Here are this week’s Top 5:

1. American’s Desire for Earned Success – Pollster and pundit Michael Barone pontificates on why Democrats’ plans for winning over the majority of Americans – by buying them off with entitlements and benefits – isn’t working:

Why aren’t voters moving to the left, toward parties favoring bigger government, during what increasingly looks like an economic depression?…

I think the larger mistake the Obama Democrats have made is that they suppose ordinary voters want government to channel more money in their direction.

But ordinary Americans don’t want money as much as they want honor. They want what the chance to achieve what American Enterprise Institute President Arthur Brooks calls “earned success.

2. Wisconsin Recall Elections Bring Disappointment to Unions – As expected by political insiders, last Tuesday’s recall elections involving six Republican state senators yielded only two new Democrats, falling one shy of what was needed to turn the State Senate. This affirms the voters’ general support for how things are going in the state. It also comports with the good news coming out of Wisconsin in the last few months showing the positive effects of Governor Walker’s collective bargaining law – cities able to re-negotiate with unions and save their budgets from a lot of red ink:

Someone has to be pretty deep in the Land of Denial to spin the Wisconsin recall elections as good news for Democrats. But the Daily Kos’ Markos Moulitsas rose to the occasion yesterday.

Republicans managed to keep four of the six seats that Democrats and their public union allies had targeted for recall, thwarting Democratic plans to wrest control of the state legislature from GOP hands. Of the two seats that Republicans lost, one was in a solidly Democratic district that a Republican happened to hold only due to a fluke of nature, David Freddoso of the Washington Examiner notes. And the second was held by an alleged adulterer whose wife revealed that he had moved outside his district to live with his young lover.

3. Getting Serious with the Super Committee – The Super Committee was chosen this week by the respective Congressional leaders and the positioning has already begun over spending cuts, defense cuts, new tax revenues and entitlement changes. But like we saw with the previous budget deals, there seems to be little willingness to make structural or permanent changes. Yet a cursory review of current programs with the question in mind – do they serve a valuable purpose – could go a long way toward debt reduction:

But what many of these media accounts will inevitably fail to do is ask fundamental questions about these programs: What were they designed to do? And is there any evidence they accomplish their purpose? Those questions are significant because much of discretionary spending that our government introduces is speculative in nature. That is, there is little or no evidence when we begin this spending that the money will actually accomplish what we want it to. That’s why we wind up funding anti-poverty programs that don’t reduce poverty, and job training initiatives that don’t get people jobs. We justify tax expenditures to make homes more affordable or to reduce our energy dependence, when there’s little evidence they accomplish either. And yet, once begun, we often can’t get rid of this spending, even when the evidence against its effectiveness is substantial.

4. Britain is in Disarray – Despite the hullabaloo caused by S&P’s downgrade of the U.S., this last week saw even more turmoil in the European economies and even violence in Britain:

5. Are US-Sino Relations Destined to Fall Apart - As the U.S. economy continues to stumble, questions and fears continue over the Chinese and their long-term desires. The relationship is made even more tense by the Chinese military buildup as evidenced by their first naval battleship completed this week. What some are arguing is a serious focus on improving and maintaining better relations with the Chinese:

I just spent my Saturday morning doing some solid nerding. By that I mean, I read two great articles about that rising behemoth, China. The first was ‘China’s Bumpy Road Ahead by international consultant and geopolitical analyst Ian Bremmer. Bremmer, has a blog at Foreign Policy that features many guest writers and covers impactful global events, has been a long time favorite of mine and his pieces are always informative and usually provide a long term strategic outlook. (You might say Bremmer is brimming with insight!) His ‘Bumpy Road’ article is no different as it attempts to temper the conventional wisdom that China’s rise and eventual replacement of the United States as a world power is a slam dunk, home run, and another American sports cliche. Bremmer makes a compelling list of the challenges the Middle Kingdom has to still overcome, including:

this is a country that measures its annual supply of large-scale protests in the tens of thousands. For 2006, China’s Academy of Social Sciences reported the eruption of about 60,000 “mass group incidents,” an official euphemism for demonstrations of public anger involving at least 50 people. In 2007, the number jumped to 80,000. Though such figures are no longer published, a leak put the number for 2008 at 127,000. Today, it is almost certainly higher.

There is certainly no credible evidence that China is on the brink of an unforeseen crisis, but all that public anger points to enormous challenges on the road ahead. Emerging powers like India, Brazil and Turkey can continue to grow for the next 10 years with the same basic formula that sparked growth over the past 10. China, on the other hand, must undertake enormously complex and ambitious reforms to continue its drive to become a modern power, and the country’s leadership knows it.

The financial crisis made clear that China’s dependence for growth on the purchasing power of consumers in America, Europe and Japan creates a dangerous vulnerability.

A few weeks ago, I highlighted Henry Kissinger’s excerpt of his new book ‘On China’, which I was surprised to learn was about China. Have you stopped laughing? Good, I’ll continue. Well, I found an excellent review of Kissinger’s latest book by Zachary Keck from E-International Relations. Keck does a reader friendly, old fashioned book review where he smoothly intertwines Kissinger’s prior books and IR philosophies as well as other major works on the topic with ‘On China’. Keck was as impressed as I was with Kissinger’s emphasis and ‘ability to portray [the] mindset’ of various Chinese leaders:

Although China’s offensive deterrence is borne out of geopolitical realities, Kissinger does not overlook the importance of individual leaders. Indeed, one of the most noteworthy parts of the book is Kissinger’s intense focus on the nature of individual leaders and his ability to illustrate the dilemmas they faced. Given his nearly unprecedented access to a vast range of high-ranking officials on both sides of the relationship, Kissinger is uniquely qualified to tell this history. In doing so, Kissinger allows the reader to “look over the shoulder” of the statesmen in the best traditions of Classical Realism.

Overall, Kissinger portrays leaders in both countries in a fairly positive manner. This is especially true with American Presidents and occasionally their advisers (most notably, Zbigniew Brzezinski and Winston Lord), whom Kissinger finds little to criticize.

Although similar in many respects to his portrayals of American leaders, ultimately Kissinger’s accounts of their Chinese counterparts are more interesting. Kissinger clearly understands the difficult conundrums Chinese leaders often face when weighing the importance of good relations with the United States against domestic political considerations.  Kissinger’s ability to put the reader in the minds of Chinese officials is the aspect of the book that will likely be the most enticing to current and future diplomats dealing with China.

Keck ends his review with an analysis of the current battle between Republican Party’s two main foreign policy schools: Realists vs. Neoconservatives. Keck is more sympathetic to Kissinger’s realism-based view of a rising China, arguing that at this moment, it provides the ‘best prospects for peace’.

I enjoyed my ‘China’s Rise’ morning of nerdy reading, now it’s your turn. Get to those articles!

The Economist lays down the situation rather well:

In a written response to questions from senators debating his confirmation, {Treasurer-nominee} Mr Geithner accused China of “manipulating” its currency and promised that the Obama team would push “aggressively” for Beijing to change its policies. The sharp tone and use of the legally-loaded term “currency manipulation” ricocheted through financial markets as investors shuddered at the prospect of a Sino-American spat in the midst of a global slump.

The article goes on to describe the legal ramifications of officially accusing a WTO member of currency manipulation and warns against the Obama administration following such a policy. This statement by Geithner, which had to be Obama’s view and policy as well, forebodes a possible conflict between DC and Beijing. Geithner’s statement needs to be seen with Obama’s campaign rhetoric against free trade and the promotion of saving American jobs. The Chinese were listening then and they are surely listening now. The dire economic climate had led to protectionist calls by American citizens, elected officials, Democrat and Republican alike, and Obama could use his inaugural popular bounce to promote and further policies such as this if he chooses.

"Watch Out Geithner! The Chinese are Right Behind You! Just say 'Massaging'"

The Bush administration, just like Clinton’s before him, disapproved of China’s undervalued Yuan and used unofficial methods to get them to bring it up relative to the dollar with little success. However, the Bush and Clinton administrations were able to institute this policy push rather smoothly while keeping overall relations on a positive level. With the global economy still hemorrhaging, the last thing we need is a DC-Beijing economic dispute that would further rattle world markets and possibly constrain trade between the world’s two biggest trading partners.

I want the Chinese to higher the value of their Yuan as much as the next American, but the Chinese government has not responded well to this type of pressure in the past and I doubt they’ll start now, especially as they have their own domestic order to worry about. Sec of State Clinton had a productive opening talk with her Chinese counterpart, Foreign Minister Yang Jiechi, on Friday and both pledged to work together in a cooperative manner. Let’s hope so.

We must not take the last decade or so of peaceful and productive Chinese-US relations for granted. The relationship between the world’s two greatest economic powers is a vital one, but one also filled with possible conflict, conflict that could have dangerous repercussions around the globe. I support a strong, measured US stance in its relations with China, but I would suggest to tread lightly, Mr. Obama.

Fresh off the foreign policy presses, Foreign Affairs magazine’s newest issue has an article by Roger C. Altman analyzing the economic crisis and makes several claims about the decline of the West and the rise of China. Here are some of his claims that are worth discussing:

1. The US and the EU will have neither the resources nor the economic credibility to continue to hold their current integral positions in world affairs. The world’s center of gravity is shifting away from the United States.

2. China is the state most likely to gain from the West’s loss and will become a stronger relative global player.

3. The US financial system, which has been a crucial aspect of US soft power and ‘intellectual strength,’ is seen to have failed.

Let’s start with the one which has the strongest base, No. 2. Though China has indeed been adversely effected by the global economic crisis, it is true that it is in a stronger financial position than the West, as its financial structure was not nearly as compromised and its tremendous federal reserves provide shelter. As the American and European budgets contract, China will find more places around the globe to fill foreign investment gaps, especially in states rich in energy resources. China’s increasing influence around the globe will be a most definite outcome of what is turning out to be a tumultuous economic period.

"Everything's all right. I Swear!

The other two claims are a bit more cloudy. Yes, it is true that the US and Europe will have fewer resources, especially to use abroad. And yes, these states will start to look inward at their own problems and be less concerned with ones in ‘far off places’ as Obama’s political campaign detailed. But it is not like the United States and Europe are bankrupt. They are far from it. The United States just gave Georgia a Billion dollar bill, is raising its troop presence in Afghanistan by 50%, and as was discussed here a few days ago, increasing its foreign presence in such places as Sub-Saharan Africa. However, it is very likely that foreign endeavors, even ones with little controversy, will face greater political battles and hurdles in America’s near future, as budgets and tax revenues continue to decline.

The third claim by Altman is probably even more serious than the other two. Has the US/EU global capitalist economic system been compromised? Have the world’s leaders and citizens lost faith in its ability to bring growth and prosperity? Though the system has had its detractors and a far from perfect track record, many states in the global south have failed to experience the prosperity of the global north, since World War II and especially since the end of the Cold War, the American lead system has been seen as a way to wealth and higher standards of living. Is this now gone?

The actions of the US and European government’s themselves show a West that is itself shaken and losing confidence. Governments have started to buy up ownership in the banking and financial sectors and the US federal government just gave the automakers a large loan with many stipulations as to how they have to operate their business. It is widely expected that an Obama administration, along with several others in Europe and around the world, will ratchet up regulations, furthering government’s grasp into the private business sector. If the Americans are becoming less capitalist and more regulatory, than why should we other states and leaders profess confidence in the capitalist world economy? Look what has happened to us!

Altman’s claims are important for us to debate, especially the third one. Do you think the US has lost credibility in leading a global economic system based on capitalism? Can it get it back? What will this mean for world’s outlook? Is this a huge overreaction?

Anyone following the North Korean diplomatic situation over the last ten years or so can’t help but throw their hands up in the air. Perhaps the consistent theme in all of the agreements and compromises that have been reached over the years is that North Korea always wins. At no point does this seem more true than today.

Two months after convincing the U.S. to remove North Korea from the State Department’s list of terror sponsoring countries in exchange for written verification of its nuclear disarmament process, North Korea has reneged. In what seems to be an almost comical series of rebukes on U.S. led diplomacy, the North Korean regime has refused to provide written verification that it is in fact, actually disarming its nuclear capabilities. Anyone counting on a nuclear free Korean peninsula, I wouldn’t hold my breath.

Even worse is that the North Koreans have already begun reaping the ‘rewards’ of the fuel oil agreement reached under the six party talks with China, S. Korea, Japan and Russia. Supposedly the remainder is going to be halted upon receiving this verification, but this is basically just kicking the can farther down the road until the Obama Administration takes office in January.

What do we have to look forward to? Obama has denounced the hardline stance of the early Bush Administration and the six-party talks and instead called for bilateral negotiations, saying “more diplomatic engagement is necessary.” Perhaps Obama was referring to the good ole days of bilateral negotiations in the 1990′s under President Clinton. Leading up to the 1994 Agreed Framework, North Korea threatened to pull out of the non-proliferation treaty and develop a nuclear weapons program. This was met by negotiations that allowed the North Koreans to give up their nuclear ambitions in exchange for the equivalent energy in fuel oil and two 1,000 MW light water reactors to be primarily subsidized by the U.S., South Korea and Japan.  Unsurprisingly, the fuel oil began to flow but the attempts by North Korea to enrich uranium, disallow IAEA inspectors free access, and bait its neighbors continued.

"I will make you an offer you can't refuse. I'll even throw in a nuke. Let's Deal!"

The type of diplomacy used by the Bush Administration under Christoper Hill and Condi Rice has consistently failed to move the ball forward and it is unlikely more talking by an Obama Administration will do any better. Kim Jong-Il has consistently gotten the upper hand in his dealings with the US/West because he realizes that no matter how many North Koreans he starves or nuclear weapons he chases, the limits of diplomacy will save him.

We need a new strategy for N. Korea, one that can actually move/force them to discontinue their nuclear weapons program.  

Beijing Bling!

As the financial crisis first hit the US and then dominoed around the globe, hope was held out that China’s economy would not only stay strong, but that its strength would help bring the rest of us out of the cold. With poor reports coming in daily now regarding China’s economic viability and future prospects, the above is becoming increasingly less likely.

The World Bank’s Quarterly report for China was not overly pessimestic, but it contained some warnings that tougher times were on horizon:  

The impact of the international financial and economic turmoil on China’s economy has been manageable so far, but is expected to intensify.

Here is an interview with the report’s authors and a breakdown by the Council on Foreign Relations blog and CNreviews.com.  The report asserts that many of the nation’s industries (textiles) have indeed been hurt by a fall in world demand, especially from here in the US, but that other industries (more highly skilled and intensive products) were still strong.  But the most damning news came today, when the Chinese government released statistics stating that exports had dropped 2.2% since last November and that foreign investment had also dropped by 36% during the same time period.  Wang Tao, a securities analyst stated, “We were expecting a slowdown, but the magnitude is a bit shocking.”  There are now fears that China will not maintain its previously forecasted 9% GDP growth rate for the year.  

There are obvious downsides to this news as it is just another sign of the dismal state of the world economy and it falters hopes that the Chinese manufacturing and exporting machine could spur economic growth elsewhere.  But, as the Chinese Communist government surely knows, the nation’s political and social stability is at risk as well, and this will have repercussions around the globe.  I had never heard this before, but Chinese communists have reportedly put a number on the percentage of growth needed to maintain political stability for the large and diverse nation, 7%.  China’s President Hu Jintao is feeling the heat:

“China is under growing tension from its large population, limited resources and environmental problems, and needs faster reform of its economic growth pattern to achieve sustainable development,”

The Chinese Communist government has based its legitimacy largely on its continued stewardship of a growing economy.  If it is seen as not fulfilling this role, all of a sudden protest voices may garner greater sympathy from the populace.  Combine this rising unrest questioning the ruling regime with a greater amount of unemployed workers and bosses with no factories to boss and the situation becomes outright scary for Hu and his buddies.  Instability in China, let alone a change of government, would send ripples throughout the region and create havoc on the world economy, especially in states that depend on its cheap imports, foreign businesses who are knee deep in investments in the Middle Kingdom, and in many third world countries where Beijing has become a powerful investor.  Elizabeth Economy has already called China out for its lack of leadership during the financial crisis, portraying the state as a ‘responsible partner’ not a global leader.

This post is not to scare the bejeebies out of you or predict the Chinese demise, but the slowdown of China is indeed a major story in international politics and economics.  The Chinese government has proven it can handle crisis with a firm and strong hand before, and they are already being proactive in many ways to thwart a further economic tailspin.  

Am I making a mountain out of a mole hill?  What do you predict for the Chinese economic and political future?  Are they as connected as I believe they are?  Is this just a bump in China’s rise as a global power?

Now that's a ship!

Just over a week ago, Chinese Maj. Gen. Quan Lihua hinted at his country’s attainment of an aircraft carrier, though there was no official claim or intelligence verifying that this was more than just talk.  However, in my opinion, China’s economic and political rise are more than enough reason to suspect that they are pursuing building at least one ‘city on the sea’.  Great powers desire power and military strength is the most visual and substantive showcase of such a virtue.  One would be naive to not assume that China would desire to ratchet up their military prowess along with their growing economic and political might.

Maj. Gen. Quan cautioned that even if China obtained an aircraft or two, it would not be a security threat to East Asia or the US:

“The question is not whether you have an aircraft carrier, but what you do with your aircraft carrier,” he said in the interview. “Even if one day we have an aircraft carrier, unlike another country we will not use it to pursue global deployment or global reach.”

Quan continued to allude to strength and purpose of the US navy:

“Navies of great powers with more than 10 aircraft carrier battle groups with strategic military objectives have a different purpose from countries with only one or two carriers used for offshore defense.”

The Major General has a point as the discrepancy between the US Navy and all others, including China’s recent gains, is light years wide, with only a handful of nations evening holding one or two aircraft carriers, and the US having 11.  

Nevertheless, the US should be wary of a growing Chinese naval presence in East Asia, Southeast Asia, and beyond.  The US has had a strong naval ship and base presence in East Asia since World War II and a growing Chinese navy, which includes an aircraft carrier or two, would definitely put some pressure on the US presence, especially regarding the US-Japan alliance and Taiwan.  Though aircraft carriers themselves can be susceptible to many forms of attack, they are a great way to project power in a region.  Aircraft carriers do not travel alone, they bring with them a large group of other warships, planes, and personnel. Specifically, an aircraft carrier could be sent to the South China Sea, where China and Japan disagree on sovereignty, and to the Malacca Strait/Indian Ocean, where a large amount of China’s oil reserves pass through.  Chinese leaders obviously know the benefits to such a powerful projectile force as they have been planning and attempting to either acquire or build a carrier for years now. 

The US defense department, Congress, and executive have been more than keeping an eye on China’s naval ascendence.  The DoD discussed the nation’s navy in their annual report on China’s military and put out a separate China Navy 2007 report.  The US congress research service put out China Naval Modernization: Implications for U.S. Navy Capabilities – Background and Issues for Congress.  

Global Security also has a list of China’s current and projected Naval Forces.

How do you view China’s growing naval presence?  Should the US be worried?  How would you build your navy if you were China?  What ways could the US and China work together militarily and diplomatically to keep their naval operations from becoming competitors?

*Pat is traveling and visiting family this weekend, so he might not be able to write any posts.  I’m posting today as your anonymous site admin.

This past week, the US military has been spooked by a serious cyber threat causing them to ban USB storage devices across the entire DoD, as detailed in this Wired article.  The virus (believed to originate from China) is called Agent.btz.  If a computer is infected with the virus, it is designed to spread to any external drives such as USB thumb drives or USB hard drives, that are connected to the PC.  The infected drive will then spread the virus to any PC that it is connected to.

The fear of this virus causing “epidemic” infection was enough for the entire DoD to ban USB storage all together.  

It is unknown what the malware’s ultimate purpose is since its contents are encrypted. It’s interesting to note that this virus is returning to rather “conventional” infection methods rather than spreading through the network.  

What does this tell us?

The most obvious thing is that cyber warfare is very real, and it has the attention of the world’s superpowers.

The second thing this tells us, is that China and Russia are not penetrating DoD infrastructure at the network layer.  The initial infection most likely occurred on a government employees home PC, then the employee carried the virus into work via their thumb drive, and the virus slowly spread from there.  While this is dangerous, it is not as catastrophic as network worms of the past such as nimbda which probably took a few years off the lives of IT professionals around the world.  

Could this attempt be a sign of desperation?  I doubt the folks at the Pentagon are spinning this event so positive.

The last thing I want to point out (from a personal perspective) is the importance of eliminating the reliance on the Windows OS.  This virus (along with 99% of malware), only affects Windows computers. Many will try and point out that this is only because Windows has the majority of market share, and therefore is the biggest target.  While true, it is widely known among security experts how fundamentally insecure the Windows OS is.  Most critical systems and servers (especially in the DoD) do not use Windows and have migrated to some flavor of Linux over the past five years.

I just finished Ted C. Fishman’s, China Inc. this morning and here are some thoughts. The book is business/micro/macroeconomic centered, exploring how China’s economy has become the giant it is and how this in turn affects the US and the world.

Fishman does a fine job explaining the rise of China’s capitalist economy, using academic literature, a plethora of statistics, and personnel stories. After reading the book one definitely comes away with a greater sense of how China’s economy is structured, functions, and influences thousands of industries throughout the world.

The major problem with the book is that Fishman largely ignores or too easily brushes off China’s economic, social, and political problems, issues that could very well derail this economic beast.  China’s economy is amazingly vibrant and challenging other major economic systems and nations in a myriad of ways, but you cannot write an encompassing analysis of modern China and not fully explore the many social fissures, government corruption, and fragility of the system.  As I am writing this, China is facing unemployment problems that can cause a major disruption in their society as the economic downturn is hurting both foreign investment and oversea demand.

If one is looking for a book about China’s rise and its effect on world politics, Japan, US, EU, Taiwan, and East Asia, this is not the one.  Fishman is not an international relations scholar, nor does he pretend to be, but he does discuss US-China relations in this vein in the last chapter ‘The Chinese Century’.  As the last chapter’s name suggests, Fishman is the engineer in on the ‘China is a unstoppable behemoth that will dominate the globe for years to come’ train.  I, and many others, offer a more cautious view of China’s growth and the US demise.  The one thing I know for certain is that the United States has had the most dynamic and vibrant economy in the world for going on over a century.  So let us be more prudent than Fishman before we proclaim China the ruler over the current or any future century.

Foreign Affairs review

Another review

A short excerpt from the book in the New York Times Magazine.