US Politics Mega-thread - Page 1530

The Chinese state policy department gives approximately zero shits about Chinese people and a little bit less than that about Africans. China's clean energy gambit is no different to their long term macro economic policy in all areas which is to invest in long term market capture.

Economic investment is the result of market inefficiency. Someone says "we're paying $X to buy the raw materials from country Y, if we spend $Z to build a factory nearby we could save so much on the raw materials that we'd make $Z back in 3 years". The more efficient the existing market is the less the incentive to invest in creating an alternative.

Economic efficiency is created by a dense ecosystem of interrelated industries which meet the needs of each other. That's more or less what a mature economy looks like, the existence of each industry justifies the existence of the others as they all meet the needs of the others.

In the 70s China used the only resources it had available, natural resources and cheap labour, to argue to the West that paying American workers to mine American resources was inefficient when Chinese workers could be paid so much less to mine them in such unsafe environments. The West promptly invested. Once you have the initial investment you can then make the case that they really should invest in the railways and the ports to transport the raw materials, that'll save a bunch of money. And once you have sufficient raw materials all extracted in the same place with good internal infrastructure then it only makes sense to have the factory that assembles them into manufactured goods in China too, that's just good business. And if you're manufacturing out there then you might as well build the heavy plant, the ships, and the telecoms out there while you're at it. And wouldn't it make sense at this point when so much of the business is in China to put the management out there where they can have much more direct and responsive control. And if the management is there why not take advantage of Chinese state banking, use Chinese insurance, employ Chinese accountants etc. And with all these skilled jobs to fill why not fill them with the students from Chinese technical colleges, use Chinese engineers, Chinese researchers.

The US signed up to move shit like coal mining to China because in the 70s that's all China had to offer. But by keeping their currency artificially depressed China lured the entire ecosystem across, piece by piece. These days there's no point in an American going to college to learn how to design industrial mining equipment because there aren't American mines investing in buying new equipment. And if an American company decided that it did want to expand mining operations they would rapidly find that the experienced foremen were retired, that the infrastructure to take the ore to the processing facility had been decommissioned, that the company that built that infrastructure had gone out of business, that the processing facility was closed decades ago, and that not only are there no graduates coming out of colleges with the skills that they need but that colleges don't even teach that program anymore. The ecosystem is dead. You can't simply lay down industry like it's Sim City, it grows slowly over time as the inefficiency of each industry incentivises the market to invest in creating symbiotic and complementary industries. Once you've lost the ecosystem entirely it becomes massively inefficient to restore it, just as a railway becomes less cost efficient the fewer tonnes of freight you put on it.

China's long term economic gambit was to use the greed of western capitalism to steal the entire economic infrastructure. They don't even need to deflate their currency these days, their ecosystem is simply more efficient. Raw materials are imported to China, rather than the US, from around the world because China can use them more effectively. There was a big stink a few years ago in the UK when Dyson announced that it wasn't going to assemble products in the UK anymore but, as they reasoned at the time, they hadn't actually ever manufactured in the UK, just assembled foreign parts. When they looked into doing the plastic molding etc in the UK they discovered that no British firm could actually meet their requirements anymore.

China's investment in clean energy tech is just another aspect of their macroeconomic strategy. If you invest in building them in China then you're simultaneously investing in extracting the raw materials, in acquiring the human capital, in financing residential solar, in researching better ways to make them, and in creating a need for those skilled workers to be produced by educational establishments. Once one country has a headstart it becomes economically irrational for another country to compete. Why manufacture solar panels in the US when we're getting the raw materials from China anyway, etc.

They're not doing something new and exciting with their clean energy investment, they're doing the exact same thing they did with every other major industry. The moment Reagan scrapped the solar panels on the roof of the Whitehouse and signaled that American energy investment was going elsewhere they all highfived each other. American universities were producing petroleum engineers, not solar materials tech researchers, and just like that the game was lost.

What China is doing in Africa is reaping the spoils of victory. They don't even need to mine rare earth minerals in China to maintain their advantage in efficiency anymore. The cost saving isn't from the feckless pollution of Chinese waterways and the exploitation of Chinese labourers, it's from the combination of infrastructure that already exists in China. Now that they've successfully captured industries they can outsource the externalities to colonies without threat of competition.

It may seem that by doing so they're repeating the exact same mistake that the west did with China, that by investing abroad they're creating their own competition. But the key difference is in state policy. Western companies cannot invest directly in China. They have to create a Chinese subsidiary to act as a partner which is half owned by the Chinese state and is under CPC control. When China invited the west to invest they attached significant strings, there was a transfer of power. When China invests in Africa the opposite applies. China invests in Chinese companies, under the control of the state, which build Chinese assets in Africa, staffed by Chinese technicians and using Chinese built materials. They're exercising extreme caution to retain control over whatever investments they make in their colonies.

TLDR: Africa is still fucked. China is playing a long game. Reagan is dumb.

Edit: Incidentally this is why it's necessary for the military to waste such ridiculous amounts of money subsidizing contractors to produce shit that they don't need. The United States doesn't need a bunch of new aircraft carriers to maintain military hegemony. However it is vitally important that the US remember how to build a bunch of new aircraft carriers if they need to and the best way to do that is to just build aircraft carriers from time to time. Back in 1940 it was simple enough, the US was the world's largest shipbuilder and so it was simply a case of reallocating domestic industrial resources to a military cause. In 2019 the domestic industrial resources are dying and are kept on life support by the military spending to prime the pump. The industrial military might of the US has declined massively in the last few decades as the available domestic industrial resources that can be repurposed to military use have been lost. By spending public money to keep the last surviving ones on life support they're hoping that they'll have enough left to scale it back up if ever the time comes. Because if not the US will have to order them from RoK or Japan etc.
It's also why Britain and France will sell arms to anyone, no matter how shitty, because at least then there's someone else subsidizing their defence industries. When the default option is "spend a lot of money to build weapons, throw them in the ocean, spend a lot more money" the idea of Saudis doing the spend money part is viewed as an absolute win. Every pound Saudi Arabia gives the UK is one pound less of the government's money that they need to spend to keep BAE Systems alive. The only confusing part is why they don't nationalize the companies that they're subsidizing with public money rather than making it national policy to enrich the shareholders.

Edit2: It's also why Brexit is the stupidest thing any nation has done since Germany looked at a map of the world and said "eh, we can take them". The British Empire established London as the hub of all international commerce and in doing so it built the largest and most effective commercial ecosystem in the world. The world's largest banks, investors, insurance companies, accounting firms, consultants, legal firms, shipping firms and so forth were all based out of London and all provided constant reinforcement to each other in a self sustaining ecosystem. Even after Empire London remained the financial capital to Europe and the entrance to all European commerce. No other city could rise to replace it because it couldn't simultaneously replicate all of the elements that gave London its competitive advantage. The human capital simply wasn't there. The universities producing the graduates to keep London going didn't exist because there was no economic need for them to exist. London is still the jurisdiction of choice for most international business disputes because it has become so established, you wouldn't fight your case outside of London because the courts outside of London have never heard those cases. As long as it was not lost through a single wholesale migration to the continent it could never be lost because no single element would move unilaterally and lose its competitive advantage. Britain lucked out through history, it no longer has to make anything of value, it is the location where all the other places which do create value come to meet and do business.
The British public then decided to place economic barriers between the commercial gateway to Europe and Europe. Good job guys.