Time for the West to Embrace Chinese Industrial Policy, Not Eliminate it

Western market fundamentalism is a dead-end road as far as long term economic prosperity goes.

By Marshall Auerback (guest post)

This article was produced by Economy for All, a project of the Independent Media Institute.

Robert Atkinson of the Information Technology and Innovation Foundation has just written a very compelling analysis of China’s national industrial policy, especially in relation to the exponential growth of its telecommunications industry. Some of the key findings of the paper, “How China’s Mercantilist Policies Have Undermined Global Innovation in the Telecom Equipment Industry” are as follows:

  • “Without unfair, mercantilist Chinese government policies and programs for its telecom giants, China would lack a globally competitive telecom equipment industry. Neither Huawei, nor ZTE, would have more than minor market shares, even in China.
  • Chinese market-share gains have come at the expense of innovative telecom equipment providers in other countries. By artificially taking market share from more innovative companies, the latter have had less revenue to invest in cutting-edge R&D.
  • As a share of sales, leading non-Chinese equipment companies invest more in R&D, and patent and contribute more to international standards when compared to Huawei and ZTE.
  • Beijing’s policies dramatically limit foreign access to China’s huge telecom markets, providing them with a guaranteed source of revenue to attack foreign competitors.

The analysis is characterized by an implicit bias against Chinese mercantilism, a bias that many champions of free trade naturally share. While reflecting those preferences to a degree, Atkinson’s report does offer a recognition that China’s state-driven capitalist model has played a significant role in driving industrial development and innovation (while also contending that such protectionism and heavy-state subsidies have had the negative byproduct of inhibiting innovation in western economies that have eschewed such practices).

Economic Crisis Was Foreshadowed Before the Coronavirus

By Alejandro Nadal

Republished from La Jornada, March 11, 2020, with permission.

It is with great sadness that we announce that Alejandro Nadal, an economist, lawyer, professor at the Centro de Estudios Económicos (CEE) of the Colegio de México, and a longtime contributor to Triple Crisis blog, passed away on March 17 after a short time with fast-moving cancer. As former D&S co-editor and former Triple Crisis administrator Timothy A. Wise put it, “A great loss for us all, far too young and otherwise healthy and vibrant. Like Frank Ackerman. Tough times, just when we need those clear, critical minds most.”  This article was his last for the Mexico City daily newspaper La Jornada, where he was a columnist. It was submitted on March 10 and published on March 11, just six days before he died. Even though he wrote it almost two weeks ago and the news is moving so quickly, it still seems to capture powerfully the current moment and the economic context of the pandemic. The journal Sin Permiso, on whose editorial board Nadal served, has posted an obituary and tribute here, and has made available a pdf compiling some of his articles.  —Eds. 

Cycles and crises in capitalism can happen in an irregular way. This is part of the anomalous movement of an economy that is inherently unstable. The great crisis of 2008 was the result of such processes. And to bring an economy that has fallen into imbalance back to life, you need to inject it with liquidity in good quantities. For example, the monetary easing policy measures implemented by the Federal Reserve were felt before the crisis and their speculative effects began to spread throughout the economy from 2009–2010. Astronomical amounts went into the pension funds and treasury departments of large corporations, where they served to fuel global speculation. But what they did not do was promote investment and employment.

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Trade, Currency War Weapons Double-Edged

By Jomo Kwame Sundaram, Anis Chowdhury
Cross-posted at Inter Press Service.
The US-China trade war has flared up again less than two weeks after US President Donald Trump delayed new tariffs of US$160 billion on Chinese imports until December, purportedly to avoid harming the holiday shopping season.

Ratcheting Up War Talk

Earlier, after two days of trade talks without much progress, Trump claimed on 1 August that China had not kept its promise to buy more US farm exports. He then announced 10 per cent tariffs on US$300 billion worth of Chinese imports, besides the 25 per cent already levied on US$250 billion of goods from China.
China’s Commerce Ministry responded on 5 August by stopping purchases of US agricultural products. Its central bank, the People’s Bank of China (PBoC) also allowed China’s long over-valued renminbi (RMB) currency to fall below the RMB7 per dollar ‘threshold’ to its lowest level in more than a decade, causing US equity markets to plunge.
In response, Trump tweeted, “It’s called ‘currency manipulation’.” Supporting the President, the US Treasury officially claimed, for the first time since 1994, that China was manipulating its currency.

Italy and China’s One Belt One Road Initiative

By Sara Hsu

China has become a leader in globalization, most visibly through its One Belt One Road initiative, which spans several continents and aims to build up infrastructure and trade between China and the rest of the world. While the program has, for the most part, remained controversial in the West due to a fear of Chinese imperialism, in March 2019, Italy broke with the G7 major economies and signed up for the program. Some analysts have expressed concerns that this move will allow China a back door into Europe’s heartland, while others see it as a shrewd move on the part of the Italians, allowing them to obtain much-needed financing for a number of endeavors. So, which is it, and is this a win-lose or a win-win situation?

China Has Strategic Objectives In Going Global, Does Africa?

From The Real News Network.

If Africa as a continent does not have strategic objectives of its own, the history of impediments to African economic development will be repeated in its engagement with China, says Ethiopia’s Alemayehu Geda.  

LYNN FRIES: It’s The Real News. I’m Lynn Fries. My guest on today’s show is Ethiopia’s Alemayehu Geda, who is a Professor of Economics at University of Addis Ababa. We are meeting at the UN Geneva, where Professor Geda just presented at anexperts meeting. Professor Geda, welcome.

ALEMAYEHU GEDA: Thank you very much.

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Seeds of Resistance, Harvests of Hope: Farmers halt a land grab in Mozambique

Timothy A. Wise

On July 26, 2018, farmers in Xai-Xai, Mozambique, achieved a milestone. They met to formalize their new farmers’ association, elect leaders, and prepare a petition to the local government for land. The association, christened Tsakane, which means “happy” in the local Changana language, was the culmination of six years of resistance to a Chinese land grab that had sparked protest and outrage. The association now has a request pending for its own land.

With the Chinese rice plantation floundering, the Tsakane farmers offer a vivid demonstration that perhaps the best way to grow more food is to give poor food producers more land.

The rise and fall of a land grab

I first visited the vast rice fields of Xai-Xai, three hours up the coast from the capital city of Maputo, in 2017. Since 2008, Mozambique had been one of the leading targets of large-scale agricultural investment projects, widely denounced as land grabs by critics. Community resistance had halted most such projects in Mozambique, including ProSAVANA, the controversial Brazil-Japan initiative, which was intended to be the largest land grab in Africa.

China’s Embrace Of An Intellectual Property System Imposed On It By The United States

According to Peter Drahos, Professor of Law and Governance in the Law Department at the European University Institute in Florence, the two biggest scientific powers, the U.S. & China, need to rethink the world’s intellectual property-based innovation system to safeguard citizen interests or else this privatization of technology, an arms race mentality in science, will produce a dark, dystopian future none of us really want.  Drahos was interviewed by Lynn Fries of the Real News Network. Find the original TRNN post, which contains links to related stories, here.

China’s Bid To Assist Assad In Syrian Reconstruction Is About Security and Profit

By Sara Hsu

Even as the West favors airstrikes against Syrian president Bashar al-Assad and steers clear of supporting the president in rebuilding Syria, China has stated that it is interested in reconstructing the war-torn nation, and Chinese firms are lining up to become part of the process. The reconstruction cost is expected to amount to $250 billion, according to the United Nations. China’s motivations are apolitical, and are not aimed at opposing the policies of Western nations. Rather, China is propelled by economic and security reasons to take part in rebuilding Syria.

Chinese firms interested in reconstruction include infrastructure construction companies such as China Energy Engineering Corporation and China Construction Fifth Engineering Division. In addition, a Syria Day Expo held in Beijing was attended last year by hundreds of Chinese infrastructure investment firms. At the First Trade Fair on Syrian Reconstruction Projects held last summer, officials pledged $2 billion for the reconstruction process. Chinese energy firms might have benefited as well, since before the Syrian war began, Syria’s main energy contracts were held with Western energy companies such as Shell and Total. However, Russia has been given exclusive rights to produce oil and gas in Syria.

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From Japanese Bubble to Chinese Time Bomb

An Interview with Walden Bello

Asia’s financial crisis came a decade before the global crisis, but it has had a lasting influence and left a legacy that could sow the seeds for the next global crisis.

How did the Asian financial crisis in 1997-1998 differ to the one that broke in the US and Europe in 2008?

The Asian financial crisis in 1997-98 was similar to the 2008 global financial crisis in that it was also the product of speculative bubbles in real estate and the stock market created by the search for high profits by finance capital. The difference was the role of currency speculators and hedge fund operators in hastening the bursting of the bubble and the collapse of the real economy; these actors played a negligible role in the 2008 crisis. These speculators, led by George Soros’ Quantum Fund, targeted the overvalued currencies of the Asian economies, particularly the Thai baht, betting on the probability that they would be devalued relative to the dollar owing to investor fears that the bubbles would burst, thus accelerating the devaluation of the currencies and making tremendous profits once the Asian currencies were devalued. Had the speculators not been active, the bubbles would still have burst and the real economy would still have entered into severe crisis, but the “landing” would have probably been less rough.

Where the uniqueness of the 2008-2009 crisis lay was in the fatal marriage of a real estate bubble with financial engineering. Tremendous amounts of cash flowed into real estate that were plowed into loans, a great many of them of dubious quality because the debtors’ capacity to repay the loans was questionable– thus the term subprime loans. Financial engineering allowed mortgage originators to slice, dice, and package these loans into securities that were then sold to banks and other financial institutions, which then resold them to other banks and financial institutions. When the mortgage holders could no longer service their mortgages, the quality of the loans was drastically impaired. But billions of dollars of these now toxic securities were circulating in the global financial system, upending the balance sheets of the US and foreign banks and institutions that held them and driving many, like Lehman Brothers, to bankruptcy, and others, like Citi and the German regional banks, requiring a massive government rescue.

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An Empire Upside Down, Part 2

Christy Thornton

This is the second part of a three-part article on the United States and Latin America in the Trump era, forthcoming in the July/August issue of Dollars & Sense magazine. Part 1 focused on Argentina, this part focuses on Peru, and Part 3 will focus on Colombia. Christy Thornton is an assistant professor of history and international studies at Rowan University.

Trade and Multipolarity

When Peru’s newly elected President, Pedro Pablo Kuczynski, arrived at the White House for a meeting with Trump, the narrative seemed to be one of continuity rather than change. During Kuczynski’s visit, Trump took the time to highlight to reporters his approval of the sale of military vehicles to Peru. The deal was for $668 million in reconditioned Stryker armored infantry carriers—mid-sized, rapidly deployable, armed people-movers, used by the U.S. Army in Iraq and Afghanistan, particularly in urban areas. (Notably, they are manufactured and reconditioned by a General Dynamics subsidiary in Canada, not the United States.) During his White House press briefing with Kuczynski, Trump told reporters, “I understand they’re going to be buying quite a bit of our military—some of our military vehicles. And they are great vehicles. I just looked at it and we’re approving it.”

While Trump took credit for approving the agreement, the deal was actually worked out in December, under the Obama administration. That Trump’s administration decided to continue a policy of selling security-related materiel to a Latin American country was no surprise. Security aid and arms sales have long been a backbone of the relationship between the United States and Peru, which, according to the Stockholm Institute, has received more than $1 billion in arms sales since 1950.

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