China is eating our lunch and is ready for dinner

Even among those who think President Trump is wrong, oh so wrong, about nearly everything, there is a grudging admission that some of his observations about China are correct. “China is eating our lunch!”  They have subsidized their own industries while creating obstacles to US companies wishing to enter their markets and they steal our intellectual property.   If Trump can make progress on those issues, he will have served us well.  

But it’s China’s long game that troubles me.  They are likely to make concessions to Trump because the global trade paradigm feeds their coffers. In spite of the capital flight of recent years, China still has over $1 Trillion in US Treasuries on deposit in the Bank of China.  They are using that capital to fund a long-term strategy to build a China centric supply chain with outposts in developing nations hungering for foreign investment. In addition, they are investing in military technology to bypass the US as our military budget has declined precipitously since 2010. 

Americans tend to take our global hegemony for granted.  The US long game from its founding was Manifest Destiny, expanding the nation from one coast to the other and extending our buffer zones across two oceans. It took about 150 years to achieve this position and the commitment of Cold Warriors to maintain it.  We’ve been so secure for so long that we can’t imagine it might change nor can we imagine impact when it does. Now, that hegemony is in jeopardy as a defense strategy based upon aircraft carriers and foreign military bases is undermined by American withdrawal, reduced military budgets and foreign powers investing in asymmetric capabilities like cruise missiles and cyberwarfare. 

Enter Senator Marco Rubio (R-FL) who now proposes a China style national industrial policy for the US. He would protect American manufacturing, restrict capital flows and change the tax code to incentivize technology companies to invest in R&D.  Senator Rubio might be looking at how Japan used its industrial policy to become the world’s second largest economy over 40 years following WWII (they are third behind China now).  But it’s noteworthy that policies that worked well during their rise from the ashes have not served them well since.  The senator should also brush up on economics.  Comparative advantage still works. Competing with China in manufacturing may sound nice to American labor unions; however, our real advantage is in technology and innovation. And the best way to support innovation is for government to get out of the way.  

A better (non-Trumpian) approach would be to create economic alliances with China’s other competitors, such as India, South Korea and Japan and to invest in military technology to counter China’s cyberwarfare military expansion.  We should also expand our economic development initiatives in Africa, the continent most likely to grow economically in this century.  Initiatives of this nature won’t fit into the brevity of an American electoral cycle. For the U.S. to play a long game to counter China, a president will have to clearly define our strategy (Manifest Destiny 2100?) and work to gain bi-partisan support.  Such a plan must include strategies for economic development in the U.S. that will rebuild communities through investment in infrastructure, education and workforce development. Failing to do so will undermine political support for such an initiative in the long term.

Unfortunately, I don’t expect such long term thinking or leadership to emanate from the current resident of the White House. 

WHO WILL LEAD? 

What I’m reading…

… "A Brief History of Time by Stephen Hawking”:  I was inspired to read it in the wake of the author’s death.  Now, I’m not sure I’ll make it to the end.  I haven’t studied physics and math since college and wonder why I should start again… “Reimagining Mobility: A CEO’s Guide”:  a report from global consulting company, McKinsey & Co., describes how autonomy and electrification will affect automotive transportation over the next decade or two… “Is the Campus Free Speech Crisis Overblown?”: an opinion piece in the Wall Street Journal featuring comments from college students on the topic. 

The Poll

Well, the poll favors the short form of essay that I’ve experimented with since the beginning of the year.  (It’s still open if you’d like to vote.) However, the vote was close, and my wife voted for the short form. Maybe we should disallow her vote since she’d just like me to shut up.  What do you think?

McCain as seen from Annapolis

My history professor during Plebe (Freshman) Year at the U.S. Naval Academy had been a fighter pilot in the Vietnam War.  He often deviated from the curriculum to tell “war stories.” Pilots who missed their targets were often those afraid to fly within the range of enemy ground-to-air missiles, he told us.  There were a few seconds when you had to fly straight toward the ground with missiles going past you at relative speeds of hundreds of miles per hour.  “They looked like telephone poles flying by,” he told us. 

That was 1967, the year John McCain was shot down over Vietnam.  His story was the stuff of legend during my four years at the Academy; and, I recall, like it was yesterday, being glued to the TV, as McCain was the first to disembark from the plane that carried him home from the Hanoi Hilton.  Although on crutches, he lowered himself to kiss the ground he walked on.  It was March of 1973, a month before my twins were born. 

Twenty-somethings embark on a journey of discovery.  How does the world work?  How can I ensure I will have a roof over my head?  How do I progress in my career?  As a young military officer, these questions were accompanied by discussions of the Cold War, politics and the Vietnam War.  It was only natural to wonder how one might stand up to the kind of treatment that McCain suffered.  I confess I never thought I could.

Of course, McCain was the most famous of the P.O.W.’s because of his father’s rank and position.  His actions served as an example for military officers both in and out of captivity.  One must wonder where he developed such a strong sense of duty and honor.  His record at the Naval Academy was certainly less than stellar.  In its obituary of him, the New York Times asserts that he “resisted discipline, broke rules, piled up demerits though never enough to warrant expulsion.”  They might have been describing me in that sentence, though I would never claim to have his courage.

The market values conformity.  Job performance is measured in part on the basis of our conformance to the rules.  John McCain never did well on that measure.  His departure from norms carried over to his political life. 

A popular video on social media shows him at a campaign event in 2008.  A woman rises to confess her fear of Barack Obama because “he’s an Arab.”  Refusing to take advantage, Senator McCain disagrees and extols Obama’s character to scattered boos.  He could have expressed sympathy for her point of view.  After all, spreading fear is how candidates get elected. That he didn’t was a mark of his character.

Less well remembered, but no less important, was his departure from Republican Party orthodoxy during his failed primary campaign in 2000.  Then he described Jerry Falwell and Pat Robertson as “agents of intolerance.”  It’s an attitude and approach that was also reflected when he surprised his U.S. Senate colleagues by voting against the repeal of the Affordable Care Act.  In his statement following the vote, he exhorted his colleagues to “stop political gamesmanship and put the health care needs of the American people first.”  Perhaps that’s why his 2008 presidential opponent, Barack Obama, said on Sunday “all of us can aspire to the courage to put the greater good above our own. At John’s best, he showed us what that means.”

But the event I remember most was his admission of a mistake in 2000.  He had called a Confederate flag at the state capital in Columbia, SC a “symbol of heritage.”  He later confessed that he feared losing the South Carolina primary “if I had answered honestly.”  Military training, including Plebe Year at the Naval Academy, involves breaking down conditioned responses.  Of the four allowable responses by a Plebe to an upperclassman, the most resonant is “No Excuse, Sir.”  Everyone makes mistakes.  But, failing to admit one – to make excuses – is a mark of poor character.

Over the last 25 years, there has often been a call for our military heroes to run for president -- Schwarzkopf, Powell, Petraeus. What’s their appeal? The sentiment transcends party politics. People don’t care about that. Quite simply, we long for true leadership – a “No Excuse” approach to the job. Isn’t that the mark of a true leader?

McCain was labeled a maverick because he wasn’t afraid to break with his party to do or say what he thought was right.  His history tells us why.  To quote Seth Lynn, the Marine Corps veteran who heads the Veterans Campaign, an organization that prepares veterans for a second career in civic service, “Military members have… seen that the enemy is the guy at the end of the battlefield, not the guy at the other end of the aisle".

WHO WILL LEAD?

What's Russia really up to?

With ISIS and the Syrian refugee crisis on the news so often, it’s hard for some Americans to relate to the comments of General Joseph Dunford, the new Chair of the Joint Chiefs of Staff.  Testifying before the U.S. Senate during his confirmation hearing in July, he identified Russia – not Iran, North Korea, China or ISIS – as the greatest threat to US national security.

Many analysts and journalists have speculated on the motives of Russian President Vladimir Putin.  Following the Russian incursion into Ukraine, the Los Angeles Times ran an op-ed piece titled ‘Is Vladimir Putin Insane?’  In it, German Chancellor Angela Merkel is quoted as saying that Putin lives in “another world’.  Other pieces have described him as a tyrant and compared him to Hitler.   Meanwhile, General Lloyd Austin, Commander of U.S. forces in the Middle East admitted to Congress that he was completely flummoxed by Russia’s military actions in Syria. 

Yet, I have seen very little said or written about Russia’s compelling national security interests as a key driver of their behavior.  As I see it, there are two geographic factors driving Putin’s and Russia’s behavior. 

Russia is a vast plain that is easy to attack from every angle, except the sea.  So, they have been attacked throughout their history from both the East and West.  Their compelling interest is to create buffers between themselves and potential attackers.

 That said, Putin knows he doesn’t possess the military strength stand up the US.  So, he exploits the vacuum we created in the Middle East to his advantage by becoming the enabler of Iran’s compelling interest.  The consolidation of Shia power from Iran through Iraq to Syria serves them as well as it does Russia, which gains a buffer zone to its south.  It also threatens both Turkey (a NATO member) and Saudi Arabia, an American ally and, like Saddam’s Iraq, an Arab nation ruled by a Sunni minority.  

As for Ukraine, Russia’s actions — from annexing Crimea to carving out a swath of land that gives them access to it — are driven by another compelling interest, access to the sea.  Like all nations, access to sea routes is essential to commerce.  Securing Crimea provides them with access to the Mediterranean.  

There was a bit of coverage about the Arctic Ocean when President Obama visited Alaska a few months ago.  Our Coast Guard has only one icebreaker to Russia’s 27 securing their access to the sea routes that open up as the ice floes melt.  

Americans tend to take our security for granted.  We are geographically too far from Europe and Asia to have suffered from the ravages of war in the last century.  Very few are aware that the US Navy has secured 100% of the world’s waterways since WW II.  We ensure peaceful commercial sea traffic for every nation in the world.

Now, we are reducing our military presence throughout the world and downsizing our navy.  Is it any wonder that Russia sees an advantage and takes it?  Their incursion into Ukraine tests NATO’s resolve while their support of Syria’s Assad advances a refugee crisis that tests the EU’s economic resilience. 

The Obama administration has been criticized in the press for lacking a cohesive foreign policy. Yet, there may be long-term benefit to the U.S. letting the Middle East and Russia be Europe’s problem.  Our so-called ‘pivot to Asia’ will have greater economic benefit through stronger trading and security relationships that challenge China.  Our Asian allies seem to care about that.  

Does Europe care?  Will they stand up for themselves?  They are already sounding like Chamberlain. 

WHO WILL LEAD?

Our Mission

Management is doing things right; leadership is doing the right things.

Peter Drucker (1909 - 2005)

I went to the “Un-college”. At least that was our joke at the time. It was a play on words from the popular 7-Up commercial. 7-Up, the Un-cola was an alternative to Coke and Pepsi. And the US Naval Academy was an alternative to a real college, it was the Un-college. So, despite my pursuit of a business career, I never studied finance, marketing or industrial engineering. In fact, I never even studied management.

At the Un-college, we studied Leadership. I don’t mean by observation or inference; we took college courses on the topic. That formative era in my life has provided me with a perspective I often find lacking in our institutions, in our sense of civic duty and, indeed, our approach to solving the multitude of strategic challenges we face today.

If I sound a bit pious or arrogant, I am sorry. But, the anger felt by Main Street for Wall Street, by Republicans for Democrats (and vice versa) or by labor for management has resulted from a lack of leadership in our institutions. At the core of this anger is the faith the citizenry placed in our so-called leaders.

Throughout our history, the little guy has always known that rich guys make the rules. American institutions have always attracted people and capital because the rules made it possible for everyone to have success and for many to become rich guys. How long can this continue? Will global investors continue to have faith in US investments in the face of a rising debt burden and a lack of transparency? Will America continue to thrive when its high tech manufacturers can’t find enough workers with the math skills to operate complicated machinery? Will we continue to lead the world in innovation while our grad schools are populated largely by foreign nationals?

Millions of Americans, who have done the right things, have been wronged. People who have worked hard and trusted government and their corporate bosses have been betrayed. Their jobs have been shipped overseas, our schools are deteriorating and our financial underpinnings have been undermined.

Last week was my inaugural of this blog, “Who Will Lead?” My mission is to look at the issues of the day, the contradictions and hypocrisy and ask that question – who will lead?

I hope to keep you entertained and perhaps to enjoin you in a dialog. I would also like to expand the audience. So, if you find something interesting or provocative, please click the button to “Follow” this discussion and tell your friends.

And, as you follow current events, ask yourself that question:

“Who Will Lead?”