The Bear’s Lair: Cold Wars can be good for business

The chilling in relations with China since 2017 and the discovery that China may well have been responsible for the release of the COVID-19 virus is forcing the world to accept that the globalization and free trade world of 1991-2015 is no more. Instead, with China an authoritarian Communist society that seeks domination and does not play by the rules of international trade, we are back in a Cold War like that of 1945-91. From the last Cold War, we can learn important lessons to win this one and prosper while doing so.

The first lesson is to take the Cold War seriously. Nothing loses a Cold War so quickly as wishful thinking and unilateral concessions to the other side. Allowing China to build coal-fired power stations ad infinitum, with only vague promises of reform some time in the future, while the West hobbles itself with insane “climate change” environment policies, is a recipe for global subjugation as much as it is for economic collapse.

China today is a larger menace than was the Soviet Union in 1945. China is Communist, but it has adopted something like Lenin’s 1921 “New Economic Plan” to gain an international strength and position in the international economy far in excess of the Soviet Union’s, either in 1945, when it was exhausted by war, or later, when the internal contradictions of its economic model had hobbled its progress. The Soviet Union was competitive with the United States in weapons until about 1980, and it was able to achieve marked successes in individual sectors such as space technology when the regime set its best scientists on the problem, but it had no consumer economy worth a damn (hence Richard Nixon’s success in the 1959 “Kitchen Debate” with Nikita Khrushchev) and its agriculture grew steadily more hopeless. Finally, it had a population only modestly larger than that of the United States, and one that was hampered by ethnic prejudices worse than those in most of the United States.

China, on the other hand while much poorer than the United States (as was the Soviet Union, to a greater degree than was realized at the time) has around four times the U.S. population, itself an enormous military advantage, and its population is very largely ethnically homogenous – minorities such as the Uighurs represent only a few percent of the total. Its regime is equally undemocratic and cruel as was that of the Soviet Union at all but its worst peak in the 1930s, and equally dedicated to global domination, if not more so, since China has two millennia of tradition of thinking itself global top dog. Economically and militarily, Xi is thus a much greater menace to our world than was Stalin.

In the original Cold War, there was some realistic analysis up-front by two of the world’s great thinkers very shortly after the end of World War II. Before that time, the West was as naïve and unilaterally generous towards the Soviet Union as much of it still is today towards China – not surprising with two of its senior permanent officials, Harry Dexter White and Alger Hiss being active Soviet spies. However, two great presentations alerted policymakers to the menace and changed Western decision-making habits to deal with the Soviet menace and the Cold War in a non-naïve manner. One presentation was verbal by Winston Churchill in March 1946 at Fulton Missouri, the “Iron Curtain” speech. The second was written, by George Kennan as a “Long Telegram” from Moscow to his State Department superiors in February 1946, subsequently expanded publicly in “Foreign Affairs” in its July 1947 issue.

There is no question that equivalently clear thinking is now needed about China. There is no obvious source from which such clear thinking might come. The State Department contains no George Kennans; its senior people are all hopelessly “woke” and committed to the fuzzy statist globalism of the last 30 years. It’s also unrealistic to expect Boris Johnson to perform the function of Churchill in 1946; while he has the intellectual equipment, he lacks both Churchill’s unparalleled international stature and his overwhelming gravitas. Donald Trump is sufficiently clear on the matter – he was a surprisingly good foreign policy President – but he is now out of office and hated by half the country and almost all the media.

For the remainder of this piece, let us assume that clear thinking has emerged from somewhere, and look at the steps that must be taken. (The alternative, of clear thinking never emerging, dooms us not only to a loss in the global Cold War but everlasting servitude in our day to day lives, as the dominant Chinese techniques of population control are used by our own “woke” masters.)

The most important step, as a matter of great urgency, is to harden Western supply chains. We must not rely on China for scarce resources, such as rare earth elements. We also must not rely on the country for vital elements of our medical supply chain, allowing them to become the single source for certain pharmaceuticals. In the other direction, we should be increasingly skeptical of selling China high-tech equipment or allowing it to control significant U.S. tech companies. We should also ensure that our Allies (to be defined later) are not subject to Chinese blackmail, or dependent on China for important elements of their imports or infrastructure.

That is not to say that all imports from China should be banned, or that trade should be sharply cut back. There are plenty of alternative sources for cheap clothing, even if they are mostly more expensive, so there is no reason Chinese exports in that area should not continue. Manufacturing in China of tech equipment is a gray area; there is no reason why it should not be one of several sources of such equipment, provided that it can neither cut off supplies nor steal the technology (and we should assume in principle that international patent and license agreements are of no value when dealing with China).

In the defense area, a 1950s approach is essential. The U.S. and its allies should rebuild defense forces, whatever the cost. This will have useful spinoff benefits; unlike “green” technologies, which have mostly proved to lack job creation potential, defense technology jobs undoubtedly have that potential, providing innumerable well-paid engineering, technician and assembly-line jobs, the beneficiaries of which will be safe from blue-collar anomie and living standards degradation. In the other direction, we must be extremely clear-eyed about trade and money flows towards China; as an extreme case, there must be no more funding of Chinese germ warfare laboratories – they can pay for that research themselves, and we must as far as possible deny them the scientific knowledge they would need to do so. American universities must also be closed to Chinese citizens, except in the most useless subjects – we will be delighted to educate as many Chinese sociology graduates as they wish, allowing them to return home and subvert their society as they have subverted ours.

At home, we must reorient the security agencies so that they do their job, devoting their resources to detecting and stamping out Chinese Communist subversion. The campaign against right-wing subversion is utterly misguided; there is no significant right-wing populist global power seeking to overcome us! As for surveillance of U.S. citizens, it should be kept under strict limits, whether by government or by the big tech companies; there should be severe privacy and data protection laws, strictly enforced against the likes of Facebook. One objective of Chinese policy is to reduce us to their level, through leftist subversion and mass surveillance and “cancelling.” This must be resisted a l‘outrance, as it was in the early 1950s. Big Jim McLean must Ride Again! If your Mommie is a Commie, especially one with Chinese connections, she must be Turned In as soon as possible!

Internationally, the United States will be in competition with China, just as it was with the Soviet Union. To win, it must pick up as many allies as possible. It will be hindered in this by the remnants of globalization. Organizations such as the World Economic Forum will hate and resent the newly aggressive and nationalist United States and will naturally seek to build up China at its expense. In the 1940s, such organizations could be labeled “Communist front” and over time deprived of funding and credibility; in the new world this will be more difficult. Conversely, just as Richard Nixon played the “China Card” in 1971-72, thereby neutralizing much of the Soviet Union’s power, an intelligent administration will be able to play the Russia Card today. Vladimir Putin, although an unpleasant and amoral autocrat, is not a Communist and thus has no reason to ally with China, if he is given an attractive alternative by the West. A pro-Putin foreign policy, so long as he lasts, can be both politically and economically attractive; after all Russia, with its massive natural resources, sophisticated technology and 13% flat tax encouraging entrepreneurship, is potentially a highly attractive business partner.

In the long run, China’s Communist dictatorship is doomed to economic failure, just as was the Soviet Union, provided we do not allow the country to loot Western technology and give it free handouts through fatuous “climate change” treaties. For the United States and the West, the chance arises through defense spending to develop a dynamic and prosperous economy with a myriad advanced technology jobs, like that of the 1950s. All that is needed is a strong voice, like those of Winston Churchill and George Kennan, to summon the West to a proper view of its best interests.

(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)