Categories
World

Europia

One wonders whether a massive buildup of troops in Alaska—or the Pacific theater more generally—would not have been a more powerful deterrent given how many units Russia had to transfer from the Far East. Would Russia risk nuclear war to protect her sparsely populated eastern wastes? She would, I think, have felt compelled to maintain more conventional forces there, reducing the numbers available for Ukraine. That might also have deterred China, in case she is planning on surprising us by piggybacking Taiwan on Ukraine.

Granted, it would have been cheap talk. The United States do not, I think, fear loss of status more than they fear war these days.

Categories
Antitrust Monopolization

Antitrust Preemption

The best way to regulate the tech giants is to tax the immense scarcity rents they generate. Instead of doing that, the Biden Administration has gone all-in on antitrust action, which can’t touch those scarcity rents, even if antitrust action does succeed at making tech markets more competitive, which is unlikely.

When I make this point, people tell me: “don’t worry! Taxation and antitrust action aren’t mutually exclusive. The Biden Administration is also pro-tax.”

Well, is it?

The Canadians are planning on taxing the tech giants, and instead of rushing to complement this sound policy, by imposing our own tax, the Biden Administration is threatening to retaliate if they don’t scupper their plans.

An administration, like everything else, has a budget constraint, denominated in attention as well as dollars. If it is going all-in on one thing, it’s not going all-in on another.

And to go all-in on one policy, an administration may need to reject others in order to maintain the coherence of the one it favors, which seems to be happening here. The Biden Administration is complaining that it’s unfair for Canada to single out American tech companies for taxation, something that would have less bite if America were singling them out itself.

So, please don’t tell me that yes, you agree that antitrust probably can move the needle only very slightly, if at all, but why not try it anyway?

If you’re trying it, you’re not trying the stuff that actually works.

Categories
Civilization

Not Without Precedent

A massive troop buildup followed by an ultimatum and then an invasion based on a totally absurd and completely made-up pretext, while the international community looks on in reproach and horror.

That was our invasion of Iraq in 2003.

We didn’t have a dictator to blame it on. A whopping 72% of Americans supported the war. And reelected its instigator the following year in free and fair elections.

One hopes that it doesn’t end as badly for Ukraine.

Update:

Putin “has chosen a premeditated war that will bring a catastrophic loss of life and human suffering,” President Biden said in a statement that called the Russian operation an “unprovoked and unjustified attack.”

“Russia alone is responsible for the death and destruction this attack will bring, and the United States and its Allies and partners will respond in a united and decisive way. The world will hold Russia accountable,” he said.

https://www.washingtonpost.com/world/2022/02/23/russia-ukraine-updates/

Well, we, too, chose a “premeditated war that [brought] a catastrophic loss of life and human suffering.” President Biden voted for it when he was a Senator.

We have never been held to account.

Categories
Antitrust Monopolization

Some Goliath

I do not understand Paul Krugman here:

Yes, there’s a profit-maximizing price, but the cost to a business of charging somewhat less than its profit-maximizing price is small, because lower margins would be offset by increased sales. (To be formal about it, the losses caused by deviating from the optimal price are second-order.) This wiggle room means that corporate pricing may be strongly influenced by intangible considerations, like fear of alienating buyers. . . . Given this reality, it’s not foolish to suggest that some corporations have seen widespread inflation as an opportunity to jack up prices by more than their costs have increased without experiencing the usual backlash.

Paul Krugman, Do Democrats Have a Technocrat Problem?, N.Y. Times (Feb. 22, 2022).

I agree that corporations don’t have to worry about experiencing the usual backlash. Because they are experiencing way, way more than the usual backlash, and not just from consumers, as shown in the poll to which Krugman cites, but also from, you know, The White House.

I mean, if you asked me what the worst time ever would be to jack up prices, I would say that it’s in the middle of a global pandemic in which any price increase is going to be viewed by a surly public as price gouging.

But I guess that’s just me.

There’s something else I don’t get about this argument.

Monopoly power is the power over price that comes from artificial scarcity; it comes from firms voluntarily holding something back. But firms are producing and selling more than ever before, at least if the amount of stuff transiting through ports is any measure. Savannah, for example, was recently operating 50% above pre-pandemic levels.

How can firms be holding something back while increasing their output by anywhere near that order of magnitude?

It’s possible that they could go even further but purposefully aren’t. But we have almost no true monopolies in this country in the sense of single firms alone serving entire markets. The meatpacking market that is so concerning the Biden Administration is concentrated, but it still has four large players.

How does a group of three or four firms ramping up output to meet surging demand still manage to hold something back, especially when the true extent of demand is unknown (as it always is) and holding back by too much while other firms continue to increase supply is a recipe for a catastrophic loss of market share?

The answer is: by actually coordinating output directly with each other—forming a cartel—just as we often see firms that are trying to reduce output in response to declining demand meet to try to manage the reductions in a mutually profitable way.

But no one seems to be alleging that American industry is cartelizing. Antimonopolists want to break up large firms, not bust cartels.

It’s much more likely that the price increases are what they appear to be: driven by scarcity.

I’m also a bit confused about this:

And perhaps an even more important point, cracking down on excessive industrial concentration and market power would help reduce inflation, regardless of the role market power played in causing inflation in the first place. As an old line puts it, you don’t have to refill a flat tire through the hole.

Antitrust cases last a long time. The Department of Justice sued AT&T in 1974. The company was broken up in 1982. If inflation is still 7% in 2030, it will have become structural, and only another Saturday Night Massacre will save us.

There are plenty of good reasons to want to eliminate monopoly pricing, and industrial deconcentration is one way to do that. But reducing inflation isn’t one of those reasons. I’m all for faster antitrust enforcement, but the reality is that the courts and inflation move at very different speeds.

And that’s before we even consider that antitrust action is a one-time fix. You can only deconcentrate the economy once. But inflation is a perennial problem. Once all those antitrust cases have gotten prices down ten years from now, antitrust won’t have anything to offer in combating the next inflation, either.

Even if Krugman is right about market power and the current inflation, what being right here gets progressives is almost nothing. Here’s how Krugman puts it:

Nobody sensible would argue that opportunistic exploitation of market power is the main factor behind recent inflation. But contrary to what some people might want you to believe, economic theory by no means rules out the possibility that it may be a factor.

It cannot be ruled out that monopoly is a factor in inflation? The progressive movement I signed up for pursues policies that it knows make a difference. Like taxing the rich. Not stuff that “can’t be ruled out as being a factor.”

And Krugman is usually all about the big stuff. So why not one, but two columns now trying to defend the possibility that monopoly might matter albeit not as much as other things?

Sadly, I think that’s because antimonopolism has eaten the progressive mind over the past few years.

It’s no longer mere policy serving as a means to an end.

It’s now ideology. An end in itself.

Progressives know that Goliath must be slain, and they are going to insist on it, no matter what, even if the most that can be proven about Goliath is that he can’t be ruled out as a secondary cause of the economic problems we care about.

Some Goliath.

Categories
World

Owning the Power

But the world’s most powerful countries have rarely used force to . . . set up client states in their region.

David Leonhardt, Why Ukraine Is Different, N.Y. Times (Feb. 21, 2022).

Yes, I know that David Leonhardt is only talking about the past 80 years. But he’s still laughably, embarrassingly, pathetically, naively wrong.

Does he not realize that the government that we set up in Afghanistan was a client government? (And if we set up a client state in a place, does it not become “our region”?)

Sure, the Ghani government fell when we left last summer, but, you know, that wasn’t on purpose! We were planning to have the Ghani government—or an equally pliable replacement—as a client for a long, long time to come.

It just didn’t work out as planned, which is why that evacuation was so last-minute.

And that’s just the most obvious recent example.

Because we also invaded Iraq twenty years ago . . . and Iraq is now a client state!

Does Leonhardt really think that a government that we put into power and which we have since used military intervention to save repeatedly from falling to the Islamic State is in any position to say “no” to a serious request from us?

And what about Kuwait, which owes its existence to a bit of set-piece military fun called the First Gulf War? If President Biden—nay, an obscure undersecretary of state—picks up the phone and calls Nawaf Al-Ahmad Al-Jaber Al-Sabah to ask for something is he going to get a “no”?

Oh, and then there’s Vietnam. Let’s date American military involvement to 1961 to 1975, comfortably within Leonhardt’s 80-year time frame.

Does anyone think that South Vietnam during this period was not one of our client states, and that if we’d won the war that relationship would not have continued for a very long time?

But 80 years takes us all the way back to 1942!

Which means we also need to come to terms with the fact that we created lots and lots of client states when we won the Second World War.

We can debate whether they’re still clients today, whether they have so prospered under the sun of our love, so come to accept our global dominance, that the relationship looks more like friendship than control.

But certainly in the decades after the war they were clients.

There’s Germany, which fought against us in two world wars but has been awfully friendly (the eastern part during the Cold War aside) ever since we conquered the western bit, and within the borders of which we continue to maintain a large troop presence to this day.

And there’s Japan, which used to hate us but changed its tone after we defeated it and set up a friendly government there. We still station a ton of soldiers in Japanese territory, as well.

And then of course there is South Korea. We didn’t want that territory to fall into enemy hands, so we conquered it back from that enemy in the early 1950s and set up a friendly government there and continue to station a ton of troops there, as well. If South Korea isn’t a client now, it certainly was in, say, 1965.

I’m not saying that World War Two or the Korean War weren’t good fights (indeed, we went to war with Germany and Japan only after they declared war on us). And I’m not saying that there aren’t lots of Koreans and Japanese and Germans who are happy about their countries’ relationship with the United States.

But let’s get real.

None of these countries posed an imminent threat of invasion to the United States. (Hawaii was not a state at the time of Pearl Harbor and anyway the Japanese aim at Pearl Harbor was to destroy a fleet that it believed would be used to interfere with its conquest of Asia, not to occupy the Hawaiian Islands.)

But we conquered them because we (quite reasonably, in my view) didn’t like what they (or in the case of Korea, China) were doing in their own backyards and realized that if they got away with it our own ability to project influence into those backyards, some of which were also our backyards, would wane.

And after we conquered these countries we set up friendly governments.

And you can make the case that they are all still dependent on us, not least for security, which is the root of all power.

The United States is a great power.

Great powers are great powers because they can make other people in other countries do what they say, by military force if necessary.

We can feel good about being a great power because we think what we tell others to do is better than what other powers would tell them to do.

Or because we are better or more humane at running the world than others would be.

But, please, don’t tell me that we somehow manage to be a great power without exercising power!

What makes Ukraine different is not that it’s the first time in 80 years that one country is trying to make a client state out of another. We do that all the time. It’s that for the first time in 25 years a great power not called the United States is trying to make a client state by military force.

Ukraine is significant only because it reminds us that the brief period during which the United States was the world’s sole great power is probably over.

Categories
Antitrust Monopolization

Progressive Cologne

So here’s my suggestion: Give Biden and his people a break on their antitrust crusade. It won’t do any harm. It won’t get in the way of the big stuff, which is mostly outside Biden’s control in any case. At worst, administration officials will be using inflation as an excuse to do things they should be doing in any case. And they might even have a marginal impact on inflation itself.

Paul Krugman, Why Are Progressives Hating on Antitrust?, N.Y. Times (Jan. 18, 2022).

It probably won’t work, so let’s do it?

We need to do it for other reasons, so let’s do it for the wrong reason?

There’s a word for this: Obsession.

Meanwhile, elsewhere in the piece, Krugman dismisses price controls, which are one remedy that would actually solve a few problems in the highly efficient (and hence unwise-to-break-up) industries, like meatpacking, to which he’d like to take the antitrust axe. (Not even price controls would, however, help with inflation.)

Krugman did write the introduction for a recent edition of the General Theory, but he diverges from his teacher on antitrust.

Keynes famously thought inflation, or the lack thereof, had nothing to do with competition, monopoly or any other microeconomic phenomenon, which is why he disdained both the N.R.A. and Thurman Arnold. Instead, he invented a whole new branch of economics—macroeconomics—to explain it.

But if there’s no intellectual foundation for progressive antimonopolism, why does it so appeal? As Krugman’s evocation, elsewhere in the piece, of J.F.K. talking tough to the steel industry suggests, it’s a macho thing—progressives thumping their chests at corporate America.

If that sounds a bit savage, there’s a cologne for that, too.

Categories
Meta

The Magic of Science

Suppose that it were discovered that knocking on wood reduces the incidence of premature death by, say, 10%. Suppose that the provenance of this statistical regularity were impeccable. That it were found not only in data gathered from life, but also in carefully constructed experiments involving millions of subjects observed over decades.

Suppose, further, that a great deal of research were done on the mechanism behind such a connection between a knock-knock-knock and longevity, and that all possible mechanisms were ruled out. Knocking on wood in a vacuum produced the same result. So too did knocking with a mechanical prosthetic rather than knuckles. Even asking someone else to knock for you did the trick.

Science would, then, be forced to conclude that the connection between knocking on wood and longevity is a fundamental law of nature, up there with gravity, albeit an eccentric law given its startling narrowness (suppose that it were only to work for humans—animals knocking on wood were not to live longer) and seeming lack of integrability with the other laws of physics.

Question: would we then be forced to conclude that magic is real, since, in effect, an element of human superstition had been found, in the light of science, to be empirically verifiable? Or would the fact that it had come to be empirically verifiable make it cease to be magic?

In other words, is our disenchantment with the modern world due to the fact that the laws that science has proven are, well, boring, and don’t involve the superpowers we once so hoped were real? Or is our disenchantment caused by science itself, by an orientation to the world that seeks always to shine a light on things instead of to respect the mystery?

Categories
World

The Counterweight that Isn’t

The Muslim World. (Mohsin, OIC Member States, CC BY 3.0)

As the United States comes now to face Russia and China in great power competition, one feels intensely the lack of a unified Muslim world. For one need only take a look at a map to appreciate that it is a dagger at once aimed at the Russian belly and the Chinese back—and has historically been an important antagonist of both empires. There is no question that, were Islam not the geopolitical non-entity that it is today, Russian and Chinese horizons would be badly limited by the need to protect their flanks. Instead, the only threat the Muslim world presents to these countries today is as an enticement to conflict in dividing up its territories in Central Asia.

Categories
World

Atlas Shrugged

After the collapse of the Soviet Union, the United States believed, correctly, that they were the world’s only remaining great power. China was poor. Europe had long been exhausted by its two great 20th century wars, and political collapse in Russia had reduced her to the rank of a middle power—an echo of this view is found in the observation, oft-repeated these days, that the Russian economy is the size of Italy’s. The question then became whether the United States should use its power to police the world, or whether it should allow the lesser powers to mistreat each other or their people.

The first Gulf War seemed to say that, at least when it came to the revision of borders, the United States would police the prevailing territorial status quo. Iraq had annexed Kuwait, and the United States rode in to reverse that outcome. American-led military action also put a stop to Serbian expansionism a few years later, seemingly reinforcing this signal.

The American commitment to protecting individual persons around the world, as opposed to sovereign nations, seemed somewhat weaker, but was by no means non-existent. There was much hand-wringing in Washington about failure to intervene to quell genocide in Rwanda, for example.

The picture of America as sole great power was reinforced over the ensuing decade. The September 11 attacks, carried out by a ragtag group without the backing of any government, suggested that the United States were without any substantial adversary. And the response—the invasion of Afghanistan and the adventure in Iraq—suggested that the United States could strike any nation at will without fear of anything more than a brief tut-tutting from global public opinion.

Then came Russia’s annexation of Crimea in 2014, which challenged America’s claim to sole great power status that had by then prevailed for the past quarter century. The first Gulf War, in 1991, had been a warning to the world: the United States, as sole great power, would not tolerate the revision of borders. Now Russia had chosen to revise a border. Would the United States seek to do to Russia—a country it had treated like a middle power for a quarter century—what it had done to Iraq in 1991?

The response was: crickets. The United States did nothing. And just like that, two new great powers (re)appeared on the world stage: Russia and China.

Things had changed over the past decade or so. First, Russia’s weakness, which had fundamentally been a political weakness caused by the collapse of the Soviet state, was gone; the country had regained political stability and was now once again capable of acting decisively on the world stage. And it still had its nuclear weapons, and plenty of delivery channels, which its Italian-sized economy was more than enough to maintain. Second, breakneck economic growth had vaulted China’s economy into competition with the United States, and her wealth was buying her the military capabilities she would need to be a great power as well.

Great power status is not just about wealth and military power, however. It is a mindset. Britain, France, and Germany could all ramp up military expenditures and challenge the United States. But they do not because they were exhausted mentally by their attempts to maintain their great power status in the 20th century. They are content to play second fiddle to the United States. Russia, however, emerged triumphant from the same wars that exhausted Britain, France, and Germany. And China has waited two centuries to regain what it sees as its rightful place as center of the world. Both countries have the great power mindset.

America’s failure to respond to Crimea suggested that perhaps America had lost it—not the mindset needed to be a great power, but the mindset needed to be the sole great power. For any country that fears war more than it fears loss of status loses its status immediately, and what was at stake was America’s claim to be the guarantor of world order. But America’s stated justification for failing to respond to Crimea was precisely that it feared war.

Russia got the hint immediately, and within the year intervened militarily in the Syrian civil war, propping up a regime that the United States opposed, not least on human rights grounds. With that, Russia had challenged not only America’s commitment to protecting states against states (Ukraine against Russia) but also America’s admittedly much more equivocal commitment to protecting people against human rights violations.

Again, the response was: crickets. The United States was willing to tolerate Russian policing of the very region over which the United States had most asserted its own control over the past 25 years. Americans themselves didn’t seem to notice, but anyone who was paying attention (i.e., the rest of the world) understood this to be a signal humiliation.

Meanwhile, even before Russia’s annexation of Crimea, the Chinese had embarked on a campaign of island building in international waters that China claimed as its own. This was another territorial revision and so another direct challenge to America’s claim to guarantee the territorial status quo.

Here, too, the response was: crickets. And the islands have become a sprawling archipelago.

What we have witnessed over the past ten years is the collapse of the unipolar world order over which the United States presided after the fall of the Berlin Wall. It should be no surprise that Russia would continue to expand territorially in the wake of such a collapse. It will be no surprise when China does as well, not least by retaking Taiwan.

At present, the United States remain the strongest power both economically and militarily. But, particularly in respect of China, that may not continue.

The first question America must answer for herself is: does she want to reestablish her former role as the world’s sole great power? If the answer is yes, then she must fear continued loss of that status more than she fears war. Russia, certainly, values her return to great power status more than she fears war. And that is precisely why she has returned to that status.

So, where do the United States stand on this?

The answer would seem to be: no, America does not want to defend her sole great power status.

And despite enjoying it mightily while it lasted, she perhaps never was willing to suffer anything to protect it. There was, after all, no real risk involved in the first Gulf War; it afforded America the equivalent of “cheap talk” in game theory—an opportunity for empty posturing.

Moreover, if America had wanted the role of sole great power to begin with, she would have exploited the vast nuclear advantage she enjoyed immediately after World War Two to deny Russia the superpower status she later enjoyed.

Having failed to do that, America would, in any event, later have exploited the collapse of the Soviet Union to ensure that Russia never again could pretend to empire.

And America would never have promoted Chinese economic growth in the 1980s, 1990s, and 2000s, for America would have heeded the warning attributed to Napoleon, to wit: “let China sleep, for when she wakes, she will shake the world.”

Categories
Antitrust Monopolization

Victor Hugo: Pro-Trust

[T]he prosperity of [the town] M. sur M. vanished with [its mayor and leading business owner] M. Madeleine; . . . lacking him, there actually was a soul lacking. After this fall, there took place at M. sur M. that egotistical division of great existences which have fallen, that fatal dismemberment of flourishing things which is accomplished every day, obscurely, in the human community, and which history has noted only once, because it occurred after the death of Alexander. Lieutenants are crowned kings; superintendents improvise manufacturers out of themselves. Envious rivalries arose. M. Madeleine’s vast workshops were shut; his buildings fell to ruin, his workmen were scattered. Some of them quitted the country, others abandoned the trade. Thenceforth, everything was done on a small scale, instead of on a grand scale; for lucre instead of the general good. There was no longer a centre; everywhere there was competition and animosity. M. Madeleine had reigned over all and directed all. No sooner had he fallen, than each pulled things to himself; the spirit of combat succeeded to the spirit of organization, bitterness to cordiality, hatred of one another to the benevolence of the founder towards all; the threads which M. Madeleine had set were tangled and broken, the methods were adulterated, the products were debased, confidence was killed; the market diminished, for lack of orders; salaries were reduced, the workshops stood still, bankruptcy arrived. And then there was nothing more for the poor. All had vanished.

Les Miserables