Showing posts with label China. Show all posts
Showing posts with label China. Show all posts

Saturday, May 1, 2021

Governmental Isolationism amid Corporate Outreach: a Post-Political World?

Warren Buffett's Berkshire Hathaway Inc. held its annual meeting today. For all the talk of frosty relations between China and USA, the American billionaire's longest ancillary presentations were China-related: "U.S.-China forum" and "U.S.-China Investor Forum." China-based BYD and Oglivy Global China also made appearances, with Oglivy indicating "rule of law" and "capital markets" were the major reasons USA businesses continued to succeed. 

Capital being mobile and American lawyers being no pillars of honesty or efficiency, one wonders if Chinese executives have already co-opted the best elements of America's corporate playbook. After all, it was China, not USA, that most recently issued an antitrust ruling against one its largest technology companies, and China that received more capital inflows than USA during COVID19 because of its deft (and draconian) handling of the pandemic. 

What was China's reaction to receiving "hot money" after its world-leading post-pandemic recovery? It increased its funds' limits on overseas investments, essentially transferring "paper" inflation risk to the United States and the EU. (If it sounds like Communist Chinese regulators are one step ahead of capitalist Americans, it may be because China has studied Hong Kong and Singapore.) 

Twenty years after September 11, 2001, the evidence is clear and convincing: given the size and influence of the informal economy, America's single-minded focus on terrorism guaranteed American isolationism and thus China's rise. More specifically, when American regulators demanded full compliance with financial regulations designed to catch criminals, capital reaction was swift: capital, being mobile, left to more neutral, business-friendly locations. In seeking status as the world's indispensable currency, the USD failed to acknowledge a conflict: it required legal monogamy and obedience from its partners at the same time it actively played the field. Cheating was inevitable. 

Consider sanctions: they work only if the party being blocked needs something from the sanctioning body. In other words, sanctions fail in a multi-polar world where parties can obtain goods and services from multiple sources at comparable prices. Where such goods and services are available at lower prices than sanction-happy competitors, the result is foretold: China's economic rise from 2001 to 2021 and beyond. Similar to America's gun laws, long-arm statutes pursuing international enforcement have produced not compliance but more creative sellers, leaving the already law-abiding as the only persons affected. In this context, USA's extrajudicial actions, such as arresting a Huawei executive (via Canada), make sense, as does the rise of non-traditional banking such as cryptocurrency. 

"Extrajudicial" is exactly what it looks like: outside the law. When lawyers fail to create workable alternatives to international competitors, whether formal or informal, they create disrespect for their country's laws while increasing opponents' opportunities. As of today, the effect is both domestic and international: after at least sixty years of failure, many American local governments are no longer interested in following federal policies on drugs or sex unless paid handsomely in federal grants. 

A geographically-isolated democracy in which lawyers and politicians cannot prove their legal model is ideal creates a vacuum that will be filled by multinational corporations, international mafia, and one-party governments. Why one-party governments? Because a world lacking idealistic, moral and wise lawyers favors the executive branch and thus non-democratic political systems. China's most significant 21st century contribution may not be replacing the United States but establishing a "post-political" world. Do we really want the most accessible cultural values to be determined by multinational banks, behemoth investors, and centralized governments? As long as more people are likelier to listen to Buffett than Biden, we'll find out. 

© Matthew Rafat (May 2021) 

"The Chinese government will allow businesses to flourish... [after studying Singapore] they changed Communism, and now we have Communism with Chinese characteristics." -- Charlie Munger (2021) 

Wednesday, December 18, 2019

USA's Strategy in Trade War is More Complex than Reported

No one has written a decent article explaining USA's perspective on trade vis a vis China, so I'll throw my hat in the ring. As with any negotiation, whether China "wins" depends on its ability to ascertain USA's ulterior motives. (Lawyers know no matter how specific the final language of an agreement, there is always room for interpretation.) 

Robert Lighthizer, the U.S. Trade Representative, wants to obviate China's usual currency devaluation in order to stimulate its domestic economy. Stated another way, the U.S. is trying to increase domestic Chinese consumer consumption by reducing the two countries' trade deficit. Why is this American objective potentially destabilizing for China? 

With so much else at stake, American "experts" erroneously emphasize the financial value of China's promises of agricultural purchases, believed to total 32 billion USD over the next two years. In reality, America's main goals are to 1) stop China's ability to fluctuate its currency unilaterally, thus limiting its power to assist export-oriented businesses (whether SOE or otherwise); 2) stop China's "free" technological gains through IP transfers, including software code, thereby increasing the cost of competing with USA corporations; and 3) stop China's alleged procrastination in reforming its judicial system, which, due to an alleged lack of independence, appears to tolerate a laissez-faire attitude towards IP violations. Thus, China's agreement to purchase American agricultural products are the Republican Party's opening salvo aimed at advancing a Trojan Horse reshaping China's entire economy

To understand the challenges in achieving viable compromises, remember that USA's economy is consumer-driven. According to some sources, consumer spending comprises a whopping 68% of America's entire economy. A consumer-driven economy allows for higher individual debt, more private enterprise, and less government interference. Though much of China's recent GDP growth is from consumer spending, its path from "developing" to "developed" status has been through non-consumer infrastructure spending and exports. 
China's success thus far should not be overlooked. From Singaporean professor Danny Quah: 
In absolute terms, the average person in the bottom half of the US income distribution today is worse off than the average person in 1980 in the US... [but] the people at the bottom half of China's income distribution today are four times better off than they were 30 years ago.
America desires less restricted markets within China and a less export-oriented economy because domestic Chinese consumption would tilt towards USA/EU products. In other words, it wants to rewrite the rules of the game to favor its own economic model (domestic consumer spending, privatization) over China's (government-driven growth that has taken 750 to 850 million Chinese out of poverty). I don't fault the U.S. Trade Representative's approach. As of today, American Nike is far better than Chinese LiNing, American Ford far better than Chinese Geely, EU-Unilever and EU-NestlĂ© far better than any Chinese company, and so on. Why the gap in quality and reputation? 
From World Bank
I'll say it again: because China has focused on infrastructure and other government-driven projects rather than domestic consumerism, it is just now trying to move up the consumer supply chain. (It has already moved to the top in ports, roads, trains, solar energy, etc.) In fact, China is well-positioned to compete in the global consumer market because its per capita GDP recently reached the "magic" 10,000 USD number, at which point most people, especially younger people, feel comfortable trying new items and upgrading personal preferences (e.g., pork to beef, the latest smartphone, etc.). 
For its part, USA is trying to impede China's shift into USA's economic specialty of consumerism through tariffs (hurting China's exports), technological blocks (hurting Huawei), legal mechanisms (using Western countries' court systems to threaten criminal charges against Chinese executives), and manipulating oil prices ("In 2018, China had record oil and gas imports and remains the number one crude oil importer in the world after surpassing the United States in 2017 and is the number two natural gas importer, behind Japan"). 

I see little chance of success for the United States in the short-term because China still has numerous options (Manila and Jakarta ports instead of HK and Shanghai) and alternate suppliers (oil and otherwise), allowing it to soften the blow of any US trade restriction. More importantly, China's government regularly publishes five to ten year economic plans, and if an American objective runs contrary to stated governmental aims, it seems unlikely China is willing to lose face by acceding to American demands. 
Over 1,000 pages on governance.
To its credit, China knows it currently lacks expertise building globally recognized, consistent brands and has failed to replicate other countries' branding successes, whether Japan or South Korea. (I dislike K-pop, but South Korea's outsized influence in Asia's entertainment scene shows remarkable prowess in generating consumer demand.) In Chinese-majority Singapore, I have seen zero Chinese Luckin Coffee stores but plenty of Taiwanese bubble tea shops and American Starbucks, indicating China has yet to operate comfortably within other countries' regulatory systems. 

Incredibly, replicating and improving global supply chains has proven easier than building products everyone wants and can access within those supply chains. If China has to divert spending that could otherwise be used to attract competitive ad agencies, international legal experts, and other fundamental blocks of consumerism, then it risks being left behind at the exact moment it opens markets to foreign competition and its own consumers can afford to differentiate between domestic and international brands regardless of tariffs. 

The West beat the Soviet Union not because America's approach towards human rights or privacy was fundamentally different--post-Snowden and Church Committee investigations, we know both West and East are and were surveillance and military-driven. Yet, despite more similarities than differences, the West succeeded because it was able to create better stories by leveraging innovation through the private sector and parlaying substantial development risk onto private banks. (See, for example, USA's Community Reinvestment Act of 1977, through which the federal government can allow or disallow bank branch expansion based on geographic and income-based diversity of loans.) 

Once upon a time, Ronald Reagan and the West could advance a credible anti-Communist narrative because America's diversity, refugee policies, private sector loans, oil access, and bankruptcy rules trumped its inconsistencies. Rather than worry about the U.S. Trade Representative's non-numerical demands, China should be asking itself the following questions: What will China's narrative be? And will it be able to create a stable and credible one if, moving forward, it is forced to increase the value of its currency to support greater domestic consumer demand? 

© Matthew Mehdi Rafat

Bonus: A few caveats: 

First, a weak or weaker currency does not guarantee a country will export more than it imports. Indonesia--a country with oil, gold, natural gas, and timber--has a relatively weak currency. Bloomberg News reported on December 16, 2019 that Indonesia's "imports of consumer goods surged and exports contracted for a 13th straight month." 

Second, the broad language disclosed so far reminds me of USA's most recent attempt to mediate between North and South Korea. (Regarding China and USA, what exactly are the components of "high-standard commitments to refrain from competitive devaluations" & enforcement "mechanisms"?) A year later, nothing truly substantive has changed between North and South Korea despite the hype surrounding diplomatic efforts; furthermore, as of last month, according to Reuters' Joyce Lee and Ju-min Park, "The United States is 'very actively' trying to persuade North Korea to come back to negotiations... as a year-end North Korean deadline for U.S. flexibility approaches."

Similarly, I predict these American-Chinese talks will be much ado about nothing and another chapter in America's habit of overreaching post-Vietnam-War. Also, I'd be lying 
if I said I wasn't curious to see if China tries to use its purchasing commitments to influence America's 2020 elections. Interesting times, eh? 

President Xi Jinping (December 31, 2019):

"Human history, like a river, runs forever, witnessing both peaceful moments and great disturbances." 

Wednesday, November 7, 2018

Incredible Book on Chinese Influence in the Philippines

I just discovered an incredible book, Chinese Participation in Philippine Culture and Economy (1964), edited by Dr. Shubert S.C. Liao, Professor of Economics, University of the East. 

Dr. Liao took work from other writers like Dr. Mao-Lan Tuan and Dr. H. Otley Beyer, creating a deeply edifying compilation of Philippine history. I heard the term, "Hadramaut Sayyids," for the first time and learned "about 2% of the present Philippine population is descended from Arab or Persian ancestors, either ancient or modern." Other sections of the book detail anti-Chinese legislation throughout Asia. 

Below are a few selections, copied under fair use doctrine: 


Sunday, September 23, 2018

Interview with Sulistiansyah Rahmadi, Indonesian Traveler

Q: You've visited over 20 countries so far, mostly in SE Asia, right? 

SR: Yes. 

Q: What made you start traveling? 

SR: My first country was Singapore, and it's quite the opposite of Indonesia. They're organized, the language is different, and it blew my mind that we have things so different from my [Indonesian] culture. When I visited Australia, I thought it would be all-white, but it's multi-racial. Whenever I travel, it's the opposite of what I expect. For example, I felt accepted in Australia, in contrast to Georgia [the Caucasus], where I felt discriminated against as an Asian. 

Q: Which cities did you visit in Australia?

SR: Melbourne and Sydney, but I liked Melbourne the most. 


Q: Did you travel mostly alone or with groups?

SR: Alone. Previously, I traveled with groups, but not recently. I changed because when I go alone, I get more. More wisdom... I get a lot more. With a group, it's mostly fun things, and they are doing fun stuff, but after that... [shrugs his shoulders] 


Q: You traveled to Iran recently?

SR: April 2018 for two weeks. I visited Tehran, Kashan, Isfahan, Shiraz, Kerman, and Yaz. Usually, I make an organized itinerary with a budget, and in this case, I followed my schedule 70%. It was quite tight but I stuck to my schedule. Mostly I traveled over land--hitchhiking, by car, or by train, because I like seeing the scenery. 


Q: Iran has an image in the West of being a desert country. 

SR: [laughs] Iran in the north is mountains and snow, and four hours from Tehran is a place named Tochal, a ski resort. You can even see snowcapped mountains from Tehran. Kerman, in contrast, is desert, and they call it a "dead zone," because nothing can live there. 

I enjoyed Shiraz the most because I like history. You can call me a history geek. Shiraz has Persepolis, and Alexander the Great conquered the city. After Iran, I visited Istanbul, Izmir, Seljuk, Konya, Antalya, Ankara, Pamukkale, and Cappadocia, Turkey. 

Q: How long did you spend in Turkey? 

SR: I spent 12 days, mostly one or two nights in each city. If you want know about the people, it's not a good way to do it, but my goal was to visit the ruins. 

Q: When I visit ruins, whether it's Stonehenge or Rome, I'm usually disappointed, because either the ruins are literally rocks in the ground, or they've been renovated to the point of looking fake. Only Ephesus in Turkey has impressed me.

SR: For me, it's more than rocks. When I touch the same stone that people touched three thousand years ago, I'm following in the footsteps of the people back then. It's history in the earth, right in front of my face. 

Q: What top three places would you recommend for history buffs?

SR: 1) Egypt (Cairo, Alexandria, Thebes, Memphis, Luxor, Saqarra, Abu Simbel); 2) China (Xi'an and the Terracota Warriors in the Shaanxi province); and 3) Latin America (Aztecs in Mexico, Mayans in Peru, Incas in the Andes). 


So far, I've only managed to visit China. LatAm is much harder for me, because it's so far away, less traveled by Indonesians, and therefore very expensive. Egypt is far away, too, but we [Indonesians] go to Hajj, and Egypt is near Saudi Arabia, so it's more popular. 

Q: What made you interested in archaeology?

SR: My parents are both teachers, and through storytelling, they opened my mind about the history of different countries. I was exposed to history through storytelling in elementary school and since then, I've wanted to see things I did not know about. The future is fascinating, but the past is more fascinating. Did you know the name "China" is derived from  Emperor Qin [Shi Huang] three thousand ago? People today still use the name of this one emperor to recognize themselves, a man who died three thousand years ago! 


Q: How do you afford to travel so much? The Indonesian rupiah is not a strong currency. 

SR: I do not say it's easy. I'm just a medium-level freelancer [graphic designer]. I have advantages because my clients are foreigners, so I get paid in US dollars or Euros. I cannot afford to travel all year long, but I can afford to make two trips every year, as long as I travel cheaply. I hunt for cheap flights, and I sometimes buy tickets one year before. I stay mostly in dorms and hostels--it's like one room you share with six to eight people with a shared bathroom. You have to do your homework and make your itinerary as clear as possible to make it possible. 

Q: What are your favorite travel accessories?

SR: My holy grail is my backpack. It's a cheap backpack--it's actually used for cameras, but I put country flag patches on it and take it with me everywhere. I'll have to replace it soon. 


Q: I find the Indonesian people very friendly and open compared to other cultures. What do you think is the source of such friendliness, especially after Suharto's Communist purges?

SR: I think that's one of many reasons. Because of our history political corruption, we want to forget much of our past. And when you look to the future, you have to be open, especially if the goal is to make a new, better future in contrast to the violent one your parents knew. 


Also, we are not one entity. We are the opposite of homogenous. We are already used to differences. Here in my province (South Sumatra aka South Sumatera), we have about six or seven dialects. Different people, different tribes. so it's not new for us to embrace new movements or different people. 

Sulistiansyah Rahmadi lives in Palembang, Indonesia. His blog is https://sulisbae.com/ and he can be contacted through his Instagram account: https://www.instagram.com/baesulis/  

Sunday, July 22, 2018

Dear Kids: It's Up to You Now, and It Always Has Been

Philip Larkin was more right than he realized. They do f*ck you up, your mum and dad, but this time, they've managed to f*ck up the entire world. Let us count the ways--and provide a few lessons from their failures. 

1. Segregation has been the defining feature of 21st century Western civilization, as has constant warfare. You'd think more people would make the connection between conflict and segregation, but you'd be overestimating humanity's ability to self-analyze--especially when much of its wealth derives from selective inflation in residential property. Seen properly, segregation constitutes unconscionable insider trading on the future of one's neighborhood at the expense of all other residents. 
From Perry's Singapore (2017)
To fight this alliance between respectable taxpayers and the shills they elect, we must understand segregation is not the natural result of registering property, respecting property rights, insurance company incentives, or Hernando de Soto-style capitalism. ("The issue in the 21st century in the West is assetless paper and everywhere else it is paperless assets.") It is the result of lawyers and governments creating legal systems that prioritize tax revenue using short-term metrics (i.e., not factoring in long-term costs of segregation) and then delivering services based on assumptions of expected tax revenue. To take one extreme example, during the 1992 L.A. riots, LAPD cordoned off affluent Beverly Hills, leaving Koreatown and other minority areas to fend for themselves. Of course more prosaic examples of segregation's long-term inefficacy exist, but by now, even the most myopic must see two systems: one for respectable taxpayers, and another for the ones left behind invisible lines until a crisis makes them visible. 

Once we realize the primary evil in the world can be reduced to a single phenomenon, we can marshal our resources to eliminate it. Unlike abstract wars on poverty and terrorism, a war on segregation is capable of producing tangible results. Complexity by and for lawyers can be made simple; government hiring practices can be reformed to avoid nepotistic job structures often benefiting one race, one religion, or one ideology; and mafias thriving in the ruins of political neglect can be co-opted. 

Any decent sociologist or city planner's goal should be to create James J. Guild's Indonesia, the opposite of segregation: 

This is not a city of sanitized and detached nuclear families living in insulated bubbles and disconnected from one another. It’s a city of bonds, where neighbors — probably because they are packed together so densely — chat with one another and hang out on the curb eating fried tempe with raw chilis. The city may not be perfectly planned, but everyone that lives here — minus the super rich — experience and share in those imperfections together.

There has never been a sustained War on Segregation. Its supporters are too numerous, too united, too powerful. Brown vs. Board of Education failed even as it succeeded, but as the world becomes increasingly globalized and diverse, I foresee mandatory conscription if civilization is to continue.  

2. Any entity that can attract and deploy capital without consequences will become corrupt--often with unforeseen consequences. For example, study Project MKUltra or review America's "black budget," estimated at 50 billion USD annually (as of 2016). Ted Kaczynski, a domestic terrorist caught only because a family member recognized his handwriting, was part of Project MKUltra. Some lessons: community collaboration and other factors not part of any formal accounting mechanism can be more valuable than tools valued at billions. Meanwhile, progress is often packaged with expensive bells and whistles to prevent you from seeing gifts proffered are less valuable than the ones you already have. 

3.  Incremental change is common in advanced societies because compromise is a sign of maturity. When consistent, incremental change occurs in pursuit of a specific goal benefiting all--educational reform, tax reform, etc.--progress continues. When incremental change occurs because political factions are preserving their own bailiwicks, social cohesion suffers, revolution inches closer, and propaganda proliferates. If you see stagnation and greater inequality--potentially fatal self-inflicted wounds when others are improving living standards--be flexible in your choice of location unless you have a long history in one place.
From Jim Rogers' Street Smarts (2013)
4.  Don't read or listen to people who rely on secondhand information. Every single scenario has two sides--look at Barry Seals' life, for example--and remember: if one person's motives and motivations vary so vastly by the month, large organizations with hundreds of individuals cannot be summarized in neat packages. 

5. You will hear others telling you to keep your "inner child." They mean your sense of wonder. To that end, watch and find good movies. Almost anything with Audrey Hepburn, Marilyn Monroe, Cary Grant, or Hong Kong filmmaker Wong Kar-Wai will do. These are my sources of wonder--yours may differ. 

6. Be careful whenever you establish legal preferences. First, all laws will be enforced by Establishment-minded employees, whether police, lawyers, or judges. Second, the enforcement of the law matters far more than the law itself. (Selective drug arrests and prosecutions are simple examples of the aforementioned principle.) Third, the original purpose or intent of any law will always degrade or attenuate, and as society itself changes, laws made by previous legislators are more likely to be useless over time--except to characters within the Establishment desiring to entrap political or other enemies.

7. In the end, the world is filled with charlatans, liars, and thieves, but it has always been this way, and one of your ancestors may have been one of them. Your lack of knowledge about the past--and the future--does not excuse you from being honest and forthright. In the end, each generation must contend with an ever-increasing pile of dung, so get your shovel, and get to work. 

Thursday, June 7, 2018

Book Review: Mingfu's The China Dream

Liu Mingfu discusses the scourge of hegemony, preferring superpowers that balance each other's excesses and tendencies to overreach. However, he is too sanguine on military spending, seeing it as necessary for deterrence. To justify continued military spending worldwide, he even argues the military has a more educated population than the civilian population on a per capita basis, but cherry-picks above a certain rank and references a Joseph Nye quote out of context to make his argument. 
Mingfu admires Russia's military history, especially in WWII, and claims Marxism's economic ideals helped influence America by making it more moderate. He likely means unions and socialist leaders like Eugene Debs. 
The book would have improved with an American editor clarifying some gaps. Nevertheless, it is a must-read for anyone interested in China's views on the rest of the world. 

Bonus: "A country that makes enemies everywhere in the world, no matter how large or powerful, is a country that will never be safe." 

Monday, March 12, 2018

Unintended Consequences and the Difficulty in Understanding the United States

State Statistics

Let's take two states. State "LI" has a pro-government spending bias. It spends much more on public welfare and education than conservative State "NT." Like many Southern states, NT has a history of de jure racism ("In 1870 the state Constitution was amended to prohibit interracial marriage.") and defied Brown vs. Board of Education by increasing privatization of education. As of 2008, 17 of its school districts continued to be under a court-supervised desegregation order

LI is the opposite--it was first to ratify the Thirteenth Amendment to the United States Constitution, which abolished slavery nationally. Other than housing laws, it did not participate in expressly racist legislation. A billionaire philanthropist built several prominent institutions, including a top-ranked private university, in the state. The country's first African-American president came from LI in 2008. 

NT also had a private philanthropist build a major private university, but unlike LI, it has no nationally-recognized public universities. In 2016, while LI voted for liberal presidential candidates, NT voted overwhelmingly for conservative candidates. 

As of 2016-2017, NT's per capita personal income was 44,317 USD annually, and LI's per capita personal income was 51,817 USD annually. NT's population was about 74 to 79% white; LI was more diverse, being 62 to 77% white. LI had higher union membership than NT: "In 2017, union members accounted for 15.0 percent of wage and salary workers in [LI], compared with 14.5 percent in 2016." NT, a right to work state, had union membership of around 5.7% in 2016. In 2013, NT spent 8,208 USD annually on primary and secondary school pupils; LI spent 12,288 USD annually.

You might say it's obvious LI is doing better than NT, but you'd be wrong. In 2015, LI had 863 homicides and 1,220 firearm deaths. Its infant mortality rate in 2016 was worse than the average American state, with some counties alarmingly worse. Although NT's infant mortality rate was actually higher than LI's, it had a lower homicide death rate


LI's pension deficit was the largest of all 50 states; in contrast, NT had one of the highest funding ratios. Even on citywide level, LI's Ogacihc was the worst city in terms of underfunding, while NT's Ellivhsan was one of the best (See pp. 22 and 23). 

Homeownership? NT prevails with 67.2% ownership in 2017 vs. LI's 65.4%. 

Don't count out LI, though: 

LI had a higher average ACT score of 20.7 (or 21.4, depending on which data set you use) compared to NT's 19.8. (Counterpoint: the average nationwide score is 21, and after adjusting for random factors, one could argue there's not much difference between the two states.) 

What about interracial marriage? Some NT cities (Agoonattahc) rank the worst/least on this measure, while one large metro in LI ranks among the best/most. 

Passport issuance? In 2017, LI had 791,802 passports (0.0618 rate) while NT had 242,532 (0.0361 rate). 

Except for pollution, most health statistics, including infant mortality, favor LI. 

What's the point of reviewing these statistics? Well, they don't actually show anything useful if you want to relocate. A person looking to buy a home would probably prefer NT's largest metro area over LI's, but someone interested in price appreciation and public transportation might prefer LI. 

Also, NT might have fewer homicides than LI, but what if it's because of underreporting or a corrupt coroner misclassifying deaths? What about police shootings of civilians? Did anyone think to consider divorce rates or the quality of public schools when factoring in local housing prices? How about the number of public parks and/or development-protected areas? 

We have all heard "there are lies, damn lies, and statistics," but it's important to highlight a mathematical aspect of capitalism few people understand: 1) it is much harder to maintain rising wages and disposable income than to control inflation in essential items; and 2) higher populations, especially if including many new entrants, impact data tremendously. Thus, NT might be a much better place to live today because its wages and wage growth are more likely to allow residents to buy a home than in LI, but no solid evidence indicates higher property taxes or corporate closures will make this true 10 to 15 years from now. In addition, if NT has gained thousands of new residents in the last few years, its supply/demand data will be skewed because there is no guarantee of continued inward-migration, and at some point, taxes or expenditures must rise to meet the increased population demand. 


Finally, although the data indicates NT should be less racially-tolerant than LI, a) it depends on which city you visit; and b) NT's general hospitality may trump any of its residents' underlying opinions about groups in general. More below on b): 

"Sure, up there [New York City] black and white work side by side. But at night the black goes home to his ghetto and the white to his suburb. Here in the South we've been living together for 250 years, talking to each other every day. That gives you something solid to build on." -- Mayor Johnny L. Ford [National Geographic (October 1975), pp. 569] 

"It struck me as notably ironic that Southerners could despise blacks so bitterly and yet live comfortably alongside them, while in the North people by and large did not mind blacks, even respected them as humans and wished them every success, just so long as they didn't have to mingle with them too freely." -- Bill Bryson [The Lost Continent, paperback, pp. 63 (1989)]

The lesson? Statistics do not provide useful guidance in evaluating a state because they are not set up to capture direct, honest feedback even at a local level, which means they cannot reliably predict inward or outward migration patterns. Even if one asks the right questions, experiences vary so much across different cities in the same state, it is difficult to get a clear picture on anything meaningful. Never before have we had so much data; never before has such data been so useless. The older I get, the more I realize economics and sociology need to be merged to be a useful discipline. 

Debt, Debt, Baby

Setting aside social and cultural dynamics, modern American capitalism works by capturing platforms and using debt to continue to gain market share. This model works only if interest rates remain low and if banks are willing to roll over maturing debt or if private equity investors are willing to loan/invest more funds. 

When someone complains Uber or Amazon are not as profitable as other companies, you can safely ignore them on macroeconomic issues--they don't know how the modern economy works. (Even Nokia needed 17 years before it turned a profit on electronics--and that was before any newfangled financial "innovation.") Indeed, most successful American cities have become financially successful because they've carved out some unsustainable federally-linked advantage (security spending, educational loans, ethanol subsidies) or loophole (segregation, lax antitrust enforcement, etc.). Seen this way, "capitalist" America is not much different from "socialist" China, except China's national government has recently become stricter, functioning as a proper check and balance against local corruption--and growth at any cost. 
America or China? From Duncan Clark's Alibaba (2016)

Today, a debt-fueled strategy might be essential in an era where countries from China to Singapore practice a hybrid public-private model, practically picking winners and losers by governmental association. Alibaba infamously transferred Alipay, an online payments business worth at least 1 billion USD into a structure held 100% by a Chinese domestic company "[t]o expedite obtaining an essential regulatory license." [See Duncan Clark's Alibaba (2016), Ch 11.] The payment to international investors was 51 million USD. Alipay--not Alibaba--subsequently "was the first of 27 [Chinese] companies to be issued licenses and was awarded license number 001" by the PBOC. [Id.] 

Seen in a non-ideological light, countries and municipalities that attract capital--especially at lower interest rates--and roll over debt without asset sales will be successful. It has nothing to do with democracy, socialism, or any other "ism." The modern world--from international relations to the smallest city--runs on debt and the perception and confidence such debt will be paid. Public-private partnerships, with their more assured outcomes, are probably the future, and America needs a strategy apart from overspending on military R&D, both domestically and internationally, then trickling down innovations through private companies to the civilian sector. 

In such a convoluted world, numbers and statistics are not as helpful as they should be because every entity, not just ratings agencies, has incentives to optimize the numbers. Given the necessity of a strong banking sector in a debt-fueled economy, America's 2008-2009 banking bailouts should now make sense, except the lack of substantive reform, especially in the "shadow banking" sector, foretells another crisis. Unsurprisingly, debt-fueled economies prioritize economic growth and productivity over all else because growth makes it easier for debts to be paid both directly (newer debtholders maintain the cycle) and indirectly (inflation in assets renders past debts less valuable). It is unclear whether younger generations in developed countries are willing to accept such a paradigm. 
From Marilynne Robinson's What Are We Doing Here? (2018)

More troubling, some states have used lower interest rates and debt to pay off vested interests such as government unions rather than investing in the future. LI's pension issues are one obvious consequence of such an approach as well as an example of unintended consequences. When the Federal Reserve lowered interest rates, making it easier for tech companies to gain national and international market share, it did not intend for some states to handicap future generations by paying off vested or corrupt interests through complex political machinations. It may not have even intended the privatization that eventually came after such methods sapped cash flow from local and state budgets. Regardless of intentions, if growth must be maintained, especially through debt, then we must all "publish or perish," and quality and integrity aren't guaranteed in such single-minded productivity, either in products and people. I have spent much of my life studying numbers only to realize the "optimization bias" I mentioned earlier means any conclusions I've derived from "objective" data is inferior to an in-person daily stroll in an area. 
Jim Rogers, Street Smarts (2013)
What's Next?

If a paradigm deficient in quality or meaningfulness is an unintended economic result, how can we create a better one?  "The fundamental problem [of economics] is not our lack of information but our limited ability to process it." [Ha-Joon Chang, 23 Things They Don't Tell You about Capitalism (2010)] I've traveled extensively for two years and I have processed why developed countries are faltering. Their systems--economic, social, and cultural--no longer prioritize justice. As stated above, they prioritize debt and debt repayment, which require deference to banking and military sectors. Security is good, but it does not make the soup taste better. Let me explain more clearly.

Society 1 is able to have as much as it wants--as long as Societies 2 and 3 buy its loans/debt. Society 1 creates systems based on x, y, and z values--and then builds numerous institutions around those purported values. The problem is that Society 1, flush with almost unlimited possibilities because of its ability to issue debt, eventually forgets to cross-check whether its values--democracy, capitalism, meritocracy--are actually reflected in its institutions. As its institutions become larger and more entrenched, they rely on perception to increase numbers, and it becomes easier to use the media--especially visual images--to convince voters to go along. (
For example, even if Society 1's military has lost every non-Grenadian war since Vietnam, most recently in Syria, producers--financed partly by government money--will greenlight another Churchill or WWII movie.) 

Of course such maneuvering has limits. As it becomes more obvious something is wrong, distractions and misinformation are used to maintain debt aka the status quo. In such a world, having multiple layers of complexity becomes useful to survival even if not a single layer benefits non-insiders. 

Over time, a few people start to realize Society 1's true values aren't whatever it claims, such as freedom--it's the opposite. The inability to do certain things--copying IP, threatening harm, silencing speech, invading a private citizen's privacy, etc.--is a free society's foundation. The trick is achieving a balance where citizens don't rely on insurance companies and their lawyers to receive a fair, predictable result while avoiding a nanny state. As of 2018, the balance in America, er Society 1, had gone so far awry, the following disclaimer would arrive from a public university after having paid 450 USD for event tickets: 

For All Ticket Purchases: The Division of Intercollegiate Athletics of the University of Iowa does not guarantee the availability of tickets, and reserves the right to modify or cancel any of the conditions displayed on this website, including ticket pricing or availability, at its discretion and without prior notice. If the University does not fill a ticket order or request, it will refund the purchase price or credit the customer's charge account, and is not responsible for any other damages or fees which might be incurred. By using this website, you agree that any ticket transactions with the University of Iowa are governed by the laws of the State of Iowa, without regard to conflict of laws principle.

Why bother having a website selling tickets if there's no guarantee you'll get the ticket you paid for? The Iowa, er, Awoi, lawyer did a good job for his/her client, but a terrible job for society and America's citizens. Historians will ask whether Americans forgot that all three branches of government, along with the fourth pillar of media, were required for a functioning government. Debt makes a leading appearance here, too, because new lawyers with 100,000 USD in student loans will need to pay off the loans before valuing justice and fairness above personal preservation. Lawyers are fond of saying the law doesn't create justice, only a chance at justice. Yet, as legal fees, one-sided agreements, and complexity (look at the indemnification clause in any online agreement) increase, one can argue such chances have disappeared for most people. 

Without all branches fulfilling their roles, some Americans saw decline as early as 2009: 

“We are watching the decline and fall of the United States as an economic power — not hypothetically, but as we speak,” said Craig R. Barrett, the chairman of Intel.

While traveling, I have wondered what America will leave behind as its economic empire declines, and until now, I have omitted an important detail. China will indeed become the world's economic superpower, but it does not seem able to replicate the ideals America brought the world in just 55 years. A country that jails Liu Xiaobo--author of the words below--will never be admired except grudgingly, even if Xiaobo is clearly a deluded, Western-backed warmonger. 

Throughout all these years that I have lived without freedom, our love was full of bitterness imposed by outside circumstances, but as I savor its aftertaste, it remains boundless. I am serving my sentence in a tangible prison, while you wait in the intangible prison of the heart. Your love is the sunlight that leaps over high walls and penetrates the iron bars of my prison window, stroking every inch of my skin, warming every cell of my body, allowing me to always keep peace, openness, and brightness in my heart, and filling every minute of my time in prison with meaning. My love for you, on the other hand, is so full of remorse and regret that it at times makes me stagger under its weight. I am an insensate stone in the wilderness, whipped by fierce wind and torrential rain, so cold that no one dares touch me. But my love is solid and sharp, capable of piercing through any obstacle. Even if I were crushed into powder, I would still use my ashes to embrace you.

Even Singapore, a healthy blend of American and Chinese influence, jails Jehovah's Witnesses and bans their literature. For all its practicality, Singapore's Chinese elite cannot bring themselves to make an exception to military conscription for a well-established religion--an issue America resolved in 1943: "Those who begin coercive elimination of dissent soon find themselves exterminating dissenters. Compulsory unification of opinion achieves only the unanimity of the graveyard." (Supreme Court Justice Robert Jackson)

It is true that America jailed Martin Luther King, Jr. and spies on its own people with the same fervor as East Germany's Stasi, but MLK was released and Snowden is still alive. The perpetrators of Abu Ghraib may not all have gone to jail, nor received appropriately lengthy sentences when convicted, but because of American media (and the delightful Errol Morris), no decent person hears the names Lynndie England, Charles Graner, or Megan M. Ambuhl without feeling pity and outrage. 

You see, every country is the same in the sense all of them lurch towards entropy, with the rate of decline contingent on its people's ability to reverse poor decisions and--apologies for the colloquialism--prevent "full-retard." It's not coincidental that America's decline and China's rise occurred when decisions post-9/11 were not reversed in a timely manner. Even before Abu Ghraib; the overbroad Patriot Act; Guantanamo Bay's murky legal status; and the trillion-dollar illegal invasion of a former allied country, America's failure to ensure a match between its institutions and purported values led to a mishmash of unmanageable fiefdoms, none of which were truly free, and--more importantly--none of which could be shut down quickly if maintaining harmful trajectories (such as the cementing of the military-industrial complex). From The Atlantic (September 2016), by Steven Brill

DHS--which has had seven undersecretaries or acting undersecretaries for management--has perennially been on the GAO’s list of agencies whose overall management is considered “at risk.” From the beginning, the agencies thrown into the new superagency fought to keep their turf, often calling on congressional allies to help. “At one meeting early on, I mumbled something about why should the Coast Guard and Customs each have their own helicopters and planes,” [DHS's] Tom Ridge recalls. “Why couldn’t they combine to purchase the same stuff? Within a few days, we had calls from Capitol Hill warning us not to mess with the Coast Guard’s or Customs’ procurements.” (The two agencies still have their own air forces.)


In hindsight, the failure of America's lawyers and journalists to expeditiously reverse the mistakes of the executive and legislative branches was the beginning of the end of America's reputation. No nation can withstand hypocrisy for long; humanity's DNA rejects it like a lethal virus. But--and there was always going to be a "but"--at least America, in purporting to adhere to certain values, gave room for its idealists to reach for them. 

Interestingly, as of 2018, China also prioritizes economic success and uses debt to turbocharge its economy, but as the creditor of over one trillion USD, its export-driven economy has unique advantages as well as risks (currency devaluation, tariffs, etc.). If it does not continue to create jobs, why should anyone with an independent streak stay if they can leave? Countries like the UAE do not do well on the "daily stroll" test despite financial prosperity because they have not assimilated their best talent. Similarly, China's behavior towards nonconformists will rob them of the privilege of being emulated, which will limit its ability to keep its best people. There is a reason a young Jack Ma (Ma Yun) learned more in Australia than in China and does not trust people from Shanghai, Taiwan, or Hong Kong. 
From Clark's Alibaba (2016)

In almost every country, the best residents are from somewhere else or have developed their ideas elsewhere, and in any time period, it will always be much easier to steal talent than to create it. Consequently, nations that do not provide the appropriate balance of security and freedom lose automatically because they do not promulgate values to be emulated as long as they silence critical or nonconformist voices. The act of silencing people who think differently repels the most talented, who are often outsiders. No amount of prosperity can resolve the hypocrisy of telling others they know what is best for them while expelling people who question the status quo. 

America may be in decline, it may have the world's highest incarceration rates, but it continues to uphold values other than financial prosperity. Such values, even if allegedly secondary, allow nonconformists to prosper, who then contribute to art, literature, sports, movies, and other distractions that may eventually provide non-obvious opportunities for cohesion, innovation, or collaboration. China may be on the rise, but as long as it chills nonconformity, it will lose talent to other countries, giving competitors the upper hand. 

One Big Family: Stupidity, Insanity, & Idealism

"I never dreamt that I would get to be / The creature that I always meant to be." -- Pet Shop Boys, "Being Boring." 

I've said before Trump was elected because American voters rightfully realized if choosing between stupidity and insanity, at least insanity can provide advantages. (Had Bernie Sanders been the Democratic nominee, the election would have been a fair fight.) The difficulty in understanding the United States is that while it will make mistakes, including incredibly stupid ones, idealism and insanity are fraternal twins. It takes some level of delusion to think you can change the world, to ignore the vested interests already at the door ready to block your efforts. Weak countries tend to see one of the twins and not the other. They cannot see that by censoring one twin, they cause the other--and perhaps a level-headed cousin or two--to flee or opt out of public affairs, leaving a space that will be occupied by authoritarians who do not believe the purpose of security is to create diverse meritocracies with opportunities for all citizens. Humanity never knows in the present tense which fraternal twin it is dealing with, nor which extended family members will make positive contributions, but we do know America has benefitted the most from the world's migration in the 21st century, a migration that would not have occurred without purporting to stand for certain values. In the end, America's lasting contribution to the annals of knowledge might be far more than the fact that meritocracies are aided by "uninhibited, robust, and wide-open [public debate that] may well include vehement, caustic, and sometimes unpleasantly sharp attacks on government and public officials." It might be that without such an approach, the best migrants will not come, or if they come, will not assimilate. 

Any man more right than his neighbors should not constitute a majority in his neighborhood only if he lives by himself in the woods. 

Conclusion

Will Trump's insanity be better than Hillary's stupidity? As long as residents lack free mobility, which requires legal reciprocity, it doesn't matter. "Voting with one's feet" is not possible until immigration laws worldwide are modified, and even then, any reform will be based on subjective factors, an imperfect endeavor. Countries claiming to value human beings must work together to increase mobility, the ultimate check and balance on power's tendency to make mistakes. In the end, one cannot favor freedom without giving credit to its midwife, mobility, and the world's failure to properly resettle refugees makes me pessimistic for the future of freedom and justice. 

I also wanted to share what I've learned from my travels, but as usual, I've wandered far astray. I really only have three lessons: 

1. Living with a member of the opposite gender, even only for one week, changes your body's chemistry. 

2. There is no ideal place. Everywhere has tradeoffs, and the act of traveling makes it easier to determine what you really value. For example, I've known I value clean air since I traveled to India in 2010

3.  Living close to farmers means everything you eat tastes delicious--and is often cheaper because third-party transportation costs are absent. 

My travels are not over. I enjoyed Mexico City 
and Guanajuato city and will be visiting Houston tomorrow, then Iowa City in April. I look forward to touring several Iowa cities (believe it or not, Iowa has one of America's oldest surviving mosques), and I'm interested in seeing how the generally conservative state will respond to my penchant for stirring the pot. That's my way of saying if Terry Brands punches me at the Wrestling World Cup, I probably deserved it. I'm still going to yell "Alireza Dabir" if I run into him. I want to see how Middle America treats its dissidents. 

© Matthew Mehdi Rafat (2018)

Update on April 11, 2018: I saw one of the Brands brothers in Iowa City, and only then did I realize a flaw in my plan: Tom and Terry are twins, and I can't tell them apart. 

Update on April 18, 2018: According to Leila Fadel in the May 2018 edition of National Geographic, "The first mosque was in North Dakota. Iowa is home to the oldest surviving place of worship built for Muslims in 1924, with an immigration act that barred people from Asia." 

Update on August 14, 2020: Though Liu Xiaobo was awarded the Nobel Peace Prize, in fact he has consistently supported American wars. According to The Guardian's Barry Sautman and Yan Hairong, Liu "has endorsed the invasions of Iraq and Afghanistan, and he applauded the Vietnam and Korean wars retrospectively in a 2001 essay." Nevertheless, the authors write, "Imprisoning Liu was entirely unnecessary."