Monday, August 18, 2008


Lip synching is no mortal sin, although it can be deceptive and unethical. Through no fault of her own, Lin Miaoke was tabbed to give a phony rendition of “Paean to the Motherland” during the spectacular opening ceremony for the Beijing Olympic Games ten days ago. Poor little Yang Peiyi , who thrilled the vast global audience with her voice, was heard but not seen, turning a traditional child rearing maxim on its head.

This is not an earthshaking episode in international entertainment history; nothing like the infamous wardrobe malfunction, let’s admit. But it does tell us a lot abut the Chinese system. Astoundingly, this was a high-level political decision in China. The Politburo – the highest body of the Chinese Communist Party -- intervened with Chen Qigang, the musical director of the opening night extravaganza, to make clear that getting cute little Miaoke on TV was, as he told the media, a “matter of national interest.”

That’s like the national committee of one of our major parties “suggesting” to the networks who should sing the national anthem at next year’s Superbowl. That’s a matter of “national interest”? Any network eager to recoup its investment in the event will of course make that decision on its own without regard to the wishes of the government or any political party.

That hypothetical comparison might suggest two important lessons to be learned from an otherwise inconsequential blip. First and most obvious, the Chinese Communist Party still tries to micromanage its vast and complex country. Not just the economy or news coverage, but which little girl scores higher on its cuteness scale. You don’t have to be a Westerner to see the ridiculous excess in that. The second lesson is more subtle. If Beijing goes too far in asserting the national interest, Washington stops way short of what’s needed. On this side of the Pacific, the “national interest” seems to begin and end with national and homeland security.

I’m happy to let the networks decide who shall sing the anthem while I’m still in the kitchen getting ready for kick-off, but I’m eager to see someone in Washington accept responsibility for defining the American national interest in economic terms. Somewhere between the excesses in Beijing and the deficiencies in Washington lies a happy medium that would serve each country far better.

Charles Blum

Wednesday, August 6, 2008


The next American president faces a fuller and probably more daunting than usual agenda. Constitutionally, he is commander-in-chief, and national security must of course come first. There’s another White House role, long neglected in this country, that closely rivals the first in importance and in fact impacts our national security directly. America needs someone to lead the process of forging and implementing a comprehensive national trade strategy. We need a “competitor-in-chief.”

We need to commit ourselves as a society to reduce our foreign debt, restore the value of the dollar, and expand investment and production in this country. Without protectionism or isolationism, America could then once again be financially strong and enjoy the strategic benefits that flow from being a creditor nation. Those changes would enhance our leadership in the world while restoring faith in the American Dream.

Recently, I’ve sat through dozens of discussions about the need for such a strategy to meld all the factors – traditional trade policy as well as tax, energy, environment, health care, infrastructure, education, and other policies – into a coherent, comprehensive program that would unleash the competitive brilliance of American workers and entrepreneurs. The overall concept seems to be gaining in acceptance. There is no lack of interesting ideas about the various components of an effective national strategy. We have numerous studies and ample data in hand.

Intellectually, molding these inputs into a strategy is challenging work, but it’s not impossible. Virtually every other economy of any size has a clear idea of what it is tying to accomplish economically and how that advances their national security. If they’ve “connected the dots” for themselves, why can’t we, too?

The core of the American problem lies in the very nature of our system of government. A key to our constitutional design is the broad diffusion of power. The good news is that such diffusion protects citizens very well (albeit not perfectly) against abuses of government power. The bad news is that it makes fundamental reform quite difficult and, in peacetime, nearly impossible.

Only strong, sustained and dedicated White House leadership can overcome the political, institutional and bureaucratic barriers to fundamental reform. To change things for real, the next administration needs to commit itself and its resources to that task as a matter of the highest priority. In other words, we need to deal with our international economic performance with the same serious sense of purpose that we expect from the national security team headed by the commander-in-chief.

So, here is a simple scenario for either candidate to give America a fair chance to develop an effective national trade strategy:

1. Pick a vice presidential running mate with background and experience fit to be the “competitor-in-chief.” This would include knowledge of the inner workings of the Congress, the executive branch and the real as well as the financial economy.

2. Announce now that you will designate the vice president as the head of a new, improved National Economic Council. Naming the second highest elected official in the land as its head would empower the NEC to delegate tasks to executive agencies, to ensure effective coordination and strategic coherence, and to stop turf battles before they can disrupt the effort.

3. Task the NEC with devising a comprehensive plan within six months of Inauguration Day.

A decision now to address our international competitive and debt problems as a top priority of the next administration would help either candidate assure the voting public that he is serious about fundamental economic reform. It would give him a mandate for change without which he could not hope to overcome vested interests. It would give the next vice president the chance to get a running start on the agenda that could be of make-or-break importance to the administration – and the country.

Charles Blum

Sunday, August 3, 2008


If you liked the news on the Ikea factory being set up in Virginia (see my May 31 post “Good News, Better News”), here’s some more. In a front-page story this morning (“Shipping Costs Start to Crimp Globalization”), the New York Times reports that Tesla, which aims to produce a luxury electric car for the American market, is setting up a battery factory in California.

That wasn’t the company’s original idea. Plan A was to produce the heavy batteries (a half ton per pack) in Thailand, ship them to the UK where they would be partly installed, and then ship them again to the US for final assembly. Plan A is a victim of high petroleum prices, which among other things are shooting ocean shipping costs through the roof. As the Times notes, the cost of shipping a 40-foor container from Shanghai to the West Coast has jumped to $8,000 compared to $3,000 just a few years ago.

The article goes on to recount how high transportation costs are beginning to force a rationalization of extensive global supply chains premised on perpetually cheap energy costs and a lack of concern about their environmental impact. While the carbon emissions-intensive supply chain may not yet be headed for history’s scrap heap, there is a serious move to make major revisions in them. One consequence is likely to be shorter, more fuel efficient supply chains wherever possible -- greater regionalization instead of globalization.

All this got me to thinking about John McCain’s excellent little idea a while back to offer a $300 million prize to someone who could come up with the best electric car battery. Let’s say, lighter, more efficient, and longer lasting than Tesla’s. Finding that kind of money in the federal budget wouldn’t be hard, and we could always borrow a little more from our oil-exporting trading partners for such a worthy cause.

But after the check was handed over in the Rose Garden, where would the budding entrepreneur decide to manufacture those (still heavy) batteries? I’d be not one bit surprised if the decision were to take the money and run, placing the new plant in a more investment-friendly place, say, Canada.

Tariffs, of course, are not the issue. We’ve enjoyed free trade with Canada in automotive products since the mid-1960s. More to the point, Canada provides several perfectly legal and powerfully attractive inducements to American investors. Canadians depreciate new investments aggressively – one-third of the remaining balance each year, starting from the date of expenditure rather than operation. That lowers the cost of capital. They rebate their consumption tax – the federal and the provincial goods and services tax – when a product is exported from Canada. Most countries offset that rebate with a tax of their own. Almost uniquely, the U.S. chooses not to tax imports. And they fund health care out of general tax revenues, reducing the burden on individual manufacturing enterprises.

I have no doubt that the American worker is as good -- and usually far, far more productive -- than his foreign competitors. Ditto for American entrepreneurs. But American public policy is a disservice to those workers and entrepreneurs, punishing them with policies better suited for the 1950s than for the 21st Century. Whether globalization cedes ground to regionalization or not, these policies will continue to be one of driving forces of America’s economic decline until we find the political will to change them.

Charles Blum