This post is loosely related to themes such as “The Great Stagnation” and “The Complacent Class”, to cite two recent books by Tyler Cowen.  Also loosely related is Scott Alexander’s epic blog post Meditations on Moloch.  And perhaps “The End of History”.

As time goes by, neoliberalism seems more and more like a immovable force.

Think about it.  The Great Recession seemed to completely discredit neoliberalism.  All the most fashionable intellectuals on the left and the right say so.  Entire governments on the left (Syriza), center (Five Star), and right (Trump) are elected to replace neoliberalism with something better.  Socialism, nationalism, whatever.  The British vote to leave the EU.

But neoliberalism is like the zombie that cannot be killed.  Syriza can’t do much of anything, and Trump’s only major achievement is an ultra-neoliberal corporate tax cut.  Here’s today’s FT:

In practice, Mr Grieve himself has said another referendum is the “only” route to stopping Brexit.  What the advocate-general’s opinion does is open the legal path. Indeed, on Tuesday analysts at JPMorgan doubled their estimate of the possibility of “no Brexit” to 40 per cent — while halving the probability of “no-deal” in early 2019 to 10 per cent.

Are hardline Brexiters worried that no-deal is off the table?

Not outwardly. “It’s full steam ahead,” said one pro-Brexit Tory, who predicted the government would lose Tuesday’s meaningful vote by a margin of 40.

However, supporters of Mrs May’s deal argue that Brexiters have trapped themselves and that parliament, in which a majority favours soft Brexit or no Brexit, is now in control.

“They’ve completely messed it up,” said one Tory MP. “I’m coming to the conclusion that they wanted the [2016 Brexit] referendum only as a way of protesting.”

What!?!?!  There’s still a 40% chance that Bryan will win his bet?  That’s crazy.  It’s as if NIMBYism also applies to entire policy regimes.  No new economic policy regimes in my backyard!  The British public is like that accountant in the Monty Python routine.  They wanted DRAMATIC CHANGE, just so long as nothing in their life actually, you know, changes.  “We want to be like Singapore!” . . .  “Well, maybe not, perhaps we could first try Norway.” . . .  “Er, don’t rush me.”

I never got the Trump phenomenon until I figured this out.  Re-read the last six words of the FT quotation.

I’m a neoliberal, and thus am thrilled with this state of affairs.  But I’m uneasy because I don’t understand why I’m winning.  So what gives—why is neoliberalism so hard to kill?  I await an explanation from my commenters.

PS.  Here’s what happened in 1968, fifty years ago.  First men to orbit the moon.  The Tet offensive in Vietnam.  Two assassinations of US political leaders.  Revolutionary activity in countries all over the world (Mexico, China, Czechoslovakia, France, Germany, etc., etc.) Race riots and student riots in the US. The 747 airplane launched.  Two thousand miles of interstate highway are built—in one year.  Friedman’s natural rate hypothesis. The ATM, 911 lines, and air bags invented. Kubrick’s “2001” released. The White album and Beggar’s Banquet. Fifty years later we have what?  What happened this year? The stupid fight over Kavanaugh?  You might argue that there are all sorts of cool technological developments occurring now.  OK, but consider this:

[Engelbart] went on to considerably more significant accomplishments, including the computer mouse, the graphical computer interface, text editing, hypertext, networked computers, e-mail, and videoconferencing, all of which he demonstrated in a legendary “mother of all demos” in San Francisco in 1968.

That’s from a book entitled “How to Change Your Mind”.  Which modern equivalent of Doug Engelbart came up with that many neat ideas this year?

I miss 1968.

I’m bored.

Tyler Cowen responded to my recent post, arguing that China is a threat to the liberal world order:

If you are the global hegemon, and another country, largely hostile to your political values and geopolitical desires, engages in widespread subversion of your power and influence, you must in some way hit back.  Otherwise you will not be global hegemon for much longer.  And unlike India or the EU, China desires to build an international political and economic order which would destroy liberalism as we know it.  Imagine a world where autocracy is a much more widespread norm, the Xinjiang detentions and North Korean nuclear weapons are considered entirely appropriate behavior, Taiwan is a vassal state, and few Asian countries could allow their media to print criticism of the Chinese government, for fear of retaliation.  Institutions such as the WTO would persist only insofar as they created loopholes which gave China the benefits of membership without most of the obligations.

Did I mention that politics in Australia and New Zealand are subverted regularly and blatantly by Chinese influence and money?  Very likely the same is underway in the United States (and other countries) right now.

You can put aside trade practices altogether, and simply look at the extreme and still under-reported degree of espionage and spying conducted by China, aimed at major U.S. corporations.  It’s not quite an act of war, but it is not the classical model of trade either (“Mercantilism is bad…what’s wrong if they send us goods and we just send them back paper dollars?”).  China is violating U.S. laws on a massive scale, and yes, I am sorry to say, trade is our main way of “reaching” them and sending a message.

First I’ll explain why I mostly don’t agree, and then I’ll also briefly describe how Tyler might be correct:

1. I don’t believe that China is trying to destroy the liberal world order.  Here’s what I think they are actually trying to do.  China accepts that the liberal world order will remain in place.  The most developed countries will continue to be free market democracies.  China likes to trade with those countries, and China respects their achievements.  China doesn’t like or respect places like North Korea and Turkmenistan.  Rather, China wants a free hand to continue being an authoritarian country, with a crackdown in places like Xinjiang. Unlike the Soviet Union, they are not trying to instill communism in other places.  Their support for autocracies in the developing world is simply a marriage of convenience; they know that (in the UN) these countries will also oppose American attempts to force human rights on China.  I believe that many Westerners wrongly apply the Soviet model, which doesn’t fit China at all.  As an aside, Trump loves autocracies and views countries like Canada as enough of an enemy that we must stop buying their steel for national security reasons.  (Of course, Tyler would not defend Trump on those points.)

2. The Xinjiang detentions are a gross human rights violation, but Trump is making no attempt to do anything about it.

3.  China is probably unhappy with North Korea’s nukes, but doesn’t know what to do about it.  Neither do we.  Unlike the US, China also wants to avoid the collapse of North Korea, for geopolitical reasons.  That’s the actual reason that China deserves criticism on North Korea; a collapse of their regime would be a good thing.

4.  “Vassal state”?  Taiwan is part of China.  At least that’s the official view of Mainland China, the US, and the Taiwan constitution.  According to international law, accepted by the US, regions like Taiwan, Crimea, Catalonia, etc., do not have the right to unilaterally secede, without permission from the central government.  That doesn’t mean I oppose independence for certain regions—the Czech divorce seemed to work fine; I’m just describing the rules of the game. China is not claiming any inhabited land, anywhere in the world, that the US does not consider a part of China.  China is not a Soviet style expansionist power, and for the past 2000 years has been the least expansionist great power in all of world history.  They have 1.4 billion people at home to worry about; the last thing China wants to do is run other countries.  Rather they like regimes who won’t criticize their human rights and are open to doing business with them.

5.  I’m skeptical of Tyler’s argument that Asian media outlets are especially afraid to criticize China.  The only one I read frequently is the SCMP, and it’s full of criticism of China (albeit perhaps less harsh than if China didn’t control Hong Kong.) How about the media in Japan?  South Korea?  Taiwan?  India? I don’t doubt that a few pull their punches in order to have better business opportunities with China, but that’s their decision.

6.  Like many developing countries, China is allowed more trade restrictions than the developed world.  As China gets richer, it will adhere more closely to WTO rules. Indeed China has recently been reducing trade and investment barriers, and it’s in China’s interest to continue doing so.

7.  I follow Australian politics pretty closely, and I see no evidence that Chinese influence is a major problem.  When cases of bribes are discovered, the politicians are punished.    For those who have a more conspiratorial mindset than me, tell me why I shouldn’t regard Trump as Putin’s puppet?  I’ve criticized Trump on that basis, but even I don’t think Russia controls the US to any significant extent.  The Russia sanctions remain in place, even though Russia almost certainly has information that could be used to blackmail Trump, who appeared to lie about his business dealings there. That’s not to say that Australia isn’t a bit friendlier to China than it would be if a huge portion of its exports weren’t going there.  But that influence does not require the bribery of local politicians, it’s economic self-interest.  Australia just banned Huawei, over the objections of China (HT:Ray Lopez.)

8.  This is hard to respond to:

You can put aside trade practices altogether, and simply look at the extreme and still under-reported degree of espionage and spying conducted by China, aimed at major U.S. corporations.

Like most bloggers, all I know is what I read.  So if China’s doing all sorts of bad things that are not being adequately reported, I can’t comment.  Nor can I comment on US espionage, something that I know little about.  I’m certainly not going to defend espionage, but in this case I’d guess the actual damage from China stealing intellectual property (in global utility terms) is very small.

Tyler is very polite and often lets others have the last word, so let me try to take the other side of this issue for a moment, in case he doesn’t respond.  Where might I be wrong?  The best argument is that I myself am too much a product of the Cold War.  I don’t see the China threat because I expect it to manifest itself in the way that the Soviets behaved after WWII; taking actual control of countries in places like Eastern Europe, or supporting guerrilla groups in the third world.  Perhaps I’m missing that there is a new form of international competition, involving high tech espionage, fake news, bribing local politicians, economic support for friendly autocrats, etc.  In other words, China’s doing a lot of the “softer” stuff the US did during the Cold War.  That’s not a defense of China on my part, as the US was wrong to support autocrats and wrong to try to change foreign election results.

Here are a few final thoughts.  Yes, the Soviet Union really was a nuclear threat, and we were lucky that there was no accidental escalation into outright war.  But otherwise we Americans were wrong about the Soviets. Its collapse was pre-ordained by the relentless rise of neoliberalism after the 1970s, which continues to this very day.  While I liked Reagan, in retrospect he had little to do with the collapse of Soviet communism.  Similarly, we overestimate the threat posed by China, which is still poorer than Mexico.  Unlike places like Mexico and Brazil, China has a strong desire to be a rich country, and will likely eventually become one.  But it will only be able to do so by continuing to reform its economy.

If the US wants to continue to be a global hegemon, it’s most useful role is in enforcing the international norms against one country invading and taking territory from another country.  (A norm China strongly supports!) And on that issue, there’s another great power that is a much greater threat than China.  Like Tyler, I find NATO to be a very useful organization.

I also wonder if there is a sort of instinctive suspicion of powerful Asian economies, which don’t share our values in some respects. Trump has assigned Robert Lighthizer the responsibility of negotiating with China, despite that fact that he was one of those who warned about the Japanese threat during the 1980s, a threat now almost universally viewed as a false alarm.  That doesn’t mean he’s wrong this time, but it should give us pause.

In any case, it’s all a moot point.  Trump’s not skilled enough to win this game.

Tyler Cowen has a new Bloomberg post on the recent truce in the US/China trade war.  Here is a rare example of where I strongly disagree with him:

Nonetheless, it’s not quite fair to describe the trade war with China as a problem that Trump started and then pretended to solve. The reality is that hostility toward Chinese trade practices has been building for some time. Anti-China measures have long commanded bipartisan support not only in Washington but also among corporate leaders, who see themselves as victims of unfair Chinese trade practices and espionage. This is an issue that predates Trump, and he deserves some credit for doing something to help solve it.

Everything in that paragraph is completely correct–except the last portion of the final sentence, which is wrong. Tyler’s right that Democrats and Republicans and corporate executives have been complaining about China for years.  For instance, Chuck Schumer used to constantly complain about China’s huge current account surpluses.  He demanded a sharp revaluation in the Chinese yuan.  China did exactly what he requested, sharply revaluing the yuan upward and reducing China’s current account surplus to near zero.  But as with any schoolyard bully, capitulation of the victim just whets the appetite for more bullying.  Schumer is not at all satisfied.

China needs to know that if they give in to US demands once again, we’ll just find new topics to complain about. The US is a bully—that’s what we do.  We bully small countries any time they don’t agree with our foreign policy, on anything from Iran sanctions to breast milk.  (Yes, China also occasionally bullies small countries on issues such as the disputed islands in the South China Sea.)

I read the situation very differently from Tyler.  Previous presidents like Clinton, Bush and Obama occasionally complained about Chinese trade practices, but their economic advisors were not foolish demagogues like Peter Navarro, they were serious people who correctly advised them that China’s policies were not a big problem for the US and that we’d be better off with a policy of engagement.  As a result, these presidents wisely ignored the calls for a trade war with China.

Tyler mentions practices that we object to such as government supported Chinese state-owned enterprises, and these are indeed bad policies.  But it’s up to China to decide how to organize its economy, not the US.  After all, Europe was also full of state-owned enterprises during the 1970s, as well as all sorts of hidden barriers to US imports.  That was too bad for Europe, but would the US have been wise to launch a trade war against Europe during the 1970s?  Obviously not.

Consider the following two cases:

1. China has foolish economic policies that hurt China a lot and also hurt the US a little bit.

2. India has even more foolish economic policies that hurt India enormously and also hurt the US somewhat.

If the reasons cited by Tyler were the actual basis for the trade war, then India should be the target, not China.  India’s policies are even more anti-market, and deprive the US of even more potential gains than what we’d get from a liberalized China.

Now suppose I’m right, and this is all window dressing that is disguising the real motive—crude protectionism based on economic doctrines that were discredited 200 years ago.  In that case the trade war would be launched against the country with the largest amount of exports to the US, which is China, not India.  Protectionists believe that imports hurt an economy.  Pundits may complain about Chinese policies like state-owned enterprises, but if China’s exports to the US were at the level of Cambodia then no one would care.  Does Cambodia even have state-owned enterprises?  Most Americans don’t know and most don’t care.

So while Tyler’s right that many people in America have been complaining about China for years, he’s wrong in claiming that Trump deserves credit for listening to those complaints and trying to “solve” the problem. It’s up to China to determine how to run its economy.  It’s up to American consumers and firms to decide if they want to buy Chinese goods, or invest in China under the conditions offered by the Chinese government.  Although the US is less protectionist than China, we are far from being a free trading nation.  How would we feel if other countries put sanctions on the US, in retaliation against our numerous protectionist policies?  We should lead by example and unilaterally adopt 100% free trade, unless there’s a clear national security issue (not a phony one like cars and steel.)

I encourage the Chinese to continue liberalizing their economy, as they’ve been doing for the past 40 years—but only because it’s good for them.  Regarding US demands, the best strategy for China is to stand its ground.  Fortunately, Trump has shown he’s desperate to get deals, even if the concessions on the other side are trivial.  Fortunately, Trump also worries about the stock market, and thus he will eventually give in, as he has done so many other times. On the other hand, it makes sense for the Chinese to look like they are willing to compromise, as that will make things easier for Trump.  Like the Chinese, he doesn’t like losing face.

PS.  There may be a few national security issues with China where sanctions are appropriate. I’m no certainly expert on high-tech espionage.  But that’s only a tiny faction of the trade dispute, and if it is a problem is better addressed through sanctions targeted at specific high-tech companies like Huawei.

Put yourself in the position of the Chinese leadership, trying to figure out the goals of Western policymakers, particular the Americans. Recall that last spring we negotiated a trade agreement with China, and then changed our mind.  What do those Westerners actually want from us?

For years the West has complained about the massive Chinese current account surpluses, which peaked at about 10% of GDP.  This year China’s surplus is expected to be 0.5% of GDP, the most nearly balanced of any major economy.  Only Belgium will be closer to “perfection”, if that’s how you look at a current account of zero.

Is the West happy?  Not at all.  Two new complaints have arisen.  First, China continues to run a large surplus in the trade in manufactured goods:

Many analysts doubt that most trading partners will be persuaded by Beijing’s rhetoric or by the declining current account surplus. While commodity exporters and tourist destinations have increased sales to China, displaced manufacturing workers who have fuelled support for Mr Trump and other populist leaders have not seen much benefit.

“Workers in the manufacturing sector around the world do not have much reason to be impressed by China’s rebalancing, since it hasn’t helped them in the aggregate,” said Brad Setser, senior fellow for international economics at the Council on Foreign Relations.

And second, many foreign policy hawks are now saying that the rise in China is itself a bad thing.  We need a “new cold war” aimed at slowing China’s rise.  So if those are your two policy concerns, what is the single most disastrous action that China could take?  Here’s a FT piece discussing the recent trade war truce:

Complicating matters further were different interpretations of the deal emerging on Saturday night from the two capitals.

China raised the prospect that the tariffs could be eliminated entirely after the new round of talks, which the US did not highlight. Beijing did not mention the 90-day deadline for the negotiations, or the possibility that the tariff escalation could return if no agreement was reached. China was also much less detailed on the purchases of American goods it was committing to.

However the optimistic tone struck by the two leaders in Buenos Aires suggested a willingness to strike a deal.

If China liberalized its economy then it would grow even faster.  That should be really bad news for the Cold War crowd, those who fear the increasing military strength of China.  In addition, a liberalized China would buy even more commodities, services and high tech goods, and export even more of the manufactured goods that are adversely impacting America’s Rustbelt.  So is this what the Trump Administration wants?  More Chinese liberalization?  Or would they prefer that China go back to the Maoist era when they were a threat to neither the US military nor to America’s blue-collar workers?  Search me.

As for the protectionists who are looking to Trump as their savior, good luck with that:

There were already some signs of a backlash to the truce from some of Mr Trump’s supporters most hostile to China.

“Is #Trump making a huge mistake? The devil is in the details! But I’d be lying if I didn’t say at first glance this is very disappointing,” wrote Dan DiMicco, a steel executive who led Mr Trump’s trade unit during the presidential transition. “I don’t agree but I defer to the president.”

Defer to the president? DiMicco might want to consider what happened to those who worried about the South Korean Free Trade agreement and “deferred to the president” to renegotiate it.  Or those who trusted Trump to re-negotiate NAFTA.  Or those who trusted him to strike a deal with EU President Juncker.  Or those who trusted him to negotiate with North Korea.  Or those who trusted him to lobby Congress to get rid of Obamacare.  Or those who trusted him to get Congress to build a border wall.

I’m actually not all that upset that’s there’s no there there.  When it comes to protectionism, incoherence and incompetence are something to be welcomed.  But I do feel for the Chinese leadership, trying to figure out whether the US wants China to be like the US, or whether the US believes the world’s only big enough for one United States of America.

I sometimes wonder if Trump is a secret fan of Mao, worried that rapacious capitalists residing in the world’s largest economy are exploiting Latin American countries:

At times, Mr Bolsonaro’s gripes echoed those of the Trump administration, far to the north. In October Mike Pompeo, the American secretary of state, accused Chinese state-owned firms of “predatory economic activity” in the region. Mr Pompeo’s predecessor, Rex Tillerson, had urged Latin Americans to reject “new imperial powers” like China, bent on extracting natural resources while issuing unpayable loans.

Is Noam Chomsky now writing Pompeo’s speeches?

PS.  In many ways the US is becoming more like China.  Consider the Tiananmen event of 1976.  Zhou Enlai had recently died, and there was an enormous outpouring of grief in Tiananmen Square.  Lots of flower wreaths were laid at a statue in the center of the square, for day after day.  This continued for so long that eventually people began to recognize that it was an implicit protest against Mao, and the square was then cleared by the military.  It happened again in 1989, after the death of the lead reformer in the Chinese government, Hu Yaobang.  In a totalitarian society, people are afraid to speak out in protest, and must work through a medium that cannot be criticized—the Catholic Church in communist Poland, Islam in Middle Eastern dictatorships, or the death of a hero in China.

Americans are free to publicly criticize Trump, unless they are Republican Party officials.  In that case, they must offer any criticism in the most subtle way possible, which is hard for us occidentals.  Fortunately, some GOP officials have learned from Communist China, and are now offering implicit criticism of Trump via extravagant praise for recently deceased GOP leaders such as McCain and Bush, especially praise focused on exactly those qualities that are lacking in Trump.

PPS.  Speaking of China, the American Cultural Revolution has still not crested.  As in China circa 1966-76, there is still lots of naming, shaming, and public confessions, especially if you are born into a privileged group.  Just today I learned that the holiday song “Baby, It’s Cold Outside” has been banned from a Cleveland radio station.  With each new form of idiocy, I naively think it can’t get any worse.  I recall thinking the Yale Halloween fiasco was the peak.  I’d be interested in the views of commenters—predict the year of “peak idiocy” in the current wave of political correctness.  I say two years into the administration immediately following Trump.

America keeps getting richer, but it doesn’t seem to be making us happier. There is an epidemic of depression among the young, and suicide rates keep soaring to new highs. I’m going to argue that the main problem is the 3-point shot, which is a long shot in the game of basketball, for those who don’t follow sports. This is what’s making us unhappy. Obviously you’ll need to bear with me on this one.

The three point shot occurs from behind a line about 22 feet from the basket, which was added to spice up the game back around 1980.  For years, the shot was rarely used.  When I was 30 years old, the two most exciting plays in basketball were the 3-point shot and the slam dunk.  The successful completion of these shots gave you the same feeling as three cherries at the slot machine in Vegas.  But like an explanation point in literature, these two exciting shots lose much of their impact if overused.  And they are increasingly overused.

After the Golden State Warriors achieved great success by loading up on skilled three point shooters, other teams saw that this was the way to go.  The game was further “hacked” by the Houston Rockets, who realized that you could have one highly skilled player control the ball, and either drive to the basket or take a three pointer.  The other four would stand around at the three point line.  James Harden was too skilled to be guarded with one player, so he’d either score a layup at the basket, or, if defended with two players, he’d pass to an open teammate to shoot a three pointer.  Rinse and repeat.  I wouldn’t say that basketball became boring, but it’s much less interesting.

My team hired a new coach this year, who realized that the mediocre Milwaukee Bucks team from last year could become much better by adopting this approach, even though the Bucks are not particularly talented, except for one player.  I read that in November, the Milwaukee Bucks became the first team in NBA history to shoot over 60% from two point range for an entire month (excluding October, when few games are played.)  This is because Milwaukee figured that the optimal strategy was to either drive to the basket or shoot threes.  No “midrange” shots.  Their three point shooters are not particularly talented, but the odds favor that shot so strongly that the other team still must guard the 4 players at the three point line, and no one in the universe can guard Giannis close to the basket.  As a result, this season he’ll blow by the NBA record for slam dunks by a wide margin.  (For foreign readers, imagine they made the net in football (soccer) twice as large, and allowed players to use their hands–that’s the impact of the three point shot.)

Spurs coach Gregg Popovich is the greatest basketball coach of all time, and he’s horrified by what’s happened to his sport as a result of the three point shot:

I hate it, but I always have,” Popovich said of the shot. “I’ve hated the three for 20 years. That’s why I make a joke all the time [and say] if we’re going to make it a different game, let’s have a four-point play. Because if everybody likes the three, they’ll really like the four. People will jump out of their seats if you have a five-point play. It will be great. There’s no basketball anymore, there’s no beauty in it. It’s pretty boring. But it is what it is and you need to work with it.”

His championship team from 5 years ago featured the most aesthetically beautiful style of play ever seen in any American team sport, deploying a wide range of approaches.  Now it’s nonstop drive to the basket and score, or toss it out for a three pointer, over and over and over.

Do you see what we did?  The NBA noted that three pointers were lots of fun for fans, and thought that increasing them 10-fold would increase the fun 10-fold.  But it didn’t happen.  It’s as if baseball moved the fences in 100 feet to have lots more home runs.

Or—and this is where I finally get around to explaining why we are so unhappy—as if you made it so that all our desires were right at our fingertips.  No more unpleasant surprises in foreign travel; you’ll surf the internet and know exactly what to expect before you leave home!  You can also use the internet to do research on your date, before going out with him or her.  No messy surprises. No more need to browse through an old bookstore; it’s all on Amazon.  No need to trek out to the movie theatre and wait expectantly for the new Star Wars, it’s all on your big HDTV.  Remember when eating at a Thai or sushi restaurant was a thrill?  Remember when it stopped being a thrill?  Remember why it stopped being a thrill?

Last night I saw Anthony Bourdain’s final episode on CNN.  He revisited the Lower East Side of New York, where he used to buy drugs when he was young.  By modern standards, the Lower East Side circa 1980 was a nightmarishly awful place, and yet he and the people that he interviewed longed for the wild and messy world they had lost.  He seemed like someone who had lost interest in the modern world.

I’m not a Luddite who is opposed to change, indeed there are lots of rule changes I’d like to see in sports—starting with no instant replays by referees. (Remember, it’s a zero sum game.)  But we need to be careful that we don’t assume that just because X is pleasurable, 10X will be 10 times as pleasurable.