In this edition, we explore the China tariffs.

As always, for more, check out my book: The Art of The New Cold War

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Topic: To Tariff or Not to Tariff, that is the question:

The Biden Administration is reportedly considering removing the trade tariffs placed on Chinese products in 2018 under the Trump Administration.

Strong pressure for removal of the China tariffs is being applied by multinational corporations and trade industry lobbies with significant business interests and investments in China. As card-carrying members of the China Lobby, the CCP is pushing them, as their American agents, to do everything possible to end the tariffs and other anti-China measures taken by the US government under the Trump administration, and thus far continued by the Biden administration. Chinese Ambassador Qin Gang made this explicit in a recent interview.

Unfortunately, these advocacy efforts, and the campaign contributions that come along with them, are now starting to bear fruit, with many Democrats and Republicans alike signaling support for tariff removal. It is also being advanced under the guise that it will help tame America’s runaway inflation. This argument is especially persuasive with the Biden administration, and Democrats generally, under enormous pressure to do something—anything! —on inflation with midterm elections fast approaching.

As enticing as the prospect may sound to some, however, removal of the China trade tariffs would be a terrible strategic blunder for the US and is a veritable Trojan Horse.

a. China tariff removal will not reduce US inflation.

Let’s first dispense with the fallacy that removal of the China tariffs will reduce inflation in the US in any meaningful sense. This argument relies on two main assumptions: 1. That the China tariffs are a driving cause of inflation in America; and 2. by cutting the China tariffs companies will pass cost savings onto US consumers.

Regarding the 1st assumption, if the China tariffs were a primary driving force of the current US inflation, such that by removing them inflation would significantly decrease, why then did they not generate inflation when Trump first put them into place in 2018 or throughout Trump’s term in office, and only now years later when Biden is in office? On its face, this suggests other main inflationary factors at play, and of course there are. Chief amongst them, massive supply chain disruptions stemming from Covid and the war in Ukraine; enormous stimulus and government spending pumped into economy; and a tight domestic labor market.

Removal of the China tariffs addresses none of these main inflationary drivers.

Indeed, even if all the tariffs were lifted today, China which is currently locking down major cities and ports under their “zero-covid” policy would not be able to deliver supply chain relief. A fact the below graphic from Scott Gottlieb makes abundantly clear.

As to the 2nd assumption, this argument naively assumes that companies and industries benefitting from the removal of the China tariffs will pass along significant cost savings to their customers. But why would they? When the main inflationary drivers previously discussed remain, and there is no shortage of demand for their products at current price levels, which US consumers continue, however painfully, to absorb due to lack of alternatives. It is therefore far more likely that companies merely use any reduction in costs from removal of the tariffs to fatten up their own profit margins and defray effects they are facing from the other inflationary drivers.

Moreover, even if there were some marginal savings passed along, the benefits would be vastly outweighed by the damage removal of the China tariffs would cause to domestic US manufacturers and exporters, and the jobs and wages that come with them.

Indeed, given the current incredible strength of the US dollar relative to the weakness of the Chinese Yuan, which recently hit a 17-month low vs the dollar, a gap poised to further widen with US interest rates rapidly rising, there could hardly be a worse time to cut the China tariffs. For without the tariffs in place to help balance the scales, Chinese exports will possess a massive cost advantage in the US market, while US exports by contrast are far more expensive, and thus at a competitive disadvantage in China. This will further exacerbate the US trade deficit with China. It will also serve to detrimentally effect US long term strategic interests.

b. Removal of the China tariffs harm long term US interests.

Removing the China tariffs will forestall the desperately needed renaissance in US domestic manufacturing and reshoring of critical supply chains. It will perpetuate the same dangerous and idiotic dependencies on China that have destroyed America’s ability to actually make things at home. A fact on stark display during Covid when the US struggled mightily to produce medical equipment, critical supplies, and even the most basic necessities. This has been punctuated even further recently, with the current alarming shortage of baby formula in America, something once thought unthinkable in the richest most powerful nation in the world.

There simply cannot be any return to the disastrous policies that have left America so helplessly dependent on a nation in China located thousands of miles away, which hates us and is determined to supplant us. One need only ask the Europeans about that, who have themselves been abruptly awoken due to the war in Ukraine to their own dangerous dependences on Russia for energy; something which in hindsight appears the height of stupidity. America’s dependence on China for its manufacturing is equally insane and dangerous.

The China tariffs also send important signals to the market and investors as they evaluate where and how to deploy funds going forward. If the tariffs are removed, investors will conclude that the risks of investing in China have decreased and will return to pouring money into China as before, instead of investing those funds in America. Companies will also continue to source products and materials from China, and invest in manufacturing there, again instead of America, or other places, because it is easy and profitable for them to do so. They will also learn the lesson that the US government can be bullied into going soft on China.

If, however, the tariffs remain even in the face of a full court press by corporations and their lobbyists, and during a particularly vulnerable time politically with inflation surging and elections looming, it will send an equally strong signal that on China, America is united, and corporations and their lobbyists cannot, and should not even try to influence it. This will portend more and greater trade frictions and economic decoupling from China, making it more difficult and fraught with risk for US companies to do business there. This will serve as a powerful and much needed deterrent. It will also strongly signal America’s long-term determination to combat China and win the New Cold War.

c. Tarriff removal helps the CCP and hurts America win the New Cold War.

The China tariffs must be viewed in the larger adversarial Cold War context, and not simply in economic terms. In that regard, this would be a particularly disadvantageous time to remove the China tariffs.

Firstly, China is clearly complicit in Russia’s war with the Ukraine, having almost assuredly greenlit Putin’s invasion, and subsequently provided Russia with at least financial assistance, if not more, under Xi and Putin’s “no limits partnership.” As such, far from rewarding China with the removal of the tariffs, which they desperately want, if anything, America should be exploring additional sanctions against China for their role in the Ukraine situation, in order to both punish them and to help ensure they cannot profit from the situation, as indeed they already are by, for example, buying up Russian oil and gas on the cheap.

Secondly, the CCP’s stated goal is for China to supplant America as the world’s foremost superpower. China’s growing economy and market are the main sources of its strength and power in the world, from which all others flow. They also underpin the CCP’s political legitimacy in China and the implicit bargain the CCP has made with the Chinese people—absolute political power for the CCP in return for continued economic growth and prosperity.

The tariffs have hurt China’s economy far more even than they have let on. And China’s economy is currently showing severe signs of stress owing in large part to their increasingly disastrous zero Covid policy, which has caused China to lock down entire cities, and may cause China to miss its annual growth targets and fail to create the millions of jobs needed to sustain its massive population. The CCP’s draconian Zero Covid policies also have multinational corporations rethinking investments in China. Additionally, China’s highly indebted real estate sector, which makes up around 30% of their entire economy, has come close to imploding after the collapse of massive Chinese real estate firm Evergrande this year, which exposed huge liabilities in the entire sector. And these are just a few of the major headwinds the Chinese economy is facing at the moment.

These vulnerabilities, along with a general trend towards deglobalization spurred on by Covid and the war in Ukraine, have provided America with a window of opportunity to further accelerate economic decoupling from China and invest in bringing back America’s manufacturing base. Cutting tariffs, however, will only hurt these efforts and help the CCP. Indeed, removing the China tariffs would be akin to a drug addict returning to their dealer for a few more hits, before they swear, they’ll quit. We all know how that ends.

President Ronald Reagan understood that engaging in an arms race with the USSR was in US long term strategic interests. Yes, it was costly to America in terms of greatly increased military spending, but it was far more costly for the USSR, indeed it ultimately exposed their underlying weaknesses and effectively broke them. America must now think similarly regarding economic decoupling with China. Economic decoupling from China, which the tariffs are and should be seen as a necessary and important part of, will undoubtably have some detrimental effects and additional costs to America, at least in the short term. But it will be far more detrimental to China, especially now given their current economic vulnerabilities, and like the arms race was to the Soviet Communist Party, could even prove fatal to the CCP and its ambitions of overtaking America.

Finally, when your enemy wants you to do something, it is generally a bad idea to do it. China is desperate for the tariffs to be removed and for trade to return to what it was before Trump came into office, so that America stays dependent on China, and can continue on its economic growth trajectory. This alone is reason enough not to remove the tariffs. Indeed, if anything they should be doubled.

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In this special edition, we explore the decline and fall of the Roman Empire, its lessons for America, and how America can avoid Rome’s fate. This is Part II of our continuing multi part series. If you missed Part I, you can find it here: Part I

Please share and subscribe. And as always, for more, please check out my book: The Art of The New Cold War

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Topic: The Decline and Fall of the Roman Empire, what lessons it holds for America, and how America can avoid Rome’s fate. Part II

In this Part II of our series comparing America to the Roman Empire’s decline and fall, we explore the second of the 8 main causes generally agreed upon by historians as responsible for Rome’s ultimate demise, and its application to modern day America: Economic troubles and overreliance on slave labor.

As explained by the History Channel:

“Even as Rome was under attack from outside forces, it was also crumbling from within thanks to a severe financial crisis. Constant wars and overspending had significantly lightened imperial coffers, and oppressive taxation and inflation had widened the gap between rich and poor. In the hope of avoiding the taxman, many members of the wealthy classes had even fled to the countryside and set up independent fiefdoms. At the same time, the empire was rocked by a labor deficit. Rome’s economy depended on slaves to till its fields and work as craftsmen.”

The above description sounds in certain respects eerily similar to the America of the last two decades. America has, for example, suffered a historically severe Financial Crisis, engaged in forever wars that have drained its coffers, accumulated an ever ballooning national debt with no signs of shrinking, massive gaps between the rich and the poor, and most recently, on top of it all, runaway inflation.

Below, we will discuss the major economic issues threatening America, and what needs to be done to fix them so that America can not only avoid Rome’s fate, but even thrive again.

We begin with the 2008-2009 Financial Crisis and its aftermath.

The 2008-2009 Financial Crisis

Slightly over a decade ago, America suffered a severe financial crisis caused by the collapse of the housing market. In US history, the “Great Recession” is second only to the Great Depression in its devastation to the American economy. And though America eventually recovered, the crisis and the drastic actions taken to save and resuscitate the world’s largest economy, caused deep and long lasting economic, social, and political scars and distortions, that reverberate even to the present.

For many, the American Dream--literally their very homes--vanished due to the Financial Crisis along with their jobs and the dignity and purpose that came along with them. To add even greater insult to injury, Americans watched the same Wall Street bankers responsible for the disaster, through the reckless creation of Frankenstein securities, get away Scot free with golden parachutes to boot. Far from punishing the financial sector at all, the US government provided it with generous bailouts, and then stuck the American people holding the bill. Some financial companies, like private equity giant Blackstone, even made a killing gobbling up all those foreclosed homes and then renting them back at higher rates to the poor folks that lost them in the first place. A cruel irony to say the least.

The financial crisis engendered profound distrust in government, the entire economic system, and the so-called experts and elites that ran them both. Especially as it became crystal clear that the system was completely rigged in their favor; if not in fact set up entirely for their benefit. As bankers like then Treasury Secretary Hank Paulson who stood on the right side of the perpetual revolving door between Wall Street and the government, funneled mountains of taxpayer money to their old firms and colleagues. While ordinary Americans received lower wages, a falling standard of living, and a much harder time buying or renting a home. Not to mention a ballooning national debt on top of it all.

As a result, the Financial Crisis called the entire idea of capitalism itself into question. With the bailouts directly contradicting shibboleths espoused for decades by free market evangelists, now begging for exactly the opposite! Even worse, the bailouts essentially allowed the financial sector’s losses to be socialized, while their gains continued to be privatized. The whole system appeared to be one giant double standard: free enterprise for the poor, socialism for the rich.

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The Rise of Woke Capitalism

Predictably, the Financial Crisis sparked anti-capitalist, Leftist movements like Occupy Wall Street, advocating for extreme forms of wealth redistribution, and calls for capitalism to be replaced with socialism, or worse, communism. These calls further evolved in the subsequent Covid pandemic, along with other so called social and economic justice related issues. Together, they bred the conditions for a new and increasingly toxic form of identity politics to emerge and gain hold in America, which has now morphed into a form of cultural McCarthyism, with those running afoul blacklisted, or in the modern parlance, cancelled.

But as Vivek Ramaswamy discusses in his excellent new book Woke, Inc. instead however of fighting back against these anti-capitalist movements and the Leftist groups who lead them, as they may have in the past, Wall Street and US corporations have taken an entirely different tact, and struck a Faustian bargain with the extreme Leftists.

For their part, corporations embraced and even advanced the far Left’s extreme identity politics and so-called social and economic justice related initiatives, even generously funding leftist organizations dedicated to them, making, it should be noted, many Leftists quite rich in the process. In return, the Left would not materially harm the corporations’ businesses or their profits. Such, as for example, by calling for the break up of massive monopolies, particularly in the Tech industry, that had grown to amass unfathomable power over American society. There would be occasional sacrifices of course, especially those aligning with the Left’s political and societal goals, such as purging corporate executives unable to get with the new program, or who attempted to rebel against it, or simply happened to be of the wrong persuasion. But so long as the corporations paid sufficient lip service, adopted the right words, and made the appropriate performative genuflections to the exalted Left and its myriad causes, they were largely spared from its wrath.

In fact, all in all, for corporations, this turned out to be quite a good deal, as they learned quickly how to leverage fashionable social values, and virtue signaling, to generate even greater profits. While at the same time, it allowed them to disguise their greed for those profits. For as Ramaswamy writes in his book, social causes served as a form of reputational or moral laundering for companies’ profit-seeking.

Likewise, it has been quite advantageous for the Leftists as well. It enabled them to secure heretofore unimaginable amounts of funding to support an entire Woke Industry, gainfully employing—and enriching—armies of activists. It has also helped the Left achieve aims that proved impossible through the electoral and legislative process, and have brought what were once widely considered extremist views, long confined only to the outer recesses of Leftist think tanks and Academia, into the mainstream.

So, it was that “Woke Capitalism” was born in America, or “Woke, Inc.” as Ramaswamy calls it, through the fusing of far-left identity politics with massive corporate power. And as this new Leviathan grew monstrously, it has perpetuated a brutal new monoculture and cultural Marxism in America, that brokers no dissent, and has served to divide the nation, with those on the wrong side thoroughly ostracized, canceled, and branded forevermore with one or more of the Left’s favorite scarlet letters.

Though we will delve much further into the dangers of this new religion (cult) of Wokeism on American society and culture in other sections of our multi part series, it has had severe economic consequences for America as well.

To that end, the Left is seeking to create a new economic system that rewards identity over merit, with equality of opportunity replaced by equity of outcome. That is, that certain economic outcomes deemed desirable by the Left should be predetermined, regardless of the consequences, and regardless of merit. Thus creating an economic, and socioeconomic system of the Left’s designed preference based upon identity characteristics.

This has spread already into the classroom, where America’s future workforce will be built, with profound implications for America’s economic future. As set forth in a recent article in the Economist magazine:

“Wokeness’s next frontier, with the greatest potential to make a mark on the future, will be the classroom. In California’s recently approved ethnic-studies curriculum, which may become a high-school graduation requirement, one lesson plan aims to help students “dispel the model-minority myth” (the idea that to dwell on Asian-American success is wrong). Roughly one-sixth of the state’s proposed new maths instruction framework is devoted to social justice. It approvingly quotes from studies suggesting that word problems about boys and girls knitting scarves be accompanied by a debate about gender norms. Last month the governor of Oregon signed a bill eliminating high-school graduation requirements of proficiency in reading, writing and maths until 2024—justified as necessary to promote equity for non-white students.”

In a hyper competitive world, where STEM disciplines drive future national economic and global power—a fact China is well aware of and is pumping out STEM graduates in record numbers—not only are American classrooms not concentrating nearly enough on them, but are now even watering them down in the name of social and economic justice. And further still, excellent students in STEM, and other subjects, are being held back so as not to eclipse their peers. Recently, for example, NYC announced that it was ending its gifted and talented program for that very reason. In fact, even the very idea of educational excellence is now being called into question, if not completely sacrificed at the altar of Wokeism, with merit now equated to “Privilege.” And grades and test scores castigated as tools of oppression.

Moreover, schools now spend an inordinate amount of valuable classroom time indoctrinating kids on how to be Woke, instead of teaching them valuable skills for the future. California even made Critical Race theory a requirement for high school graduation! Employers already bemoan the lack of in demand skills of US graduates, and this will only serve to force employers to continue to look outside of America for the talent to fulfill their needs, as American students become more adept at the intricacies of intersectionality than at basic math.

Finally, while corporations currently profit from their alliance with the Leftists, it is akin to riding a tiger that one must keep riding for fear that if they fall off they will be eaten. And as we have seen, the Left relishes nothing more than devouring its own. To the Leftists, this alliance with corporate power is but a temporary means to a permeant end. Once corporations have served their purpose and are no longer needed, they will again become the enemy. The time will come, perhaps very soon, when the Left turns on their corporate benefactors, who have helped them rise and grow strong, and they will be brought to heel in the name of socialism. For in the end, that is what Woke Capitalism is: a transitory pathway to identity based socialism.

The Fading Middle Class

The truth is that many, especially the young, would not be turning away from capitalism, and seduced by the Siren Song of socialism peddled by the Left, if not for the fact that capitalism was not working the way it should for them. The difficulties of affording a decent place to live; crippling student loan debt for degrees qualifying one only for work as a Starbuck’s barista; extortionary health insurance bills; and skyrocketing prices for even the most basic necessities like gas and groceries. All of these hit the young especially hard, and socialism offers a ready made solution to them all—have the rich pay for everything! To a young person struggling to make their way in the world, sharing a small cramped apartment with several roommates, and living on a diet consisting largely of Ramen Noodles, that surely sounds very appealing. Moreover, as we have set forth, there is evidence for the idea that the US economic system is rigged in favor of the moneyed elites, and proof to support the narrative that capitalism has failed.

Of course, young people often struggle when they are just coming up in the world, not just in America, but everywhere, one may even call it a universal rite of passage, or paying your dues, earning your stripes, etc. You are not supposed to get the big job or the fancy car right away. You have to work for it. You have to earn it.

It is not simply the young, however, who are struggling to afford the basics of a good decent Middle Class life. A life many Americans saw their parents enjoy, and believed their birthright. Indeed, it was once commonly accepted that children would have it better than their parents. But that Middle Class life of old is now increasingly difficult to achieve and out of reach for many Americans. A reason President Trump’s famous slogan “Make America Great Again,” resonated. For many Americans realized, even if only at an instinctual level, that America is not the place that it once was.

And in fact, the Middle Class itself is being squeezed out, as America becomes with every passing year ever more bifurcated into the rich elite and the poor serfs. As Peter Thiel once aptly described it, the middle class is caught in a veritable pincer movement between the rich and the poor. To further the point, according to recent Federal Reserve Data for the first time in US history the top 1% has a larger share of wealth than the entire Middle Class.

If young people did not also see older people struggling perhaps they would have more hope for the future, and for capitalism. But instead they have a real sense that the opportunities in America are not what they once were, and that contrary to improving upon the standard of living of their parents the opposite is now occurring. Where the Boomers got great job stability, pensions, and endless opportunity in an optimistic country overflowing with it, Gen Z and Millennials have received instead nonstop turmoil and social media. Perhaps, this is why many have become so nostalgic for the early 2000s, the 90s, and even the 80s. They pine for simpler less chaotic times and for the security they provided. To the “Glory Days” of an America more united, more affordable, and happier.

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Outsourcing and Globalization

While the Financial Crisis, and now Covid, shown a glaring light on the power divide between America’s elites, including its largest multinational corporations, and the American people, along with their increasingly diverging interests, it was in many respects just part and parcel of what had been done to the American people for decades.

Through trade deals like NAFTA and actions like championing China’s entry into the World Trade Organization (WTO), the US government all but green lighted corporations to outsource American jobs overseas in favor of low wage foreign labor. While simultaneously allowing the US market to be flooded with cheap foreign goods made by essentially slave labor that undercut and decimated US small businesses.

This all occurred despite US politicians, like President Bill Clinton, adamantly claiming that it would not when these policies were initially sold to the American people. Clinton even called China’s entry into the WTO at the time an economic “one-way street,” benefitting American workers, consumers, and investors. Turns out it was a “one way street”, but in the other direction, with the vast majority of the benefits accruing to China, while the losses were borne by America’s small businesses and workers.

As a direct result of these terrible decisions, America’s once mighty manufacturing sector was decimated along with the good jobs that once sustained whole towns and cities and supported entire families. This weakened America not only economically, but from a national security standpoint as well, by making America dependent on far flung supply chains, in places like China; a fact severely exposed during Covid. It also caused massive trade deficits to grow, as America hardly makes anything the rest of the world wants anymore, and imports vastly more than it exports.

Nor is it simply low cost, low skill goods or textiles that are now made elsewhere, but the most strategically important industries once dominated by the US, like semiconductors, and even those invented by the US, like solar panels. This occurred because America simply did not care enough to try and keep these industries and the good jobs that came with them, while other nations did everything possible to obtain them, including through the provision of enormous government subsidies and other incentives. Soon these nations came to dominate these industries, and many more like them, as they built economies of scale and gained valuable experience and skills in manufacturing, while in turn America’s own atrophied for lack of use and care. Thus, this was not simply an accidental occurrence, but a conscious choice on the part of America’s policymakers.

America’s workers, once the backbone of America who built the nation into the industrial powerhouse of the world, are now amongst the biggest economic losers, as America all but stopped investing in the actual building of things. And many regular Americans have found the good jobs that they or their parents once had, that allowed for a decent middle class life, gone. In their stead, are lower wage service jobs. Until even they too were being replaced.

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Mass Immigration

America not only replaced much of its workforce particularly in manufacturing with labor overseas, but just as it imported cheap foreign goods, it also imported cheap workers through mass immigration to do many other jobs. Business even came to rely on the importation of cheap foreign labor through immigration (legal & illegal) in lieu of investing in the skills of the existing citizenry and in labor enhancing technology.

Just as the Roman Empire overly relied and became dependent upon slave labor to fuel its economy, a factor ultimately leading to its downfall, America has similarly become dependent upon the mass immigration of low wage labor into the country. And just as the Roman Empire was forced at great costs to continue to conquer people and nations to acquire the slave labor to fuel its economy, America likewise has been compelled to keep its borders wide open to mass immigration.

Like Rome, this mass immigration of cheap labor has come at great costs to America. As I write in my book The Art of the New Cold War:

“Mass immigration, however, has also not been without significant costs to America. Including the fraying of social cohesion, which has grown throughout the years. As the U.S. immigration system went from tightly controlled to a veritable free for all, with millions of people entering the country illegally, or by exploiting gaping loopholes. Causing many Americans to sour on immigration all together, as their government appears unable to control the nation’s borders or even determine who enters the country. Immigrants also compete with U.S. citizens, displacing jobs and lowering wages, a problem particularly acute in lower skilled jobs susceptible to low wage immigrant labor. Coupled with competition from low-cost labor in China, cheap immigrant labor has dealt a devastating blow to many U.S. workers. Low wage immigrant labor has also increased economic inequality in America. By not only depressing wage rates for workers but increasing the economic returns to capital disproportionately benefiting from low wage labor.”

Unfettered mass immigration has been perpetrated against the American people under the guise that immigrants do jobs that American citizens will not. This is of course untrue, or, more precisely wrongly stated. What is really meant is that low wage immigrants do certain jobs for less money than U.S. citizens are willing to accept to perform those same jobs. If paid more for these jobs, however, many more Americans would almost certainly willingly perform them. Thus, the issue is one of business not wanting to pay more for certain jobs. Not Americans’ unwillingness to do them.

Another reason commonly proffered for endless open border polices and mass immigration is that America is a nation of immigrants. And by extension no American has any right to deny others the same opportunity to live in America that they, or their ancestors had. But what is forgotten, or intentionally left unsaid, is that America is also a nation of citizens. It is not merely a collection of random, disconnected individuals from other places who simply happen to find themselves on the same plot of land.

Author Michael Anton in his excellent book, “The Stakes”, provides a very useful and instructive analogy in this regard. He argues that America, like any nation state, is in essence a membership organization, with citizens being the members. And like any membership organization, be it a Trade Association, Chamber of Commerce, or the Elks, existing members set the terms and conditions for membership, and at their discretion invite new members to join the organization based upon those terms and conditions. The organization is run for the benefit of the existing members, conferring upon them certain privileges not provided to non-members. Otherwise, what would be the point of membership. Potential new members must not only add value to the existing membership, but also must subscribe to the organization’s core mission and values.

Likewise, Americans have every right to decide who becomes a citizen, and set the terms and conditions of doing so. Americans may also deny people who are not members, that is who are not citizens, any of the benefits and privileges of citizenship. This includes not only privileges like voting, but also working in the country, and even entering and staying in the country.

Additionally, Americans have a right to expect, and even to demand, that would be citizens enhance their lives and economic well being and the nation as a whole. For it is, after all, for their benefit that America exists, not for the rest of the world, or for those who are not citizens. This is nothing other than the foundation of a nation which has no reason to exist unless it favors its own to the detriment of others. This is in fact the very point of a nation.

Returning then to the membership analogy, why would members allow non-members to not only enjoy the benefits of membership, but indeed by doing so actually significantly diminish the benefits of existing members? This makes no sense. And yet, as we see, this is precisely what is occurring in America. Non-citizens are taking jobs, lowering wages for citizens, raising costs of social programs and stretching thin public resources.

The Left, and big business interests, however, hardly give any thought or care whatsoever as to whether immigration, legal or illegal, actually enhances the lives of existing Americans, or the nation as a whole. Or, whether it in fact does exactly the opposite. For example, by suppressing the wages of US workers. A fact even a recent report by the Biden Administration admits is the case.

But many on the Left not only view immigration into America as an eternal and uninfringeable right, but to them the very idea of protecting the nation’s borders, or even having borders at all, and determining who, how, and when a person enters, and whether or not they stay, is intolerable. They believe that borders should instead be wide open, with no enforcement whatsoever. A sentiment some big business interests also share, as it provides them with an endless supply of cheap labor to exploit. They also believe that citizens and non-citizens alike should be on equal footing, and that non-citizens should even be granted every benefit and right of citizens. Indeed, in many ways they advocate for the complete erasure of any distinction between them.

This is intended, in essence, to strip America of its sovereignty and divorce it from its nationhood. A process which the Left, elites, and multinational corporations have been trying, unfortunately quite successfully, to do to America and Americans for decades. And it is at the very heart of America’s economic problems. Conversely though, its reversal also provides for the solution to them.

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The Antidote: Patriotic Capitalism. Back to the Future.

Now that we have diagnosed some of the significant economic issues currently plaguing America, and even threatening the Republic’s very existence, as it did Rome, what can be done about it? Is there an antidote?

I believe that there is. And I believe, like much else, it can be found in America’s past. For just as Rome declined and then fell largely because it got away from what made it so great in the first place, so too has America. This is true in numerous respects, including from an economic perspective.

The secret sauce that built America into the greatest economy the world had ever seen, with the biggest and most prosperous Middle Class in history, has been known by different names. Some call it Economic Nationalism or Neo-Mercantilism, or as Henry Clay famously dubbed it the American System. I have taken to calling it Patriotic Capitalism, and discuss it at length in The Art of the New Cold War Newsletter, Patriotic Capitalism, which I encourage you to read for greater detail than I will provide here.

Regardless, of what one may call it, the features of this secret sauce are basically the same: Protection of domestic markets and industries through tariffs and other trade barriers; government enhancement, funding, and development of key strategic industries and cutting edge technologies; and strong manufacturing and mercantilist policies that favor exports over imports. This is what made America rich and powerful. And ironically is the very same formula that has been copied by China in its own meteoric rise.

Over the last few decades, however, America has abandoned this formula in favor of neo-liberalism. Americans have been fooled into believing that the secret sauce that allowed America to flourish for nearly two centuries and grow into the mightiest nation on earth, would actually destroy America’s economy. And that only by embracing its exact opposite, that is neoliberalism—free markets, free trade, unfettered globalization and perpetually open borders—would America’s economy grow.

This lie has been peddled to the American people by those multinational corporations and cosmopolitan elites who benefit from neoliberalism disproportionately, and do so at the expense of America and average American citizens. For while these elites and multinationals have prospered through neoliberalism, to the majority of the American people, as we have seen, neoliberalism, and the policies that have furthered it, have meant quite the opposite. They have resulted in American jobs shipped overseas; lower wages for American workers; US manufacturing decimated; small businesses crushed; slowing growth, innovation, and overall economic dynamism; reduced upward mobility and extreme inequality; a disappearing middle class; unaffordable homes, healthcare, and other basic goods; a severe lack of social cohesion; and critical supply chains located in hostile far off places.

It has also allowed the American economy, and by extension the country, to become beholden to and run for the benefit of global interests, not American interests. Neoliberalism, in many ways the catalyst for globalization, has made corporate America disloyal to US interests, and, as S. George Marano wrote recently, put “capital over country.”

Indeed, many of the the largest “American companies” are increasingly divorced from America. Seeing themselves instead as global or multinational, they view America simply another market for their goods and services, not their homeland for whom they owe any real debt or loyalty. And instead of investing in America, these companies go where labor is the cheapest, and park their money outside of America in tax havens, through corporate inversions—a process by which companies, primarily based in the U.S., relocate operations overseas to reduce their income tax burden. And while America still needs its largest companies to produce jobs, products, and overall economic activity in the country, these companies increasingly no longer depend upon America or its market in nearly the same way. As Intel’s former chairman Craig Barrett once put it bluntly, “Intel can move wherever it must to thrive, but I sometimes wonder how my grandchildren will earn a living.”

This mentality has had profound implications for America, and as S. George Marano writes, “corrupted the political, military and social aspects that made the US a superpower.” To that end, instead of investing in building up America and American power, US corporations and Wall Street have poured massive amounts of capital and investment into places like China, helping to build it into the great rival and threat to America that it is today. Worse still, to protect their huge investments in China, Wall Street and these corporations have formed a powerful China Lobby in Washington to block any US governmental actions that could be detrimental to China, even when taking those actions were in America’s best interests.

Therefore, Patriotic Capitalism, as I define it, is not only about a return to the secret sauce that made America so great, but also, about the restoration of the principle of national preference in America’s political economy. If America is to right the ship, and gain what it has lost, capitalism can no longer be divorced from patriotism, as it has been. It cannot be separated from the interests of the nation and its citizens. The two must be inextricably intertwined again.

This will require a new robust Pro America Industrial Policy. As I wrote previously:

“Therefore, the US government must forcibly seek to realign the economic interests of US companies with the nation’s through a robust pro-America industrial policy to create patriotic capitalism utilizing a wide variety of carrots and sticks.

For example, by making it far more expensive and onerous for US companies to outsource American jobs and manufacturing, especially in strategically important industries, while at the same time providing financial advantages, like reasonable tax incentives, for those that do not. America should also enact punitive measures for outsourcing companies including being barred from accessing taxpayer funding or financing, and curtailment of the ability to transfer data through data privacy laws. While federal pension and public investment funds should be required to invest in America and American companies, whether exclusively, or at a very high percentage, and the Buy American Act further strengthened. These actions will not only serve to level the playing field by taking away competitive cost advantages of outsourcing but make it more advantageous and profitable to hire U.S. workers.”

The goal of these actions, and many more like them, which I detail more fully in my book, is to bind US companies once again to America’s national interests and prosperity. In the long run, it will also make these companies, and their American workers, even richer, stronger, and more prosperous. For Patriotic Capitalism is not about tearing companies or businesses down, far from. It is about building them up alongside America, and giving them every advantage possible to succeed and innovate in America with American workers, and then to conquer world markets.

Finally, Patriotic Capitalism will renew faith in capitalism generally by rebuilding America’s great Middle Class, while also helping to create again a desperately needed sense of national purpose. And by doing so, foster social cohesion by replacing the Left’s corrosive identity politics with the common cohesive identity of America. This will not only help America avoid Rome’s fate, but usher in a new American economic Golden Age.

In this edition, we explore the AUKUS pact and Investing in China.

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And as always, for more, please check out my book: The Art of The New Cold War

Feedback is always welcomed. Thank you for reading!

Topic 1: AUKUS causes a Ruckus

Last week, the United States announced a new military partnership with the United Kingdom, and Australia – dubbed the AUKUS pact.

While the AUKUS pact includes coordination and increased collaboration in strategic areas such as artificial intelligence, quantum technologies and cyber capabilities, perhaps the most significant part of the pact, undoubtedly the one receiving the most headlines, is that America will also be arming Australia with a new fleet of state of the art nuclear-powered submarines. A historically significant move representing a departure from decades of strict US military policies against sharing this kind of advanced technology.

Though not explicitly stated, the AUKUS pact is clearly aimed at combating the rise and expansion of China. And indeed from a strategic standpoint, AUKUS hits China right where it hurts. As the Wall Street Journal points out, it threatens one of China’s relative military weaknesses: the ability to locate and defeat submarines, particularly nuclear-powered vessels. The AUKUS pact also signals a hardening of the U.S. position toward China, and a significant raising of the strategic stakes. As Sam Roggeveen of the Lowy Institute notes, that while previously there was reason to question whether America really desired a new “Cold War” with China, “this announcement is significant evidence that it is indeed prepared to take such a momentous step.”

This fact was not at all lost on China and they immediately expressed their deepest displeasure, with China’s Foreign Ministry calling the AUKUS pact a reflection of “outdated Cold War zero-sum mentality and narrow-minded geopolitical perception” and claiming that it would bring about a regional arms race.

China, though, was not alone in expressing displeasure with the new pact. France too was especially incensed.

Indeed, to France AUKUS meant FUKUS (pardon the French). For as a result of the pact, France lost a 60 billion dollar submarine deal, as Australia chose the US made nuclear submarines over French diesel powered submarines and canceled the order for which they had previously contracted. The perceived slight was made worse as apparently the French were not informed about the new pact, and resulting loss of their deal, until right before it was announced. In response, the French called the pact a stab in the back, and promptly recalled their Ambassadors from both the U.S. and Australia. They have since been restored.

Despite France’s protestations, however, as Washington Post columnist Josh Rogin tweeted wryly, France has made very clear their wish for “strategic autonomy” as it relates to China, and now seem rather perturbed that they are getting it:

It should also be recalled that right before President Biden took office, the EU, pushed hard by France and Germany, moved forward with a Comprehensive Agreement on Investment (CAI) with China, despite Biden’s pleas to hold off and allow his new administration the opportunity to engage with them on China policy. From that point onward, it has been clear, in both word and deed, that despite the almost century long Transatlantic Alliance with America, which saw the defeat of Nazi Germany and the Soviet Union, that France does not wish to stand with its long standing ally in the New Cold War with China. Instead, they seek neutrality, if not to profit by playing one off of the other. Thus, France, and the EU generally, should not be wholly surprised when they find themselves set aside for more erstwhile allies.

But while France and China were angered by the AUKUS pact, others were quite pleased by the development, including, notably, Japan and India, who are already aligned with both America and Australia in the QUAD alliance, aimed at combating China in the Indo Pacific. And indeed, Japan’s foreign minister, Toshimitsu Motegi, quickly welcomed AUKUS, while the Times of India noted the overlapping membership of the Quad and AUKUS and even suggested that “in future, the two could merge.” No doubt this will be a topic of discussion when the leaders of the QUAD meet in Washington on Sept. 24th.

Not to be completely outdone, however, a day after Biden announced the new AUKUS pact, China announced it had applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The CPTPP is the successor agreement to the Trans-Pacific Partnership (TPP) initially negotiated by the Obama administration before President Donald Trump withdrew the U.S. from the agreement shortly after taking office. Among others, the CPTPP, which is now the world’s largest trading group, includes Australia, Canada, Chile, Japan and New Zealand.

China certainly relishes the delicious irony of joining a trade agreement begun, and then abandoned, by the US, and which was originally explicitly designed to exclude China. And though there are serious questions as to whether China will be ultimately able to make the necessary economic reforms to successfully enter the CPTPP, or whether member nations like Japan, Australia and Canada will accept them, it is at the very least a useful juxtaposition for China to make in relation to America, showing countries in the Indo Pacific that they are committed to the region’s economic prosperity, while America in turn is far more concerned with military hostilities. This plays to what China sees as its main advantage over the U.S.: economics. And perpetuates an emerging thematic of the New Cold War: US military might vs. China economic might.

For America, security based pacts like AUKUS and the QUAD are strategically smart and effective in many ways in combating China and limiting its military expansion. But they must also be complemented with economic based alliances in order to blunt China’s greatest strength: the size of the Chinese market and the resulting economic influence it provides. And so just as it is not in China’s strategic interest for America to form security alliances like the QUAD and the AUKUS in China’s own backyard, it is not in America’s strategic interest to neglect and allow China to dominate the economic aspects of the New Cold War either, especially in the all important Indo Pacific region. As I write in my book:

“America must be a major driver of economic development in the region to counter and compete with China. To do so, America must not only prioritize the region economically but also reallocate resources currently being employed in places like the Middle East and others of lesser strategic importance and deploy them to the Indo-Pacific. America should also join with allies and other stakeholders in the region such as Japan and Australia to coordinate, drive, and amplify economic development opportunities in the region to compete with those offered by China.

Indo-Pacific nations will be watching closely to see U.S. commitment to the region. Any perceived erosion of U.S. credibility in supporting allies or inability to provide a viable alternative to the economic opportunities offered by China will force nations to reconsider their relationship with the U.S. and move closer to China. America must therefore continually demonstrate commitment to the region. A good step in this regard would be for America to re-enter the Trans-Pacific Partnership (TPP). By renouncing TPP, America forfeited a leadership role in establishing multilateral rules and institutions for regulating trade in the region, and which also accounts for one-third of all world trade. Something China—understanding the strategic bullet it dodged—called a grand gift. It also laid significant doubts concerning U.S. commitment. Returning to the TPP will lay some of those doubts to rest.”

Topic 2: Xi’s new economy. Return of the Mao.

There is a lot happening in China economically these days, as the government continues its ever growing crackdown on various sectors of the economy, which we have documented extensively in previous editions of the Newsletter. But it is becoming clearer by the day that this not simply a rectification of a few wayward sectors, or a comeuppance for some brash Chinese billionaires who flew too close to the sun and angered their political masters in Beijing. But a complete reorientation and overhaul of China’s entire economic system.

Former prime minister of Australia and the global president of the Asia Society Kevin Rudd sees the crackdown in China, as part of an entirely new development paradigm playing out, which is being driven by a return of Communist Party ideology, severe demographic issues, and economic, and cultural, decoupling from the West. Rudd writes in the Wall Street Journal:

“The forces of ideology, demographics and decoupling have come together in what Mr. Xi now calls his “New Development Concept”—the economic mantra combining an emphasis on greater equality through common prosperity, reduced vulnerability to the outside world and greater state intervention in the economy. A “dual circulation economy” seeks to reduce dependency on exports by making Chinese domestic consumer demand the main driver of growth, while leveraging the powerful gravitational pull of China’s domestic market to maintain international influence. Underpinning this logic is the recent resuscitation of an older Maoist notion of national self-reliance. It reflects Mr. Xi’s determination for Beijing to develop firm domestic control over the technologies that are key to future economic and military power, all supported by independent and controllable supply chains.

Much of the party’s recent crackdown against the Chinese private sector can be understood through this wider lens of Mr. Xi’s “new development concept.” When regulators cracked down on private tutoring it was because many Chinese feel the current economic burden of having even one child is simply too high. When regulators scrutinized data practices, or suspended initial public offerings abroad, it was out of concern about China’s susceptibility to outside pressure. And when cultural regulators banned “effeminate sissies” from television, told Chinese boys to start manning up instead of playing videogames, and issued new school textbooks snappily titled “Happiness Only Comes Through Struggle,” it was all in service of Mr. Xi’s desire to win a generational contest against cultural dependency on the West.”

Jude Blanchette of the Center for Strategic and International Studies echoes Mr. Rudd’s sentiment: “This is not a sector-by-sector rectification; this is an entire economic, industry and structural rectification.” Barry Naughton, a China economy expert at the University of California, San Diego, goes further still: “Xi does think he’s moving to a new kind of system that doesn’t exist anywhere in the world. I call it a government-steered economy.” And a recent Wall Street Journal examination shows Xi is trying forcefully to get China back to the vision of Mao Zedong, who saw capitalism as a transitory phase on the road to socialism: “He is trying to roll back China’s decades long evolution toward Western-style capitalism and put the country on a different path entirely, a close examination of Mr. Xi’s writings and his discussions with party officials, and interviews with people involved in policy making, show.”

So, what then does this all mean for those looking to invest in China? This has sparked quite the debate between some of Wall Street’s biggest titans, including notably, legendary hedge fund manager George Soros and Blackrock’s Larry Fink.

BlackRock, the world’s largest asset manager, recently began a major initiative in China, launching a set of mutual funds and other investment products for Chinese consumers. This came just weeks after BlackRock recommended that investors triple their allocations in Chinese assets. “The Chinese market represents a significant opportunity to help meet the long-term goals of investors in China and internationally,” BlackRock Chairman Larry Fink wrote in a letter to shareholders.

In response, legendary investor, turned political influencer George Soros wrote an essay in the Wall Street Journal, entitled “Blackrock’s China Blunder”, in which Soros bluntly stated that pouring billions of dollars into China would likely lose money for Blackrock’s clients and damage the national-security interests of the U.S. and other democracies. Soros wrote: “The BlackRock initiative imperils the national security interests of the U.S. and other democracies because the money invested in China will help prop up President Xi’s regime, which is repressive at home and aggressive abroad. Congress should pass legislation empowering the Securities and Exchange Commission to limit the flow of funds to China. The effort ought to enjoy bipartisan support.”

As the Wall Street Journal points out, the BlackRock-Soros feud is a microcosm of Wall Street’s China dilemma. On the one hand, companies like Blackrock see a massive market of 1.4 billion potential customers. But on the other hand, there are incredible risks related to the brewing tensions between America and China, and the heavy and fickle hand of the Chinese Communist State.

Putting aside Soros’s national security related arguments about investing in China, however, which I largely agree with by the way, the continuing and growing crackdown of major sectors and industries of China’s economy, along with the looming collapse of China’s largest property developer, Evergrande, which has roiled markets this week and portends a major rectification of the whole Chinese property sector representing nearly 30% of the entire Chinese economy, seems to support Soros’s thesis that foreign investors are increasingly playing with fire in China, and should significantly limit their exposure accordingly. And indeed, other major investors echoed Soros’s sentiment this week, including Cathy Wood of Ark Invest, who announced she is largely divesting from China, while other high profile investors, like Jim Chanos, and Mohammed Al Erian questioned whether China is even currently, as El Erian put it, “an investable market.”

To exemplify the point, private equity giant Blackstone recently got burned in China, with a large real estate deal abruptly falling apart due to “political reasons.”

Some have speculated that President Xi is merely making necessary reforms to China’s economy that are long overdue, including an out of control and severely over indebted real estate sector. And that Xi is attempting to steer China’s economy to be more productive and innovative, less fragile, and more equitably distributed, or what Xi calls “Common Prosperity”. It also comes at a time when Xi is looking to be crowned President for life in 2022 at the next Party Congress, and the economic crackdowns are way to further solidify his support with the Chinese people.

While this may all indeed all be true, and there may in fact be valid reasons for some of the actions Xi is taking, can and should US investors take the risk, with not only their own money but those of ordinary Americans as well, by investing in China with the current incredible uncertainty? Let alone for the fact that by doing so they are helping America’s great rival. I think not. Shrewd and patriotic US investors alike would be wise to stay far away from China these days.

And for any who wants to read an insider’s account of how things really work in China, may I suggest the fascinating new book Red Roulette.

First, let me begin by apologizing for the delay in getting this edition out. It has taken me a bit longer than usual, and caused me to think a bit more deeply. I have also been contemplating a new book. Stay tuned for more on that in the future.

In this special edition, we explore the decline and fall of the Roman Empire, its lessons for America, and how America can avoid Rome’s fate. This is Part I of what will be a multi part series coming out over the next few months, interspersed with normal editions of the Newsletter as we return to more regularly scheduled programming.

Please share and subscribe. And as always, for more, please check out my book: The Art of The New Cold War

Feedback is always welcomed. Thank you for reading!

Topic: The Decline and Fall of the Roman Empire, what lessons it holds for America, and how America can avoid Rome’s fate. Part I

Like so many, I have spent time these last few weeks watching the events play out in Afghanistan, and pondering its meaning and long term implications for America. Some of my thoughts are contained in the previous Afghanistan edition of the Newsletter. But it has also caused me to wonder more broadly whether it is a harbinger of America’s decline and fall, or the opposite, the spark for its renewal. Being a student of history, and always mindful of that wise aphorism regarding those who neglect to learn from it, I sought guidance in the past.

America is not of course the first nation to encounter troubles in Afghanistan, known for good reason as the “graveyard of empires.” Prior to America, the Soviet Union failed spectacularly in Afghanistan, leading to its ultimate demise only but a few years later.

But there are also historical examples of failure in Afghanistan leading to a nation's renewal.

Take the British. Who in 1842 were embarrassingly defeated by Afghan warlords. Far from leading to the fall or decline of the British Empire, however, it caused the British to recalibrate and concentrate on more important interests and competitors, including China. A fact portending America’s current situation. As Gregory Mitrovich writes in an excellent piece in the South China Morning Post entitled America in decline? China still has a way to go before it can seriously challenge the US:

“Although the victory of the Taliban is a blow to the US, there is an important historical lesson that China should remember. In 1842, the Afghan warlords had defeated British efforts to install a ruler who was friendly to British interests, giving credence to Afghanistan’s reputation as the “graveyard of empires”.

However, this ignores the reason Britain accepted this setback; it chose instead to focus on the Opium War in China, a defeat which Chinese leaders still regard as the beginning of the “century of humiliation”. As Beijing must understand, the US is similarly abandoning Afghanistan in 2021 to concentrate on its contest with China.”.

Thus, history shows that America’s failure in Afghanistan, as dire as it currently appears, does not necessarily portend America’s fall and decline. In fact, it could even provide the catalyst to just the opposite--a new rise to even greater heights.

This question of whether Afghanistan will be for America a harbinger of decline and fall, or catalyst for renewal, brought me to ponder the decline and fall of another famous empire: The Roman Empire. And to compare the circumstances that brought it down with those of present day America.

Comparisons between America and the Roman Empire are not new of course and are in fact—forgive the pun—legion, and even something of a cottage industry. I am also mindful of the potential folly of going too far in projecting the unique factors and circumstances that befell the Roman Empire a thousand years ago onto 21st century America. But there are, I believe, instructive lessons for America from Rome’s decline and fall. Even glaring warnings that should be heeded. And as I pondered the causes of Rome’s decline and fall, I saw similarities to many of the ills currently plaguing America.

To that end, the History Channel has compiled a handy list of 8 main causes for the decline and fall of the Roman Empire generally agreed upon by historians. They are as follows:

1. Invasions by Barbarian tribes

2. Economic troubles and overreliance on slave labor

3. The rise of the Eastern Empire

4. Overexpansion and military overspending

5. Government corruption and political instability

6. The arrival of the Huns and the migration of the Barbarian tribes

7. Christianity and the loss of traditional values

8. Weakening of the Roman legions

In this Part I, we will analyze the first cause above and its application and analogy to America, and how America can avoid Rome’s fate.

I. Invasions by Barbarian tribes:

One of the chief causes agreed upon by historians for the Roman Empire’s collapse was a string of military losses against outside forces like the Goths and the Vandals.

The History Channel explains:

“The most straightforward theory for Western Rome’s collapse pins the fall on a string of military losses sustained against outside forces. Rome had tangled with Germanic tribes for centuries, but by the 300s “barbarian” groups like the Goths had encroached beyond the Empire’s borders. The Romans weathered a Germanic uprising in the late fourth century, but in 410 the Visigoth King Alaric successfully sacked the city of Rome. The Empire spent the next several decades under constant threat before “the Eternal City” was raided again in 455, this time by the Vandals. Finally, in 476, the Germanic leader Odoacer staged a revolt and deposed the Emperor Romulus Augustulus. From then on, no Roman emperor would ever again rule from a post in Italy, leading many to cite 476 as the year the Western Empire suffered its deathblow.”

While, unlike Rome, America is not yet in any immediate threat of having its capitol sacked and raided by an outside force, since the terrorist attacks of 9/11 America has engaged in wars and military conflicts in the Middle East against modern day barbarians like Al Qaeda, ISIS and the Taliban. Culminating in America’s recent withdrawal from the war in Afghanistan.

Though the wars in Afghanistan and Iraq have not directly threatened the American homeland, they have certainly weakened America. They have caused America to spend trillions in treasure, deploy countless human and material assets and resources, and distracted America from far more important priorities in both the domestic and foreign policy arenas. They have also hurt America’s credibility on the world stage and its ability to project power around the world, and shattered the myth of its invincibility. Exemplified by the humiliating sight of the Taliban returning triumphantly to power after 20 long years of war.

The failures in Afghanistan are not the result of any lack of resoluteness or prowess by America’s military forces, who, to the contrary, exhibited both in spades, holding and controlling a large, inhospitable, and ungovernable nation located on the other side of the world for 20 years. A remarkable achievement, perhaps unmatched by any military in history. No, the failure in Afghanistan is attributable to an absolute lack of will, vision, and competency on the part of America’s political leadership. This represents the largest and most dire problem that America faces, and is in many ways at the root of all the others. Indeed, it could rightly be called America’s Achilles heel.

The wars in the Middle East also caused America to take its focus away from other outside threats, most notably, that of China. While America expended enormous resources and focus in the Middle East, America allowed China to metastasize to an existential level threat to American power. History will show this to be a severe strategic blunder on America’s part, akin to spending time and energy removing a relatively innocuous wart, while ignoring the rapid growth of a potentially terminal tumor.

Unfortunately, however, China is not the only malignant disease that grew untreated while America was at war in the Middle East. Alas, it may not even be the most dangerous.

America’s domestic situation has rapidly deteriorated over the past 20 years as it concentrated on nation building abroad while neglecting to do the same at home. And now the days right before and directly after 9/11 appear in retrospect to be the apex of US domestic strength and unity, from which thereafter it was all downhill. And the world before 9/11, which I grew up in, seems now on so many levels a paradise long lost and forgotten; a veritable Eden from which we have been cast out.

There are numerous reasons of course for the rot and the decay that have crept into America, some long predating 9/11, and which will be discussed at length in other sections. But there can be no doubt that 9/11 and the wars and circumstances that followed contributed to and exacerbated all of them.

But while 9/11 and the wars in the Middle East have clearly caused America to decline, whether they will be a cause of its ultimate fall is yet to be seen. They do perhaps hold the seeds that may yet bring it about. They also, however, may hold the seeds for an entirely new rise.

For hope in this regard, America can look to the historical example of its comparative failure in Vietnam, and the domestic upheaval that surrounded it. Though America lost in Vietnam, again largely as the result of its political leadership, it rebounded quickly to ultimately triumph against its great rival the Soviet Union in the first Cold War, and became in only a few years time more powerful, and unified, than ever. A testament to America’s extraordinary regenerative powers.

Though as Johns Hopkins University scholar and renowned author Hal Brands notes the “US recovery didn’t happen automatically … it took a concerted effort to revive American power”. It also took a once in a generation leader in President Ronald Reagan and the Reagan revolution, taking over from the historically weak and inept Jimmy Carter, and replacing Carter’s Malaise with Morning in America.

Thus, America can recover from Afghanistan and the years of war in the Middle East and rise again, as it did after Vietnam. But it will take a concerted effort, smart and decisive policymaking, and an iron national will. None of this can occur, however, without strong political leadership, alongside a new generation of committed Patriots willing to do whatever it takes, to rebuild and remake America’s crumbling foundations, and return America once again to unparcelled greatness.

To that end, history has shown that often weak leadership begets strong leadership. That is, sometimes you need a Chamberlain to get a Churchill, or a Carter to get a Reagan. The trick of course is to survive weak leadership long enough and well enough to get to the other side. To avoid the fate of Rome, or that of the Soviet Union, will depend very much on America’s political leadership over the next few years. For therein lies the road to ruin or riches.

In this edition, we explore Patriotic Capitalism and National Power.

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And as always, for more, please check out my book: The Art of The New Cold War

Feedback is always welcomed. Thank you for reading!

Topic: Patriotic Capitalism and National Power

Many years ago, it was famously said that what was good for America was good for General Motors, and vice versa. Meaning that the success of the country and the company were inextricably linked. They succeeded and prospered together.

Since the onset of globalization, however, this has not been the case. Indeed, U.S. corporations increasingly do not even view themselves as American. But instead, as global citizens and brands of the world, belonging and loyal to no single country, i.e. multinational.

Now large US companies are divorced from America, viewing it simply as another market for their goods and services. Albeit still a relatively important one given its size. But any loyalty is reserved solely for their shareholders around the globe, and any desire to see America excel as a nation goes only so far as the company’s ability to make profits there are concerned. The link between country and company has been severed. And while America still needs its largest companies to produce jobs, products, and overall economic activity in the country, companies, by contrast, increasingly no longer depend upon America or its market in nearly the same way they once did. For as Intel’s former chairman Craig Barrett once put it bluntly, “Intel can move wherever it must to thrive, but I sometimes wonder how my grandchildren will earn a living.”

This change has profoundly impacted the power dynamics and relationship between US companies and America. Whereas before there was an alignment of interests in many respects, even a shared pride in “Made in America”, this is often no longer the case. If anything, there is increasingly a divergence of interests, as America is forced to compete for its own companies’ business with other countries, creating a proverbial race to the bottom. America now gives away massive tax breaks and other costly incentives just for the privilege of having its own companies locate plants and operations in their mother country. This has provided capital and corporations with tremendous leverage, to the point of even making them masters over the state.

It has also caused significant strategic issues for America’s national defense and foreign policy. Especially relating to its biggest geopolitical competitor: China.

US companies lust after the massive Chinese market. And not only do they kowtow to the CCP and its wishes, but also transfer key technology and intellectual property to Chinese companies and make significant investments in China to ensure access to the Chinese market continues. They also act as the CCP’s de facto agents and lobbyists in Washington blunting and undermining America’s attempts to combat China. Recently, they strongly advocated for the removal of all US tariffs on Chinese goods, and unblocking of the sale of technological components to Chinese companies. Measures critical to US efforts to win The New Cold War, and ensure overall national strength.

China’s ability to commandeer US companies for its purposes and divide their loyalty has provided it with significant strategic advantages against America in the New Cold War, which the CCP continues to fully exploit. And, unlike US companies, Chinese companies remain completely loyal to their home country, and are fully invested in fulfilling the CCP’s national strategic goals. Indeed, Chinese companies are intended to ultimately serve China, not the other way around. And China demands their patriotism and loyalty.

To that end, as recently reported by the incomparable China expert Bill Bishop in his excellent Sinocism newsletter, at a July meeting with Chinese business leaders and entrepreneurs, President Xi was quoted as follows:

“First, I hope we will enhance our patriotic feelings. Enterprise marketing knows no borders, and entrepreneurs have their motherland. Excellent entrepreneurs must have a high sense of mission and a strong sense of responsibility for the country and the nation, and closely combine the development of their enterprises with the prosperity of the country, the prosperity of the nation and the happiness of the people, and take the initiative to bear the responsibility and share the worries for the country. Patriotism is the glorious tradition of excellent entrepreneurs in China in recent times.”

China’s ongoing crackdown on tech and other sectors—documented extensively in previous editions of this Newsletter—have further emphasized this point, in conjunction with an overall push driven by the CCP and captured by the catchphrase, “common prosperity,” now appearing everywhere in China.

But while investors complain, even file lawsuits, when America seeks any sort of similar loyalty from its own companies, these very same investors readily accept this in China. Even rewarding Chinese companies that tightly align with the CCP and its goals. In fact, as reported recently in the Financial Times, foreign investors are now following Beijing’s lead by investing heavily in the CCP’s favored sectors, like Chinese chip, software and biotech groups, viewed by the CCP as vital to national strength, while eschewing those unproductive sectors, like gaming, e-commerce, and social media platforms, that the CCP sees as sapping national strength. The CCP is therefore successfully driving foreign investment where it wants for the overall benefit of the nation.

Furthermore, while consumers in America hardly punish US companies for disloyalty to America (in fact sometimes they even reward them for it) Chinese consumers, often encouraged by the government, severely punish Chinese companies for showing insufficient patriotism.

To illustrate this point, take Nike for example. Once an emblematic US company, Nike recently announced that it was now a brand of China and for China. This shocking announcement, however, has not hurt Nike a bit with US consumers who continue happily buying and wearing its products. Consider if the opposite had occurred. If an emblematic Chinese company publicly announced it was a brand of America and for America. That company would be thoroughly boycotted in short order by Chinese consumers and out of business; or, at the very least, forced into an expensive and humiliating apology, accompanied by public shaming and firing of company executives.

While much is made these days in America about capitalism versus socialism, or communism, and a great deal of discussion had about such things as “stakeholder capitalism” and ESG (Environmental, Social, and Governance) investing, there has been far too little emphasis on the allegiance US companies owe to their home country of America. Or what I have come to term Patriotic Capitalism.

And while I want to believe that US companies are—at least in some cases anyway—led by patriotic Americans who want to see America prosper and win the New Cold War against China, short term economic interests will undoubtedly act as a gravitational force against it. A fact the CCP is well aware of.

Therefore, the US government must forcibly seek to realign the economic interests of US companies with the nation’s through a robust pro-America industrial policy to create patriotic capitalism utilizing a wide variety of carrots and sticks.

For example, by making it far more expensive and onerous for US companies to outsource American jobs and manufacturing, especially in strategically important industries, while at the same time providing financial advantages, like reasonable tax incentives, for those that do not. America should also enact punitive measures for outsourcing companies including being barred from accessing taxpayer funding or financing, and curtailment of the ability to transfer data through data privacy laws. While federal pension and public investment funds should be required to invest in America and American companies, whether exclusively, or at a very high percentage, and the Buy American Act further strengthened. These actions will not only serve to level the playing field by taking away competitive cost advantages of outsourcing but make it more advantageous and profitable to hire U.S. workers. 

In short, US companies that align with Pro America policies should be provided every economic advantage to succeed, and those that do not should be burdened with every disadvantage possible.

To add additional pressure on U.S. companies to align with pro-America industrial policies, the American public should be enlisted by appealing to their sense of national pride and patriotism. As consumers the American people can exert tremendous influence on companies and drive economic behavior towards a more patriotic capitalism. America should also create an investment fund, which I call in my book the Patriot Fund, to invest in and alongside private capital in promising U.S. industries and technologies, akin to a venture capital or sovereign wealth fund. Shares of which should be issued directly to the American people across all income classes, so they have a direct financial stake in its success and broadly benefit from the wealth of the nation.

Finally, America should take pages out of China’s playbook by directing companies and investment in the strategic sectors that benefit the nation. This can be done by ensuring certain supply chains and technology remain in America. Including if need be through the Defense Production Act, which President Trump used to speed U.S. production of medical supplies amid the COVID-19 pandemic, and subsequently to speed development of mines of strategically important rare earths vital to new and existing technologies. Use of the Act should be expanded to other essential industries and supply chains as well.

The goal of these actions, and many more like them which I detail more fully in my book, is to bind US companies once again to America’s national interests and prosperity, rebalance the power of the relationship, and return to the mentality exemplified by what is good for America is good for General Motors, and vice versa.

It is also intended to make US companies strategic assets in the New Cold War, and not liabilities. And not only will it greatly enhance America’s ability to win against China, but also enhance the lives of everyday Americans and nullify growing calls for socialism or worse, communism. Most Americans don’t really want either, but are desperate for a better form of capitalism, one that works for more people and fosters greater social cohesion and love of country.

Patriotic capitalism is the answer.

This week we focus exclusively on the historic events taking place in Afghanistan and their implications and opportunities in The New Cold War.

As always, for more, please check out my book: The Art of The New Cold War

Feedback is always welcomed. Thank you for reading!

Topic: Afghanistan: When life gives you lemons….

Like most prideful and patriotic Americans, I am horrified and disgusted by the scenes now playing out in Afghanistan, as we watch what the Wall Street Journal aptly described this week as a Saigon on steroids.

The situation is made ever the worse by the fact that less than a month ago President Biden assured the American public that our withdrawal would not create another Saigon like debacle. Indeed, Biden led us all to believe that the Afghan army, trained and equipped by the US military over twenty years, and outnumbering the Taliban army 3 to 1, had a better than good chance of winning the war. Thus, all was well. Nothing to worry about.

Biden’s very rosy assessment of the situation was proven spectacularly wrong within mere hours of America’s scheduled departure, with Taliban forces sweeping through the country like a hot knife going through butter, and within only days were in complete control. Winning the war with hardly any resistance at all from Biden’s much heralded Afghan army, which it became clear was thoroughly incapable of fighting without American support, and all but gave up on the battlefield.

This appears to be a monumental failure of intelligence and/or a complete lack of judgement. As the Financial Times wrote scathingly this week: “[E]ither the White House went ahead with the pullout regardless of intelligence warnings of what would follow, or the speed of the offensive was indeed unforeseen — a startling lack of insight in a country where America has had a ground presence for two decades.”

Now, the US is not only faced with scenes reminiscent of Saigon and the ignominious end of the Vietnam War, but also the utterly humiliating sight of the Taliban flag flying high at the US embassy on the 20th anniversary of 9/11. As far as symbols go, it could hardly be worse, and it represents a deep stain on American honor and prestige. It will also be used for propaganda and recruitment purposes by America’s enemies.

Before I proceed further, however, I need to be crystal clear that this not the fault nor the responsibility of our brave men and women in the US military who served and fought honorably in Afghanistan over the past twenty years, and who have in many ways kept us safe on the home front by doing so. They deserve our deepest respect and admiration, and their service and accomplishments should not in any way be diminished by Afghanistan’s fate. This is squarely on the poor political leadership, both Democrats and Republicans alike, along with the high level military commanders that failed to define the mission or what constituted success and ultimately turned a war into some sort of a nation building exercise.

I am reminded by something my Grandfather, a Colonel in the Air Force who fought in WWII and was an all around American badass and hero, once said to me: “You go into a war to win it, or you do not go in at all.” These words have always stuck with me. And I believe it is a lesson our leaders in America have forgotten, as fully illustrated by Afghanistan and Iraq, and Vietnam before them. In the end, so called “limited wars” have proven far more costly than total wars for America. For as Napoleon said: “In war, groping tactics, half-way measures, lose everything.”

I believe—and have argued in my book and elsewhere—that America should have left Afghanistan and Iraq a decade or more ago. Indeed, right after Bin Laden was killed, for example, would have been an opportune time to do so, as it would have provided a successful, logical, and victorious end to the awkwardly titled “Wars on Terror.” It would have also avoided the ill fated business of nation building in the Middle East that proved so utterly disastrous, and which led us to the place where we find ourselves today.

As such, I do not fault Biden, or Trump for that matter, for making the decision to withdraw at long last from Afghanistan. Indeed, I applaud them for doing so. As I firmly believe that even if we stayed there for another twenty years the result would ultimately be the same: the Taliban in ultimate control and/or some form of blood soaked Civil War. Moreover, we have spent resources and focus in Afghanistan, and Iraq, that should have been spent at home. And on our single biggest threat: China. Now we can finally do so. This is the silver lining to the mess we are currently witnessing.

Thus, it is not with the decision to leave that I, and I believe most Americans, take issue. But the incompetent implementation of the withdrawal, which provided the world with a glaring portrayal of abject American weakness. Something that is completely unacceptable and intolerable to all prideful and patriotic Americans, and for which our leaders should never, ever be forgiven. Indeed, heads at the highest levels of government should and must roll.

We must also begin to move forward, and look ahead to the New Cold War with China. And in that context, we must discover whether the failure in Afghanistan will be another Vietnam for America: a temporary setback America ultimately overcame to win the Cold War against the Soviet Union only a decade later. Or, like Afghanistan was to the Soviet Union, a hastener of America’s ultimate demise. What America does at home will largely determine which of these two outcomes prevails. Perhaps the scenes in Afghanistan, coupled with the challenge posed by China, will focus the mind and provide much needed motivation for America’s domestic renewal. We should all hope and do our part to see that this is so.

Afghanistan will also have direct and profound implications in the New Cold War and on China, which we discussed previously in the The Art of the New Cold War Newsletter #1.

Of course, China is already attempting to use America’s failure in Afghanistan to its full strategic advantage. For example, by using it as an illustration to the world of America’s waning power, and even heralding it as a “turning point in the decline of American hegemony.” China is also using it as a warning to Taiwan not to count on American support, as was reported by the The South China Morning Post.

Additionally, China is positioning itself to take advantage of the US withdrawal by making deals with the Taliban, and angling to construct infrastructure in Afghanistan as part of China’s grand and extremely ambitious Belt and Road Initiative (i.e. the Project of the Century). China also sees an opportunity to exploit Afghanistan’s vast natural resources (valued at around a trillion dollars) including all important rare earths.

But as much as China senses opportunities, it has serious concerns as well. As some of Afghanistan’s implications may in the end provide strategic benefits to America in the New Cold War. For example, by freeing up the US to ramp up efforts to counter China on the South China Sea and other places of strategic importance to China.

Afghanistan also borders China’s highly problematic Xinjiang region, where China has imprisoned millions of Muslims, known as Uighurs, and even committed a form of genocide against them. Thus, the prospect of battle hardened Muslim fighters and terrorists operating on China’s borders, without US troops to keep them busy and in check, becomes a very worrying prospect. Understandably, some of them may be rather angry about what China is doing to their fellow Muslims across the border.

And as Afghanistan becomes an increasingly unstable, hostile, and dangerous country once US forces are gone, China may be forced into the “graveyard of empires.” A fact renowned geopolitical strategist Ian Bremmer also made recently in this pithy tweet:

Indeed, it is to America’s advantage for China to become occupied in Afghanistan, and spend some time there getting stung by that perpetual hornet's nest. America should even seek to kick the hornet’s nest from time to time to ensure that China keeps getting stung.

To that end, Mao Zedong famously quipped, “everything under heaven is in utter chaos; the situation is excellent.” Going forward, this is the mantra and strategy that America should adopt in relation to Afghanistan. It is time for America to reprise “Charlie Wilson’s War” and begin to arm Afghan insurgents who are willing and able to fight an insurgency against the Taliban and China. The very same way America once helped the Mujahedeen take down the Soviet Union in Afghanistan.

They say that when life gives you lemons, make lemonade. Time for America to start making some Chinese-Taliban lemonade in Afghanistan.

This week we focus on topics including: U.S.-China decoupling, the CCP’s crackdown on the video gaming industry, and COVID origins.

As always, for more, please check out my book: The Art of The New Cold War

Feedback is always welcomed. Thank you for reading!

Topic 1: To Decouple or Not to Decouple, that is the question?

For years, scholars and economists have pondered the question of when China will overtake the U.S. as the world’s biggest economy. A question gaining increased interest as China gets closer to achieving that goal, with some speculating that based on current trajectory it may be as soon as the end of the decade. Indeed, by certain metrics, including Purchasing Power Parity (PPP), China’s economy is already larger.

The question has profound implications for both nations, and for the world at large. These implications are psychological and practical and include, but are not limited to, the status of the dollar as the reserve currency, the balance of power, and the signaling of a new epoch in the world.

But what if China never overtakes the U.S. as the world’s largest economy? What if they fail to achieve their goal and instead go the way of Japan; which in the 1980s was heralded as a potential economic challenger to the U.S., until it crashed and never recovered to vie for the throne again.

Undoubtedly, China is a much larger nation than Japan, both by population and size, and has many more natural advantages than Japan ever did, making it a far more likely contender for America’s economic throne than perhaps Japan ever really was. And after all, China was the world’s biggest economy for much of human history, and so would simply be regaining its former title.

Still, China is not without significant weaknesses that may potentially derail its economic trajectory and stall out its development. And while China’s extraordinary rise over the past few decades was relatively smooth, and certainly aided by a number of factors, including in no small measure America’s highly accommodative policy of economic engagement with China, it is now facing strong headwinds that threaten its decades long, largely unimpeded economic march to the top. Indeed, things are starting to get much more perilous for China as they attempt to make their way to the world’s economic summit.

For starters, much of the low hanging economic growth fruit has already been picked, and infrastructure driven investments and other frequently used simulative measures no longer juice growth as they once did. Along with providing diminishing returns, they now simply add more debt onto an already overly indebted economy.

China is also facing significant demographic issues. The decades of reaping the great benefits of a young and seeming inexhaustible workforce to power China’s economy is coming to an end. Now China is faced with what some have called a demographic time bomb, as birth rates have plummeted to extreme lows due to decades of one child polices, coupled with soaring costs of education and housing. Thus, China is faced with the fate of growing old before it grows rich. And having many older people without enough young people to support them, will necessitate the creation of a massive social safety net, which China currently lacks. This will cost enormous amounts of money, and will divert resources from other economic drivers.

Additionally, America has at long last awoken to the full measure of the China threat and China’s potential rise to the top of the global food chain. As a result, America’s decades long highly accommodative policy of economic engagement with China, which greatly facilitated China’s rise, has come to an end. Now instead China is facing U.S. tariffs on its products and other trade curbs that are disrupting its access to global markets and advanced technologies, which China’s requires to move its economy up the value chain and avoid the dreaded middle income trap that may threaten to stall its development. Other countries, like those in the E.U., have become far more cautious about allowing Chinese investment as well, especially in their strategically important industries and technologies. China is also facing greater isolation than in the past due to its human rights abuses, and potential responsibility for COVID (more on that later in the Newsletter).

There are also growing calls for the partial or complete decoupling of the Chinese and U.S. economies.

To that end, a recent Bloomberg study showed five different futures regarding China’s economic rise. Of the five futures generated the two that envisioned a near complete decoupling in the trade and economic relationship between the U.S. and China, showed that the Chinese economy would never catch up with the U.S. economy. For while decoupling would certainly hurt America in ways, it would hurt China much more.

Thus, as the study suggests, one of the most effective ways to disrupt and contain China’s rise is for America to simply economically decouple from China, and to accelerate this process as soon as possible while China is still dealing with other significant issues, as set forth above. Indeed, I advance just such an argument in my own book, as recited in the excerpt below:

“To further disrupt China economically, America should pull supply chains out of China. Not only will this secure America and its economy but also place strain on China’s economy and populace, and by extension the CCP, as China has an extremely large population to employ, house, and feed to stave off social unrest. Moreover, this will force China to become more insular, and revert further into its state controlled economic system, starving out the private sector. This will retard China’s economic growth, and breed even greater inefficiencies, causing China to become more like the Soviet Union with the same strategic vulnerabilities.

Further, by ripping supply chains out of China America can take away some of the CCP’s most powerful weapons of political coercion and economic warfare. Currently, the CCP wields enormous power and leverage over both companies and countries by virtue of their control over critical global supply chains. This represents a major vulnerability for not only America but the entire free world. One that must be reversed. And while there will undoubtedly be short term pain and costs as a result, it is a price worth taking. For though in the short term some goods may become more expensive for Americans and corporations may lose profit, these costs pale in comparison to the long-term costs and consequences of continued American dependency on China. Moreover, the benefits both economically and from a national security perspective of America regaining control over industries and supply chains will be tremendous.  Additionally, “decoupling” from China will pose a serious threat to its main source of global influence—the size of its market.”

There will of course be those who will fight this decoupling tooth and nail for the sake of their own economic interests and profits. Namely, those business groups and multinational corporations with large interests and dependencies in and on China. Known infamously as the “China Lobby.” And indeed, just this very week, the China Lobby was actively seeking to undermine any kind of decoupling, as reported by the Wall Street Journal :“Nearly three dozen of the nation’s most influential business groups—representing retailers, chip makers, farmers and others—are calling on the Biden administration to restart negotiations with China and cut tariffs on imports, saying they are a drag on the U.S. economy.” A request which thankfully was flatly rejected by President Biden’s administration.

And as Florida Senator Marco Rubio said accurately and presciently this week in a Senate Intelligence Committee hearing, China has weaponized America's own "corporate lust for profits" against the U.S., and that the U.S. must look closely at corporate America’s reliance on China and the Chinese Communist Party: "U.S. corporations are so desperate to have access to the Chinese market that they’ll lead costly boycotts in an American state that passes a law that they don’t like.”

America’s dependency on China’s market and cheap Chinese goods is akin to an addict hooked on drugs. And just as an addict must get off the drugs or face dire consequences, so must America remove its dependency on China or suffer long term costs. But just like the drug addict, it will not be an easy or painless process. There will be the pain and agony of withdrawals. While enablers, like the China Lobby, will push back and try to justify continued dependency. But it must be done, and it must be done now for the sake of the long term health and strength of the nation. And in the end not only will America and its citizens be much better for it, but China will lose a great deal of its current and potential power. That’s what I would call a win-win proposition.

Topic 2: Opium of the Mind

This latest victim of China’s continuing tech crackdown was the massive Chinese video gaming industry (the world’s largest). This follows on the heels of the CCP’s crackdown on the education and after school tutoring industry the week prior, which was discussed in The Art of the New Cold War Newsletter #4. And which of course itself followed a long line of tech related companies that have been laid low by the CCP going back to last year.

But unlike the CCP’s earlier crackdown on technology companies, the latest crackdowns on the video gaming and after school tutoring industries are of a different sort. For while previously tech companies were brought to heel due purportedly to issues surrounding data collection and national security concerns, the CCP’s concerns surrounding education/tutoring and online video gaming industry appear to be more societal in nature.

For example, the after school tutoring sector was seen as a driver of inequality, and placed too much competitive pressures and work load on the young. And due to its often exorbitant expense also deterred people from having more children; something the CCP is hugely concerned with given China’s massive demographic issues.

Likewise, the CCP has societal concerns with online video gaming as well. The CCP recently called it the “Opium of the Mind.” A politically potent term given its historical connotations to the infamous Opium Wars that heralded China’s Century of Humiliation. The CCP has come to see online video gaming as addictive and destructive for young people, and thus damaging to societal harmony.

With the CCP seemingly expanding the scope of its crackdown to more industries and companies everyday, and with many believing that it is far from over, it has caused the risks of investing in China to rise dramatically. Indeed, as reported in the Wall Street Journal, “investors, analysts and company executives believe the government is just getting started in its push to realign the relationship between private business and the state, with a goal of ensuring companies do more to serve the Communist Party’s economic, social and national-security concerns.”

This is even more reason to refrain from investing in China. For if it wasn’t clear before, than it certainly is now, there is only one entity in China that truly possesses all the power: the CCP. And even massive multi-billion dollar industries can be crushed overnight. Invest wisely.

Topic 3: COVID: An origin story (continued.)

As discussed in the The Art of the New Cold War Newsletter #3 there has been a great deal of renewed interest lately in the COVID “Lab Leak Theory”—that COVID leaked or escaped from a Wuhan lab in China conducting research into, among other things, bat coronaviruses, and located in close proximity to where the world’s first COVID outbreak occurred.

While the lab leak theory was dismissed initially—and prematurely—by scientists in favor of natural origins, the theory has since made a resurgence. Based upon the continued lack of evidence for COVID’s natural origins along with additional evidence for the lab leak theory, both circumstantial and otherwise, and prominent scientists calling for it to be fully investigated as a result. 

To that end, in late May, President Biden directed US security services to conduct a 90 day review and investigation into the probability of the lab leak theory.

CNN reported last month that based on the ongoing investigation senior Biden officials now believe that the COVID lab leak theory is as credible as natural origins explanation. And this week CNN reported that US intelligence agencies have obtained a treasure trove of new genetic data from the Wuhan Lab, that they are currently deciphering. Per CNN sources, “[t]his giant catalog of information contains genetic blueprints drawn from virus samples studied at the lab in Wuhan, China which some officials believe may have been the source of the Covid-19 outbreak.”

China of course continues to block the World Health Organization (WHO) from any further investigation into the Wuhan lab. Even though the WHO has formally called for further investigation of the lab as part of its Phase 2 search into the COVID origins. China has also deliberately not provided critical data from the lab or from the early days of the first COVID outbreak in Wuhan. This makes the new “treasure trove of data” obtained by US security services all the more interesting, and potentially impactful. It also means that the information was likely obtained through the hacking of China’s computer systems, and other covert means. This fact alone will make China very unhappy.

But to further add to the suspicion around China and the Wuhan lab, the South China Morning Post reported this week that “China is updating its lab animal testing laws as it tightens up on animal use in the aftermath of the coronavirus pandemic and allegations that the pathogen leaked from a laboratory. The draft changes to the Regulation on the Administration of Laboratory Animals include expanded rules on safety and infectious disease control in labs, as well as specifications on genetic modifications.”

So while China continues to block further investigation into the Wuhan lab, it is making significant revisions to its laboratory regulations, especially those related to the handling of animals and infectious diseases. This is made even more curious by the fact that right before Covid hit, the Wuhan Lab in question had alarming and well documented issues with its severe lack of safety protocols while it was engaged in dangerous gain of function experiments, on among other things, bat coronaviruses. It makes one wonder then if the CCP is tightening up protocols now to ensure another pandemic causing virus doesn’t leak out from one of its labs.

In this edition, we explore topics including US Deputy Secretary of State Wendy Sherman’s meeting in China, the return of US Industrial policy, and the breakup between Wall Street and China.

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And as always, for more, please check out my book: The Art of The New Cold War

Feedback is always welcomed. Thank you for reading!

Topic 1: Sherman’s chilly meeting in China

As highlighted in The Art of the New Cold War Newsletter #3, this week’s meeting in the Chinese city of Tianjin between US Deputy Secretary of State Wendy Sherman and her Chinese counterparts was expected to be a testy affair, especially as it was preceded by Chinese sanctions on seven US individuals and entities. It did not disappoint.

This was the second face-to-face meeting between senior US and Chinese officials since President Biden took office. The first occurring in Alaska in March between US Secretary of State Antony Blinken and his Chinese counterparts that descended into a very public sparring match in front of the cameras, with Yang Jiechi haranguing and lecturing Secretary Blinken—and by extension America—in a manner not seen before, at least not publicly anyway.

Far from toning down the harsh rhetoric, however, U.S. Deputy Secretary of State Sherman was met with more of the same from Chinese officials. This even included being presented with a list of grievances that America must immediately correct, and another list of areas that are heretofore off limits.

As reported by The Diplomat:

“Xie presented Sherman with two lists: the ‘List of U.S. Wrongdoings that Must Stop’ and the ‘List of Key Individual Cases that China Has Concerns With.’ The full lists were not made available publicly, but Xinhua provided a summary:

In the List of U.S. Wrongdoings that Must Stop, China urged the United States to unconditionally revoke the visa restrictions over Communist Party of China (CPC) members and their families, revoke sanctions on Chinese leaders, officials and government agencies, and remove visa restrictions on Chinese students.

China also urged the United States to stop suppressing Chinese enterprises, stop harassing Chinese students, stop suppressing the Confucius Institutes, revoke the registration of Chinese media outlets as “foreign agents” or “foreign missions”, and revoke the extradition request for Meng Wanzhou [the CFO of Huawei, who was detained in Vancouver, Canada in December 2018].

Per China Politico Correspondent Stuart Lau, Sherman was also presented with four areas that America must stop acting in relation to China:

Unsurprisingly, China made its list of demands without admitting any fault of its own, nor did it offer anything in return. Other than perhaps vaguely alluding to the fact that once the U.S. does everything China wants then perhaps it will consider working with the U.S again.

China also dispelled any notions that attempts by the U.S. to separate climate change cooperation from other contentious areas would work. This is something we highlighted in The Art of the New Cold War Newsletter #2, where we noted that: “China will dangle false promises of cooperation on climate change to attempt to get America to disarm against China on other fronts (economic, trade, human rights, foreign policy, tech, etc.), while China just keeps on ruthlessly advancing and pursing its interests. To believe otherwise is naïve and foolish.”

This meeting, and the previous one in Alaska, make clear China’s belief that it is inexorably ascendant and that its rise to the top of the global food chain cannot be stopped, while America—and the West—are in terminal decline. This mentality now infuses and informs all of China's words and actions. China sees itself increasingly negotiating from a position of strength relative to America (and the world), and believes it can now dictate terms to America. Something that only a few years ago would have been unthinkable.

Expect more chilly meetings like this one as the New Cold War heats up.

Topic 2: What is old is new again. The return of US industrial policy.

Republicans and Democrats alike are embracing the need for a robust US industrial policy to challenge and out compete China, with a number of bills worth billions and even trillions of dollars currently working their way through the US Congress to do just that, by boosting American research and development and rebuilding the nation’s infrastructure.

But like Voldemort from Harry Potter, some are still reluctant to openly use the term. As noted in an excellent piece by Alex Lo in the South China Morning Post, entitled: Industrial Policy: The economic practice that dare not speak its name in America.

Mr. Lo points out that for years the term “industrial policy” has been considered taboo in Washington as economic neoliberalism and market fundamentalism reigned supreme. Mr. Lo defines industrial policy as “concerted government efforts to promote specific industries identified as being critical to national security and/or economic competitiveness.”

But as Mr. Lo argues (and I do as well in my book the Art of the New Cold War), while Americans have been made to believe in the inherent magic of private enterprise and free market and government free capitalism, they don’t actually know, or understand, their own economic history. Not only was America developed and built through a robust industrial policy powered by strong government support and protection, but practically invented the entire concept of industrial policy. Subsequently copied by numerous developing nations, including most notably China, to great success.

Indeed, many of America’s founding fathers and greatest leaders were ardent proponents of industrial policy. This list includes such luminaries as Alexander Hamilton, Benjamin Franklin, Abraham Lincoln, Franklin Roosevelt, and even that greatest of government skeptics Ronald Reagan, who advocated for a US industrial policy to combat and out compete Japan and the Soviet Union.

Former US Trade Representative under the Trump Administration Robert Lighthizer made similar points this week in an essay for the NY Times entitled: America shouldn't compete against China with one arm tied behind its back. On the need for a robust US industrial policy to compete and defeat China, Mr. Lighthizer wrote:

“[W]e need a multifaceted long-term strategy. China certainly has one. Our strategy must include a tax and regulatory regime that encourages innovation, job creation and manufacturing in America; an industrial policy that includes subsidies to foster the development of the most advanced science and technology; a modern, highly trained and focused military; full engagement from our intelligence and diplomatic communities; and a robust plan to combat China’s unfair trade practices.”

To that end, Mr. Lighthizer argues that the US Senate’s recently passed bill intended to bolster America’s technological and industrial capacity called the U.S. Innovation and Competition Act, started off as a great bipartisan effort to combat China, and still contains important provisions, such as “$200 billion to bolster scientific and technological innovation, $52 billion to rebuild our capacity to make semiconductors, and a supply-chain resiliency program to bring manufacturing of personal protective equipment, medicines and other key products back to this country,” but at the last minute the bill was significantly watered down.

Mr. Lightizer refers specifically to an amendment titled the Trade Act of 2021, which limits and hamstrings America’s ability to use tariffs on China and other countries, and even cuts them on broad product categories.

Like industrial policy, tariffs remain to many a negative term in Washington. But again like industrial policy, tariffs have played a significant role in America’s economic history and success. As Lighthizer writes:

“The notion that all tariffs are bad is foolish and counterproductive. They have been an effective tool of economic policy since the beginning of the Republic. They can offset unfair subsidies by foreign governments and industrial policy; break reliance on foreign suppliers; and raise import costs, thus encouraging companies to bring jobs back to this country. To the extent that tariffs might raise consumer prices (which is itself debatable), that is a small price to pay to achieve a strong manufacturing base and secure access to critical supplies.”

As Lo and Lighthizer both advocate in their articles, and as I do in my own book, to defeat China, America must remember its history and return to its economic roots, and the very foundations that made it a great economic power in the first place. This includes getting serious again about a robust industrial policy to support and enhance strategically important industries and technologies, coupled with smart, effective, targeted tariffs to protect them and balance the trade scales.

The old ways are often the best ones.

Topic 3: Wall Street and China’s nasty break up

The CCP continued its crackdown on some of its most profitable and innovative companies (a growing list that includes Ant Group, Meituan, and Didi, among others), causing investors in China and abroad to once again take significant financial hits. This week it was the $100bn education and tutoring industry in China that was in Beijing’s crosshairs.

But even more impactful and concerning for investors was an accompanying potential ban on Chinese companies using a structure known as variable interest entity (VIE), which is how many foreign investors, including Wall Street firms, invest in Chinese companies. As Joseph Sternberg at the Wall Street Journal explains in his piece this week How China Played American Investors:

“Beijing has in mind something called the variable-interest entity, or VIE. Many big-name Chinese companies that have sold shares in foreign markets (including Hong Kong) over the past two decades have done so only quasi-legally at best. Beijing prohibits foreign ownership of large sections of the Chinese economy, and especially the most profitable parts involving digital technology and data. The workaround was to create an offshore holding company or VIE. The Chinese operating company would bind itself contractually to remit its profits to the offshore entity, which could then sell shares to foreign investors.”

The potential ban on VIEs has already wiped billions from the market value of Chinese companies listed on the NY Stock Exchange with the risks to investing in Chinese companies rising dramatically. This also represents a major break in the long love affair between China and Wall Street. Perhaps even a permeant change in the nature of relationship with Wall Street no longer serving Beijing’s interests. Sternberg continues:

“Giving credit where it’s due, Beijing has played foreign investors like a fiddle. It induced them to finance the expansion of the riskiest parts of its economy while distracting them from asking why China couldn’t use its enormous financial resources to back unicorn tech companies itself. This funded national champions to compete with the Western giants, while insulating domestic middle-class investors—a politically sensitive cohort if ever there was one—from the risks. For whatever inscrutable reason, Beijing now appears to be deciding its interests lie elsewhere.”

Even the most ardent of China’s Wall Street lovers are starting to take serious note of the changing nature of the relationship and its implications. US economist and former Morgan Stanley Asia chairman Stephen Roach now believes the actions are signaling the early stages of a cold war:

“I am a congenital optimist when it comes to China. But I find these actions really quite disturbing,” Roach told CNBC’s “Trading Nation”. “China is going after the core of its new entrepreneurial driven economy, and it’s going after their business models.”

For many years, Wall Street looked the other way on China’s lies and cheating and the many risks of the relationship for the sake of profits. But now that those profits are jeopardized they are forced to see what was always staring them straight in the face: China is an abusive lover indeed.

What I’m reading:

I am currently reading The Long Game by Rush Doshi. Highly recommend it. Mr. Doshi, who currently serves as the Director for China on the Biden Administration's National Security Council (NSC), details through meticulous research of internal Chinese Communist Party (CCP) documents, sources, and words China’s grand strategy to overtake America and establish a new world order.

This week we focus on topics including: sanctions, cyber warfare, COVID origins and Space Jam 2.

As always, for more information, please check out my book: The Art of The New Cold War

Feedback is always welcomed. Thank you for reading!

Topic 1: A Game of Sanctions

In response to the Hong Kong business advisory issued last week by the White House (and highlighted in The Art of the New Cold War Newsletter #2), warning American companies about the elevated risks of doing business in Hong Kong as the CCP tightens its grip over the semi-autonomous region, and which was accompanied by US sanctions against several CCP officials, China has now imposed its own sanctions on seven US individuals and entities.

Those sanctioned include former US secretary of commerce Wilbur Ross, US-China Economic and Security Review Commission Chairman Carolyn Bartholomew, former Congressional-Executive Commission on China staff director Jonathan Stivers, DoYun Kim from the National Democratic Institute, International Republican Institute associate director Adam King, Human Rights Watch China director Sophie Richardson and the Hong Kong Democracy Council.

China’s sanctions come only days before the long awaited talks in Tianjin between US Deputy Secretary of State Wendy Sherman, Chinese Foreign Minister Wang Yi and Vice Foreign Minister Xie Feng. Adding further acrimony to what was already poised to be a very acrimonious meeting.

This is also the first time that China has utilized its newly passed anti-sanctions law, which gives the CCP broad and wide ranging powers to punish individuals and companies that enable foreign penalties or sanctions to be implemented against Chinese companies and officials. Making clear that going forward US sanctions will be met with corresponding sanctions from China. Many US businesses operating in China will find themselves directly in the crosshairs, and should consider themselves forewarned.

The tit for tat sanctions between the US and China is unlikely to let up anytime soon, and if anything is likely to escalate further. Neither side wants to be seen (or in the CCP’s case can afford to be by their increasingly nationalistic citizenry) as backing down to the other. So every sanction will beget more and stronger sanctions from the other.

The Game of Sanctions is just beginning.

Topic 2: The World War Web

For years, China has waged extensive cyber warfare and cyber espionage campaigns against the United States and other nations throughout the world with near impunity. And as China’s cyber capabilities have grown, so have its attacks in the cyber realm. Increasingly a battlefield with real world and national security implications in an ever connected and digitized world.

This week the United States and its NATO allies took the unprecedented step of collectively calling out China for malicious cyberattacks, including a massive March attack that exploited Microsoft's Exchange Server.

This is the first time that NATO, a military alliance originally created to combat the Soviet Union in the first Cold War, has formally condemned China's cyber attacks. The U.S. Department of Justice also followed the condemnation by charging four Chinese nationals with targeting companies, universities and government agencies in the US and abroad.

While the formal condemnation, and subsequent US indictments, are certainly a step in the right direction in combating China’s widespread and malignant cyber activities, they are unlikely to alter or deter China without far more significant actions.

The U.S., and the world, must come to see China’s cyber attacks for what they are—acts of warfare, and engage accordingly. Up to and including retaliatory cyber attacks against China and its companies. It is long past time the US and its NATO allies go on the offensive against China in the cyber realm and escalate the costs for its attacks. Especially as The World Wide Web is fast becoming The World War Web.

Topic 3: COVID: An Origin Story

China is blocking the World Health Organization (WHO) from any further investigation into its Wuhan virology laboratories.

WHO recently announced that further investigation of the labs is warranted and required, as they may contain evidence related to COVID’s origins. But China has vehemently denied that this is the case, and continues to call the “lab leak theory”—that COVID leaked or escaped from Wuhan labs conducting research into, among other things, bat coronaviruses, and located in close proximity to where the world’s first COVID outbreak occurred—a debunked conspiracy theory.

However, while the lab leak theory was dismissed initially (and prematurely) by scientists in favor of natural origins, the theory has made a resurgence. Based upon the continued lack of evidence for COVID’s natural origins along with additional evidence for the lab leak theory, both circumstantial and otherwise, and prominent scientists calling for it to be fully investigated as a result. Senior Biden officials now even believe that the COVID lab leak theory is as credible as natural origins explanation. And President Biden has directed US security services to conduct a 90 day review and investigation into the probability of the lab leak theory.

Indeed, when one begins to look closely at it the Lab Leak Theory it actually makes the most sense. To that end, Josh Rogin, Washington Post columnist and author of the outstanding book Chaos Under Heaven, has done amazing work in this area by meticulously documenting the dangerous “gain of function” experiments conducted at the Wuhan labs and their severe lack of safety protocols.

China is obviously extremely unhappy about the continued resurgence of the lab leak theory, and that the WHO—of which they are a member and major funder—has not only not closed the door on it, but appears to be opening it up even wider, with formal calls for it to be a significant part of their Phase 2 COVID investigation.

Undoubtedly, the risks to China (and especially the CCP) are enormous. If the lab leak theory is confirmed it would not only completely contradict China’s narrative that it handled COVID successfully, but would open it up to worldwide condemnation for allowing COVID to spread, and for likely covering it up, if not worse.

For these reasons, China will continue to refuse to cooperate on any further investigation into the labs, and will continue to hide or bury relevant data, and suppress would be whistleblowers. But by doing so, however, China only serves to stoke the fires of suspicion and keep the lab leak theory alive.

For as Shakespeare once famously said: “Me thinks you dost protest too much.”

Topic 4: Lebron’s Space Jam 2 rejected by China

As of this writing, LeBron James Space Jam 2 movie is still not scheduled for release in China. This is despite the fact that the movie was made, and sanitized, specifically to satisfy the CCP censors. And despite the fact that Lebron James himself has consistently kowtowed and bent the knee to Beijing. Including even infamously rebuking Houston Rockets General Manager Daryl Morey for supporting Hong Kong’s freedom protests.

Not being released in China will be a massive financial hit for Space Jam 2. As reported by Fox, “without China, Space Jam 2 is likely to lose several hundred million dollars. Space Jam cost $200 million to make and market and is expected to earn only $60-70 million without a release in China.”

Hollywood generally has found China and the CCP much less receptive to their movies as of late. As Hollywood begins to face the same fate as every US industry in China. Whereby, the CCP only allows US companies to make money in China for a short time, so domestic Chinese companies can learn (and steal) from them. Then the CCP squeezes out US industry and ensures that the domestic industry takes over.

Expect LeBron and Hollywood to continue being rejected in China, despite their incessant kowtowing.

One Chart to Go:

The Economist magazine recently published the following chart. A stark perspective of how the balance of economic power has shifted from America to China ever since America (stupidly) allowed China into the World Trade Organization.

Please share and subscribe.

And as always, for more information, please check out my book: The Art of The New Cold War

Feedback is always welcomed. Thank you for reading!

Topic 1: Cancel Culture China Style and Historical Nihilism

It is well documented that America suffers currently from a virus known as cancel culture brought on by over exposure to extreme “wokeness.” What is less known perhaps is that China is also experiencing its own brand of cancel culture. China’s version, however, is in many ways America’s polar opposite.

While America’s cancel culture involves the denigration and discrediting of the nation’s history and heroes (e.g. tearing down of historical statutes and monuments, kneeling or turning away during the national anthem, and belief that the entire country was founded upon a tainted legacy), China’s version, by contrast, punishes those who disparage or disrespect Chinese history and national greatness. In short, people are “canceled” for displaying a lack of patriotism. This includes being seen as too “Western” leaning, or not strictly adhering to the Chinese Communist Party’s (CCP) approved historical narrative.

This coincides with a burst of nationalistic activity and sentiment that have swept across China this year—the 100th anniversary of the founding of the CCP. With patriotic tourism taking off as Chinese citizens flock to famous sites of the Chinese Revolution, often while wearing revolutionary uniforms and costumes. And patriotic movies, shows, and books are in high demand.

China’s cancel culture is driven and vigorously enforced and executed by an army of netizens online, who mercilessly terrorize and troll, and demand punishment for any anti-China transgressions, even those long in the past, forcing groveling public apologies—and far worse—from transgressors.

It is not simply a grassroots phenomenon, however, but one openly encouraged and advanced by China’s all-powerful leader, and emperor in all but name, Xi Jinping. Xi has spoken publicly of the need to drive out what he terms “historical nihilism,” which refers to any discussion or research challenging the Party’s official version of history. In February of this year, Xi ordered a nationwide campaign to study Party history ahead of the CCP’s 100th anniversary, and in May it was reported that China’s internet regulator had deleted more than 2 million posts containing “harmful” discussion of history. There have also been reports of people being detained for allegedly “insulting historical heroes” online.

Both America’s and China’s versions of cancel culture are concerned with forms of indoctrination and the rewriting of history to fit with a preferred narrative. But while China’s history is being revised to everything is good, America’s is being revised to everything is bad. This begs the question of which presents the greater threat—enforced national self-love or national self-loathing? What does each say about the current status of their nation? And which is more conducive to victory in the New Cold War?

For the moment at least, one need only look at the increasing confidence, patriotism, and social cohesion of a rising China versus a bitterly divided, conflicted and uncertain America to know the answers.

Topic 2: Democracy vs. Authoritarianism

An overarching theme of the New Cold War, as it was in the First Cold War, is competing governance systems: U.S. Democracy vs. China’s Authoritarianism. With developing nations around the world watching closely to see which system is the more successful, and thus which should be adopted by those in the developing world.

As reported this week by Axios, across the world democracy is in retreat. Indeed, global democracy has been in decline for 15 consecutive years according to Freedom House. And the trend is not only continuing, but may even be accelerating.

A fact recently highlighted in America’s own backyard, with the assassination of Haiti's president showcasing the country’s failing democracy. Other nearby countries are struggling to retain their democracies as well, including Brazil, Peru, and Nicaragua.

There is, however, one big bright spot for the democratic side of the ledger, with Cuba seeing the largest protests against its authoritarian Communist regime in decades. It is too early to tell what the outcome will be, and the Communist regime is cracking down hard on the protestors and blocking their online communications (with Chinese technology, it should be noted). But there is more hope in a long time that Cuba may finally break free of their repressive authoritarian Communist regime once and for all. Something that would certainly be in America’s interest, and democracy generally. Not to mention the optics (and fodder for information warfare purposes) of another Communist Regime, like China’s, falling. Perhaps, it will even serve to begin to turn the tide of authoritarianism’s rise.

So let’s all support—Cuba Libre!

Topic 3: The Increased Risks of Doing Business in China

Doing business in China has always come with a certain level of risk for western companies, including the near certainty of having products counterfeited and intellectual property stolen, among others. But lately the risks have increased significantly as the New Cold War heats up, and calls for economic decoupling grow. A fact that the recent Didi IPO fiasco (highlighted in The Art of the New Cold War Newsletter #1) made clear to Wall Street.

This week the White House is also issuing an unprecedented advisory to warn American companies about the risks of doing business in Hong Kong as China tightens its hold on the semi-autonomous region. Hong Kong is a major international financial hub. But since the CCP forcibly asserted greater control over Hong Kong last year, and abolished the long standing “one country, two systems” governance in place since the former British colony was returned to Chinese rule in 1997, and which had long made Hong Kong the gateway for foreign companies into China, the risks of doing business in Hong Kong have risen dramatically, threatening its status as a global financial center.

New threats include the Chinese government’s ability to gain access to data that foreign companies store in Hong Kong and a recently passed anti-sanctions law allowing the CCP to punish individuals and companies that enable foreign penalties or sanctions to be implemented against Chinese groups and officials.

For instance, under China’s new anti-sanction law, if the US sanctions a CCP official for facilitating the genocide of Uighurs in Xinjiang and a foreign financial institution, like a US bank doing business in Honk Kong, adheres to the US sanctions by blocking financial transfers related to the sanctioned individual, then under the new Chinese law the bank itself could be sanctioned or punished by the CCP in retaliation.

This poses a highly realistic scenario. Especially as the advisory on Hong Kong comes on the heels of the White House’s warning to US business on human rights abuses in Xinjiang, in which US business were warned to exit the region or face potential legal action for using forced Uyghur labor in the future. Many U.S. businesses have a limited understanding of their supply chain in China, and the CCP has made it even harder to avoid using forced Uyghur labor in supply chains by exporting it into other Chinese regions, creating a shell game scenario. To make matters even worse, the CCP has threatened foreign companies that speak out in any way, or even acknowledge what is happening to the Uyghurs in Xinjiang. Some, like the retailer H & M, have even faced crippling boycotts in China for doing so.

Increasingly, US companies are being put on the horns of a dilemma in China as they are forced to choose sides between the China and the US. This is not only driving up the risks of doing business in China, but accelerating decoupling between the world’s two largest economies. Companies are quickly learning that they can no longer have their cake and eat it too in China.

The newsletter will focus on all aspects of the defining geopolitical event of this century: The clash between America and China. The New Cold War.

We will discuss a broad range of topics including, military, economics, foreign policy, politics, technology, and everything in between. My goal is to publish the newsletter once a week, highlighting and analyzing the important, stories, news and trends related to the New Cold War emerging each week.

And as always, for more information, please check out my book: The Art of The New Cold War

Feedback is always welcomed. Thank you for reading!

Topic 1: Didi and China’s Big Tech Crackdown

The Chinese Communist Party (CCP) continues its crackdown of Chinese Big Tech companies. Beginning in earnest in the fall of 2020 with the squashing of Chinese fintech giant Ant Group's IPO and the humbling of famed Chinese tech entrepreneur Jack Ma. The latest high profile victim of the crackdown is Chinese ride hailing company Didi.

Unlike Ant, Didi’s IPO moved forward with a listing on the New York Stock exchange, before meeting Beijing’s ire. Only days after the much heralded IPO launched, which was the largest Chinese company listing on the NY Stock exchange since Alibaba and had massive US institutional investor support, Chinese regulators suddenly informed the company that its popular ride hailing app would be indefinitely blocked in China, its largest market, while regulators evaluated alleged issues related to data sharing and data protection, putting the future of the company at risk.

Predictably, this sent Didi shares plummeting, causing many US investors to lose money. US investor and noted China Hawk Kyle Bass even opined to CNN: "The Chinese believe deeply in symbolism and numerology. Banning an IPO that just went public in the US -- with US investor money -- on our Independence Day was basically a big F-U to the United States."

There are numerous conflicting stories about the reasons for the crackdown on Didi. Some speculating that regulatory concerns were raised to the company prior to moving forward with the IPO, including concerns regarding sensitive Chinese data falling into American hands and maps on the ride hailing app showing important, and secret, government buildings. There is even a question about whether the company had Beijing’s sign off on the IPO in the first place. Despite concerns, however, the company went forward with the IPO on the NY stock exchange only days before the 100 year anniversary of the CCP’s founding, a particularly sensitive time.

If there were regulatory issues raised to Didi prior to IPO, and not disclosed to investors, expect angry investor lawsuits to be filed against Didi (and rightfully so). The situation has also caused a severe loss of US investor trust in Chinese companies (which should have happened years ago). Even famous investor, financial commentator, and unabashed China Bull Jim Cramer, who touted the Didi IPO only a week earlier and encouraged investors to buy as much of it as possible, questioned why a US investor would buy a Chinese IPO ever again after the Didi debacle. “You’re a moron if you buy a Chinese deal after this. You’re a moron. I don’t care if it pops,” Cramer said on CNBC Tuesday. “Why do you need to put your capital at risk after this?”

The CCP’s crackdown of Didi and Chinese Big Tech companies generally is also indicative of the fact that the CCP views everything through the lens of national security and control. And any Chinese tech company, or tech billionaire, that challenges the complete control and power of the CCP will be reigned in; a fact Alibaba founder Jack Ma discovered to his detriment as he was used as an example for discipline by the CCP. The CCP will simply not allow any other power centers beyond or apart from the CCP to develop in China. Something they have watched occur in America with the US Big Tech giants, and their immense powers over society and government. The CCP also fully understands the power of data, its potential uses and threats. The reason why US tech companies like Facebook and Google cannot operate in China; in contrast to the US allowing Chinese companies like TikTok to operate in America.

The Didi situation is also reflective of the CCP strongly pushing for Chinese companies to list on the Hong Kong stock exchange and not in New York, or other western exchanges. This an effort to further strengthen Hong Kong as a financial center, and part of a larger economic "decoupling" of China from the West and Western Markets, on the CCP’s own terms. The Didi situation further illustrates the fact that the CCP believes that Chinese companies are intended to benefit, serve, and strengthen China only. And if US investors are screwed in the process, even better. Never forget that the CCP are ruthless practitioners of China First.

Topic 2: China and Climate Change

Progressive and environmental groups in the United States are warning President Biden to lay off China and not engage in a New Cold War with China, for the sake of climate change. Believing that without the full cooperation of China, by far the world’s largest polluter, that global environmental and climate related issues will be impossible to address.

This line of thinking plays directly into the CCP’s hands. Indeed, the CCP understands fully how climate change can be used as a wedge to neutralize and divide opposition against China. In fact, they already openly float the idea of cooperating on climate change in exchange, of course, for America not attacking China in other areas. Though even as China says this and makes promises to decrease their emissions generally, they continue to obtain the majority of their energy from cheap coal, with no apparent signs of stopping, as they continue to economically develop.

Bottom line: China will dangle false promises of cooperation on climate change to attempt to get America to disarm against China on other fronts (economic, trade, human rights, foreign policy, tech, etc.), while China just keeps on ruthlessly advancing and pursing its interests. To believe otherwise is naïve and foolish. And for proof, one need only look at discussions throughout the years on trade or market reforms and all China’s many empty promises that never came true while they continued to cheat. As the old saying goes, fool me once…..

Topic 3: Tesla’s adventures in China

According to Bloomberg, Tesla is having a very bad go of it these days in China, despite doing just about everything possible to succeed in China and appease the CCP.

For a little while at least, everything appeared to be going very well for Elon Musk and Tesla in China. However, the brief honeymoon is now over. As Bloomberg reports: “After receiving red-carpet treatment from government officials, who granted Tesla the unprecedented concession of allowing it to wholly control its local subsidiary, the carmaker is now being forced to rethink its strategy, from customer service to public relations, in a market that’s key to Musk’s long-term ambitions.”

Tesla has now increasingly come under an unusual degree of attention from Chinese regulators, as well as a rash of negative press coverage and online criticism. And according to Bloomberg, “last month, the Chinese government ordered a recall of almost all the cars Tesla has sold in the nation — more than 285,000 in all — to address a software flaw. At the same time, the vehicles are being banned from some government facilities over concerns they could send data to the U.S., and local carmakers like Nio Inc. and Xpeng Inc. are mounting a vigorous challenge to Tesla’s dominance, winning over consumers with increasingly stylish designs.”

The story of Tesla’s troubles are an all too common one for US companies trying to do business in China. In fact, it very much fits with the usual pattern and fate eventually suffered by almost every US company in China: the US company is allowed to operate in China for a time and even make some money while their intellectual property and technology is systematically stolen, then they are squeezed out of the Chinese market by the CCP so that Chinese domestic companies can win using the US company’s own stolen technology. Rinse, dry, and repeat.

The allure of China's massive market continues to be a Siren's song that ultimately ends in misery. One it appears even the great Elon Musk cannot escape.

Topic 4: China takes over U.K.’s largest semiconductor plant

As reported by CNBC, amid the worldwide semiconductor chip shortage, Newport Wafer Fab, the U.K.'s largest chip producer, is set to be acquired by Chinese-owned semiconductor company Nexperia.

Semiconductors are critical to the global economy and national strength and are used in everything from cars and phones to advance weaponry. The COVID 19 pandemic has caused severe chip shortages and opened the eyes of the world to their strategic importance, and to the fact that the vast majority are made in Taiwan and Korea. This presents significant dependency, supply chain, and national security issues. A fact not lost on either America or China. Both nations are now attempting to various degrees to build their own domestic chip plants and capabilities.

China gaining control over the U.K.’s largest chip producer is a concerning prospect for not only the U.K., but for America and the world as well. Especially as no Chinese company is free of CCP control and influence. And by law, Chinese companies must share all technology and resources with the Chinese military under Xi Jinping’s Military-Civil Fusion strategy.

Despite calls to block the acquisition from both British and American politicians, so far PM Boris Johnson has refused to take action. This is particularly perplexing given Johnson’s previous concerns about CCP influence, for example in the U.K.’s 5G infrastructure, along with Johnson’s own push for post Brexit Britain to be a technological leader, and push for self sufficiency. This acquisition appears to be exactly the opposite, and should be blocked by Johnson. Giving the CCP control over its largest semiconductor producer, in the middle of a chip shortage, is sheer insanity.

Topic 5: US withdrawal from Afghanistan and the New Cold War

According to President Biden, the US is scheduled to end military missions and withdraw from Afghanistan on August 31st. At long last officially ending America’s longest war.

The aftermath of the US exit from Afghanistan is likely to have implications in the New Cold War, especially as Afghanistan shares a border with China. China is already positioning to take advantage of the US withdrawal, by making deals with the Taliban, and angling to construct infrastructure in Afghanistan as part of China’s grand and extremely ambitious Belt and Road Initiative (i.e. the Project of the Century). China also sees an opportunity to take advantage of (exploit) Afghanistan’s natural resources including all important rare earths.

But as much as China senses opportunities, it has serious concerns as well. Afghanistan borders China’s highly problematic Xinjiang region, where China has imprisoned millions of Muslims, known as Uighurs, and even committed a form of genocide against them. Thus, the prospect of battle hardened Muslim fighters and terrorists operating on China’s borders, without US troops to keep them busy and in check, becomes a very worrying prospect. Understandably, some of them may be rather angry about what China is doing to their fellow Muslims across the border.

This may even present another potential strategic benefit of the US getting out of Afghanistan once and for all (other than of course no longer continuing to waste massive amounts of US money and resources). And as Afghanistan becomes an increasingly unstable, hostile, & dangerous country once US forces are gone, China may be forced further into the “graveyard of empires” than it likes. Indeed, it is to America’s advantage for China to become occupied in Afghanistan, and spend some time there getting stung by that perpetual hornet's nest. America should even seek to kick the hornet’s nest from time to time to ensure that China keeps getting stung.