US Investors Must Defy the True Menace of the American Markets
Nesting dragon alert!
Will the tentacles of the “Chinese dragon” nest in the very bowels of Western infrastructure, in the inner sanctums of allied networks, intelligence, and datacenters?
Traveling through the UK, from castles in Cumbria thronged with scientists to the elegant domains of Old Slen, the family home of former Defense Minister James Ramsden and his formidable son, I find myself engulfed in the Huawei issue.
People are discussing it everywhere I go, eclipsing even the concern with Prince Andrew’s sex life, the weather (drizzle), or the climate and the coronavirus (twofold doom ahead).
Should the UK succumb to the Trump Administration’s extraordinary claim that the purchase of telecom gear is an urgent “national security” matter?
While freshly-minted conservative Prime Minister Boris Johnson has ruled in favor of continuing use of Huawei equipment, most conservative Politicians dissent. Exemplifying the continuing campaign against Huawei as a “national security” threat is Senator Marco Rubio (R-FL) in the US and MP Tom Tugendhat in the UK.
Both are exemplary conservative leaders, tough-minded and incisive, ascendant in their parties on the two sides of the Atlantic and eager to perpetuate the “special relationship” between the US and the UK.
To Rubio in the midst of the Washington national security establishment, Huawei is a “critical test” of “our mutual economic and national security interests.” Tugendhat, running for the Chairmanship of the House of Commons’ Foreign Affairs committee, chimes in, after consulting what he imagines to be relevant experts:
“Talking to former prime ministers, serving MPs, congressmen, and senators from our ‘Five Eyes’ [intelligence cooperative among Australia, New Zealand, Canada, and the US] and with our EU partners, it’s clear that the Huawei decision is being seen as an indicator of how we see the world. Are we willing to nest a dragon more deeply in our critical national infrastructure or do we — like them — recognize that sovereignty isn’t just about land, it’s also information.”
Tugendhat joins the sinophobic chorus: “Now we’re taking back control from Brussels [through Brexit], we don’t want to risk handing it over to Beijing.”
The Real National Security Threat
In the name of resisting Chinese statism, government officials and politicians, left, right, and center join in supporting the extension of government powers in telecom networks. Ironically defied by Huawei’s own triumph over the state-owned telecoms of China, the rise of Western telecom statism thrusts government into the guts and ganglia of all industrial supply chains and information technologies.
Previously the Trump Administration joined many observers in declaring that artificial intelligence (AI) is also an “existential” national security concern.
Thus, bans similar to Huawei’s apply to such Chinese cybertechnology innovators as SenseTime, iFlytek, and HikVision that produce face recognition equipment. The new Paul Reveres spread their alarms and anathemas even to the video-nimble prurience of Chinese social network TikTok of Bytedance.
These policies mean that key US technology companies such as Intel and Broadcom are being required to give up some $11 billion in chip sales to China now and perhaps hundreds of billions in the future.
Somehow recognizing people’s faces is deemed overreach by government, but widely intruding on company decisions on technology and supply chains is a routine expression of “national sovereignty” over “information.”
Essentially the US government position is that all new technology and information gear is subject to detailed governmental regulation on grounds of national security.
Do we really believe it has come to this? That the US must regulate its technology companies and data centers more restrictively than do the Chinese Communists regulate theirs?
Peripheral in the United States, the Huawei issue is central in Britain. British telecoms bought most of their previous-generation of 4G networking equipment from the Chinese colossus. According to the US, all this gear should be ripped out and replaced by often inferior and incompatible products.
What seems a simple matter of “national security” to American politicians thus appears to many Brits including Boris Johnson, as a matter of US bullying, protectionism, and imperial overreach.
This is a profound philosophical divide. Socialism consists largely in the belief that the existing “means of production” are permanent and unchanging, and that countries compete on a known and possibly level playing field.
Capitalism consists of a constant, dynamic and unpredictable competition by free enterprises to disrupt the playing field.
Governments everywhere, even when they purport to uphold free enterprise, resent the unpredictability of capitalist freedom. They prefer to believe, with followers of Karl Marx, that some particular configuration of infrastructure, whether railroads, looms, and factories of the Industrial Age or AI and 5G today, are a final thing — an eschaton.
The country that gains these promontories, so it is believed, will rule the future of the world. Governments must intervene to assure victory in this “full-societal” war.
Socialism is a cogent temptation for incumbent capitalists, who want government guarantees, for conservative pols, who want to pander to their incumbent beneficiaries, and for military strategists who want to manage the existing panoply of powers.
Make no mistake, mercantilism — the political control and regulation of international trade — is a form of socialism. No matter whether in the name of “national security” or “level playing fields” or enforcement of “intellectual property,” dictation to companies of their trading partners is socialism.
As advancing telecom and transport technologies propel economic growth and supply-chains into a global web of information tools, mercantilism becomes ever more insidious. In fact, it is more subversive of market freedoms even than national control of the diminishing domains of domestic companies.
Today, for all its ritual communism, China leads the world in the number of capitalist companies with the freedom to do commerce creatively around the globe. It now educates most of the world’s engineers.
China’s technology leaders, such as Huawei and Ping An, are actually freer to trade and invent than our own firms such as Google and Amazon. American tech leaders face increasingly intrusive regulations on spurious grounds of anti-trust, privacy, and diversity.
Banishing China from our markets and trade will confine to an ever-shrinking horizon the ever-diminishing number of reasonably free US companies. Suppressed by a campaign of regulatory overreach led by green Luddites and lawyers — at last being boldly combatted by President Trump — the number of US public companies is down some 50 percent in 20 years.
The challenge we face is not the “containment” of a Communist regime that mimics and steals US technology. The challenge is competing with a freer and more innovative capitalist power. Benefiting from a long “special relationship” with the US, China now uses US industry standards, operating systems, chip architectures, and networking protocols to outperform and out-innovate America.
The most telling and far-reaching threat to Chinese communism is not the West but Chinese capitalism and its deep engagement with the US.
To banish from China our industry standards, protocols, OSs, and architectures — on the grounds that they were somehow stolen — are deeply destructive to American technology.
The Trump Administration drive, supported by many Democrats, to “decouple” our economy from China’s in fact is a campaign to contain America and guarantee its decline. It plays into the hands of the continuing Communist Party threat to Chinese and world capitalism.
US investors must defy this menacing threat to American markets brought on by American politicians. We must do this by defending and strengthening the still massive engagement of US companies in China and Chinese companies in the US and the world.
That is what we are doing here. I regard it as a patriotic trust.
Editor, Gilder’s Daily Prophecy