tomahawk6 said:
Kirkhill said:
I've Seen America’s Biggest Economic Challenge — and It Is... Us
Mark Weinberger
Apr 29, 2015
When we look around the world today, the U.S. economy is doing pretty well. China is logging its slowest growth in 24 years. Russia has been downgraded to junk bond status. The EU teeters on the brink of an uncertain future. Meanwhile, the United States is growing steadily – and racking up its longest sustained period of job growth in history.
This is only part of the story, however. The U.S. economy may be growing, but not nearly fast enough. We have strengths we aren’t using – and potential unfulfilled. And as we work to reach that potential, the biggest obstacle standing in the way might be… us.
As the world economy has evolved in recent years, the U.S hasn’t always kept up. Too often, we’ve allowed politics to paralyze us. But now it’s time to put aside politics and focus on policies that position our economy to grow, compete, and succeed on the global stage.
This is critical because, right now, 95% of consumers and 80% of the world’s purchasing power is outside of the United States. Asia’s middle class is almost twice the size of our entire country. U.S. companies earn more than half their income abroad today. Thirty years ago, it was closer to a third.
These global realities present real opportunities and challenges for America’s future. That’s something we talked about this week at the Milken Global Conference in Santa Monica – where leaders in business, politics, and academics gather every year. On the panel I joined, three issues in particular stood out – and getting them right will be critical to keeping our economy moving forward.
If we want growth and jobs at home, we need a trade policy that empowers American businesses to compete and win worldwide. Unfortunately, we’ve often missed that opportunity in recent years. Around the world, countries are striking regional deals to liberalize trade and remove barriers to business. But in many of these cases, the U.S. is not at the table.
From 2000 to 2010, for instance, Asian nations entered into 48 trade agreements. Of those agreements, the US was part of only two – and our exports to that region dropped by over 40% in the same timeframe.
We can’t afford to stand on the sidelines like this – especially in critical emerging regions like Asia. As President Obama has said: “If we don’t write the rules, China will write the rules in that region…We will be shut out…That will mean a loss of U.S. jobs.”
Fortunately, the U.S. is negotiating two ambitious free trade agreements right now: the Trans-Pacific Partnership (TPP) in Asia and the Transatlantic Trade and Investment Partnership (TTIP) with Europe. Combined, they span economies that make up two-thirds of the world’s GDP – and they’re projected to create up to two million new jobs in the United States.
Our markets are already open to these other countries. These deals will open their markets to us. And they won’t just lower tariffs. They’ll also improve global regulations, raise governance standards, and implement environmental and worker protections. They are, in almost every sense, the kind of 21st century trade deals we need.
This is a rare issue that spans party lines, from President Obama to Republican House Ways and Means Chairman Paul Ryan. It’s not often that you see those two on the same side – and we should seize the opportunity for progress.
Tax Reform: The key to keeping our competitive edge
If our country is going to compete in the global economy, we need to compete with our tax code. But we’re not doing that today.
Thirty years ago, the U.S. had one of the lowest business tax rates in the world. Some even considered our country a tax haven. But a lot has changed since then. In recent years, 90% of OECD countries have lowered taxes to attract businesses – and we’ve been left behind. Today, the U.S. has the highest corporate tax rate among OECD countries. We are the only country on Earth that taxes worldwide income along with a rate above 30%.
Thanks to this uncompetitive tax regime, our businesses are at an international disadvantage. Consider the M&A market, where foreign buyers were able to acquire over $200 billion of U.S. companies and business assets between 2003 and 2013. If our tax rate had been more competitive at the time – even the OECD average of 25% – that decade could have been very different. U.S. firms would have actually acquired $590 billion in assets – and 1,300 American companies would not have been purchased by foreign organizations.
It’s time to catch up to the rest of the world. The Business Roundtable and Rice University have estimated that tax reform would increase America’s GDP by 0.9% in 2 years, and 3.1% in 10 years. It would also drive higher incomes on average. This is a reform that’s long past due – and the rest of the world isn’t waiting around.
Immigration: Keeping the best talent in America
Right now, our immigration system is inefficient, outdated and ready for change. EY regularly recruits on university campuses, and I can’t tell you how many times we’ve had to turn away some of our best applicants because we know they can’t get the visas they need to stay in the US.
Even worse, our immigration system isn’t just turning away promising young people – it’s turning away future leaders. All you have to do is look at the list of Fortune 500 founders to see that. Of these entrepreneurs, 40% of them are either immigrants, or children of immigrants.
If we want to maintain a competitive edge in the global economy, we should be fighting to keep that kind of top talent here – not sending it away.
When you consider that kind of potential, it’s clear that immigration reform isn’t just a nice thing to do. It’s the smart path to drive economic growth in a big way. One study found that immigration reform would increase America’s GDP by almost 5%, increase average wages, and cut the deficit by over a trillion dollars over 20 years.
As we position our country for the future, let’s not lose sight of these drivers of growth. The opportunities and obstacles are clear – and now it’s up to us to decide what to do with them. In a very real way, the only thing standing in the way of America’s economic potential is… us.
tomahawk6 said:
SUPERPOWER: Ian Bremmer explains America's choices in the 'period of geopolitical creative destruction'
ELENA HOLODNY
May 19, 2015
Washington hasn't had a defined foreign policy strategy for the last quarter-century, but now it's time for America to take a look at the options and make a choice, argues Eurasia Group president Ian Bremmer in his new book, "Superpower."
During the Cold War, America had a defined policy — and everybody knew what it was. Following the collapse of the Soviet Union, the world was still safe enough for Washington to get away with not having a clear strategy.
However, in today's increasingly dangerous and unstable geopolitical environment, that's no longer an option.
"America has not had a [post-Soviet] foreign policy strategy," Bremmer told Business Insider in a sit-down interview. "We've chosen to be risk averse and reactive. You look at the Gulf Summit with the leaders not coming. You look at Netanyahu. You look at the Russians. The Chinese have the AIIB. All of this.
"And now the point is: How is America going to react to all of this?"
There are three specific foreign policy options for the US, according to him:
Indispensable America — US exceptionalism on a global scale. Indispensable America is the idea that Americans care about and actively work to make the world safer — especially because this ensures the safety of the American people.
Furthermore, if America won't play the role of the world's policeman, then no one will — and that could lead to a much more dangerous world.
Moneyball America — running America like a company. Moneyball America takes a calculated look at what America is spending money on, how to minimize costs, and how to maximize the benefits.
Independent America — American values do matter, but the way to promote them is by investing in and focusing on the US rather than policing the world around. Once you build up and improve America, you will inevitably project American values across the world.
Basically, "'Indispensable' is going with your heart, 'Moneyball' is going with your wallet, and 'Independent' is going with your head," according to Bremmer.
Business Insider and Ian Bremmer discussed America's current role in the world, how the geopolitical environment has changed since the fall of the Soviet Union, and how that affects the choices America has in the future.
This interview has been lightly edited and rearranged for clarity.
Business Insider: You write that America has three choices. However, as you trace through Bill Clinton's, George W. Bush's, and then Obama's foreign policies, it seemed as though many of their policies were a product of the world that they were leading in. To what degree would you say that it's external factors that actually shape US foreign policy? To what degree do we have a choice?
Ian Bremmer: Well, it's funny because all of my previous books were about big global structural countries. I'm not someone who likes to talk about just blaming Obama. Because you also ask, what about Congress? What about the American public? China? Russia? Europe? There are lots of reasons why we're in the thicket geopolitically that we are.
But, the fact of the matter is, the US president has a lot of flexibility on foreign policy. As much as Congress may say that they want to play more of a role, they really can’t. I mean if we do or don’t do an Iran deal, that’ll be largely on the basis of Obama. The reaction that we’ve had on Russia/Ukraine has been influenced very significantly by Obama.
I happen to believe that we are entering into this period of geopolitical creative destruction. The last time we’ve seen something like that was after WWII. I believe that this is a G-Zero environment. I believe that despite the fact that the United States is the world’s only superpower. I do not believe that this will be an American century, nor do I believe it will be a Chinese century. I think we’re done with centuries.
There’s just too much volatility.
But I absolutely believe that in an environment where there’s much more volatility, where there’s much more geopolitical conflict — that’s one where the decisions made by the American president happen to be one of the most significant factors that you can control. And the most significant one that we can control.
It’s been obvious that for the last 25 years we’ve abdicated. We’ve not had a foreign policy strategy. We’ve chosen to be risk averse and reactive. And when the Soviet Union first collapsed, that was fine, because we’re the only game out there.
But we’re sitting here in 2015 and the American economy is rebounding, and unemployment’s down, and Obama's approval ratings on foreign policy are in the toilet, and the international reaction to this has been bad.
You look at the Gulf Summit with the leaders not coming. You look at Netanyahu. You look at the Russians. The Chinese have the AIIB. All of this stuff. And the point is: how is America going to react to all of this.
I did not write this book as a pure exercise. I actually believe that the Americans have choices. And those choices will not necessarily shape the entire world in our image, but those choices will absolutely affect the trajectory of the United States in a global environment that is much more geopolitically uncertain. And I think that it behooves our president to do that.
It’s not that I fear that we’re not going to do anything — it’s not that I fear another eight years of incoherent “Question Mark America." What I fear is another two, or four, or six years of "incoherent America" and then there’s a crisis. Then there’s a — God forbid — another 9/11, or there’s a massive cyber attack, or Europe implodes, or China does something really assertive — whatever it is.
What worries me then is Americans, absent a strategy, are going to overreact — just like we did with Ebola, just like we did with 9/11, just like we do with everything — we overreact. And we would be overreacting without a strategy, in an environment not like 9/11 (where America is on top of the world), but where actually the world is blowing up.
BI: If we look at the major world leaders Obama, China's Xi Jinping, and Russia's Vladimir Putin — they all have very different strategies in their foreign policies. Obama, as you write in your book, defines a lot of his policies in negative terms ("we're not going to put troops on the ground, for example). Xi tends to keep a blank face. And then you have Putin, who's always in the public eye and very aggressive. How do you think these strategies have played out and how do you think they will continue to play out?
Bremmer: So I think that the only country in the world with a global strategy right now is China — and I think that that should unnerve us. I think that China has decided that militarily they cannot compete with the United States over the medium term, maybe even in the long term. Outside of Asia they can’t. I think [former Australian Prime Minister] Kevin Rudd understands this very clearly and I agree with him.
But the Chinese do want to compete with us economically globally. They want to compete with our standards, they want to compete with our influence, they want to compete with our architecture that we’ve created, and they’re doing that through the BRICS Bank, and the AIIB, and through the Silk Road Initiatives — you name it. Over a trillion dollars being spent. No one else comes close. And it’s a real strategy. It will certainly be overreach in some places, but overall, I suspect it will work.
Russia is in decline. Their president is extremely upset about that. He has hit upon a policy of aggressiveness that works very well domestically, and he wants to project power. And he wants to particularly do it militarily in a way that the Chinese would never do. Or certainly, would find very counter productive today.
So the Russians are the ones who want make sure that we know that their navy can be right in Latin America, and that’s just fine by them. Their fighter pilots, their bombers will have their nukes right on there. And they don’t care if they find sort of with just line of sight. No radar at all, that sort of stuff.
And obviously the Russians are much more willing to take risks and to make mistakes as a consequence of that. Putin personally is playing a very different game.
Do you think it's that the Russians are willing to take risks, or rather that they aren't great at strategizing?
Bremmer: No, I think they’re willing to. Putin is thinking much more tactically than he is thinking strategically. But I think that to the extent that he’s think strategically, he’s more willing to accept risks because he sees that a more risk averse posture over the last twenty years has led to incremental gains from the United States and allies that don’t really respect the Russians very much — in a way that they respect China quite a bit.
So you look at anything from sending an ambassador over to Russia who meets with the opposition on the first day — we’d never do that, the American ambassador to China wouldn’t do that because we think that China’s too important. NATO enlargement, missile defense, Baku-Tbilisi-Ceyhan pipeline, energy exploitation from the Caspian to the West, and now Ukraine.
A lot of this is just — it’s not that we want Russia to decline, it’s just that we don’t care. It’s not really important.
Putin is tactical and risk accepting. Obama is tactical and risk averse, which you see in Syria. He makes the misstep on the red line, and then he does everything possible, ties himself in knot contortions, that clearly hurt him strategically, to avoid getting sucked into Syria. And he’s done this in Iraq, and he’s done this with the Iran deal, and he’s done this in lots of different ways — even in Russia. Some of those policies have been okay, like Iran — so far. But some have been disastrous — like Syria, and like Russia.
Risk aversion in a world that’s becoming much more dangerous, and you’re the largest power out there, is not a recipe for success. Because again the problem is that not just that Americans think that Obama’s doing the worst on foreign policy of all other issues. It’s also, when I talk to foreign ministers from every country around the world, every one of our allies — they’ll all tell you privately: “My God. What does America stand for? Like, what do you guys want?” And they all want to hedge as a consequence of that.
Beware China's Grand Strategy
How Obama Can Set the Right Red Lines
By Jeff M. Smith
May 20, 2015
Last month 57 nations applied to become founding members of China’s newest creation: the Beijing-based Asian Infrastructure Investment Bank (AIIB). Ostensibly designed to help finance projects that sate Asia’s expanding appetite for infrastructure, the AIIB has left Washington struggling over how to respond. Some applaud China for assuming greater international responsibility and wielding soft power to aid Asia’s growth. Some oppose the move as undermining the U.S.-led economic order and using aid as a tool to advance China’s strategic agenda.
In an article for Foreign Affairs, “Who’s Afraid of the AIIB?” Phillip Lipscy makes a detailed case for the former. He argues that the United States’ principal concern—that the AIIB will undermine existing international lenders and their standards—is misplaced. China, he argues, is more of a status quo power when it comes to international institutions than many think. Further, development aid is a “highly competitive and fragmented policy area” and donors, he believes, are unlikely to devote resources to any institution that narrowly pursues its own interests and is unaccountable to its stakeholders. In any event, he writes, China is already able to “undercut the quality and conditions of existing aid agencies…more expediently through bilateral aid and overseas activities of its state-owned enterprises.” Washington, Lipscy concludes, should embrace the AIIB and even join the institution to shape its policies and practices from the inside.
Lipscy admirably addresses the question of U.S. participation in the AIIB and its impact on international lending standards, but security strategist see such issues as tactical questions that pale in comparison to the broader strategic ones. China is now operating beyond the reach of a U.S. veto, capable of reshaping the international order unilaterally. The AIIB will grant China a virtuous cycle of benefits, expanding its political and economic leverage across Asia and aiding its efforts to elevate the yuan as an international reserve currency. And it is China’s own companies, with unrivaled experience building affordable infrastructure, that will be uniquely positioned to reap the benefits of the AIIB’s initial capitalization of $100 billion.
Those in the security community are concerned with whether the multilateral development bank could help free up capital for the next aircraft carrier, curry enough favor to win the carrier berthing rights in a foreign port,
or finance enough oil and gas pipelines to shield that carrier from a fuel embargo.
Such a zero-sum construct may seem unnecessarily Machiavellian: Must Washington view every Chinese advance with hostility and believe that it comes at the United States’ expense? The answer to that question, and to how Washington should ultimately view AIIB, is dependent on China and the objectives of its grand strategy.
AGENDA ITEMS
Ask ten China scholars to define Chinese grand strategy and you will get ten answers. In a formal sense, it does not exist. Yet observers can discern coherent strategic priorities that, in aggregate, resemble the elements of a grand strategy. Today, the first priority is arguably driven by the Communist Party’s preoccupation with mitigating key vulnerabilities in pursuit of stability and growth.
Rapid economic growth long ago replaced ideology as the principal binding agent of the Chinese system. At a time when Beijing needs that growth more than ever to ease the frictions in its system (rampant corruption, elite infighting, social and political unrest, environmental degradation, and massive demographic challenges), Chinese GDP growth has dipped to its lowest level in a quarter century.
Externally, Beijing is keenly sensitive regarding the vulnerability of the energy imports that sustain China’s economy, the bulk of which must traverse thousands of miles of open sea patrolled by the U.S. Navy and through the narrow naval chokepoint at the Strait of Malacca. The naked vulnerability of these imports (particularly in war time) is intolerable to Chinese strategists.
The goals of Chinese grand strategy can therefore be assumed to be attaining diverse and defensible sources of energy and rapid economic growth bolstered by a healthy supply of export markets in an increasingly connected Asia.
The AIIB has the virtue of advancing both agendas, but it represents just one finger in a Chinese hand grasping Asia in an ever-tighter embrace. China’s “String of Pearls” investments in port facilities along the Indian Ocean rim represent another. Just this past February, a Chinese state-owned enterprise assumed control of the “crown pearl,” Pakistan’s Gwadar Port. Another finger is the web of new oil and gas pipelines from Myanmar (also called Burma) to Kazakhstan, and new industrial and commercial rail links spanning from Western China to Europe. Last year a Chinese cargo train made the longest continuous train ride in history, a 21-day, 8,000-mile round trip from China’s Zheijang province to Spain and back. Meanwhile, Russia and China are currently negotiating the details of a largest-ever gas pipeline and supply contract worth up to $40 billion. Finally, Beijing is still unveiling the details of a “One Belt, One Road” New Silk Road Initiative, an ambitious vision for an interconnected Asia with each spoke linking back to the hub of the Chinese economy.
NATIONALIST RISE
There are sound economic rationales behind each Chinese initiative. And, in isolation, they would offer little cause for alarm. However, the initiatives undoubtedly strengthen China’s strategic position, which becomes more troubling when paired with a second theme emerging in Chinese foreign policy. It’s driven by a tide of nationalism that China’s leaders are attempting to wield as a political tool, but that threatens to expand beyond their control. China’s leaders appear (at least temporarily) preoccupied with stability and growth, but there are more neo-imperial ambitions lurking in the shadows.
In the extreme nationalist worldview, the U.S. military has effectively “boxed in” China along the “first island chain” stretching from South Korea to Indonesia. And they believe the United States is secretly encouraging tensions between China and its neighbors in a further attempt to contain China’s rise. This group supports more aggressive opposition to the U.S. military presence in the region, promoting tactics such as harassing U.S. surveillance vessels in China’s Exclusive Economic Zone (EEZ).
Nationalists are even more eager to punish neighbors such as Japan, Vietnam, and the Philippines—and even India—who they believe capitalized on a period of relative Chinese weakness to assume control of disputed islands in the South and East China Seas and territory along China’s land border. They seek a favorable resolution to these territorial disputes, by force if necessary. Longer-term, many aspire to a loose recreation of the tributary system, where regional powers are so dependent on Beijing or intimidated by it that they’re rendered submissive.
It is unclear how committed China’s leaders are to pursuing these outcomes, and over what timeframe, but since 2008, the ambitions have been reflected in Chinese policy with greater clarity and intensity. That year, Beijing made a paradigm-shifting miscalculation: It interpreted the global financial crisis as a symbol of terminal U.S. decline and the dawn of America’s strategic retreat from Asia. As a result, in subsequent years the world witnessed alarming growth in unilateral provocations in the South and East China Seas, a rising chorus of nationalist rhetoric, military expenditures untethered from GDP growth, confrontations along the disputed Sino-Indian border, an uptick in confrontations with U.S. naval vessels in China’s EEZ, and unprecedented “land reclamation” activities in the disputed Spratly and Paracel islands.
In 2008, Beijing made a paradigm-shifting miscalculation: It interpreted the global financial crisis as a symbol of terminal U.S. decline and the dawn of America’s strategic retreat from Asia.
Although it began before his tenure, Xi Jinping, China’s avowedly nationalist president has largely embraced the more aggressive posture. Xi’s China has outwardly abandoned the Deng Xiaoping-era adage of “hide your strength, bide your time” in favor of the confident pursuit of the “Chinese dream.” And his promotion of a new “Asia for the Asians” slogan constitutes an unsubtle effort to de-legitimize America’s presence in the region.
RED LINES
Since the turn of the century, Washington has adopted a relatively cautious and consultative approach toward China. Concerns over human rights and political freedoms, discriminatory trade policy, and growing militarization have mostly been subdued in service to a grander vision: peacefully integrating China into the Western-led international order.
This approach was largely successful in managing ties under President George W. Bush. It has been less kind to President Barack Obama. The president bears some responsibility for this, but it is also the result of a more confident and assertive China post-2008. Since then, Washington’s measured responses to incremental changes to the status quo have only invited further boundary testing from Beijing.
Consequently, there is a growing chorus in Washington urging a change in approach to Asia’s giant. A recent report by Ashley Tellis, from the Carnegie Council, and Robert Blackwill, from the Council on Foreign Relations, advocates a bold new strategy that “deliberately incorporates elements that limit China’s capacity to misuse its growing power” and “centers on balancing the rise of Chinese power rather than continuing to assist its ascendency.”
The report cautions against a Cold War–style “containment” policy, but implores Washington to abandon diplomatic idealism and wield a more robust arsenal of inducements including: preferential trade agreements that “consciously exclude China;” a technology-control regime that prevents China from obtaining military hardware capable of “high-level strategic harm” to the United States; and further capacity building for the United States and allied militaries.
The report may prove overly pessimistic in its conviction that there is “no real prospect” of ever building “peaceful coexistence” or “mutual understanding” with China. There are conditions under which the two can reach an accommodation that respects the sanctity of both countries’ vital national interests and those of China’s neighbors. But that outcome is largely dependent on Chinese behavior and may, ironically, be hurried by a more muscular U.S. approach. What’s arguably missing, however, is a critical interim step: In a security sphere pregnant with ambiguity, the United States must establish more clearly defined red lines for China.
Defining these red lines will present considerable challenges. Set them too liberally and the United States risks establishing rules that cannot be enforced or, worse, needlessly provoke Beijing and contribute to its nationalists’ siege mentality. Set them too conservatively, however, and they further encourage Chinese adventurism and continued attempts to alter the status quo in its favor.
Projects such as the AIIB, inherently non-threatening but strategically advantageous to China, will evade such red lines altogether. There’s little merit in the United States opposing such initiatives, as was apparent when American partners rushed to join the new bank over Washington’s objections. Nor should it be forgotten that the AIIB and the New Silk Road Initiative could ultimately raise the living standards of millions of people in underdeveloped corners of Eurasia. Yet, rather than viewing them in isolation, Washington must observe these initiatives in the context of a Chinese grand strategy and acknowledge the dangers and opportunities they present should that strategy assume a more nationalist trajectory.
Despite these challenges, defining new red lines is critical as any attempt to adopt a tougher approach toward China will hinge on the United States’ ability to form a broad coalition of partners. On one hand, never has the Indo-Pacific been more apprehensive over China’s rise and more solicitous of an increased U.S. presence. At the same time, Beijing’s growing power and influence will make achieving alignment on a firmer approach to China exceedingly difficult. The clearer the rules of the road, the more palatable and legitimate a tough new approach will be to the United States’ partners, and the less abrasive it will be to Beijing. Washington must be seen less as a subjective arbiter than a guarantor of a fair and consistent rules-based order.
