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Targeting the U.S. Will Make America Great Again(I)

4/27/2019

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Dr. Wordman
 
Abstract

Both the U.S. and China are facing economic problems. China has been following the U.S. as a successful example in opening up and reforming her economy. China’s rapid rise is not a miracle but simply because of Chinese citizens have been poor for too long thus having a stronger drive to improve their living standard. As China is successfully removing poverty, she gradually faces the similar economic problems the U.S. is facing, income and wealth gap, declining GDP growth, job creation, and high debt throughout all levels of government and common citizens. Therefore targeting China to make her like US is not the solution, rather, targeting the U.S. and working with China may solve our problems.

 
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Targeting the U.S. not China will make America great again, here is why!
 
The U.S. has been a superpower since WW II. Post war, the U.S. was leading in science and technology almost in every field making her the most productive nation in the world having her GDP peaked close to 40% of the world’s total GDP at one time. Since 1950’s the net U.S. GDP has been steadily increasing but declined as a percentage of worlds GDP, downward below 20%. Of course, this is due to the rise of many other countries’ productivity. This is a good thing for the world not necessarily bad for the U.S. either, since the U.S. does not want to be the only prosperous country in the world. The U.S. is still leading in many areas of science and technology then why is the U.S. slipping in per capita productivity and why are Americans nervous about her future? Technology and foreign competition have been blamed as the culprit, but never the U.S. economic model, the U.S. cultural change and never the American society.
 
The advancement in technology did bring mechanization, automation, large data processing, robots, and artificial intelligence reducing human labor and human brain needed in our industries and changing many aspects of our society. The principal change forced on human by technology is exhibited in jobs loss/obsolescence, but the technology advance also brings new jobs but the nature of new jobs requires very different set of work skills which demand appropriate education and retraining. Dealing with this issue, the U.S. economic model and government policies must bear the responsibility. In an article by Cheng Li of Brookings Institute published in Foreign Affairs, Snapshot, March 10, 2019, entitled How China’s Middle Class Views the Trade War, made a good analysis for the U.S. to ponder on. The Chinese government is very sensitive to how the Chinese middle class feels about China’s economy. The Chinese leadership knows the tremendous and ever increasing political influence of China’s middle class to the legitimacy of its governance. Therefore China acts carefully to sustain a long term economic growth and is currently in the midst of a delicate process to transition her economy, balancing manufacturing export, domestic consumption and technology innovation, while dealing with the external pressure such as the trade war initiated by the U.S.. Whereas the U.S. government is only accountable to four-year term election which unfortunately is controlled by the upper 1% rather than the middle class in America, thus only making the U.S. government focusing on short-term policies , stock market performance, and busy reversing policies of the previous administration. Consequently, the U.S. is unable to manage her national economy as well as China does.
 
The fundamental conditions of a healthy economy are healthy productivity and healthy consumption. While the healthy productivity gain depends on science and technology and skilled workers, the healthy consumption depends on a large employed population who can earn good wages and make spending. This equilibrium condition for a healthy economy can be represented by a sufficient GDP figure and a high enough employment rate. However, the employment rate should be represented by a steady permanent employment rather than a transient short-term employment for supporting a healthy economy, since short-term jobs cannot produce skill upgrade needed for new challenging jobs and innovations. When technology advances, it increases productivity and raises wages not only in a particular industry sector but it has a ripple effect raising wages across all industries. Under a socialistic concept, sometimes, the government will impose a minimum wage policy which automatically raises wages across the board as a means to raise the income level hence standard of living across the entire population especially helping the lower income groups.
 
When wages are high in an industry sector which cannot maintain high enough profitability to support the growth, the industry is likely to become a low-tech high-labor (LTHL) sunset industry, for example, textile, furniture, steel making and fresh food industries. These LTHL industries will have to move to low labor cost countries which will be glad to absorb the low tech industries. The developing countries with large populations are generally the target locations for these low-tech migrations. Numerous cases are available to illustrate this trend. The U.S. essentially lost many low-tech industries through this natural process willingly and voluntarily. No one can steal American jobs, because the U.S. is capable of prohibiting it. For example, exporting high-tech in terms of products, corporations and individuals have been strictly controlled by the U.S. government.
 
Losing low-tech industries is not necessarily a problem since maintaining high-tech industries can generally command higher profitability. Therefore, there is a saying that a developing country that making a billion pairs of jeans makes less profit than a developed country selling one jet plane. This is a true fact but one must recognize another fact that an advance jet plane may require a thousand technical professionals and skilled workers but the billion pair of jeans support hundreds of thousands of low skilled workers, a very much needed job creation industry in a developing country. So the issue in a developed country is how to create enough new jobs, how to educate new workers and retrain workers upgrading them from low-tech jobs to the new jobs. The new jobs must produce new products having a market demand domestically and internationally. Why didn’t the U.S. follow this simple formula to sustain her technology lead and upgrade industries which can maintain her job and product market base? Hindsight, there is a clue.
 
The U.S. has enjoyed the highest GDP and led in most advanced technologies. While the above natural technology migration occurred, the U.S. being a capitalistic nation, controlled by the 1% wealthy individuals rather than the mass middle income class, was driven only by profitability in their industry transformation forgetting the above discussed conditions such as to maintain employment to sustain a healthy economy. The U.S. had given up most of her labor intense low-tech low-profit manufacturing industries and focused on high return capital intensive financial industry and high profit advanced high-tech sectors, such as medicine, weapons, and sophisticated IT products. Although these capital intensive industries may have high profitability but they do not support large number of work force, in addition, they reject the low-tech skilled workers, because they are not easily re-trainable.
 
The U.S. higher education is the best in the world attracting talents from all over the world. There was not an issue of turning up enough talents to meet the demand in the financial and high-tech industries, however, that number is far short of the displaced workers who were not retrained for a new job employment. High-tech High profit sometimes do need low-tech assembly and manual packaging and to be close to the market place to sell. (smart phone is an example) The developed countries can accept the high priced high-tech products but they have less population or cheap labor and want to protect their own high-tech industries. The developing countries have large population but they cannot afford the high priced high-tech products even they may desire them. China being a large developing country with huge rising middle income population is one of the best countries for high-tech products to enter. But the high-tech products are vulnerable to government regulation or import laws and also oddly even subject to the U.S. sanction laws based on national security concerns. Thus the U.S. economic model - driving her capital intensive industries to create high profits good for the few stock holders but not enough jobs to support her replaced low-tech workers - will eventually have problems. Now she does!
 



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Ancient Silk Road, Evolving OBOR (BRI) and Future Outcome (II)

4/20/2019

3 Comments

 
Ifay Chang
 
Abstract

China’s Bell and Road Initiative (BRI) program is inspired by the ancient silk road and its successful history, but unfortunately that part of history had not been well appreciated by the West. The BRI in the past five years have shown sufficient progress and significant achievements. They should not be ignored by anyone. The Asia Infrastructure Investment Bank supporting the BRI has grown to 87 member countries and launched numerous construction projects. The BRI offers an opportunity not a threat to world economy. It is time for the few skeptics to do an honest analysis of BRI, and endorse the initiative.  


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The BRI Consists of two components, the Belt, a land based "Silk Road Economic Belt" (SREB), similar to the trade road linking Asia and Europe described above and an ocean based route "Maritime Silk Road" (MSR), inspired by the famous Zheng He Voyage as well as the heavy trade volume presently squeezing through the limited straits, ports and sea lanes. The past historical maritime accomplishments served as the basis and offered the confidence needed for modern China to offer the ambitious BRI as a global collaborative development program to stimulate the world economy and to advance the welfare of people all over the world. What is required of course is to build the physical infrastructure, roads, bridges, ports and canals, as well as upgrading the digital communication facilities, transport and logistics centers to support the financing, banking, transporting and trading endeavors.

The accomplishments of BRI so far are quite impressive but the interpretation of its impact alarming. We can cite some statistics reported in Organic Media to review the achievements attributed to BRI over the past five years (2013-2018). The first significant success was of course the inauguration of AIIB for banking business on 12-25-2015; now 87 country members joined and made $5.3 billion investments in 13 countries with 28 projects (and Silk Road fund signed 19 contracts amount to $7 billion). The first BRI forum held on 5/14-15/2017 with 57 States attending. Since the promotion of BRI, there were direct flights established with 45 countries having a total of 5100 flights per week. Total trade attributed to BRI was greater than $5.5 trillion, shipping to 600 ports over 200 countries. Total financial investments reached $28.9 billion and $80B non-financial investments. (Chinese firms raised $57.11 B in 52 countries) Eighty two trading centers were established. A total of 244,000 jobs were created. There were 16 free trade agreements including 24 trading regions and countries. Twenty four million Chinese visited BRI countries and ten million visitors visited China. Two hundred thousand students from 64 countries study BRI in China and 66,100 Chinese study in BRI countries. There are 81 educational institutions and projects and 35cultural centers established in BRI countries. ($39.3 million scholarship offered in first half of 2018)

The above statistics are impressive accomplishments in less than five years. One can easily imagine that the net impact to the world economy and cultural and trade interaction will continue to expand. However, there are naysayers about BRI in some sponsored media. Any country opposing BRI either does not understand its historical background and lack of inspirations or feels threatened to be left out of the BRI impact. In reality, BRI is a program that will benefit every country and every person on earth if moving forward. BRI is no doubt a visionary program offering a common dream to more than half of the world population. China is in the right position to lead the effort and seems to adhere to a global prosperity goal. China is smart to kick off both SREB and MSR at the same time, since they are complimentary to each other and they serve as mutual insurance to each other to warrant China’s initial $100B investment and other investors’ money. 

Some people use geopolitical arguments to caution the downside effect s from BRI. For instance, Urumqi, Xinjiang in the BRI plan may be developed into a land port of transport and distribution center projected to grow a population to 100,000. From China’s perspective, it will be a huge success of lifting her people in the west above poverty, but at the same time this will raise the Central Asia economy multiple fold. Another cautionary warning was that any new port and strait construction connecting the Pacific and Indian Ocean will impact on Singapore and her control of the Malacca Strait. Currently, Singapore and Malacca Strait are operating to capacity; any complimentary infrastructure is likely to benefit Asean countries including Singapore. At this time, the significant absentee countries in BRI are the U.S., Japan and India. Japan is already signaling interest to get on the bandwagon and India may have come around to realize that her strategic concern over her borders with neighbors may let her missing out the rapid freight trains of BRI benefiting India tremendously.

The U.S. as usual always has opposing views on any issue and the BRI is no exception. The BRI is showing measurable progress, even over spilled to South America as several Central American countries embraced the BRI concept building a complimentary new canal and welcoming ocean fiber optic cable to benefit trading of their agricultural products. The U.S. should make an honest analysis on China’s BRI proposal; BRI certainly will increase China’s global influence over time, but pinning China as a hegemony intending to dominate the world by BRI is far-fetched with no concrete evidence. Russia would have similar concerns like the U.S. but Russia had eagerly joined the BRI program for her own good. Historically China had achieved her world number one economy position in the past not through military expansion like the colonial powers tried to do.
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Suppressing others to maintain the U.S. economy to be number one in the world should never outweigh the American people’s wish (like other global citizens) to improve their standard of living. The middle class Americans have been stagnant in their status quo for too long to ignore a progressive program like BRI. Blaming rising foreign countries for American’s domestic problems is copout thinking. Waging trade war based on outdated anti-China theory and knowing that it leads to no winner is not a sound economic policy. China certainly presents competition to the world in her effort to modernize her country and lift her people out of poverty, but competition is healthy, a necessary ingredient for advancing human civilization. Humans should be smart enough to pick win-win projects and to break the zero-sum mentality in economic development. The BRI offers such an opportunity not a threat.   
 



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3 Comments

Ancient Silk Road, Evolving OBOR (BRI) and Future Outcome (I)

4/13/2019

0 Comments

 
Ifay Chang
 
Abstract

China’s Bell and Road Initiative (BRI) program is inspired by the ancient silk road and its successful history, but unfortunately that part of history had not been well appreciated by the West. The BRI in the past five years have shown sufficient progress and significant achievements. They should not be ignored by anyone. The Asia Infrastructure Investment Bank supporting the BRI has grown to 87 member countries and launched numerous construction projects. The BRI offers an opportunity not a threat to world economy. It is time for the few skeptics to do an honest analysis of BRI, and endorse the initiative.  

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The ancient Silk Road was started so long ago that we may say that it represents a network of trade routes over time connecting the East (China) to the West (mid-East and Europe) from 114 BCE to 1450s CE, referring to both the terrestrial and the maritime routes connecting East Asia, Southeast Asia with West Asia, East Africa and Southern Europe. The term Silk Road was coined by Ferdinand von Richthofen, a German, as Seidenstraße and Seidenstraßen ("the Silk Road(s)"). Richthofen made seven expeditions to China from 1868 to 1872. The term Silk Route was also used in the 19th century but it did not gain widespread acceptance in academia or in popularity. One should note that the first book entitled The Silk Road was published by a Swedish geographer Sven Hedin in 1938. The Silk Road was central to cultural interaction in addition to commerce between the Eurasian regions for many centuries, but at least from 200 BCE, the trade (silk and spice) along the seaway from the East and South China Sea to Indochina was initiated and continued through Tang, Song,Yuan and the Ming Dynasty. The famous Zhenghe expedition in 1405-1433, seven voyages exploring around the world with advanced ships covering Indian Ocean and Pacific Ocean were a testament to the effort of culture and commerce interaction conducted by China through seaway.

The land Silk Road began in the Han dynasty (207 BCE–220 CE) and was expanded in the Central Asia around 114 BCE through the missions and explorations of the well documented Chinese imperial envoy Zhang Qian. The Chinese took great interest in the safety of their trade products and extended the Great Wall of China to ensure the protection of the trade route. Trade on the road played a significant role in the development of the civilizations of China, Korea, Japan, India, Iran, Afghanistan, Europe, the Horn of Africa and Arabia, opening long-distance political and economic relations between the civilizations. Because of the Silk Road, many other goods in addition to Chinese silk were traded; more profoundly, interactions of culture, civilization, religions, philosophies, and exchanges of sciences and technologies, even transmission of diseases (such as plaque) and medicine were spread along and expanded and by the Silk Road. The Chang'an-Tianshan corridor of the Silk Road had been deservedly designated as a World Heritage Site by UNESCO in June 2014.

The significance and impact of the ancient Silk Road although traceable in limited recorded history but it was not well researched and discussed by scholars nor was well presented to the public in comparison to the exploration of China by Europeans (e.g. Famous Marco-polo story). The proposal of One Belt and One Road (OBOR or BRI, Belt and Road Initiative) by the Chinese leader, Xi Jin Ping, in 2013 at Kazakhstan (September) and Indonesia (October) seemed to have not aroused much attention on the ancient Silk Road initially. As the OBOR plan was evolving with expanded modern infrastructure construction, the significance of the ancient Silk Road attracted more recognition of the antiquated road infrastructure on the land route and the limited maritime capability on the sea lane. One can imagine with modernized infrastructure what impact OBOR may bring. (*OBOR was described in an article, Understanding of China's World Development Program, OBOR, in the book, The Changing Giants, The U.S. and China, pp. 186-190, 2017, ISBN 0977159450)
OBOR was a brilliant vision for promoting globalization especially for activating the land locked Central Asia in economic development and its interaction with the rest of the world. With today’s advanced communication capability, the announcement of such a grand plan did not immediately catch the world’s attention was a surprise, in fact being ignored by the West from America to Australia was unreasonable. The reason OBOR didn’t reach every person in every corner on Earth, perhaps, was due partly to a lack of PR work by China, partly to China’s not ready to articulate the scope, depth, evolution path and future impact of a germinating idea and perhaps mostly due to the West media unwilling to accept and comprehend such a grand proposal. After the financing bank for supporting Asian infrastructure investment (AIIB) proposal  received sufficient support in 2015, the OBOR program got its blood supply thus gaining more self-confidence and kicked off with a new name, Belt and Road Initiative (BRI).

The idea of "Asian Infrastructure Investment Bank” surfaced in the Bo'ao Forum in April 2009. The frustration of getting World Bank to finance Asian infrastructure construction needs triggered the thought to make better use of Chinese foreign currency reserves. The AIIB initiative was officially launched by Chinese President Xi Jin Ping on a state visit to Indonesia in October 2013. Even though the proposal met cold reaction from the U.S. and Japan, but it soon gained global endorsement and at its inauguration in 2015, the AIIB had 17 members subscribed 50.1% of its Authorized $100B Capital Stock. Jin Liqun was elected as its first President of five-year term with the bank opening for business on January 16, 2016. Currently, AIIB has 87 State members including European and Asian powers. (*The AIIB was described in an article, chronological account of the establishment of AIIB and its Significance, in the book, Understanding the US and China, pp 65-69, 2016, ISBN: 0977159442.)
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The U.S. has opposed China’s BRI plan from its start taking an allegedly-high-moral position that it may fail to stimulate the economic development of the developing countries and the financing organization such as AIIB may not meet the high standards maintained by the existing world financial institutions, even worse accusation was claiming that China purposely set debt traps by make easy money loans and reap bountiful fruits as the debtor countries default. But as time passed by, more countries came on-board BRI, the U.S. had changed her reasoning of opposing China’s BRI to a debatable strategy - targeting China as a threatening competitor, destined to dominate the world, thus any program accelerating China’s rise should be opposed. This hostile view is self perpetuating with little objective analysis while BRI is gaining momentum and traction. The facts and interpretations reviewed in part II may explain the hostile view and help us to make a fair analysis to reach some conclusions.



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