Politics, et Cetera

A publication from The Political Forum, LLC

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Tuesday, February 12, 2013

They Said It:

Dead flies corrupt and spoil the perfumer’s oil;

more weighty than wisdom or wealth is a little folly!

The wise heart turns to the right;

the foolish heart to the left.

Even when walking in the street the fool, lacking understanding, calls everyone a fool.

Should the anger of a ruler burst upon you, do not yield your place; for calmness abates great offenses.

I have seen under the sun another evil, like a mistake that proceeds from a tyrant:

a fool put in high position, while the great and the rich sit in lowly places.

Ecclesiastes, Chapter 10, verses 1-6.



As you prepare this evening to do something other than watch President Obama’s State of the Union address, you should consider yourself forewarned that you will miss . . . absolutely nothing.  The highlight of the night will be the presence of a number of Democrats – including the First Lady herself – who will be hosting victims of “gun violence,” in an attempt to send a message about the “urgency” of gun legislation.

Of course, the Democrats will have to count on the friendly mainstream media to ignore the uncomfortable fact that “gun violence” as they define the term is also known as “street crime,” and that they have nothing in their legislative kitbag to stop that, or to even slow it down.  In addition, the mainstream, media will be required not to notice that Mr. and Mrs. Obama’s “brave” efforts to expose the damage done by “gun violence” is virtually indistinguishable from “exploiting” the pain and suffering of others in a crass and callous attempt to advance a political agenda aimed at doing nothing more than providing a bunch of morally stunted liberals with a feeling of having done something good.

And as if this was not bad enough, the backdrop to this half-backed morality play will be a mind-numbing parade of tired bromides and recycled applause lines from last year’s address . . . and the address the year before . . . and the address the year before that . . .

Now, in case you think we may be overstating the extent of the descent into dullness that we anticipate, we will provide the following prelude to the address offered over the weekend by the folks at the Washington Post.  According to them, the President will make the long-awaited pivot “to jobs,” finally tackling those issues that most concern America’s working and middle classes.  The paper put it this way:

Obama’s approach, as described by several senior administration officials, will flip the emphasis of his second inaugural address.

In that speech, Obama argued stridently for social equality through an expansion of gay rights, citizenship for undocumented immigrants, and the moral imperative of reducing gun violence and confronting climate change.  White House officials acknowledge that he may have overshadowed his underlying message of economic fairness as a result.

On Tuesday evening, Obama will mention issues such as gun control, immigration and climate change primarily in an economic context: job opportunities in ­clean-energy technology, the fair-play benefits of a legal labor force, and safe schools as a way to drive economic growth.

“If the second inaugural outlined what the president believes is the charge for America over the course of his second term, then this address will be a return to middle-class economics and what the president believes must be done on that front,” said a second senior administration official . . .

Wow! Be still, our hearts.

Now we, of course, have not yet seen the text of the address as we write this, though we imagine that some of you will have by the time you read this.  In any case, given the advance billing, we expect the President to make several references to rebuilding the country and keeping the promise to all Americans of good jobs and employment security.  Something like this:

In the next few weeks, I will sign an executive order clearing away the red tape that slows down too many construction projects.  But you need to fund these projects.  Take the money we’re no longer spending at war, use half of it to pay down our debt, and use the rest to do some nation-building right here at home.

All these investments – in innovation, education, and infrastructure – will make America a better place to do business and create jobs.  But to help our companies compete, we also have to knock down barriers that stand in the way of their success.

Hooray!  Everyone will cheer!  He’s FINALLY doing it!  He’s finally going to concentrate on jobs and the economy and getting this country going again!  And then the more astute among the audience will notice that the first paragraph above is from last year’s address, while the second is from the one the year before.  Oh well.  Winning the future, investing at home, and pivoting to jobs all takes time, we guess.

This purported “pivot to jobs,” of course, is perfectly in keeping with the themes we have discussed the past couple of weeks.  When Obama says he is going to “focus” on the economy, what he really means is that he is going to concentrate on domestic policy and specifically on those policies that he believes will help more fairly to distribute the wealth of the blessed and beneficent rich.  And when he says that he wants to “rebuild right here at home,” what he really means is that he does not care one whit what happens in the rest of the world, as long as he is able to spend the money “we’re no longer spending on war” and spend it on his other priorities.  The world, after all, keeps getting in his way, and he’s tired of it.  Or, as we put it last week:

As countless wags have noted over the last few weeks, the nominations of Hagel and Kerry indicate that Obama is finally, some 40 years later, putting George McGovern’s words into action and telling America to “come home.”  The good guys in the rest of the world – and yes Dorothy, there are some good guys – are going to learn in a hurry that this homecoming, joyous though it may be for America’s isolationists, is going to be rather miserable for them.  It’s true that Obama decided that he couldn’t or shouldn’t free the freedom fighters in Guantanamo.  But he’s going to free those on the outside to do as they wish.

Naturally, this sounds like a brilliant plan.  The country is tired of war and, more to the point, tired of being the world’s policeman.  No one wants any more long-term commitments in far-off, hostile lands where the people we’re purporting to help are just as likely to kill American soldiers as is the enemy.  Everyone knows the economy is still struggling and that there are very real and very serious problems “at home” these days.  Like we said, brilliant plan.

Of course, like Horace said, nihil est omnino beatum.

If you were to go looking for flies in Obama’s ointment, you wouldn’t have to look very long or very hard to find one – or many, as the case may be.  In our opinion, though – and from the perspective of the markets – the most significant of these flies is the idea that American global withdrawal and a healthy economy can reasonably co-exist.  They can’t, which is to say that Obama’s plan to “rebuild at home” is not merely flawed but self-defeating.

As you may recall, last week, we noted that the origin of American “neo-imperialism” – i.e. that which Obama detests and wants to end – can be found in economic reality.  Specifically we wrote:

The origin of America’s neo-imperialism was much the same as the origin for any nation’s neo-imperialism, the need for trade and the desire to expand markets.  This may sound shallow or callous or selfish.  It may even sound as if we’re “bashing” America.  But it’s not.  And we’re not.  We’re simply stating a fact.  Commercial enterprise and the need for increased trade have always driven expansionary foreign policy.  The Anglo-American version of this is, perhaps, more noble than previous versions, given the added objective of protecting the world’s sea and trade routes for everyone’s use.  But at heart, it was – and is – still self-interested.

We have neither the space nor the inclination to expand on this point today, but we will likely revisit the topic in the near future, particularly given the impact that the Obama military and security policies will have on commercial and market interests.  Throughout this nation’s history – and especially over the course of the last century – attempts to withdraw from the world and to “nation-build at home,” have resulted in global humanitarian and commercial disasters.  Interestingly, Obama’s “Progressive” predecessors have usually been quicker than anyone to realize this.

Today, for obvious reasons (and as promised), we’d like to expand on this thought just a little bit.

The age of American neo-imperialism largely began with President William McKinley, with the Spanish-American War, and with the “open-door policy,” all of which aided the significant growth of the U.S. economy during the course of the MicKinley presidency.  After McKinley’s assassination, the Progressive icon Teddy Roosevelt continued his predecessor’s policies, expanding American interventionism exponentially.  From the Philippines to Panama, Roosevelt used his “great white fleet” (i.e. the massively enlarged U.S. Navy) to extend American influence and to expand external markets.  The “Roosevelt Corollary” to the Monroe Doctrine provided a uniquely economic justification for American neo-imperialism, principally within the Western hemisphere.

In 1907, in one of his earliest political speeches, another Progressive icon, Woodrow Wilson, spoke rather candidly about the use of force in the pursuit of both national security and economic prosperity.  At the time, Wilson was still the President of Princeton, but was contemplating a run for governorship of New Jersey and was therefore formulating his political message.  He put it this way:

Since trade ignores national boundaries and the manufacturer insists on having the world as a market, the flag of his nation must follow him, and the doors of the nations which are closed against him must be battered down.  Concessions obtained by financiers must be safeguarded by ministers of state, even if the sovereignty of unwilling nations be outraged in the process.  Colonies must be obtained or planted, in order that no useful corner of the world may be overlooked or left unused.

Ah yes, “battered down,” “even if . . . unwilling nations be outraged.”  During his first campaign for the White House in 1912, Wilson said the following:

Our industries have expanded to such a point that they will burst their jackets if they cannot find a free outlet to the markets of the world . . .Our domestic markets no longer suffice.  We need foreign markets . . . We have reached, in short, a critical point in the process of our prosperity.  It has now become a question with us whether it shall continue or shall not continue . . .  our domestic market is too small.

As it turns out, then, despite all the noble claims of promoting freedom and democracy, American “meddling” in the world has been, throughout the 20th century, a means of finding markets and protecting them.  This, by the way, was foremost in FDR’s mind in the days leading up to World War II.  Lester Thurow put it this way in a 1992 article in the National Forum entitled “New Rules for Playing the Game.”

The late 1920s and early 1930s began with a series of worldwide financial crashes that ultimately spiraled downward to the Great Depression.  As GNPs fell, the dominant countries each created trading blocs (the Japanese Co-Prosperity Sphere, the British Empire, the French Union, Germany plus Eastern Europe, America with its Monroe Doctrine) to minimize imports and preserve jobs.  If only one country had kept imports out, limiting imports would have helped it avoid the Great Depression, but since everyone restricted trade, the downward pressures were simply magnified.  In the aggregate, fewer imports must equal fewer exports.  Eventually, those economic blocs evolved into military blocs, and World War II began.

The historian Robert Freeman Smith put it as follows in an essay entitled “American Foreign Relations 1920-42,” which appeared in historian Barton Bernstein’s ground breaking 1969 book Towards a New Past: Dissenting Essays in American History.

One of the basic concerns of United States Policy makers from 1920 to 1941 was the establishment and maintenance of a world order which would be conducive to the prosperity and power of the United States.  Since the latter part of the nineteenth century government officials, intellectuals, and businessmen had been actively promoting various means for the extension and protection of the new frontiers created by the economic expansion of the country.  By 1920 one of these tactics had been modified (colonialism), and another had been rejected (international organization directed by the major powers).  Officials had developed a combination of other tactics, however, which they hoped would ensure an “Open Door World”; a stable world order in which the United States could enjoy the fruits of an imperial position without the military, financial, and administrative burdens of a colonial empire.  “Dollar Diplomacy,” protectorates, intervention, and the extension of the political and value systems of the industrial United States were all involved in the drive to establish this broad system of influence and control.  The belief that the nation’s prosperity depended upon free access to markets, raw materials, and investment opportunities was a basic element in all of these formulations….

In 1935, United States officials began to call Germany and Japan “aggressors” because of their economic activities.  A War Department memorandum in 1935 defined the ultimate “threat” in Asia largely in economic terms and stated that Japan’s desire to be the dominant power in East Asia would have “a direct influence on those people of Europe and America who depend on trade and commerce with this area for their livelihood.”  The same year Cordell Hull decided that Germany was “straining every tendon to undermine United States trade relations with Latin America.”  This anxiety over economic “aggression” grew more intense, and in May 1940, Assistant Secretary of State Breckinridge Long commented that the subordination of Europe to German control would mean that “every commercial order will be routed to Berlin and filled under its orders somewhere in Europe rather than in the United States.”  The result would be “falling prices and declining profits here and a lowering of our standard of living with the consequent social and political disturbances.”  These arguments were repeated ad infinitum, and clearly indicate that the concept of security was thoroughly entangled with the belief that the preservation of private enter rise capitalism in the United States depended upon a world order in which this to operate with few restrictions.

The Cold War, of course, was an era of constant expansion of American markets using foreign policy and military assets.  From Germany to Japan, France and Britain to Korea, American power was wielded to create and expand previously closed markets and to enhance trade and economic growth.  Sixteen years ago, Peter Dunigan and Lewis Gann, both then-fellows at the Hoover Institution, commemorated the 50th anniversary of the Marshall Plan, writing the following:

The Marshall Plan formed the greatest voluntary transfer of resources from one country to another known to history.  Technically known as the European Recovery Program, the plan was passed by the U.S. Congress with a decisive majority and was signed by President Truman on April 3, 1948 – just in time to influence the Italian election in that year . . . .

[T]he Marshall Plan (guided by the European Cooperation Administration, ECA) helped to tide Western Europe over a dangerous period.  The plan provided new confidence to Western Europe; the plan furnished money, food, fuel, and machinery at a time when the Western European economies were all in disarray.  Marshall Plan experts argued in favor of free trade, decentralized management, breaking up of cartels, the elimination of quotas and customs, and labor-saving technologies . . . .

The plan likewise presented an immense U.S. political commitment.  Not for nothing did George C. Marshall, a professional soldier, receive the Nobel Peace Prize for his efforts.  In a more intangible sense, Europeans benefited from the American sense of optimism and the American premise that peace, labor productivity, consumerism, welfare, and profits went hand in hand–this at a time when gloomy existentialist philosophies were in high fashion among European intellectuals.  America produced cheaper coal (coal miners struck in Europe’s coldest winter, 1946) and sent food to tide the Europeans over and then the means to revive quickly their economies through the Marshall Plan.  The Marshall Plan, like NATO, created an intricate network of intra-European and transatlantic contacts among businessmen, civil servants, and trade unionists.

Above all, the Marshall Plan was designed to push Europeans toward political and economic cooperation – a major objective of U.S. policymakers.  Paul G. Hoffman, who headed the ECA, predicted European unification through a common market.  Aid was administered through the OEEC (Organization for European Economic Cooperation, created in 1948, replaced in 1961 by the OECD, Organization for Economic Cooperation and Development).  In terms of a narrowly conceived realpolitik, the Americans might have benefited from dealing separately with their European allies in a strictly bilateral fashion.  In practice, the Americans looked toward a new Western European economic association.

Even after the Cold War, when the country was reaping the “peace dividend” and “investing at home” under the last Democratic president, that president was still using American foreign policy assets to expand markets, to enhance economic progress, and to stimulate growth.  Throughout the 1990s, there were whispers – more than whispers, really – about the real goals of the Clinton foreign policy team and its willingness to engage clandestine resources to achieve those goals.  The following, written in 1994 by an old acquaintance of ours, Bob Dreyfuss, gives just a little taste of what was believed to be taking place under the guise of American foreign and commercial policy.  As you read this, please keep the following in mind:  the article from which this excerpt is drawn was published in Mother Jones; likewise, Dreyfuss is a committed leftist; he is also an absolutely top-notch investigative reporter, and his research was duplicated by others, including others on the Right.

Sometime in the not too distant future, you will probably drive a stolen car.

But the thieves won’t be a neighborhood gang, nor will they be part of an organized crime ring.  You will have papers to prove that you bought the car, and every month you will make payments to a bank.  The bank, in turn, will show that it bought title from Ford, General Motors, or Chrysler.

But the Big Three U.S. auto companies will nonetheless be the recipients of stolen goods.  And the perpetrator once again will be that expert at black-bag jobs, the Central Intelligence Agency.

When President Clinton announced last September that the federal government would join the Big Three in a cooperative research effort to improve U.S. automotive technology, he left out the fact that the CIA may be a silent partner.  According to administration officials and sources in the intelligence community, the CIA has already begun a clandestine effort to help the American auto industry.

Since the end of the Cold War, Washington has been abuzz with talk about using the CIA for economic espionage . . . .

[I]n interviews, three separate U.S. officials acknowledged that the CIA is already providing the government with information about Japanese auto technology.  And since the formation of the Partnership for a New Generation of Vehicles, such information may be readily available to Chrysler, Ford, and GM . . . .

The CIA’s role in economic intelligence has grown rapidly under President Clinton.  With the formation of the National Economic Council in January 1993, the White House began edging into an industrial policy, throwing government support to selected industries to enhance U.S. competitiveness.

Since its formation, the NEC has been heavily dependent on the CIA for information on the world economy.  “Just about every day, [NEC Deputy Director] Bo Cutter is asking the CIA for information on economic issues,” says a senior CIA official.  “The National Economic Council is treating the CIA like an extension of its own staff.” . . . .

Moving from economic intelligence (defined as spying to inform the president and other U.S. government officials) to economic espionage (spying to assist private American firms) is a snap.  “It’s just a matter of turning the unclassified switch on,” says Stansfield Turner, CIA director under President Carter.

“If the CIA’s got a lot of good information that can be released on an unclassified, no-harm-to-the-intelligence-community basis, and it informs the American public better, why not?  What the hell’s wrong with that?”

We could go on (. . . and on . . . and on . . .) but we suspect that you get the point.  For more than a century now, the United States has been engaged in what can be called “neo-imperialism” as a constant and integral part of its foreign policy.  And this neo-imperialism has almost uniformly been directed by Progressives and/or Democrats in pursuit of economic growth and expanded markets.  President Obama intends to put an end to this.

And he will not succeed.

Two weeks ago, in discussing the Obama vision, we noted that this president – and those whose advice he seeks – believe that this nation’s future economic prospects will be driven principally by large high-tech and other creative companies.   According to the Obama crowd, we wrote, “The key players and the principal job providers are those that deal not in manufacture or creation of tangible goods, but those that deal in ideas, creative ventures, [and] finance.”  And unfortunately for Obama, this is where things get sticky.

Earlier this month, the Wall Street Journal ran an exclusive on the forthcoming book The New Digital Age, co-authored by Eric Schmidt, Google’s Executive Chairman, and Jared Cohen, the one-time State Department wunderkind and the current head of “Google Ideas,” which is the company’s think tank.  Among other things, the Journal writes that Schmidt “is brutally clear: China is the most dangerous superpower on Earth.”  That danger, however, does not come from China’s murderous domestic policy or its massive arms build-up, but from of its high-tech and industrial policies.  As the Journal puts it:  “In a world that is becoming increasingly digital, the willingness of China’s government and state companies to use cyber crime gives the country an economic and political edge, [Schmidt and Cohen] say.”  The paper continues with the following:

In this roundabout way the pair come close, on occasion, to suggesting western governments follow China’s lead and form closer relationships between state policy and corporate activity.

Take the equipment and software that comprises the Internet.  Most of the world’s IT systems were once based almost entirely on Western infrastructure, but as Chinese firms get more competitive, that is changing, and not necessarily for the better, they say:

In the future superpower supplier nations will look to create their spheres of online influence around specific protocols and products, so that their technologies form the backbone of a particular society and their client states come to rely on certain critical infrastructure that the superpower alone builds, services and controls.

Chinese telecom equipment companies, rapidly gaining market share around the world, are at the front lines of the expansion this sphere of influence, they say: “Where Huawei gains market share, the influence and reach of China grow as well”.  And while western vendors like Cisco Systems and Ericsson are not state controlled, they will likely become closer to their governments in the future, Schmidt and Cohen say:

There will come a time when their commercial and national interests align and contrast with China — say, over the abuse of their products by an authoritarian state — and they will coordinate their efforts with their governments on both diplomatic and technical levels.

This is good stuff – really good stuff – for a variety of reasons.  Most notably, it demonstrates that at least some in the high-tech business believe that their industry’s embrace of the administrative state should extend beyond mere regulatory policy to foreign policy as well.  Fifteen years ago, in the wake of the government’s antitrust suit against Microsoft, we argued, in a piece entitled the “Man in the Cement Shoes,” that federal government had decided to co-opt the high-tech biz, and to target it for serious and unrelenting rent extraction.  The Obama economic policy is largely based on the results of this rent extraction.  The problem is that his foreign policy seems, at least at present, to deny the ultimate end of this process.  Or, as the inimitable Walter Russell Mead recently put it:

This has implications for the politics of American defense policy, and foreign policy generally.  Silicon Valley is a major donor to Democrats, and it seems to be moving toward an understanding of the importance of a strong and outward looking America.  Historically, cutting edge corporations have supported the rise of American power partly as a way of assuring that U.S. foreign policy and power would support their corporate agendas and help them get fair treatment in a world where foreign corporations enjoyed clear backing from their governments.  It’s beginning to look as if Silicon Valley is heading down this well-trodden trail.

What this suggests, then, is that Obama’s domestic and foreign policies are all but certain to come into direct conflict with one another – and soon.  Our guess is that the domestic “team,” will win this battle.  And that means that this current “holiday from history” – which Obama will detail this evening – will be very brief.

Whatever else is he may be, Barack Obama is not a stupid man.  He has a vision for this country and that vision is explicitly dependent on Silicon Valley and the rest of the high-tech industry.  He detests “foreign entanglements,” as Washington called them, but not on principle.  He detests them because he thinks they muck things up and make it difficult for him to do what he wants to do domestically.  Turns out, he has it precisely backward – at least if Teddy Roosevelt, Woodrow Wilson, FDR, Harry Truman, Bill Clinton, and now Eric Schmidt can be believed.

Eventually, this will cause the President considerable consternation.  He will, we suspect, resist the reality of the situation as long as possible, only succumbing once it is clear that he has no other options.  And then, succumb he will.

And when he does so, “making the world safe for democracy <wink,wink>” will be back in vogue.

Do yourself a favor, then.  Rent a movie.  Turn on Netflix.  Play a game with your kids.  Read a book.  Whatever.  Just don’t waste your time tonight with the State of the Union Address.  As with everything this president says, his promises tonight will come with an expiration date.  Interestingly, in the case of his pledge to force America to “come home,” the statement will have expired even before it’s uttered.

Funny that.

Copyright 2013. The Political Forum. 8563 Senedo Road, Mt. Jackson, Virginia 22842, tel. 402-261-3175, fax 402-261-3175. All rights reserved. Information contained herein is based on data obtained from recognized services, issuer reports or communications, or other sources believed to be reliable. However, such information has not been verified by us, and we do not make any representations as to its accuracy or completeness, and we are not responsible for typographical errors. Any statements nonfactual in nature constitute only current opinions which are subject to change without notice.