Tag Archives: political economy

Damping the Benefits of Globalization

Posted on by
Reply

In one of the few sensible pushes members of the Biden administration is making, Secretary of the Treasury Janet Yellen, in her meetings in Seoul, Republic of Korea, pushed for the US and our friends and allies to shift away from dependency on the People’s Republic of China for supplies and instead to friend-shore the supply chain: get the supply components and raw materials either domestically or through trade with friends and allies.

Friend-shoring is about deepening relationships and diversifying our supply chains with a greater number of trusted trading partners. The purpose is to lower risks for our economy and theirs[.]

There are, of course, criticizers of such a change in emphasis.

…some economists have cautioned that such a shift could damp the benefits of globalization and lead to higher prices.

But this is to misunderstand, or to ignore, the real risks to globalization: dependency on our enemies for Critical Items in our supply chain. The PRC, for instance, already has attempted to corner the market on rare earths, and it already has attempted to use that monopoly to coerce Japan by embargoing rare earth sales and shipments to them. Russia is already restricting supplies of natural gas to Europe.

Walking away from the PRC, and Russia, and our other enemies on supply chain matters may or may not lead to higher prices; most likely, higher prices will be limited to the period of transition away from our enemies.

The higher cost, though, from continuing dependency on enemy nations is to our national security and to the uncertainty premium resulting from those enemies engaging in restricting or outright embargoing critical supply items in order to coerce.

Is the Iron Curtain Come to California?

Posted on by
Reply

It seems that the University of California Los Angeles has decided to move from college’s PAC-12 Conference to the Big 10 Conference, effective with the 2024 academic/athletic year.

It seems also that California’s Governor Gavin Newsom (D) is unhappy about the alma mater of Lew Alcindor, later becoming the NBA great Kareem Abdul-Jabbar, joining the exodus from the State, if only functionally and not physically.

Nobody said, “Mother may I?” to Newsom, and that angrifies him as much as UCLA’s decision to go out from a West Coast conference to a more economically sound area of our nation.

I read about it (is how I found out). No big deal. I’m the governor of the state of California. But maybe a bigger deal is that I’m the chair of the UC Board of Regents. I read about it. Is it a good idea? Did we have a chance to discuss the merits (of the decision)? I’m not aware anyone did. So it was done in isolation. It was done without regental oversight or support. It was done without any consideration to my knowledge.

Now, it may be that there is/was a contractual obligation for UCLA to advise the Board of Regents of the school’s discussions and intentions. However, Newsom didn’t mention any of that in his plaint—only that His Nibs wasn’t consulted.

Regarding those more economically sound areas of our nation—in the new era of Name, Image, and Likeness requirements that allow college athletes to personally profit form the use of their NIL material—here is, UCLA’s Athletic Director Martin Jarmond:

…the move was mostly about increasing “exposure” in the NIL era. By opening the school up to potentially more nationally televised games and East Coast markets, Jarmond says they can now provide an enhanced opportunity for student-athletes to find “their voice and their brand and what’s important to them.”

But not so fast: His Nibs is looking for ways to block the move.

Trust me when I say this: We are not going to be looking into. We are already looking into it within (and have been) minutes after reading about this in the newspaper.

No veiled threat there….

Tax Compliance and Pressure

Posted on by
Reply

This time, pressure on another nation to comply with a global minimum tax regime. The Biden administration is unhappy with Hungary for standing in the way of the EU’s agreeing a global (or at least Western World) regime that would contain a minimum tax level. That minimum level was designed to eliminate tax rate competition among nations.

On Friday the Treasury said the US is withdrawing from a 1979 bilateral tax treaty with Hungary.

Eliminating that nearly 45 year agreement actually is a boon to Hungary, though, rather than pressure, since Yellen and the Biden administration have withdrawn a tool for pressuring that nation.

Never mind that pressuring Hungary on minimum tax compliance is economically idiotic—the race to the bottom of tax rates is a race all nations should be striving to win. Or at least those nations that believe their own citizens aren’t drooling imbeciles and actually can make their own decisions concerning what to do with the money lower tax rates would leave in their hands rather than being forced to give their money into the hands of remote bureau- and technocrats.

Yet Another Reason…

Posted on by
Reply

…to stop doing business in or with the People’s Republic of China.

The China Securities Regulatory Commission is implementing changes to its rules governing publicly offered securities investment funds. These rules include requiring foreign-owned fund managers such as BlackRock and Fidelity to create Communist Party cells when operating in China.

And

In January 2021, HSBC executive Noel Quinn was unable to confirm to the British Parliament’s Foreign Affairs Committee that the bank had no party cells in its branches in Hong Kong and the mainland.

His own bank, and he doesn’t know how tied it is to the Chinese Communist Party.

The CSRC’s rules dovetail nicely with the PRC’s national intelligence law that requires companies operating inside the PRC to collect and deliver whatever intelligence information the intelligence community wishes (and companies domiciled in the PRC to go outside the nation to collect that information and deliver it).

It’s just not worth the national security risk to do any business with or within the PRC.

The New Pen and Phone

Posted on by
Reply

Ex-President Barack Obama (D) infamously bragged that he had a pen and a phone available if Congress wouldn’t do his bidding. And he proceeded to use them to reign via diktat—diktats often overruled in court (and remember, this was before former President Donald Trump (R) was able to restore textualist sanity and restrain judicial activism).

Behold, the President Joe Biden (D) version of the pen and phone tool for ruling, rather than governing: the permanent “public health emergency.”

The Biden Administration claims the declaration provides critical regulatory flexibility.

You bet it does.