Friday, May 15, 2020

The economic cold war brewing with China

By William Haupt III | The Center Square

President Donald Trump, left, meets with Chinese President Xi Jinping during a meeting on the sidelines of the G-20 summit in Osaka, Japan, Saturday, June 29, 2019. Susan Walsh / AP

“Here's my strategy on the Cold War: We win, they lose.” – President Ronald Reagan, 1981

For those of us who grew up during the turbulence and disquietude of the Cold War, our lives were filled with anger, fear and worry. We recall the first Friday of the month, the intimidating sounds of air raid sirens reminding us – one day this will be more than a test. It will be that apocalyptic Soviet nuclear bomb. Life during the Cold War for those behind the Eastern Bloc was a living hell. Life for us in the free world, it was waiting for all hell to break lose at any time when we least expected it.

The Cold War shaped the lives of us boomers while defining our culture. It embellished disdain and mistrust for communism within our DNA. We found out communism is not just dictatorial governing, it is a godless religion. We learned its means of aggression are nuclear weapons, spies, terror and propaganda. It thrives on dogma that inspires hope and delivers despair. Above all we were taught communism is self-serving to propagate more communism – so you cannot ever trust a communist.

When St. John Paul, Ronald Reagan and Margaret Thatcher commanded Mikhail Gorbachev to demolish the Berlin Wall in 1990, the advent of German reunification ended Soviet communism. While this trinity of leaders ended the Cold War without firing a single shot, it did not discourage the cold wars in the Middle East and in Asia. The free world had been fighting since the end of World War II.

The struggles in the Middle East are battles with rogue theocratic regimes that will never end since their weapons are terrorism and unprovoked attacks on Israel, the only legitimate democracy in the region. Unlike communism, their basis is a strict interpretation of faith tenets that is unpredictable to the free world. Containment and surveillance is the only feasible way to deal with them.

“If you know the enemy and know yourself, you need not fear the result of a hundred battles.” – Sun Tzu

Communism is an immoral religion in a God-fearing world. We’ve battled against it since WWII, but our success in Eastern Europe was a failure in the orient. We missed an ideal opportunity to deal a fatal blow to Asian communism during the Korean War when President Harry Truman would not allow Gen. Douglas MacArthur to take out North Korea in 1950. The free world has been haunted with that policy miscue ever since.

During World War II, there was continual unrest and corruption in China. This led to the communist takeover in 1949. Communist leader Mao Zedong declared victory over the Kuomintang Nationalist Party, and created the People’s Republic of China. This ended years of constant political civil wars that began with the Chinese Revolution of 1911. Shortly after the fall of mainland China in 1949, the U.S. and other major free world nations suspended diplomatic ties with Red China for decades.

As communists marched through Asia, the free world shunned China until the 1970s. The inherent failures of state-owned, dictated planning forced China to open its economy for survival in 1978. By 2018, the Shanghai Stock Exchange was the fourth largest in the world. Until their cover up of Covid-19, China was set to surpass the U.S. as the largest world economy within this decade. But since:

“We must account for every idle word – so must we account for every idle silence.” – Ben Franklin

When China opened its economy in the 1970s, free nations jumped on this like a flea on a Tennessee hound dog. They saw dollar signs in its low labor costs, lack of regulation, low taxes and its ability to clone anything for half of what it cost them to produce. Additionally, they ignore all environmental laws and have few laws to protect workers and children. Chinese factories run all day and all night.

China purposely devalued the yuan to gain an economic edge over other nations. The yuan was undervalued by 30 percent against the U.S. dollar until President Donald Trump imposed strict tariffs on China in 2018. This forced China to lower the yuan to 7.0 per U.S. dollar to compete in world markets for the first time since the 70s. Their economy took a dump as manufacturing increased in other countries. This was the beginning of world awareness that the Chinese communists should not be feared or catered to.

In November 2019, when Dr. Ai Fen, a physician at Wuhan Hospital in China, alerted her superiors of this serious virus, she was told to keep quiet since local authorities hide undesirable issues from Beijing. But when it infected Beijing, to avoid panic, world ridicule and economic loss, they started a full-blown information damage control campaign about the serious nature of the coronavirus. By the time they reported it to world health officials in late January 2020, it had infiltrated the globe. Virus expert Dr. Wang Guangfa admitted, “We were told Beijing was in charge of all public information.”

There are a lot of issues facing China. Will China’s communist party remain in power? Will Taiwan or Hong Kong gain more world prominence? How will they deal with huge economic losses? How do they rebuild world confidence? According to the Organization for Economic Co-operation and Development (OECD), China’s GDP is projected to drop to 4.9 percent from 6.1 percent this year. That is the biggest cut in any of the major countries tracked in OECD’s May index. Without a doubt, COVID-19 will refashion China’s internal and world political and economic status. The question is, how much?

After Covid-19, the new world order will be different as nations economically recover and count their dead. The globe is adapting quickly to China becoming less vital politically and economically than it was before the trade war and Covid-19. UN nations are aware they won’t take action against China since Xi Jinping is head of the security council. They’re now looking for new markets to trade with. And much of this trade and economic activity will be in democratic nations like India and the U.S.

“Today’s wisest investors are those who made the biggest mistakes yesterday.”
– Milton Freeman

The trajectory of China, the world’s second largest economy, already has changed and it will remain that way for some time because of the devastation they inflicted on the world and even their allies. The biggest consequence of the way they handled Covid-19 is the blow it dealt to the government. The world took notice when Trump won the trade war with them. China cannot afford to step out of line, nor can it afford any aggressive action. For now, China must eat crow and lick its wounds.

Author John Dryden wrote, “Beware the fury of a patient man.” Since 1980, the world has tolerated China’s Communist party and global footprint because they invested heavily in China for personal gain. Now, they’ve seen the consequences of doing business with communists.

Communists don’t change when they embrace capitalist economics for personal gain. Communist ideology will prevail as their global economic leverage dwindles away. As desperate as they need to keep U.S. supply chains in China, it will take a major political upheaval to change the world’s perception of China.

The effects of Covid-19 will be long-lasting. But how long nations move business out of China will tell the story. Will they give in to economic temptation and forgive and forget or will they remember: “You can never trust a communist.” Only time will tell.

 “Time can soften the wrenching intensity of those in mourning, but ask the survivors of 9/11, if it ever heals all wounds.”
– Adam Mayblum

William Haupt III is a retired professional journalist, author, and citizen legislator in California for over 40 years. He got his start working to approve California Proposition 13.