Thursday, January 3, 2019

China, Partner or Enemy


By George Templeton
Rim Country Gazette Columnist
“No people can live to itself alone.  The unity of all who dwell in freedom is their only sure defense….  No nation can longer be a fortress, lone and strong and safe.  And any people, seeking such shelter for themselves, can now build only their own prison.”   Dwight D. Eisenhower
The Price of Free Trade
A dozen of us engaged in idle chat prior to a business meeting in the mid-seventies.  We were middle managers, responsible for everything but with authority over nothing.  How was it that we got our privileged position?  Some of us had taken steps that increased the probability that we would evolve in particular directions.  None of us had planned or asked for it.  It is remarkable how things turn out.  We thought, if we outsource manufacturing, won’t it eventually mean that middle class America will have to decline in standard of living to compete with cheap overseas labor?  No job will be safe from international competition.  But it isn’t just cheap labor that matters.  It’s also government, infrastructure, and education.
The salary difference is on the order of ten to one, less within free-trade zones, more in rural communities.  How about our leaders?  Can they really control what the world will become?  There are not enough resources on the planet for everyone to live like Americans.  Nature has a way of establishing equilibrium.  The truth has a spreading velocity.
Wolves don’t care what Sheep Think
“Tariff man” welcomes economic warfare.  It’s national defense!   Tariffs are not paid by our manufacturers or the Chinese as Trump claimed.  When prices go up, importers eventually have to pass them on to you.  Tariffs hurt our friends.  They create winners and losers.  Trump wins when foreigners lose, but what about American consumers?  The Chinese are gaining on us.  Exactly how is it unfair?  What should China do to restore equity?  We must have a plan.  Have we forgotten what it takes to be a world leader?
There are three sides to this.  The first argues that we must embrace China as a partner.  The third worries about America’s fate in the coming era of Chinese influence.  Between them we find the Senate Committee on Chinese Espionage along with the FBI, Homeland Security, and the Justice Department.  They don’t see our challenge as spy versus spy.  It is country against country, a well-organized conspiracy, patient, persistent, and intense, with thousands of participants, who may never be held accountable in a court room. They are “weaponized to vacuum up U.S. industrial capabilities and emerging technologies”.   Retired General Keith Alexander, a NSA man, credits Chinese espionage with “the greatest transfer of wealth in history” ($600 billion).  However, Wikipedia lists only 28 spy cases dating back to the eighties.  In the past nine months there have been 16 individuals and four corporations charged in eight separate cases.  The increase may be a consequence of slow legal processes and a more intense focus by the FBI.
The Chinese identified the world’s needs, like the relays in smart electrical meters, and motors below fifty horsepower.  Hidden in numerous places, they have greatly reduced our costs.  Now there is the 2025 Chinese government strategy, called the “wheel of doom” by the Senate Committee.  To prevent our demise, they say that we should prohibit Chinese investment in technical start-ups, scientific research, and education.  America may abandon the World Trade Organization because it has only the force of persuasion, but the Russian meddling in the 2016 election shows how powerful opinion can be.  Influence is malleable.  It is subject to ignorance and propaganda.  Fact Check needed 3441 words to adequately respond to Sarah Sander’s recent 24 word tweet concerning the National Climate Assessment.  A good writer of propaganda can imbed a dozen propaganda techniques in a single paragraph.  We have to develop a pallet for the details.
It Never Entered Their Mind
The Confucian goal was perfect harmony, from the bottom to the top, not top down.  Rulers were to be accountable for their decisions.  They were to be moral, ensure the well-being of the people, and promote harmony through management and coordination.  Constructive criticism, accountability and public-mindedness described the relationship.  These are lofty goals, but people found a way to let self-interest take over.
Chinese Communism has an uneasy relationship with Confucianism, but they are not anti-science like our religious right.  It’s a false choice:  faith, instinct, and belief or secularism, rationality, and empiricism.   Both are human, but a choice of only one leads to missing the other.  Will China be a partner or an enemy?  Trust and participation are not among the mechanisms of war.  Influence isn’t spying.  Chinese business practice is based on long term relationships instead of contracts and lawyers.  They value the wisdom that comes along with age and experience over novelty.
Is plagiarism is a word in the Chinese vocabulary?  Cheap labor makes the manufacture of simple things in high demand profitable.  Learn the details later!  It is deep in the Asian subconscious.  It makes it easier to violate copyright laws.  But we taught them the how and why of technology and we did this although our company claimed that we have only three years to capitalize on new innovations before others figure it out.
The Committee on Chinese Espionage wrung its hands over the Confucius Institutes.  Their charter promotes Chinese culture, language, and good will, but staffing, academic freedom, curriculum, censorship, and spying are concerns.  Conservatives would rather not have college students exposed to controversy.  Communism is reluctant to privatize.  It maintains control over business, banking, and the judiciary, but it has learned from Hong Kong and Taiwan.  It bends the rules in free trade zones where many have allegiance to their family and culture, but are not enthusiastic about their government.  These are small potatoes compared with the future of our food, energy, artificial intelligence, robotics, automobile and telecommunications industries.  If we can’t solve them, how can we deal with global warming, sustainability, mass immigration, and war?
A Paranoid Style
The most useful patents are for clever things that are obvious.  They are easy to copy.  To patent is to publicize.  Historically, America has born development costs and market timing risks that are absent in copying.  Being first provides an opportunity to corner the market, but manufacturing technology progresses and making millions of anything is a challenge.  The recent Micron Technology intellectual property lawsuit involves DRAMs, an old commodity widely used since the seventies, in computers, military equipment, and even children’s toys.  The new creation shrinks chip sizes and expands memory capacity.  It takes billions of dollars and equipment available only from the USA to make the improved version.  Micron is the only American manufacturer, but they have collaborated with Taiwan.  Their competitors are in Korea.  It’s the kind of thing the Chinese government conspires to get.  Now we have three countries and four companies suing each other.
My company would not allow any unattended documents on your desk.  If you got up to go to the bathroom, you locked up all your desk drawers and filing cabinets.  A cluttered desk reveals a muddled mind!  More than one computer was required.  You periodically updated the password for each piece of software.  It took a half-hour to unlock and type in numerous passwords.  The paperless society made the only valid document the one stored on the computer.  Anything in print was obsolete and illegal.   Security police enforced this.  When companies outsource sunset technologies, they are not giving away their secret sauce.
The electro-mechanical designer’s job went away, replaced by a computer system that instantly made every change simultaneously available to those who needed to know everywhere in the world.  It increased efficiency.  Communication and automation explains why the cost of electronic components declined by a factor of one hundred since 1965, in spite of inflation.  But now prying eyes need only one thing, the computer.  Social media, the internet, and business that wants to know you, proves that nothing on the internet is secure.  Is any cryptography immune to theft and hacking?  A secret is hard to keep!
Your computer does not contain a hidden Chinese spy chip and they don’t hear your every word through the ac power line.  It is not technically feasible and even if it were, there are standards for electromagnetic compatibility and an entire industry that implements them.  It is not about security.  It’s about control.  What should be classified?  Consider non-commercial university research on quantum entanglement.  What is real and does it exist at a time and place?  Is the moon there when I am not looking at it?   Are we waves or particles?  How is it that things are true even though they are mutually exclusive?
Dragon or Very Hungry Caterpillar
There was a time when America had to go it alone.  The rest of the world had been destroyed by wars.  Nationalism argues for returning to the world of the 1950’s, but the boundary conditions of that equation are not the same.  It was before refrigeration, television, woman drivers, and jet planes.  America was still on the gold standard.  It was a world that was much less affluent and not addicted to smart phones, consumerism, and credit.  It was a world before travel and the diffusion of foreigners.  The thrill is gone.  Our culture has changed.  There is no high school electronics course. There is no kid next door with a new Corvette and less than 2 years of education.  Of course, there is a new profitable frontier and it is all around us, but not advertised.
Can we return to the fifties by introducing a 25 percent tariff on all manufactured imports?  Our government would have to take steps to discourage consumption, increase investment, and emphasize education.  Knowledge changes reality.  It’s a knowledge economy!  Education makes the future, but it needs to lead to a job first, and then continue in any subject of interest.   It must cooperate with industry and business, but then knowledge will get around.
Travels with George
The world I visited in the nineties did not have paved roads or electricity at night, yet they were making transistors.  In India, a manager proudly showed me their new semiconductor device.  I wondered if they had the government registration I signed thirty years ago.  That device was nostalgia.  So was their American factory automation.  The Japanese supplied automation in China and Taiwan outsourced jobs to them.  The world is not our adversary.  A weak competitor is better than none at all.  A more prosperous world does not mean a poorer USA.
Dealing with the decline of our middle class will require regulations and strategy.  There’s something wrong with a society that justifies a salary of eighty million dollars a year and a severance package of one hundred and twenty million dollars for a company CEO, but ignores the plight of direct-labor workers who lose their source of livelihood.  We have to be concerned, not with just profit, but with the loss of our dream and the devaluation of humanity.  That can only lead to our alienation from one another and a failure to address our common challenges.

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