Whether the world will be better, the answer may be in the book

Author: Liu Yuxiang, Editor: Wang Fangjie, Header image from: Visual China

The last moral yoke of the post-war order is beginning to crumble in the ruins of Gaza.

Despite being driven away, protesters continued to demonstrate at Columbia University in New York City in the early hours of April 24. Not only Columbia University, but also several well-known American institutions of higher learning have erupted in the past few days, demanding a permanent ceasefire in the Gaza Strip and an end to US military assistance to Israel.

What seems to be a "small matter" of campus conflict may actually foreshadow the consensus of "victim compensation" that maintains the post-World War II world order, first on TikTok and then on campuses in the United States. No one can predict what kind of consequences this kind of consensus tear will cause, which is why the US political arena is like a great enemy, and many US congressmen gather to visit Columbia University. To some extent, this is also one of the deep motivations for US President Joe Biden to sign a bill demanding the stripping of TikTok on the evening of April 24, Beijing time.

The stability of the human social order requires the consensus of faith, and if the consensus is destroyed, it indicates that the order is about to change. To protect the consensus, it is necessary to grasp the right to speak, and to grasp the right to speak, it is necessary to master the media. Therefore, the Palestinian-Israeli issue is not just a matter of the Middle East, but a matter that affects not only the ownership of large Internet technology companies, but even the future of the planet.

But the Israeli-Palestinian issue is too complex, and if there is a quick primer, Ian Black, a senior visiting fellow at the Middle East Centre at the London School of Economics and Political Science, is a very good book, Ian Black, a senior visiting fellow at the Middle East Centre at the London School of Economics and Political Science, Enemies and Neighbors: Arabs and Jews in Palestine and Israel, 1917-2017, which was published on the 100th anniversary of the Balfour Declaration and tells the history of the Arab-Israeli conflict, which has been praised by both Israeli and Palestinian historians for its accuracy and objectivity. At the end of the book, Blake writes: "The shadow of violence is near, and the end of conflict is far away." ”

It can be described as a prophecy.

As for this Columbia event, it reminds me of the late Samuel Huntington, a well-known international political theorist, who predicted in his book American Politics: Between Ideals and Reality that every sixty or seventy years, the United States will have a creed passion, and "the next creed passion may appear in the 20s of the 21st century."

You're forced to submit to Huntington's precise predictions. He also noted the impact of new forms of mass communication on the passion for creeds, first newspapers, then radio, then television, and then the Internet. His book is an advanced reading for understanding American society.

Good books are like that, they not only deeply analyze history, analyze the present, but also predict the future.

1. Imbalance

In 2014, I accompanied an interview with former Morgan Stanley Asia Chairman Stephen Roach, who published his book, Imbalance: The Interdependence of the United States and China.

The book argues that the economic relationship between China and the United States is interdependent: China relies on the needs of American consumers and pegged the renminbi to the dollar to improve export competitiveness and maintain an export-led growth model, while the United States relies heavily on cheap goods produced in China to boost the purchasing power of its consumers and drive down inflation, while using China's demand for U.S. Treasuries to pay for large fiscal deficits so that the United States does not have to worry about deficits.

But this seemingly reciprocal interdependence has also had economic side effects: the United States blames China's strong exports of "cheap goods" for creating trade deficits and straining on its workers, and the influx of "cheap money" has fueled huge asset and credit bubbles while supporting America's record consumption spree, which in turn is too dependent on the US consumer bubble for growth.

Roach writes: "This interdependence is, after all, a marriage of convenience. He predicted that this would lead to constant friction between the two sides on issues such as trade and exchange rates, geostrategic security, and intellectual property rights.

Roach's prominence and friendliness made the book accessible to many people. In fact, in the years since, the two countries have made many efforts to solve this "imbalance" problem to a certain extent, including expanding domestic demand on the mainland and reducing its dependence on foreign trade, including the "811 exchange rate reform" to improve the flexibility of the renminbi exchange rate, and the continuous deleveraging of the United States for many years.

But as a result, everyone saw it.

The seeds of this protracted trade conflict were planted in 2008 and even in 2001, but how long will it last?

It may take a long time, and the reference can be to refer to the economic game between Japan and the United States, which has been constantly playing since the textile friction in 1955. Tomoharu Washio's book The U.S.-Japan Game Review traces the period from the textile negotiations, to the voluntary export restrictions on Japanese automobiles, to the decline of the Japanese semiconductor industry due to the Japan-US Semiconductor Agreement.

"The United States has been reluctant to restrict imports even if there is already a trade deficit in a certain category of products," he wrote. Under intense domestic pressure to call for protective measures, the U.S. government shifted the blame to Japan, which exports large quantities of the product, and demanded that Japan impose voluntary export restrictions. The United States is clever at throwing its own problems, responsibilities, and obligations on the other side. Trade wars in textiles, steel, automobiles, and other sectors are all the same. Moreover, the United States regards its demands on Japan as the government's responsibility, and it will do everything to force the Japanese government to submit. ”

In fact, there is another great work that can be used as a reference for Washio Tomoharu's insight, that is, Douglas Irving's book "The Conflict of Trade", which points out that "U.S. trade policy has always been directed towards three basic goals: to increase government revenue by imposing tariffs on imports, to protect domestic manufacturers from foreign competition by restricting imports, and to reduce trade barriers and expand exports through reciprocal agreements." ”

Both Tomoharu Washio and Owen found that domestic pressure from the United States was a huge driver of changes in their trade policy, and that it was only when the United States took the lead in a certain industry that the tendency to change from protection to freedom would change.

First with Japan and then with China, why is the United States always facing a trade deficit? It is difficult to discuss industrial competitiveness alone, but to cut into the perspective of currency. As the world's currency, the U.S. dollar is actually the world's most liquid and in-demand "commodity", and as long as the U.S. dollar is printed, the United States can exchange a steady stream of goods and services from all over the world. Countries around the world are also happy to hold the US dollar for trade settlement and even as a de facto reserve for the issuance of their own currency. This seemingly "empty glove white wolf" business is actually the root cause of the trade deficit that the United States will inevitably incur, that is, the "Triffin paradox".

The so-called "Triffin paradox" refers to the fact that under the Bretton Woods system, the dollar is pegged to gold for every 35 The dollar is exchanged for one ounce of gold, and the currencies of other countries are pegged to the dollar, and the dollar has achieved the status of a world currency, but after the war, the development level of various countries is backward compared with that of the United States, and the cost of factors is lower, so in order to develop the economy, they will continue to increase exports in exchange for dollars, and as many as they want, resulting in a long-term deficit in the United States' balance of payments; while the dollar promises to be pegged to gold and convertible, it is necessary to maintain the stability of the currency value, and the United States must be a country with a long-term surplus in the international trade balance. These two requirements contradict each other and are a paradox. With the huge spending of the Vietnam War and the impact of inflation, it became increasingly difficult to maintain the fixed exchange rate between the dollar and gold, and finally the Bretton Woods system collapsed in 1971.

Yes, that was what Huntington called the "Fourth Wave of Creed Passion." As for the formation of the Bretton Woods system, how the world's currency switched from the pound to the dollar, Ben Styler, director of the Department of International Economics at the American Council on Foreign Relations, has studied in detail in "The Bretton Woods Currency War".

Time has passed, although the Bretton Woods system version 1.0 has ended, the current world is actually the Bretton Woods system 2.0 era, although the dollar is no longer pegged to gold, but it is still the world currency, the world is still willing to hold the dollar, the dollar can also be said to be one of the "national capital" of the United States. Because the value of the dollar is too strong, it is difficult for the manufacturing industry to stay in the country, so it can only transfer the manufacturing link overseas and then import finished goods, and the dollar is the largest settlement currency of world trade, which leads to the United States must be a trade deficit, and the massive influx of goods has an impact on its manufacturers who are still in the country, requiring them to intervene and protect.

This is where the root of the "imbalance" comes from. Because the dollar is the world's currency, although the traditional manufacturing industry will decline, but it will attract the best talents, coupled with the active capital market, high-tech is unique, especially the high-tech industry represented by the Internet, chips, etc., has absorbed huge profits from the world and has strong control, which in turn supports the strength of the dollar.

This gave rise to the phenomenon of the so-called "dollar tide". For other countries, as soon as the Federal Reserve cuts interest rates, a large amount of funds rush out of the allocation to emerging market countries, in order to avoid the appreciation of the local currency leads to a decline in exports, emerging market countries also passively cut interest rates, stimulated by cheap funds, the housing market, the stock market and even the primary market in these countries have become very active, the volume and price have risen, the world is telling the story of "high growth in emerging market countries"; In the primary market, the original high price, high market capitalization, and high valuation immediately showed its original shape.

The plight of emerging market countries in 1998, 2008 and even today has been affected by the "dollar tidal wave". However, the U.S. financial industry is not immune to the "dollar tide", and excessively high interest rates will lead to a mismatch between the assets and liabilities of small and medium-sized banks in the United States, resulting in periodic crises, and it can even be said that the U.S. financial system is the creator and victim of the "dollar tide". In his book Artificial Vulnerability, Charles Cairomillis discusses how this system works.

This book's discussion of the relationship between politics, finance, and real estate is very wonderful, and I believe that reading it in conjunction with Artif Mayne's "The Age of Debt" will give you a different experience.

2. Conflict

One of the realities of the current world is that the rise of China's economy has an impact on the economic pattern, not only in the "imbalance", but also in the chain reaction triggered by the relative change in strength.

The "Thucydides Trap" proposed by Harvard University professor Graham Allison's "Doomed War" is a classic theory to explain the rivalry between the two powers. The so-called "Thucydides Trap" comes from the historical summary of the dispute between Athens and Sparta in ancient Greece, and the Greek historian Thucydides' "History of the Peloponnesian War" is a must-read classic to record the dispute between the "sea power" and the "land power". Professor Allison drew on Thucydides' historical texts and Huntington's theories to create the concept.

Allison writes: "The constant rise of Athens and the growing fears of Sparta, which feared that Athens would threaten its dominance in Greece, eventually led to the Peloponnesian War. Coincidentally, Mearsheimer, a professor at the University of Chicago, also used a similar analytical framework in his "The Tragedy of Great Power Politics" to draw on Hobbes's logic of "people are afraid of killing each other, so they need sovereigns", and set the assumption that "countries put survival as the highest goal".

Mearsheimer's book was written in 2001 and was so well received that it was introduced in 2008. Perhaps to avoid the tragedy described in the book, the two countries proposed the concept of "G2" in an attempt to bridge their differences and emerge from the tragedy through economic complementarity, and the optimism generated by the "G2" concept culminated in the 2008 financial crisis when the two countries worked together to deal with the financial crisis, an experience detailed in former US Treasury Secretary Paulson's "The Edge of the Cliff: The Road to Saving World Finance."

But optimism soon slipped. Because the complementary advantages proposed by the "G2" have negative effects under the sovereign state system, that is, in the economy, the more complementary and interdependent they are, the more they will fear each other grasping their own key points and being controlled by others, even if the economies of the two countries are highly close and belong to the upstream and downstream of the industrial chain. At the same time, the industrial upgrading and strength of the rising countries will make the defending countries feel that their status has been challenged, and promote the "security dilemma".

It's a difficult problem to solve, and it's too much of a test of wisdom.

We all know the benefits of free trade. For a long time, the Fed was able to maintain a nimble strategy because "inflation disappeared" based on China's once steady supply of new labor and export-oriented, which greatly depressed the prices of manufactured goods, coupled with a seemingly small but actually far-reaching innovation in the retail industry: the "low price revolution" initiated by Wal-Mart.

Matt Ridley's book "Rational Optimist" writes that the reason for the great increase in production efficiency in the United States in the 90s of the 20th century was the reform of corporate logistics, especially in the retail industry. In fact, Wal-Mart is the company with the greatest force in logistics reform. These "socio-tech" innovations in retail alone account for a full quarter of the nation's productivity gains. The low-price revolution of China's manufacturing + retail industry has greatly reduced the spending of American consumers on food and clothing, and the money saved can be used for other consumption, driving the development of more industries.

"Innovation, whether it's in technology or in the way it's organized, not only creates something new, but also destroys something old," Ridley said. ”

Ridley is as much an optimist as Kona Woodman, who wrote "Doing Business with the World: An Economist's Round-the-World Adventure." I'm a fan of optimists, but as the American historian Mullan Peng points out in The World Crafted by Trade, trade has always been associated with violence, and the two have been mutually reinforcing. Prosperous trade, on the other hand, theoretically promotes Pareto improvements, but in reality, it is driven by violence, with winners and losers. At the end of the book, he writes, "In the retail revolution, there are winners, but most of them are on the other side of the Pacific." ”

This is not a compliment. The results of the 2016 U.S. election are a metaphor. People were surprised by this outcome, but J.D. Vance had long foreseen the choice of the "silent majority of rednecks." In his book "The Sorrow of the Countryman," he describes the impact of the decline of manufacturing and relocation on the Rust Belt, Appalachia, and the South, where blue-collar "whites" can no longer find stable jobs with fixed contracts, are relatively or even absolutely impoverished, addicted to alcohol, fentanyl, religion, disintegrating communities, and are inherited from generation to generation, and their frustration and resentment drive the results.

This is discussed in "Fracking the Bottom", "Once Glory" and "Twilight of the Elite", where the former community is increasingly divided into the "winner group" of the urban middle class and Internet upstarts who benefit from free trade, and the "loser group" of "countrymen". This phenomenon has also appeared in the United Kingdom and Japan, where James Bradworth's "The Man Who Lost His Contract", Shigeo Saito's "The Hungry Poor", Miura Exhibition's "Lower Society", and Kenichi Ohmae's "M-shaped Society" all study the changes in industry, and more and more people have to work odd jobs to get by.

In the book "Capital in the 21st Century", Thomas Piketty pointed out that the capital gains of the capitalists who enjoy globalization far exceed the increase in wages, and I will not comment on whether this conclusion is correct, but the "winners" and "losers" are divided and even conflicted in terms of ideas due to the gap in economic status, which cannot be ignored, and will dominate the decision-making trend of various countries for a long time to come.

The impact of China's huge economy on the world is extremely far-reaching. In the past 30 years, the two-wheel cycle of (China) manufacturing dollars and (Middle East) petrodollars (high savings rates in exporting countries and low interest rates in the United States) has quietly changed, and the old order has been squandered and broken by the established countries, but the development speed of the rising countries has been underestimated.

Since the "Made in China" has been continuously supplied to the world, the flood of monetary easing in developed countries can be absorbed by "Made in China". In the 80s of the last century, when there was no "Made in China", developed countries wanted to control inflation, as former Federal Reserve Chairman Paul Volcker wrote in "Changing Times": "The only way to completely solve all the problems caused by inflation is through monetary policy." ”

Now, the seal on global inflation is being unlocked, and in the book "The Great Demographic Reversal", Charles Goodhart and Manoji Pradhan write that with the emergence of the inflection point effect of the Chinese population and the blockage of global technology exchanges, "China will no longer be a force to curb global inflation", and simple monetary policy no longer seems to be able to "treat" "high blood pressure" on the other side of the Pacific and "hypoglycemia" on this side.

Of course, if the shift to Chinese industries in the past has suppressed the wage levels of similar industries in developed countries, then when China's per capita GDP reaches $12,000, even if there are no trade frictions, the cost-sensitive manufacturing industry will "live in the water" and move out partially. How do you look at this problem? Perhaps the work of "Spillover" can give us some inspiration, he wrote: a supply chain network that is deeply integrated with China's supply chain will accelerate the expansion overseas, not to transfer and replace, but to "spill over".

In the past 30 years, although there have been games and conflicts, the two large-scale players are like two "exhaust fans", constantly sucking the matching talents and industries to themselves. In the past 30 years, the combined GDP of China and the United States has grown from 27.95% in 1990 to 42.1% in 2020.

The bulk of the loss of market share is Europe, Japan, Canada and other countries, and the industrial reflection is that Europe once dominated one side in the 2G and 3G era, with Ericsson, Alcatel, Nokia, France Telecom, Siemens and many other communication companies, and now the status and stock price of these companies are not as good as before; Blackberry has long since disappeared; the sharp drop in the yen exchange rate is of course due to the arbitrage trading factor caused by the interest rate differential, but the deeper is that after the defeat in the Japan-US semiconductor war, Japan lost the opportunity to lead the development of the world's high-tech industry, and was overtaken by China and South Korea in the home appliances, shipbuilding and other industries, and the automobile industry is also facing the impact of new energy vehicles.

The competition between the two powers is like the collision of large plates, which not only squeezes small plates, but also makes geopolitical fault lines creaque, and regional powers have more and more conflicts due to historical and practical problems.

Yes, the foundations of the old world are cracking.

3. Believe

So, will the world still be okay?

If you don't think the world is good enough, then if you look at Tuchman's "Tower of Pride" and Keon Lowe's "Savage Continent", which describe the history before and after World War I respectively, you will think that today's conflict is nothing.

Yes, only 79 years after World War II, the standard of living of mankind was unimaginable to people at that time, and even the standard of living of ordinary people far exceeded that of the princes and nobles of the past. In The Rise and Fall of American Growth, Robert Gordon argues that great inventions such as elevators, penicillin, computers, automobiles, farm machinery, jet planes, and mobile phones revolutionized lifestyles.

Technological advancements have also led to an increase in revenue per unit of time. "People who used to work in the steel industry for 72 hours a week and had to endure heat, sweat and all kinds of dangers were only 40 hours a week in air-conditioned rooms as clerks or professionals," Gordon wrote. "Global per capita income in 2005 almost tripled compared to 1995." The price of commodities is also cheaper than before, he quotes an economist as saying: "The same factors that used to cause inequality in the distribution of wealth are, over time, in turn weakening the inequality in the distribution of wealth." ”

Ridley argues that economic progress can be sustained if people support innovation and trade. Robert Gordon also writes optimistically: "Technological change directly increases output. Once technology advances, it is permanent, no matter what the circumstances. ”

But, in addition to optimism, you may also feel vaguely uneasy: what if history repeats itself?

Frankly speaking, the book has its own conclusions, and you need to savor them yourself, and as a "second-class dealer", I can't give you a direct answer, let alone guarantee the accuracy of the answer. Because, you know, I'm just a useless scholar, and my biggest hobby on weekdays is just buying and reading books.

Interdisciplinary books like "A Brief History of Mankind" and "A Brief History of the Future" are also excellent, and they may not understand the terminology, but in today's AI wave, we must not only understand the past, but also face the future, and people must not indulge in the past, but look forward.

Regardless of the end result, we must believe in the future and convince ourselves that the world will be better.

So many excellent authors have spent countless hours thinking and writing to tell us that even though history has twists and turns, conflicts, and even wars, it still moves forward with twists and turns. Humanity may not be able to fully learn from history, but the authors have told us the consequences of the lessons in words, and people are trying to correct their actions to avoid repeating the mistakes of the past.

As opposed to the pessimistic expectations of many, Professor Allison writes in his book, quoting Shakespeare, that "our destiny is not determined by the stars, but by ourselves." ”

Yes, the answer sheet of fate is actually in everyone's hands.

This is the book, the answer given to me.

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