At this point, US power of bullying would be over and done with, because China will have replaced the US as the largest world market – and ipso facto the one that any trade partner has to please.

    So, to repeat, nothing would hurt US power more than a China giving unfettered access to its markets.

  26. Gravatar of P Burgos P Burgos
    25. October 2018 at 07:35

    Why pay anyone in the West (or anywhere else) to develop intellectual property if know that it is going to be stolen (or voluntarily transferred to) the CCP and then sold at a price with which you cannot compete (because the CCP didn’t pay the R&D and other costs to figure out how to make a viable product)? What economic function would be left to the West, except as a low cost manufacturer and provider of services that don’t require any protection of intellectual property?

    I think that there is a prisoner dilemma situation here, where the best option is all Western firms to not transfer technology, but since none of them can credibly commit to that, everyone has to take the option of transferring technology to compete on price in the short term. Which is why a trade war and sanctions makes sense as government policy.

  27. Gravatar of P Burgos P Burgos
    25. October 2018 at 07:43


    Maybe you are write about the impact that China giving unfettered access to markets would have on the US’ ability to act as a hegemon. However, I think you are conflating the US’ government with its people. If China is a world hegemon upholding a neo-liberal trade regime, the US people don’t have any need of US status as a hegemon. Then the US would in some ways more like Canada, Britain, or Australia, none of which themselves need to be a hegemon at all, and if that role were offered to them, the people of those countries would reject it as a costly burden (the elites, on the other hand, would love the idea). I don’t know if you are from the US or living in the US, but my impression is that people in the US are at best ambivalent about the country trying to play a kind of policeman (or bully) to the world, as can easily be seen by both Bernie Sanders and Donald Trump’s popularity (Donald Trump likes to look like a bully internationally, but his instincts seem to be to live and let live, with the Iranian sanctions being a notable exception).

  28. Gravatar of Christian List Christian List
    25. October 2018 at 18:16


    we had this discussion before a few days ago. If I remember correctly you were on my side the last time and now you are switching sides, which is kind of ridiculous. At least be consistent.

    The US is the current hegemon of the world. It can be said that the hegemon is always a kind of “bully”. If I learned anything from Scott than it’s this: Compare, compare, compare. So you have to look at this from a historical perspective. There has never been a more benevolent hegemon than the US. Never.

    The big question right now is: What kind of hegemon will China be? To answer that question as best as possible we have to look at how the Chinese regime treats its very own citizens. As soon as they are the hegemon, the Chinese regime will never treat the rest of the world any better than their own citizens. Most likely they will treat the world even worse.

    That’s really all we need to know.

    I’m pretty neutral regarding this topic because I am neither American nor Chinese. But I don’t want to find out how the Chinese regime acts as hegemon. Their Stalinistic control over everything internal is shocking enough, a world hegemon like that is a nightmare, worse than Orwell and Huxley ever imagined.

    Maybe the US will lose this fight for supremacy one way or the other. But at least they should contest. We all know that the one who doesn’t even try has already lost.

  29. Gravatar of mbka mbka
    26. October 2018 at 03:27

    Christian List,

    I’m not with or against you, most of the time I just try to point out what’s factually true from my perception. I don’t take offense at the idea that pax americana was largely prosperous and peaceful, for those within the empire, anyway. But as I pointed out elsewhere, the trick only works when the superpower takes its share, while giving order and stability in return. Now that Trump has decided that he’ll take the money but will give nothing in return, it’s going to get harder to keep friends. Plus, they have decided at the same time that a) no more pax americana and b) China is Carthago. Well this doesn’t square. And, if anything, Russia is Carthago. China never challenged the US as Russia did.

    P Burgos,

    no problem at all if China enforced a liberal, rules based world order instead of the US. And conversely, living under a hypothetical oppressive hegemon would be terrible of course. Personally I prefer, no hegemon at all, so even better if international organisations could eventually do the job of keeping law and order.

    The US elites which you think are in it just for the power, actually saw the logic quite clearly, and early. I was a total sucker at the time for Bush I’s “new world order”, naively so maybe, but i thought it was the right thing to at least try. And, forgot where I read this, maybe in these pages, Bill Clinton said the following in the early 2000’s. The US is so strong now that it can get its way in any bilateral dispute. But this won’t be the case for much longer. So it is in the US’s best interest to build a rule based order, so the US’s interests are protected by this order once US supremacy is long gone.

    This makes perfect sense, in one arc from HWB to WJC, aligning the world’s interest with the US’s interest. And here comes DTT and flushes it all down the toilet. Bad for the world, bad for the US. That’s all I’m saying. The comments on bullying were more about the mechanics of it – who can bully and why. Preferably, there shouldn’t be any bullying by anyone.

  30. Gravatar of P Burgos P Burgos
    26. October 2018 at 09:28


    How could you have a rules based order without a hegemon? Maybe we are arguing with each other, but I would look at both GWB and Obama to a lesser extent as rejecting a rules based order by starting the Iraq war and intervening in the Libyan civil war. Countries just simply aren’t going to buy into a world order in which the hegemon is going to topple regimes at will, and the strategic logic rippling out from that is that regional powers need nuclear weapons to secure themselves, and that buying into the system (by say giving up nukes) gains them zero security. I also don’t actually see DTT as totally rejecting a rules based order, not in practice really. He talks a lot of BS, but if you look at what happened with NAFTA and the EU, nothing fundamentally has changed. The sanctions on Iran are arguable, but I would think that any hegemon (and any world order worthy of calling itself by that name) would want to make regional powers engaging in proxy wars pay a pretty steep price for such behavior. Sure, there is some asymmetry in not imposing sanctions on Saudi Arabia and Turkey, but it looks like sanctions are coming (and I don’t think they would be if those two countries otherwise were trying to promote peace in the Middle East instead of competing for sphere of influence). Russia is still under sanction. So in practice, it seems like Trump is doing what a US president would have to do to try and craft a sustainable rules based order. Talk up renegotiating trade deals, make minimal changes to those deals with the US’ allies and call it a huge victory, push China very hard on its mercantilism, because that is the real problem in terms of global trade, and do what you can to promote peace in the world while minimizing counterproductive US military action. It is just that the rhetoric you need to accomplish these things politically in the US is going to sound very nationalistic. The underlying calculations of interest haven’t changed, and if anything a somewhat more nationalistic US should be a bit more predictable and less disruptive, because it isn’t going to go around starting unnecessary wars. But to get the US to say accept North Korea as a nuclear power and lift sanctions (which is the rational thing to do because N. Korea already is a nuclear power and a wealthier N. Korea better integrated into the international system is also a much more stable, less belligerent N. Korea) requires someone who is going to go through the theater of talking and looking tough, while being willing to accept the best deal and then sell that as a win for the country. This applies to basically everything else in US foreign affairs as well.

  31. Gravatar of mbka mbka
    26. October 2018 at 21:35

    P Burgos,

    “How could you have a rules based order without a hegemon?” I thought about this for a long time because it is basically the analogy to Hobbes’ Leviathan, applied to international affairs. Technically speaking, the true analog wouldn’t be a hegemon, it would be the “world government” that liberals seem to like a lot. I’m very weary of the idea for many reasons, from remote elites to abuse of power etc but the main reason that speaks against even trying is the absence of competition. You want competition of systems, within a harmonized system of liberalized flows. So the original idea of the EU appeals very much to me, get a harmonization of the four freedoms but let independent regions, countries, compete for the best local management. Competition is the only method of discovery of worthwhile innovation.

    How could this work internationally, well, once again, the EU with all its troubles, is a good prototype for trying, and before it, of course the US. We don’t see the US as a federation without a hegemon because it has reached its integrated end state a long time ago. But not because any of the states became hegemon. They all decided to share some powers, as did the cantons of Switzerland. All nationalisms and secessions are grounded not so much in “giving power back to the people” which is a really silly argument*. They are grounded in local politicians who would like to be big fish in a smaller pond. As for *: no one really experiences power in a democracy, but that doesn’t matter. I’ve lived nearly all my life in countries where I couldn’t vote and it feels no different from the one country where I can vote: nearly powerless. Again, it doesn’t matter, because it is the mere threat of democratic change that keeps beneficial competition working for the greater good in a democracy. The individual never has much power, and the “will of the people” cannot be assessed or fulfilled in any meaningful way, no matter how you string up the democracy, see Condorcet or Ken Arrow.

    Agreed that GWB and Obama damaged the international rules based order in their own way. Unfortunately they weren’t the first. Clinton gave in in Somalia after the Black Hawk down incident, that for me was the death knell – this was a UN supported operation., Pakistan had just lost 50 (!) peacekeepers to Aidid and chuecked it up. The the US loses 2 helicopters and some more troops, and pulls out. Well, that doesn’t sound like enforcement to me. Then came the operation on Serbia, again not a good idea no matter how guilty Serbia was. They could have gotten at Serbia over starting wars at the dissolution of Yugoslavia because the states had a right to secede. But there was no international case over Kosovo which was a region of Serbia with no written right to secede. So they came up with this humanitarian based intervention which was discretionary and the same thing was re-applied in Libya. If anything I have more understanding in Libya simply because Gaddhafi had violated so much in his neighborhood that one could have found a lot of very good reasons. Then finally, again a leftover of the 90s, the PNAC guys from Cheney to Rumsfeld, call it “plan hegemon” rather than anything rules based. Clinton in the 2000s saw it better – prepare for the time when the US is no longer the strongest, that’s the way to go.

    In the end all of this just reflects the hubris that at this point from 1989 to 2017 the US thought they could do whatever they wanted, and went too far.

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