Tag Archives: political economy

A Thought on Huawei

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John Hemmings made some interesting and critical points about the “security” (my metaphoric quotes) of Huawei equipment.  In doing so, he cited a study by Finite State, a cyber-security organization that looks deeply into the Internet of Things and resulting vulnerabilities—an IoT of which Huawei is aiming to be a central part (as well as a central part of national communications and defense systems and of governments).  Finite State’s analysis investigated “more than 1.5 million files embedded in 9,936 firmware images supporting 558 different products within [Huawei’s] enterprise networking product lines.”

Hemmings’ points center on these:

  • In virtually all categories we studied, we found Huawei devices to be less secure than comparable devices from other vendors.
  • On average, Huawei devices had 102 known vulnerabilities inside their firmware, primarily due to the use of vulnerable open-source and third-party components.
  • Out of all the firmware images analyzed, 55% had at least one potential backdoor.
  • On dozens of occasions, Huawei engineers disguised known unsafe functions (such as memcpy) as the “safe” version (memcpy_s) by creating wrapper functions with the “safe” name but none of the safety checks.
  • Across 356 firmware images, there are several million calls into unsafe functions. Huawei engineers choose the “safe” option of these functions less than 17% of the time, despite the fact that these functions improve security and have existed for over a decade.
  • Huawei devices had…2-8x more potential 0-day vulnerabilities than the other devices.
  • Vulnerabilities in both the routers and the fixed access network remained beyond 2012 and were also present in Vodafone’s businesses in the U.K., Germany, Spain and Portugal.

Those vulnerabilities? Given how enthusiastically Huawei’s representatives tout the superiority of their equipment, and given that fourth bullet, I suggest that those vulnerabilities also are known to Huawei’s men and put there deliberately.

And that last bullet: Vodafone had identified those “vulnerabilities” to Huawei in 2011 and received assurances from Huawei that they’d be removed.  Those security holes remained far past 2012.  And still remain as far as I can tell.

This is why Huawei has no legitimate place in any organization outside of the People’s Republic of China, nor should it have access to any technology of any nation or business outside of the PRC.

But Huawei’s CEO, Ren Zhengfei, and CFO, Meng Wanzhou, and men of the PRC’s government, like President Xi Jinping, deny all of this. And Ren is an honorable man; So are they all, all honorable men.

A Continued Power Grab

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The People’s Republic of China objects to the sale of defensive weapons to the Republic of China.

China will sanction US firms that participate in arms sales to Taiwan [The Wall Street Journal‘s conflation of the island with the nation that sits on the island], after Washington approved sales of $2.2 billion in tanks, missiles and related military hardware, Beijing said.

The PRC’s Foreign Ministry has justified the threat with this:

the arms sales “harmed China’s sovereignty and national security”

Of course, it does no harm to the PRC’ sovereignty to sell weapons to a sovereign nation.  Of course it does no harm to the PRC’s national security to sell defensive weapons to a sovereign nation that’s so much smaller than the PRC.

All the sale does is increase a sovereign nation’s ability to defend itself against the aggression, the threats of invasion, which the PRC has so repeatedly leveled against that sovereign nation.  If the PRC has no such aggressive intent, it has nothing to fear from the sale.

The PRC’s moves would be nonsensical, did they not amount to such a cynical and naked and continued grab for power.

A Thought on Tariffs

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The tariffs as used by President Donald Trump are viewed by many as having no impact on our overall trade deficit, and much is made of Trump’s disdain for trade deficits.

Thirty months into the Trump Presidency, the US economy continues to import more than it exports. This isn’t a problem, since the trade deficit is of no great consequence as an economic measure.  But in President Trump’s telling this is a clear and present danger….

Suppose something else, though.

Mr Trump has imposed 25% tariffs on $200 billion of Chinese goods, and he’s threatened a duty on another $300 billion. This has narrowed the US-China bilateral goods trade gap in recent months, but the total US trade deficit reached a record high in 2018. … Producers are leaving China, but not for America.
While Chinese goods exports to the US fell 12.3% year-over-year from January through May, Vietnam saw a 36.4% increase, according to US Census data. Taiwan had a nearly 22.5% year-over-year increase in the same five months, more than triple the increase from 2017-18. South Korean exports to the US increased 12.4% over the period.

Recall one of Trump’s other reasons for disdaining the trade deficit: the People’s Republic of China declines to play by international trade rules, and it steals or extorts other nations’ (ours in particular as one of the, if not the, leader in) technology and intellectual property, along with merely proprietary materials.

If the PRC doesn’t want to play by the same rules as the rest of us, it doesn’t need to trade with the rest of us.

Thus: if the tariffs aren’t realizing their first secondary purpose, moving production back to the US, they are gaining their primary purpose: moving production, and associated export, out of the PRC.

That’s not all bad.

Progressive-Democrats’ Minimum Wage Push

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Progressive-Democrats want to raise the national minimum wage to $15/hr.  Here are some back of the envelope numbers that could result.

The CBO says that the new minimum would cost 1.3 million Americans their jobs (in the optimistic scenario; their more pessimistic scenario had 3.7 million Americans put out of work): their current wage would go from $10.10/hr (CBO’s 2014 minimum wage which formed the core of their that-year outcome analysis) to $0.00/hr. The CBO also says that the $15/hr minimum wage would lift 1.3 million American workers out of poverty.

So, 1.3 million, or many more, Americans would lose their jobs so 1.3 million, at best, could get above poverty.

There’s more to it than that, though.

Based on that same $10.10/hr prior minimum that the Progressive-Democrats tried for just five years ago, the currently proposed job losses would result in a bit over $26.25 billion dollars lost to our economy per year through lost wages.  That’s based on only 1.3 million American workers being fired, mind you.  Balancing that would be that $4.9/hr raise (because, by CBO assumption, $15/hr is a non-poverty wage) for the lucky 1.3 million, or a skosh under $12.75 billion inserted into our economy each year.  That’s a net loss to our economy of some $13.5 billion per year.

If we adjust all of that for the actually extant minimum wage of $7.25/hr, the numbers shift to $19.5 billion per year lost to our economy in lost wages from those 1.3 million being fired, and a gain for the lucky ones of $20.2 billion per year.

That makes the Progressive-Democrats’ latest proposal a wash on wages in our economy.  Tell that wash business to the fired workers, though, and hear what they think of break-even.  Oh, and what was that, again, about “livable wages?”

Economic Misunderstanding

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The broad Keynesian misunderstanding regarding government spending is continuing.

Spending by consumers and businesses are the most important drivers of economic growth, but in recent years, government outlays have played a bigger role in supporting the economy.
The level of the federal component of GDP in the first quarter of 2019 was $78 billion, or 0.4%, lower than what forecasters expected it would be following the February 2018 budget deal….
The government is spending much less on disaster relief than it did in fiscal 2017, and a partial shutdown temporarily stalled outlays in January. Those factors explain about one-third of the missing stimulus, Mr [Ernie, an Evercore ISI economist] Tedeschi said.

No, that lack explains nothing at all about any “missing stimulus” except in the narrowest, purely statistical sense of a correlation having been found between two factors.  Correlations don’t even prove a relationship, only seeming relationships: all, or nearly all, nickels have two sides—a head and a tails.  All, or nearly all, pennies have two sides—oddly enough, also a head and a tails.  That correlation shows nothing at all substantive about a relationship between nickels and pennies.

Beyond that bit of statistical trivium, it’s necessary to recall the real-world nature of government spending: every dollar that government spends must first be taken from someone else, and then carrying costs—middle man costs—must be deducted before passing it on. There is nothing at all stimulative about government spending, as even John Maynard Keynes understood: in his government-spending-as-stimulus theory, it was the sharp rise in government spending that he held to be stimulative, not its steady state.  And beyond that, his “stimulus” was a purely price-inflationary stimulus, his spike being intended to come inside the ability of production to answer that spike in demand.

Indeed, if only because of those government middleman costs, steady state government spending is a net drag on the economy.  An additional contribution to the drag is associated government borrowing, which competition for lendable dollars drives up the cost of money for private enterprises and private citizens.  A third drag is the simple existence of Government spending: this crowds out private enterprises and private citizens by consuming resources that those citizens and enterprises would otherwise have consumed—while driving up the costs in the private economy of the remaining resources.