Tag Archives: political economy

Defanging the PRC

Posted on by
Reply

At least by a little. As part of the People’s Republic of China’s economic war that it’s waging against us, they have moved to block important mergers involving American and non-PRC companies and today are threatening our major tech companies (and by extension our smaller tech companies and those companies that supply or otherwise do business with these).

Beijing has already said it is investigating Nvidia and Google over alleged antitrust issues. Other American companies in its sights include Apple, Silicon Valley tech company Broadcom, and semiconductor-design software vendor Synopsys, said people familiar with the matter. Synopsys has a $35 billion acquisition awaiting approval by Beijing.

And

[The PRC] said it had opened an antitrust probe against Google.

And

In 2018, amid US-China trade conflicts in the first Trump administration, Qualcomm terminated its proposed purchase of Dutch chip maker NXP Semiconductors after failing to obtain clearance from China.

And

US chip maker Broadcom’s takeover of VMware, valued at $61 billion when it was unveiled in May 2022, was in peril until a meeting between Biden and Chinese leader Xi Jinping in November 2023.

If these companies did no business with companies domiciled in the PRC and did no business within the PRC, that nation would be unable to go after them at all, including having no ability to block mergers between US and non-PRC companies. The PRC’s ability to damage our economy would be restricted commensurately. Of course, withdrawing from the PRC would be expensive in the short run, but it’s a large economic world, and while the PRC is a major player in it, that nation is not the only player. The magnitude of its role, too, would shrink as we reduce our economic ties with it.

Another, central, question is this: what’s the cost of letting an enemy nation have so much influence over our economy?

It Could be made to Work

Posted on by
Reply

President Donald Trump (R) wants a sovereign wealth fund for “promot[ing] fiscal sustainability,” “establish[ing] economic security for future generations, and promot[ing] United States economic and strategic leadership internationally.” This is a slush fund with a gussied up label.

It could work, nonetheless, under a very narrow Critical Item-level set of circumstances.

• slush fund dollars can be loaned only, not committed as grants or investments
• slush fund purposes and scope clearly defined and limited
• scope and types of enterprises to which slush fund dollars may be loaned clearly defined and limited
• slush fund loans to be made at annually adjusting rates equal to the prime rate plus 12.75%, which is roughly comparable to today’s credit card interest rate markup
• slush fund loans to be repaid in full within two years
• principle to be returned to the slush fund; interest payments to be sent to Treasury for the explicit purpose of paying down the national debt
• bankruptcy can be used to discharge slush fund loans, but only via liquidation bankruptcy

Those are stiffly limiting criteria for a Federal government slush fund, but the WSJ editors are correct in every respect in their concerns about the dangers of such a fund. Setting up such a device under these criteria is likely a pipe dream chasing a chimera, but the idea is worth serious consideration: under these criteria, the idea could work; alternatively, the idea could be put to rest for a useful period of years.

NGOs and Funding

Posted on by
Reply

Non-government organizations—are they non-governmental, or are they not?

President Donald Trump (R) has ordered all Executive Branch Departments and agencies to review their funding of non-government organizations (NGOs). His order has this:

The United States Government has provided significant taxpayer dollars to Nongovernmental Organizations (NGOs), many of which are engaged in actions that actively undermine the security, prosperity, and safety of the American people.

It’s time to stop Federal transfers of taxpayer monies to NGOs. Emphasize—enforce—that “non-” part. Being affiliated with government—even if only through government financing of part of their operation—denies the “non-” part of their designation.

If us average Americans think an NGO’s activities are appropriate, we’ll support it voluntarily with our own, direct, donations. If we do not, we should not be dragooned into supporting it anyway by having our tax dollars shunted off to it.

Chaos? Whipsaw?

Posted on by
Reply

Some folks think the speed with which tariffs were laid onto Canada and Mexico and then delayed happened in a chaotic manner, with whipsaws in the mix. After all, shortly after President Donald Trump (R) announced the tariffs, US automaker managers called Susie Wiles, Trump’s Chief of Staff, and she supposedly assured them of carve-outs IAW existing trade treaties. Then Trump reiterated his tariff threat with no word of automotive carve-outs. Then agreements were made with Mexico and Canada that satisfied much of what Trump has wanted from those two nations, and he agreed to delay the tariff’s implementation. Or at least that’s what the newswriters’ imaginary “people familiar with” tell them. And all of that happened in just two days.

It’s certainly possible that the situation was a chaotic as newswriters claim.

There’s another interpretation, though.

This is just the Federal government, with a businessman in charge now better schooled in politics and the techniques of maneuvering politicians, moving at the speed of business.

In conjunction with that, keep in mind that those automobile makers assemble their vehicles in American- and Canada-domiciled factories from parts made in, or passing through, both Mexican and Canadian factories and middlemen. Whatever this administration does vis-à-vis cars and trucks, thus, would get back to those Mexican and Canadian companies and their governments.

Accordingly, a two-pronged approach: pass words back to those governments through their companies, and speak directly to those governments, with what amounts to a backdoor carrot and stick process that emphasizes the stick.

There’s this, too: the tariffs were delayed, not called off. It’s a clear move to see whether the Mexican and Canadian governments actually do what their President and Prime Minister have said they’d do.

Aside: It’s illustrative of what passes for news media today, that the news writers and news commenters (I hesitate to call them analysts) generally choose the most negative interpretation to tout, and never offer other, just as apparent, interpretations (and not just mine) with explanations of why they think those interpretations are not in play.

Another aside:

[T]he United Steelworkers, who lobbied for an oil exemption to protect their members working in refineries, decried the tariff action, saying that “lashing out at key allies like Canada is not the way forward.”

This from an organization that, like each of its brethren, feels perfectly free to lash out at businesses, threatening their existence with production-blocking strikes whenever they don’t get their own way.

Not that Complicated

Posted on by
Reply

In a Wall Street Journal article centered on why 3% inflation isn’t close enough to 2% inflation, even for government work, there was this bit:

Anticipating the public’s reaction is tricky, not least because economists still argue about why people hate inflation so much in the first place. In textbook models and in many real-world instances—including during the 2020s—wages tend to catch up to prices, so inflation doesn’t, over time, erode the purchasing power of the average worker’s paycheck.
Even so, inflation makes people feel that they are falling behind….

It’s not that complicated.

This is a case where opportunity costs become real and realized costs. Wages do catch up over time, but during that time, people keep right on aging. By the end of the inflationary period, the time behind them has in concrete terms eroded their purchasing power. The opportunities to do the things they’d wanted to do are lost forever. The abilities to do many things for themselves or with family and friends may no longer possible as they now may no longer be young enough to do them, depending on when in their lives the inflation struck them. The opportunities to acquire many of the things they wanted to acquire are permanently lost as they have less time left in which to enjoy those acquisitions, or in the case of a larger house to better accommodate a growing family, some if not all the children have left the nest and the larger house no longer is useful to them.

Over that time, too, and beyond it, wages don’t necessarily exceed the inflation, so catch-up, practical, useable catch-up—the ability, for instance, to expand savings to get back to where folks would have been had their savings regime not been interrupted by the inflationary period—does not exist.

Inflation makes people feel like they’re falling behind, because during the inflationary period they are falling behind. Then people remain behind because even with after the fact rises in wages, their opportunity to catch up is so heavily limited, and especially is the time available in which to catch up much more tightly constrained.

All of this especially is the case for folks on the lower rungs of our economic ladder. They start out with narrow margins for things like savings and acquisitions of highly useful things—that larger home, for instance, or a car to replace the increasingly expensive to maintain beater—much less to do or acquire things are fun to do or to have. In the best of times, they have trouble keeping up; with the losses from an inflationary period, they only fall farther behind, with no hope of recouping even that arrearage.