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Justin Trudeau

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America’s Trade War with China

The United States could probably extract major concessions from China in a carefully managed confrontation on trading issues, because the Chinese don’t want a trade war with their best export customer. But the US can’t win the trade war that Donald Trump is planning to wage, and it kicks off on Friday.

That’s when the first chunk of Trump’s new tariffs on Chinese exports to the United States – a 25% import tax on $50 billion of Chinese goods – actually goes into effect, and Beijing retaliates with similar tariffs on $50 billion of American exports to China. That’s just a drop in the bucket in terms of the size of either economy, but it’s also just the opening salvo in the war.

Trump has already said that Chinese retaliation would be ‘unfair’, and that if China goes ahead he will slap a 10% levy on an additional $200bn of Chinese goods. (He subsequently reduced that amount to $100 billion, but who knows?) And China has already said that it would respond with measures of a “corresponding number and quality” if the US goes ahead with that.

This is where the real tit-for-tat escalation starts, and it’s hard to see how it can be stopped. Trump is trapped by his own pugnacious rhetoric, and China’s President Xi Jinping is trapped in two ways.

One is that Trump has already imposed big new tariffs on exports to the United States by the European Union and by America’s closest neighbours, Canada and Mexico. They have all responded by imposing similar tariffs on American exports of equal value.

Xi can hardly do less, even if China’s real interests might be better served by not responding in kind to the new US tariffs. He would not wish to be seen as weaker than Justin Trudeau.

On 21 June in Beijing, according to the Wall Street Journal, President Xi Jinping met a group of chief executives of American and European multinationals and assured them that China would definitely strike back at US trade tariffs. “In the West, you have the notion that if somebody hits you on the left cheek, you turn the other cheek,” Xi reportedly said. “In our culture, we push back.”

The other factor weighing on Xi’s decisions is that Beijing is starting to see American trade policy as part of a deliberate attempt to stop China’s emergence as a great industrial and technological power and a real peer rival to the United States. After all, there are undoubtedly people in Washington who would like to do exactly that.

Trump himself does not think in geo-strategic terms, but the Chinese may well see his actions on trade as inspired by those who do. If they come to that conclusion, their willingness to go all the way in a trade war may be greater than the financial experts think it is.

China’s exports to the United States amount to about 40% of its total exports, whereas only 5 percent of US exports go to China, so an all-out trade war between the two countries would obviously hurt China more. President Xi, however, is far more able to ignore the resultant job losses and higher prices than Trump is – especially because the Americans who were hurting worst would be his own political ‘base’.

Or, alternatively, China’s heavily indebted economy may turn out to be even more fragile than it looks – in which case a trade war could drive the country into a deep recession (with unpredictable political consequences at home), and drag the whole world economy down with it. That wouldn’t be much fun either.

There’s a reason that trade wars went out of fashion after the Second World War, and it wasn’t just because international trade tends to enhance prosperity overall. Back when trade wars were the normal way of doing business internationally, in the 16th-19th centuries, the European powers spent almost half their time at war.

The first great era of free trade, ca. 1870-1914, was also the ‘Long Peace’, when no European great power fought any other for almost half a century. That peace was destroyed by the First World War (so free trade does not prevent all wars), but the trade wars of the 1930s certainly deepened the Great Depression and facilitated the rise of fascism and a second world war.

And then came the Second Long Peace, from 1945 to the present, when once again free trade (or at least free-ish trade) reigns and the great powers never fight one another directly.

I’m not saying that Trump’s assault on free trade is going to lead us back down the path to great-power war again. Many other factors go into making such a catastrophe possible. But he may be putting one of the key factors back into place.
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To shorten to 725 words, omit paragraph 7. (“On 21…back”)

Marx at 200

“Karl Marx was right: socialism works. It is just that he had the wrong species,” wrote sociobiologist E.O. Wilson, the world’s leading authority on ants. But it’s really a little more complicated than that, and now is a good time to discuss it, because last weekend was the 200th anniversary of Marx’s birth.

Marx died in London in exile in 1883, so he cannot be blamed for the tens of millions who were killed in his name in the Soviet Union, China and elsewhere in the 20th century. But he did want to change the world, and his goal was equality: the ‘classless society’.

At its peak, in the mid-1980s, ‘Marxism’ ruled the lives of one-third of the world’s people. Now it is the official ideology in only five countries, and even there it is mainly an excuse for authoritarian rule, not a real belief system. But the principle of equality remains a central value in human politics, and now we sort of know why.

Egalitarianism among human beings poses a problem that cultural anthropologist Bruce Knauft dubbed the ‘U-shaped curve’. He observed that all non-human primate species – chimpanzees, gorillas, etc. — are intensely hierarchical (a vertical line), whereas for up to 100,000 years before the rise of civilisation our hunter-gatherer ancestors were extremely egalitarian (a horizontal line).

But as soon as mass civilisations arise five thousand years ago, it’s back to chimpanzee values. Until quite recently, all civilised societies were steep hierarchies of privilege and power. So draw another vertical line, and you have the U-shaped curve.

This raises two questions: how did human beings break away from the primate norm, and why did they succumb to it again as soon as they became ‘civilised’? The best answer to the first question came from another anthropologist, Christopher Boehm, who pointed out that humans were intelligent enough to realise that the usual primate dominance struggle among all the adult males could only have one winner.

Everybody else was bound to lose, and to be bullied and dominated by the dominant male. Since each individual was far more likely to lose than to win, it was in their collective interest to shut the whole dominance game down – and unlike other primates, humans had language, which enabled them to conspire in mini-revolutions that achieved exactly that goal.

All of those little hunter-gatherer societies were egalitarian because they were, in Boehm’s phrase, ‘reverse dominance hierarchies’: the rank and file got together and overawed the would-be alphas. Even today the customs of aboriginal societies reflect this old revolution: they are fiercely egalitarian, and have strong social mechanisms for taking down those who are getting too big for their boots.

Human beings lived in tiny bands with no hierarchies, not even any formal leaders, for long enough to entrench those egalitarian values in our cultures and maybe in our genes. But even the earliest civilisations had many thousands of people, which disabled all the social control mechanisms that relied on spotting and discouraging the would-be alphas. Moreover, mass societies had complicated economies that needed centralised decision-making.

So the alphas took charge, and the millennia of tyranny began. They only ended in the past couple of centuries, when democratic revolutions started to overthrow the kings, emperors and dictators. Why now?

Probably because the rise of mass media (just printing plus mass literacy, in the early phase) gave the millions back their ability to organise, and to challenge those who ruled over them.

They were still egalitarians at heart, so they seized the opportunity; and by now more than half the world’s people live in countries that are more or less democratic. But it’s only political equality; we never got the material equality of the hunter-gatherers back, and the social hierarchies persist.

Marx’s goal was to reconquer the remaining lost ground (though he would never have put it like that), and create a classless society that lived in absolute equality. It was such an attractive goal that millions sacrificed their lives for it, but it was a pipe-dream.

The only way to achieve that kind of equality again in a modern mass society was by strict social controls – and the only people who could enforce those controls were ruthless dictators. So we learned something from the collapse of Communism. Absolute equality comes at too high a price.

But too much inequality also exacts a price. People living in modern democratic societies will accept quite a lot of inequality, especially if there is a well-developed welfare state to protect the poor. But if the income differences get too great, the politics gets ugly.

Why did Canadians elect Justin Trudeau as prime minister, while Americans chose Donald Trump as president? The two countries have similar cultures and almost identical per capita incomes, but the richest 20 percent of Canadians earn 5.5 times as much as the poorest 20 percent – whereas the richest fifth of Americans earn 8 times as much as the poorest fifth.

Inequality is inevitable, but you have to manage it.
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To shorten to 725 words, omit paragraphs 3 and 8. (“At its…why”; and “All…boots”)