Friday , September 25 2020
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Gambling with other people’s lives

Summary:
I don’t have much confidence in our foreign policy establishment. They did correctly decide to fight WWII.  But that was sort of a no-brainer, given that we were directly attacked at Pearl Harbor. Since then? We were told it was worth inflicting a lot of short run pain on the Vietnamese people, as in the long run they would benefit. We were told it was worth inflicting a modest amount of pain on the Cuban people, as in the long run they would benefit. We were told it was worth bombing Libya, as in the long run the Libyan people would be better off. We were told it was worth invading Iraq, as it would help the Iraqi people. We were told it would benefit the Yemeni people if we helped the Saudi’s invade Yemen. We overthrew a bunch of foreign leaders in places like Iran and

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I don’t have much confidence in our foreign policy establishment. They did correctly decide to fight WWII.  But that was sort of a no-brainer, given that we were directly attacked at Pearl Harbor. Since then?

We were told it was worth inflicting a lot of short run pain on the Vietnamese people, as in the long run they would benefit.

We were told it was worth inflicting a modest amount of pain on the Cuban people, as in the long run they would benefit.

We were told it was worth bombing Libya, as in the long run the Libyan people would be better off.

We were told it was worth invading Iraq, as it would help the Iraqi people.

We were told it would benefit the Yemeni people if we helped the Saudi’s invade Yemen.

We overthrew a bunch of foreign leaders in places like Iran and Latin America, which often backfired.

I’m not dogmatic on this issue. It’s quite plausible that some of our interventions helped the situation. It’s just that I don’t have a lot of confidence in the foreign policy establishment. They talk like they know what they are doing, as if foreign relations is a hard science, but the results suggest otherwise.

Now we are being told that it’s worth inflicting a lot of pain on Chinese firms and American consumers on the theory that this will somehow help improve Chinese governance in the long run. Is it any surprise that I lack confidence in this theory?

Kyle Bass is one of the most famous China critics. Bloomberg reports that he is now advocating a policy that he hopes will kill lots of Chinese people. How many? He doesn’t say. But the logic of his proposal suggests the policy would only “work” if the death toll were in the millions.

“We should take our [medical] supplies and go back home. Let the chinese virus rampage through the ranks of the GT and the rest of the communist party,” the founder and chief investment officer of Dallas-based Hayman Capital Management wrote.

There are about 80 million people in the Chinese Communist Party, most of whom are not “communists” in any meaningful sense of the word.  Given the current location of the virus (concentrated in Hubei province) and given the isolated position of the Chinese leadership, an enormous number of ordinary Chinese people would have to die in order for the leadership to be threatened.

In 1959, Chairman Mao was willing to sacrifice many millions of Chinese people based on his “theory” of how the economy should be structured.  He felt that the very real short run pain would pay off in terms of future gains.  He was wrong.

Obviously most China hawks aren’t as idiotic as Bass, but those who advocate getting tough with the Chinese are willing to contemplate the fact of short run pain based on the theory that this will somehow lead to positive political developments.  I see very little evidence from the historical record that this is likely to work.  Not zero evidence; South Africa might (or might not) be a counterexample.  But not enough evidence for me to want to engage in game theoretic strategies that impose suffering on ordinary people in exchange for very uncertain gains.

I recommend Gene Epstein’s article on the US trade war against China.  Here’s an excerpt:

When a state wages war against another state, it generally portrays itself as having first considered all the peaceful ways of settling grievances. In this case, we are told that the US can’t use the World Trade Organization to challenge China’s practices because China doesn’t comply with that organization’s rulings. The evidence is that China’s record of compliance is better than ours. An academic study on this subject scrutinizes the 43 cases in which China has been a target of trade disputes from its entry into the World Trade Organization in December 2001 through December 2018. The author finds that, in 42 out of the 43 cases,“China has timely and satisfactorily implemented WTO tribunals.” He concludes that “China’s record of compliance suggests that the dispute settlement mechanism has been largely effective in inducing compliance.”

He also observes: “Ironically, while the US has been accusing China of not complying with WTO rules, the US’s record of compliance is evidently worse than that of China. The US refusal to change the practice of ‘zeroing’ has been a blunt denial of its World Trade Organization obligations and outright disrespect for World Trade Organization rulings. In addition, while China has never been subject to any request for retaliations as a result of failure to comply, the US has faced 15 [such] requests.”

PS.  I have no idea whether Bass is a nationalist.  But one reason I oppose nationalism is that it leads people to begin to treat “the other” as if they are less than fully human.  And don’t tell me that Bass’s proposal wouldn’t have much actual impact.  I know that.  He’s not just cruel; he’s dumb.  I am interested in what he wants to achieve.

PPS.  Do you remember what Jerry Falwell said when AIDS first appeared on the scene?

AIDS is not just God’s punishment for homosexuals; it is God’s punishment for the society that tolerates homosexuals


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Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment".

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