A New Long March: Trade Or War? Xi Jinping Evoking Mao Zedong

Por Alejandro Chafuen: Publicado el 23/5/19 en: https://www.forbes.com/sites/alejandrochafuen/2019/05/23/a-new-long-march-trade-or-war-xi-jinping-evoking-mao-zedong/#6e731bac6a66

 

Xi Jinping has proclaimed to the Chinese that they should prepare for a “new long march.” The term “new long march” has a very important historical meaning in China. It evokes Mao Zedong’s strategic retreat in 1934, a retreat from nationalist troops through China’s vast territory. The goal of those who survived, though, was to come back to take power. Mao acquired a reputation as a great leader, and his party took power completely in 1949. The Communist takeover in China led to more deaths than any other regime in the history of mankind—estimates are from 49 to 78 million victims. During the period from 1958 to 1962 alone, the supposed “Great Leap Forward,” 45 million people died.

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Trade wars don’t have nearly as many deaths, but almost everyone loses. This is not an exaggeration—the United States and China make up 40% of the global economy, and what happens there affects the whole world. Both economies are much larger than the third and fourth largest (Japan and Germany), which taken together are still less than China’s. Only the United States can take on China’s trade practices—which have attracted much criticism—with any prospect of success.

Production chains are so intertwined that the shockwaves and bottlenecks resulting from a trade war will affect unforeseen producers. In some cases the affected industry may be one with a unique product, and if this were something necessary for an American military aircraft, for example, the U.S. government would feel obliged to grant exceptions. Peter Navarro, Director of Trade and Manufacturing Policy and one of the main proponents of President Trump’s aggressive stance towards China, has a team that studies these possible bottlenecks and unwanted effects of high tariffs and boycotts of Chinese products. He feels optimistic that he can control the effects, but given the interconnectedness of the economy and the economic processes behind most elaborate products, I have serious doubts.

One of today’s most perceptive economic analysts, Daniel Lacalle, has outlined the reasons why, according to him, it is China that stands to lose the most in this trade war. Its economy is deeply in debt. It needs exports to the U.S. to keep its economy at an acceptable rhythm. Stocks on the Chinese exchange are 40% below their peak, while in the U.S. they are still near record levels. Whereas in the U.S. stocks have risen 40% (DJIA) since Trump took office, in China stocks are lower.

Trade measures in US and China 2018-2019 as compiled by Statista

Trade measures in US and China 2018-2019 as compiled by Statista

CHARTED BY STATISTA

When tariffs were raised in 2018, China responded symmetrically, imposing measures of similar value to those that the Trump administration put in place. With the last two tariff hikes (September 2018 and May 2019), China responded more timidly, with measures at half the value. And regarding other retaliatory measures, as Lacalle clearly explains, two possible actions would have little effect. With regard to rare earth minerals, the U.S. has sufficient reserves to last 140 years, and there are other countries such as Brazil, our new great ally, which has reserves almost 20 times greater than our own nation’s. As for the possibility that China will sell off its U.S. debt, they have less than 10% of U.S. bonds, and the costs would be shared.
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But beyond the fact that China has more to lose, we should not forget that Trump is facing not only external enemies but strong internal enemies as well. In contrast to Xi Jinping’s autocracy, the president of the United States has an independent press very hostile to his administration.

I doubt that Xi Jinping’s China can emulate the long march of Mao Zedong’s retreat, either militarily or economically. In this global economy, the voids created would be filled quickly. But we will all suffer the pains of adjustment. The ideal would be for China to move toward compliance with just trade rules, based on transparency and rights of private property, both physical and intellectual. Unfortunately, of late it seems that we are at the beginning of this difficult struggle, and it’s far too early to be optimistic.

 

Alejandro A. Chafuén es Dr. En Economía por el International College de California. Licenciado en Economía, (UCA), es miembro del comité de consejeros para The Center for Vision & Values, fideicomisario del Grove City College, y presidente de la Atlas Economic Research Foundation. Se ha desempeñado como fideicomisario del Fraser Institute desde 1991. Fue profesor de ESEADE. Síguelo en @Chafuen 

 

Liberty As God’s Gift: A Christmas Reflection On The Legacy Of Frederic Bastiat

Por Alejandro Chafuen: Publicado el 24/12/15 en: http://www.forbes.com/sites/alejandrochafuen/2015/12/24/liberty-as-gods-gift-a-christmas-reflection-on-the-legacy-of-frederic-bastiat/

 

Christmas is an ideal day to reflect about liberty. Frederic Bastiat (1801-1850), the author of “The Law,” one of the most widely read and translated books about liberty, is acclaimed by lovers of free enterprise. Awards and associations across the United States and the world, such as the Bastiat Society, are named after him. Christmas is also an important day to highlight a major aspect, usually neglected, of the philosophy of this French writer and political economist: his grounding on God.

Bastiat’s “The Law,” starts with a recognition of God as the source, and ends with and acknowledgment of the connection between God and liberty. In the second paragraph of this work he writes: “We hold from God the gift that, as far as we are concerned, contains all others, Life—physical, intellectual, and moral life. But life cannot support itself. He who has bestowed it, has entrusted us with the care of supporting it, of developing it, and of perfecting it. To that end, He has provided us with a collection of wonderful faculties; He has plunged us into the midst of a variety of elements.”

Frederic Bastiat died on Christmas Eve, 1850, in Rome, where he is buried in the Church of St. Louis of the French. (Photo montage and info-graphic by Adriana Peralta)

Frederic Bastiat died on Christmas Eve, 1850, in Rome, where he is buried in the Church of St. Louis of the French. (Photo montage and info-graphic by Adriana Peralta)

He was not a utopian, his view of man was that of a fallible being. He condemned “unintelligent egoism” as a cause for the perversion of law. Fallen human nature leads some:

To live and to develop … at the expense of one another. This is no rash imputation, emanating from a gloomy, uncharitable spirit. History bears witness to the truth of it, by the incessant wars, the migrations of races, sectarian oppressions, the universality of slavery, the frauds in trade, and the monopolies with which its annals abound. This fatal disposition has its origin in the very constitution of man—in that primitive, and universal, and invincible sentiment that urges it towards its well-being, and makes it seek to escape pain.

Economic incentives, especially protection of private property, can be very powerful: “Wherever plunder is less burdensome than labor, it prevails; and neither religion nor morality can, in this case, prevent it from prevailing.” It is the responsibility of human beings to work to develop a system of law that respects human nature, and protects the most important economic institution: private property. This is consistent with his Christian belief. For Bastiat, societies that respect property are also those “where the thought of God prevails the most over the inventions of men.” He cautioned that “when human institutions infringe on divine laws, not only error, but evil is the result; but this evil deviates and falls on people whom it should never have injured.”

His approach was not individualistic, it required self-sacrifice. He wrote that he placed his noble cause “a thousand times higher than our little individual ideas” and that he learned “that individual self-sacrifice is the soul and cement of any voluntary association.” Sounding more like Pope Francis than Ayn Rand he explained further:

Economists are accused of not taking self-sacrifice into account and perhaps despising it. Please God, we will never fail to recognize the power and grandeur in self-sacrifice. Nothing that is great and generous, nothing that arouses fellow feeling and admiration in men can be accomplished except through selflessness. Man is not just an intelligent man, and he is not merely a calculating being. He has a soul, and in this soul there is a germ of fellow feeling which may be developed until it attains universal love, to the point of the most absolute sacrifice, at which point it produces the generous actions that, when narrated, bring tears to our eyes.

His optimism for freedom was based in his conviction that “God has implanted in mankind also all that is necessary to enable it to accomplish its destinies. There is a providential social physiology, as well as a providential human physiology. The social organs are constituted so as to enable them to develop harmoniously in the grand air of liberty.” He even saw God’s Providence as the foundation of free trade “which is revealed in the infinite variety of climates, seasons, the forces of nature, and individual aptitudes, assets that God has distributed so unequally among men with the sole aim of uniting them through trade and through the bonds of universal fraternity.”

(Photo montage and info-graphic by Adriana Peralta)

(Photo montage and info-graphic by Adriana Peralta)

In the preface of “Providence and Liberty,” a short book devoted to Bastiat’s Christian views and life, three champions and scholars of the free society, Leonard Liggio, Jacques Garello and Samuel Gregg, wrote that “Bastiat had absorbed into his soul the essence of the message of Jesus Christ: that God is a Creator who so loved the world that He gave us His Only Son. “To be really communicating with God,” Bastiat commented only days before his death, “man needs to rely on a Revelation. I myself took the matter the right way: I do not discuss dogma; I accept it.”

He died on Christmas Eve, a good time also to reflect on Bastiat’s exclamation: “what could interest a kind heart more vividly than that the life of Jesus, that evangelic morality, and that mediation of Mary! How moving they are.” For believers, it is also a perfect day to absorb the last sentence of “The Law”: “Liberty is an acknowledgement of faith in God and His works.”

 

Alejandro A. Chafuén es Dr. En Economía por el International College de California. Licenciado en Economía, (UCA), es miembro del comité de consejeros para The Center for Vision & Values, fideicomisario del Grove City College, y presidente de la Atlas Economic Research Foundation. Se ha desempeñado como fideicomisario del Fraser Institute desde 1991. Fue profesor de ESEADE.