US midterms: Trump looks to tariffs and tax cuts to win in rust belt

Amid talk of a trade war between the US and China business has urged calm. But some manufacturers relish the clash

Patti Waldmeir in Chicago
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© AFP


Atlas Tool Works, the precision manufacturing company Zach Mottl runs with his father and sisters, was founded by his Czech great-grandfather in 1918 in Chicago.

The company once supplied the US telecoms equipment industry, before it began sourcing from China, earlier this century. After remortgaging the father’s house to keep the company alive, Atlas moved into new markets, making precision components for the aerospace and medical equipment sectors.

Now, having struggled to survive for a number of years, the company has a strong order book in the US and is raising workers’ wages. And Mr Mottl is counting on President Donald Trump’s policies — from tariffs on Chinese imports to tax cuts to regulatory reform — to keep it that way.

Based in a down-at-heel, working-class suburb south-west of Chicago, Atlas has annual sales of between $7.5m and $9.5m but less than 5 per cent of its products go for export. And Mr Mottl points to what he believes is a disconnect between the small business community and the boardrooms of big US industry.



“We forget that most of the companies that are leading the charge screaming about tariffs make up a very small bit of the economy,” says the dapper 40 year old. “But it is small businesses like mine that make up the major part of the economy and I am in favour of tariffs.”

While the conversations among many bankers, chief executives and policymakers in New York and Washington are permeated with the threat of a trade war with China, for many of the people running businesses in parts of America’s manufacturing heartland, any negative impact from the tariffs is paling in comparison to the boost they feel they are receiving from tax cuts and a loosening of regulations.

The promise to restore US industry to its former glory gave Mr Trump slim margins in swing districts of the industrial Midwest in 2016, delivering him the presidency. Now, as he faces a referendum on his first two years in office in the US midterm elections in November, he is counting on optimism in the rust belt states to help prevent an angry Democratic backlash reversing the balance of power in Congress.


Zach Mottl (left) and an old photo of Atlas Tool Works (right)


President Trump, who believes in leaving no superlative untweeted, has been assiduously courting this constituency. His recent Twitter feed reads like one long celebration of animal spirits of the US economy: the lowest US unemployment rate in nearly half a century; manufacturing confidence at its highest level since records began two decades ago; and the highest small business optimism ranking in history, topping even the morning-in-America days of former president Ronald Reagan.

The White House’s efforts to sell the image of the businessman-president reached its most bizarre moment earlier in October when Mr Trump chatted about industrial policy in the Oval Office with the rapper Kanye West, who then dubbed him a “master of industry”.

Many in the US business establishment would laugh at that honorific. Corporate leaders from both coasts have made dire predictions about the president’s decision to declare a trade war on many of its biggest trading partners, most notably China. Retailers cannot be sure what tariffs will apply to the goods they are importing for Christmas; technology companies don’t know whether they can continue to rely on cheap Asian contract manufacturers to hold down prices; carmakers bemoan the impact of tariffs on input prices.

But Mr Mottl, former chairman of the board of the Illinois Technology and Manufacturing Association, says he is “grateful for the president’s ‘enough is enough’ approach on tariffs”, which will help him compete with subsidised imports from China.

He describes himself as an “independent voter”, but adds: “I think the election of this president was part of a positive vibe. Then there was tax reform and now tariffs, a lot of small businesses get it, it’s about bringing the supply chain back here . . . There is a sense of optimism, a sense that the US is the place to do business again.


President Donald Trump holds up a signed executive order in Wisconsin in April last year © Bloomberg


“We turned 100 this year and it has been our busiest ever. We have seen significant accelerating demand, particularly in the third and fourth quarters. And our order books are full,” he adds.

Mr Mottl works alongside his father and two sisters — one is head of engineering and the other manages the production department. Formerly called Atlas Tool and Die, the family changed the name because “we don’t want to sound antiquated”. He gestures at component parts that Atlas makes for hospital sterilisation machines, for the radar and guidance systems of aircraft, and brackets for telecommunications equipment, all of them mounted on the wall of the company conference room, sharing space with grainy black and white photographs of the company down the decades.

Atlas is offering cost of living allowance rises for the first time in years, and matching retirement contributions up to 3 per cent of pay, he says. Adding that US tariffs could make the business even stronger. He refers to a long list of components targeted by the three latest rounds of US tariffs imposed on Chinese products: he and some of his customers, he says, will benefit, because overnight their products should seem cheaper.

“These [tariffs] are all part of a perception game as much as reality. Little micro-decisions are being made and people are weighing into their thought processes things like tariffs. People are starting to say, if we are going to make a new product, maybe we should make it in America.”



Plenty of large companies do not share this rosy outlook. Ford, Fiat Chrysler and General Motors cut profits guidance because of the probable impact of tariffs when they reported second-quarter earnings in July, following earlier downbeat statements by Daimler and Harley-Davidson.

A string of third-quarter results this week from industrial groups including 3m, Caterpillar and United Technologies have highlighted higher costs because of tariffs, spooking US investors worried about the impact of a trade war.

However, Scott Paul of the Alliance for American Manufacturing, a lobby group that supports the Trump- inspired “Made in America” manufacturing campaign, says that profit warnings from big global companies do not tell the whole story of the trade war.

“Tariffs are much more a topic of conversation in political circles than on the factory floor,” he says, adding that so far they have had “only a really benign effect on the manufacturing economy.

Any job losses — and there have been very few actually documented . . . are being more than offset by the strength of the factory economy,” he adds.

Jay Timmons, head of the US National Association of Manufacturers (NAM), echoes that sentiment. “From a height of 30,000ft, manufacturers are incredibly positive and optimistic about the economy today and the future for their business . . . more optimistic than they have ever been in the history of our survey,” he says. Companies like an environment where “the regulators are actually talking to business” about issues, he adds.

“In the 1950s and 1960s, people took for granted the place of manufacturing in our economy and our society.” Since then, the status of manufacturing had eroded, and “regulatory and tax issues started slamming us”, he adds. But now “manufacturers don’t feel they are constantly having to look over their shoulders, they can look ahead to the future”.



Jay Timmons, president and chief executive of the National Association of Manufacturers © Bloomberg


Nicholas Pinchuk is chief executive of Snap-on which designs and manufactures high-end tools for use in automotive repair and other transport industries. He hosted Mr Trump at an event promoting “Made in America” manufacturing at the company’s headquarters in Wisconsin last year, where the president posed for pictures against an American flag made of interlocking Snap-on tools. But Mr Pinchuk did not vote for the president: “I wrote in for Paul Ryan,” he says referring to the Republican Speaker of the US House of Representatives and a hometown candidate who did not stand in the election.

He disputes the notion that Mr Trump’s tariffs should be treated as a “hand-wringing event” for global companies such as Snap-On, which manufactures in China and around the world, and produces 80 to 85 per cent of its tools in the markets where they are sold.



“I was asked: ‘Boy, isn’t this a risky time?’, and I said: ‘Risky versus what?’ We just got, for us, 600 or 700 basis points of tax relief, so versus a year ago, is it risky? I don’t think so,” he says, adding “that is much better than we were a year ago, from a profitability point of view”. Tariffs are just another issue that companies have to manage, he argues, like currency movements.

Lighter regulation under the Trump administration is also boosting manufacturing optimism, he says, noting that NAM estimates the cost of regulatory compliance for US manufacturers at nearly $20,000 per worker per year — or $35,000 for smaller companies.

 “Part of the animal spirits that are abroad in the land right now come from the fact that while there may not be any one regulation that most people can point to and say, ‘I have been delivered from evil’, they have a belief that there isn’t going to be a further [regulatory] burden, and that in itself is great.”



While Snap-on in Wisconsin will be a century old in 2020, Golden’s Foundry in Georgia, which makes parts for trucks, farm equipment, railway stock and other industrial equipment, is already 136 years old. The company was founded by George Golden’s great-great grandfather and his family.

Chinese competition has decimated the foundry industry, says Mr Golden, adding that industries such as his will be “completely lost” without politicians like Mr Trump fighting their corner. “We need to move away from this Washington consensus that it’s OK for manufacturing to leave our country,” says Mr Golden. Mr Trump would not even need to maintain tariffs against China forever, he says, “just long enough so that I can raise the issue of the overvaluation of the dollar at a cocktail party without being treated like I have a third eye in the middle of my forehead”.

He too welcomes the positive psychological impact of the Trump presidency on US manufacturing, lauding “the feeling that we are going to stand up for American manufacturing, we are going to be open for business again” — whatever happens, in the end, about tariffs.

Burl Finkelstein, vice-president of operations for Kason Industries, another Georgia company, which makes components for walk-in refrigerators and latches for delivery trucks, says there is a bottom line for small manufacturers in the US. “Not everybody loves Trump,” he says, “but they can’t deny they are doing well” under his presidency.


The heavyweight rivals

America’s new attitude towards China is changing the countries’ relationship

It is getting more antagonistic in many ways




WANG JIANQIN, in a thick red jerkin worn over her working clothes, does not look like an agent of superpower reprisal. The 60-year-old farmer rears 4,000 pigs in a brick-walled compound in Shunyi district, some 45km from Beijing. About a fifth of the food that she uses to fatten them up is soyabean meal, something China has come to import in vast quantities from the American Midwest.

Over the past 30 years, as the demand for pork in China has outstripped that in any other country, Ms Wang and her peers have done very nicely out of that American soya. And in America farmers have done well out of Ms Wang. Chinese money helped them pay for lots of cheap, Chinese-made goods at Walmart—as well as for the genetically modified seeds and other high-tech inputs stuffed with American know-how that make them so productive.

But this year their earnings will be a good bit down. In April President Donald Trump accused China of stealing intellectual property, coercing American firms into technology transfers and other unfair trade practices. Mr Trump spent a dizzying spring and summer announcing punitive tariffs, expanding their scope and amping up their severity. There are now tariffs of between 10% and 25% on $250bn of imports. Mr Trump has growled his willingness to go up to 25% on all of those goods and start in on the remaining $267bn if he does not get his way.

When China punched back, announcing tariffs on up to $60bn of American imports, it included a 25% tariff on soyabeans to hurt farm states that had voted for Mr Trump, such as Iowa. Despite China’s president, Xi Jinping, having fond memories of the time he spent in Muscatine, Iowa, in 1985, the fact that the state is both second among America’s soyabean producers and disproportionately influential in American politics makes it a prime target. Ms Wang was weaponised. As the price of soya has shot up, she says, some of her peers have switched to other feed, and she is thinking of following suit. The Chinese Feed Industry Association has proposed new standards for pigfeed that cut the soyabean content to just 11-13%—a change that could reduce annual consumption by 10m tonnes.

China wants to do a deal. But America may want more than it is willing to give, because its concerns are wider than trade. Mr Trump sees himself leading a fight against “globalism”, by which he means any order that binds American sovereignty, or fails to put American workers first. As he put it to the UN General Assembly in September, “We reject the ideology of globalism and we embrace the doctrine of patriotism.” And his great patriotic fight is with China. “When I came,” he said in August, “we were heading in a certain direction that was going to allow China to be bigger than us in a very short period of time. That’s not going to happen any more.”

A broadly based interdependence ties Beijing’s pigs to Iowa’s fields, interweaves supply chains and distribution networks across the Pacific and has seen copious Chinese investment in America. That had, until recently, led observers in both China and America to think attitudes like Mr Trump’s could be nothing but bluster. Though relations might be testy from time to time, the economic logic which favoured getting along was simply too strong to ignore. But American unease about China’s growing technological heft, increasing authoritarianism and military strength is now overriding that logic.

America is undergoing a deep shift in its thinking about China on right and left alike. There is a new consensus that China has a deliberate strategy to push America back and impose its will abroad, and that there needs to be a strong American response. The coalition takes in conventional free-traders in the White House as well as the zero-summists in Team Trump and the national-security hawks in Congress. Pentagon chiefs and the bosses of spy agencies have framed China as the greatest threat to America’s security, requiring a “whole of government” response. In civil society, the coalition includes religious conservatives, human-rights advocates, labour unions and old-school protectionists.

On October 4th Vice-President Mike Pence hammered the new attitude home in a de facto declaration of cold war. As well as decrying China’s internal repression and its surveillance state, he inveighed against its attempts to hack and bamboozle America: it was employing “political, economic and military tools, as well as propaganda, to advance its influence and benefit its interests in the United States.” One example: a supplement in the Des Moines Register, Iowa’s newspaper of record, which China paid for in an attempt to turn Ms Wang’s American suppliers against the administration’s trade policies.

Given Russia’s blatant attempts to interfere in the election that brought Mr Trump to power, one could be forgiven for rolling one’s eyes at this stressing of the mote, as opposed to the beam. But Mr Pence levelled charge after charge, hinting, without supplying evidence, at darker interference. He deplored the China-friendly programmes supplied to dozens of American outlets by Chinese state radio. He accused China of exerting pressure on American universities by threatening to deny visas to researchers, and bribing and bullying Hollywood into portraying it in a positive light.

The vice-president accused the Communist Party of obtaining “American intellectual property—the foundation of our economic leadership—by any means necessary”. It would feed this into its “Made in China 2025” plans to dominate advanced industries such as robotics, biotechnology and artificial intelligence. He decried its intimidation of Taiwan, which China believes to be a rogue province, and its broad military ambitions. China, he said, “wants nothing less than to push the United States from the western Pacific and attempt to prevent us from coming to the aid of our allies.” This would not stand. The Trump administration, Mr Pence said, “has now pledged to fight back hard on all fronts—and win.”

This is not just a war of tariffs and words. In early October Xu Yanjun, a functionary of China’s foreign-intelligence agency, was lured to Belgium and then extradited to America on charges of stealing trade secrets from American aerospace companies. It is the first time a Chinese national has been extradited to America for such spying. A few days before that, in what a spokesman for America’s Pacific fleet called “a series of increasingly aggressive manoeuvres”, a Chinese destroyer came within 40 metres of an American guided-missile destroyer, the USS Decatur, which was on “freedom of navigation operations” within waters China stakes a claim to on the basis of a couple of disputed reefs nearby. Warships acting like dodgems feels like an escalation.

The ship that foundered

In an ocean of mistrust, it is worth recalling what still holds. The two countries’ bilateral trading relationship remains the world’s biggest, despite the trade war. The Chinese diaspora and 350,000 Chinese students in American colleges and universities mean there are a great many personal ties between them. China co-operated in harsh sanctions aimed at getting North Korea to restrain its nuclear programme. Some progress has been made in cracking down on the flow of Chinese opioids to America. And it is not as if the two countries are fighting proxy wars in third countries. This is not—yet—a cold war like the previous one.

But genuine, if sometimes wary, engagement has been replaced by frank talk of strategic competition and deepening mistrust underlined by big tariffs. As Kevin Rudd, a former prime minister of Australia now running the Asia Society Policy Institute, a think-tank, puts it, the ballast that once kept the relationship on an even keel has been jettisoned. What went wrong?

The original ballast, the steadying factor which allowed Richard Nixon’s opening to China in the 1970s, was a shared strategic mistrust of the Soviet Union. America’s underpinning of East Asia’s security gave China the confidence to begin its opening up to the world in the late 1970s. After the collapse of the Soviet Union, a shared dislike of it was no longer much of a basis for a relationship—especially as the overtly pro-American tone of students in Tiananmen Square in 1989 had made the party afraid that America was bent on toppling communism there, too. But gradually, over the 1990s, the two sides found a new way to steady their relationship: trade.




The meet cute


The era of closest alignment was the early 2000s, after America helped China become a member of the World Trade Organisation. China had been building up its armed forces since the Taiwan Strait crisis in 1996, when a show of naval force by President Bill Clinton brought Chinese missile tests designed to intimidate the Taiwanese to an abrupt halt. But China was not in a position to mount a serious regional challenge to America—where concern about its rapid rise was tempered by an assumption among political and business elites that the rapid expansion of its middle class would bring some measure of liberalisation. It was not just Westerners who imagined that an authoritarian China might liberalise internally and become a “responsible stakeholder”, in the phrase an American diplomat, Robert Zoellick, used in 2005. Many Chinese argued the case, too.

There were incidents that raised tensions, such as the forced landing of an American spy plane on Hainan after a collision with a Chinese fighter in 2001. But neither side saw an attractive alternative to getting along.

Then two things changed. The global financial crisis narrowed America’s economic lead. After the collapse of its export markets threw some 20m Chinese out of work in just a few months, the government responded with a massive stimulus, rolling out high-speed rail, motorways, sewage-treatment plants, housing projects and more. Chinese GDP bounced back; America’s growth remained well below par for years, seemingly justifying a certain technocratic cockiness, as well as a degree of Schadenfreude. In 2006, measured in current dollars, America’s economy was five times bigger than China’s. In 2017 it was just 60% bigger (see chart).




The second change was Mr Xi. His ascension in 2012 began what Chinese officials now call “the new era”. He celebrated and sought to entrench the state’s leading role in the post-crisis economy. He stifled dissent and tightened the authoritarian screws. His new-era China loaned vast sums to governments with dodgy records on everything from human rights to corruption and the environment. Its Belt and Road Initiative and the lending institutions that support those infrastructural ambitions, along with its talk of “reform of the global governance system”, make it plain to Mr Rudd that China is not embracing the American-led global order. It is seeking to change it—at precisely the time that America, under the anti-globalist Mr Trump, is giving up on its support.

American concern over those changes has been exacerbated by a generational shift in its bureaucracy. Douglas Paal of the Carnegie Endowment for International Peace, a Washington think-tank, points out that the public servants who knew China as a poor country and saw the fruits of it opening in the 1990s are retiring. Whether they be the kindly folk who administer development aid or hard-boiled China-hands at the Pentagon or CIA, the younger officials now running China policy have known only a wealthy, powerful nation breaking promises of reform. In 2014 many also saw their own sensitive data, sometimes including information about love lives, drinking habits and finances gathered for security clearances, stolen by Chinese cyber-thieves from the Office of Personnel Management. “That makes the risks personal,” says Mr Paal.

Such malfeasance continues. On October 9th CrowdStrike, an American computer-security company, published a report into intrusion attempts it had monitored, identifying China as the most prolific source of nation-state attacks on American computer networks in the first half of 2018. The firm cited evidence of China-based hackers attacking firms in biotech, aerospace, mining, pharmaceuticals, professional services and transport. Foreign diplomats and Western businessmen say that Chinese intruders frequently target sensitive commercial data held within servers in China and even Western home countries. The agreement between Mr Xi and Barack Obama in 2015 that China would refrain from state-sponsored intrusions to steal commercial intellectual property is clearly in poor shape. Controls on Chinese investment in American tech businesses are tightening up.

The Chinese government’s response is to declare its support for cyber-security and the protection of intellectual property, though American firms which have had their technology snaffled say that Chinese courts make no pretence of upholding the same law for all. On October 15th the state news agency, Xinhua, published a commentary calling America “a cyber-predator that has a notorious record of violating other countries’ interests and rights.” The country’s ulterior motive was “fearmongering” against China, it said, citing the “eye-popping” revelations made by Edward Snowden, a former American cyber-spy turned leaker who revealed how America’s National Security Agency used hacking techniques and hidden vulnerabilities in high-tech kit to eavesdrop on America’s foes—including China—as well as its friends. Xinhua also accused America of “slandering” Chinese high-tech enterprises such as Huawei, a telecoms giant, in order to “stir up Sinophobia in other countries so as to browbeat or hoodwink them into blocking Chinese competitors and saving the market for US companies.”




Tag—you’re it


China is also becoming a new source of competition on the high seas, its warships increasingly active from Djibouti on the Horn of Africa, where China has established its first overseas base, to the East China Sea, where America is treaty-bound to protect disputed islands controlled by Japan. Last April China’s largest-ever naval exercise saw scores of ships in the Taiwan Strait. China has also been picking away at the dwindling number of states that maintain official relations with Taiwan.

Raising the stakes

China’s military spending has not changed much as a share of GDP; but when your GDP is as large as China’s, and growing as fast, you can afford to buy a lot of arms. The International Institute for Strategic Studies, a think-tank, notes that since 2014 China has launched naval vessels “with a total tonnage greater than the tonnages of the entire French, German, Indian, Italian, South Korean, Spanish or Taiwanese navies”. What is more, the increasing number of its ships may well understate the rate at which China is improving its ability to sink enemy vessels. China’s anti-ship missiles, launched at sea, in the air or from the ground, are more plentiful and more advanced than America’s, and some boast longer ranges, too; the same goes for some of its other munitions. That, according to Eric Sayers, who until recently was a consultant at America’s Indo-Pacific Command, is what America’s planners need to worry about.

A growing array of satellites and sensors, including some on disputed islets, can funnel panoptic targeting data to this wide array of missiles, making it dangerous for hulking American aircraft-carriers to station themselves near flashpoints. “In any air war we do great in the first couple of days,” says Christopher Johnson, formerly the CIA’s senior China analyst. “Then we have to move everything back to Japan, and we can’t generate sufficient sorties from that point for deep strike on the mainland.” If America cannot destroy missile sites on the mainland it risks incurring severe losses in any fights near Chinese shores.

America does have one thing that its rival does not: friends. Many of these, including India, Japan and Taiwan, are glad to see it dispensing with old niceties and calling China a strategic competitor. America, India and Japan hold annual exercises that grow more ambitious by the year, flying aircraft off one another’s decks and sharing tips on how to hunt unfriendly submarines. An intelligence-sharing agreement between America and India, which Indian leaders had kept on ice for years, was signed in September, paving the way for more advanced weaponry to flow to India’s armed forces. America and Australia have both sounded out Papua New Guinea on the prospect of new bases in the southern Pacific. The “Five Eyes” intelligence alliance, in which America, Britain, Canada, Australia and New Zealand freely share the fruits of their eavesdropping, has been energised by joint efforts to track China’s interference in foreign countries.

In fractious times, it is good to talk. Yet lines of communication between America and China are shutting down just as they are most needed. A high-level diplomatic and security dialogue between the defence ministers of America and China, hailed as a “pillar” of the relationship when it was launched last year, was abruptly junked by China last month, after its armed forces fell foul of American sanctions on buying Russian arms. China has also curtailed or cancelled several other military contacts between the countries—not that these have ever been extensive or especially fruitful. A lower profile Military Maritime Consultative Arrangement, in which each side swaps complaints about encounters like that in August, continues to function. Were that to now be abandoned, alarm bells should really start ringing.




Tensions between the two powers have risen before—but only when there has been a crisis, as in the Taiwan Strait in 1996 or on Hainan in 2001. What is alarming is the degree to which they have heightened without any such flashpoint. Now that the relationship’s ballast has been largely jettisoned, future squalls will be even scarier.

Chinese caution might offer some hope. Officials in China are remarkably casual, even dismissive, about the idea that the country’s behaviour played any role in stoking today’s tensions. But they still hope to de-escalate the trade war. This is why, though Chinese media routinely call America a bully, and treat its complaints against China as false pretexts for strategic containment, the taps of nationalist outrage have not yet been cranked fully open, and communist propaganda chiefs have not launched a personal campaign against Mr Trump. If the Chinese public has been taught to see the American president as their foe, it is harder to cut a bargain with him.

Self-fulfilling prophecies

Economic officials in China insist their country remains committed to open markets. Li Wei, head of the Development Research Centre at the State Council, China’s cabinet, sets out clearly that this is for reasons of self-interest—a shrewder tactic than merely mouthing pieties about Chinese benevolence. China must continue to open and reform its economy, he says, because of its own development needs. Recalling the phrase of China’s paramount leader in the 1980s, Deng Xiaoping, that opening a window to the world would bring in both fresh air and a few flies, Mr Li says that “people generally find that there’s quite a lot of fresh air that came in with reform and opening up, not a lot of flies.” He insists that if China punches back on trade, it should be seen as aggression in defence of globalisation, not a rethinking of China’s commitment to open to the world.

But an ambition for further development is hardly going to placate America. Take the Made in China 2025 initiative unveiled in 2015 by the State Council and filled with references to “indigenous innovation” and self-sufficiency in high technology, a cause that Mr Xi has made his own. Though Chinese diplomats now downplay the plan’s importance—lamenting that, intended for domestic consumption, it has become a focus for international concern—it was enshrined in the central government’s latest Five Year Plan, approved last year. A study undertaken by the European Chamber of Commerce in China in 2017 that tallied up central and local government announcements found hundreds of billions of dollars in subsidies, research funds and other forms of support. In sectors from electric vehicles to industrial robotics, foreign firms face pressure to hand over core technologies to Chinese joint-venture partners, merely to keep market access. Mr Pence fumes that “Beijing now requires many American businesses to hand over their trade secrets as the cost of doing business in China.”

The charge that America would not tolerate China growing larger under any circumstances used to be something of a fringe view in Beijing. Now there is a debate at the top of the government as to whether it is in fact true, and that America has become a foe so implacable that there is no point making concessions to it. That atmosphere makes it harder to avoid a deeper trade confrontation. Even if Mr Trump surprises the world once again and settles for a deal over trade that he can tout as a win, the mood of competition over regional security could bring tests of strength on the seas and in the sky, as well as miscalculations and possible clashes.

Well-connected scholars and retired officials have shared their concerns with Western contacts about a febrile mood within China’s national-security establishment. They detect genuine excitement over the prospect of a great-power contest in which China is one of the protagonists. This coincides worryingly with the squeezing of public space for discussion. Scholars are not now supposed to debate foreign policy in the open, and strident nationalists dominate what debate there is. Even the idea of an expensive arms race with America strikes some Chinese experts as a fine plan, given their confidence in the long-run potential of their economy. In this dangerous moment, blending grievance and cockiness, it seems astonishing to remember that less than a generation ago Chinese leaders assured the world that they sought only a “peaceful rise”.

sábado, noviembre 03, 2018

CHINA´S GREAT LEAP BACKWARD / FOREIGN POLICY

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China’s Great Leap Backward

For decades, the country managed to avoid most problems suffered by dictatorships. Now Xi Jinping’s personal power play risks undermining everything that made China exceptional.

By Jonathan Tepperman

(Etienne Oliveau/Getty Images/Foreign Policy illustration)


In the last 40 years, China has racked up a long list of remarkable accomplishments. Between 1978 and 2013, the Chinese economy grew by an average rate of 10 percent a year, producing a tenfold increase in average adult income. All that growth helped some 800 million people lift themselves out of poverty; along the way, China also reduced its infant mortality rate by 85 percent and raised life expectancy by 11 years.

What made these achievements all the more striking is that the Chinese government accomplished them while remaining politically repressive—something that historical precedent and political theory suggest is very, very difficult. No wonder, then, that the China scholar Orville Schell describes this record as “one of the most startling miracles of economic development in world history.” 
The miraculous quality of China’s achievements makes what is happening in the country today especially tragic—and alarming. Under the guise of fighting corruption, President Xi Jinping is methodically dismantling virtually every one of the reforms that made China’s spectacular growth possible over the last four decades. In the place of a flawed but highly successful system, he is erecting a colossal cult of personality focused on him alone, concentrating more power in his hands than has any Chinese leader since Mao Zedong.
In the short term, Xi’s efforts may make China seem less corrupt and more stable. But by destroying many of the mechanisms that made the Chinese miracle possible, Xi risks reversing those gains and turning China into just another police state (think a gigantic, more open version of North Korea): inefficient, ineffective, brittle, and bellicose. And that should worry not just China’s 1.4 billion citizens but the rest of us as well.



Members of the Red Guard during the Cultural Revolution in China in 1966. (Universal History Archive/UIG via Getty Images)


To understand what makes Xi’s personal empire-building campaign so dangerous, it helps to first understand what made China exceptional for so long. Throughout modern history, most tyrannies and one-party states have shared a few basic traits. Power is held by a very small number of individuals. To maintain their power, those individuals repress dissent and rule by intimidation. Because bureaucrats and citizens live in fear, they compete to flatter their bosses.

Nobody tells the truth, especially when it could make them or their leaders look bad. As a result, cloistered tyrants—their egos bloated by constant, obsequious praise—find themselves increasingly cut off from reality and the rest of the world (think Kim Jong Un, Bashar al-Assad, or Robert Mugabe) and end up ruling by whim and instinct with little sense of what’s actually happening in their own countries. The impact of this ignorance on domestic and foreign policy is disastrous.

For 35 years or so—from the time Mao died and Deng Xiaoping launched his reforms in the late 1970s until Xi assumed power in 2012—China avoided many of these pitfalls and defied the law of political averages by building what scholars have called an “adaptive authoritarian” regime. While remaining nominally communist, the country embraced many forms of market capitalism and a number of other liberalizing reforms. Of course, the old system remained highly repressive (remember Tiananmen Square) and was far from perfect in many other ways. It did, however, allow the Chinese government to function in an unusually effective fashion and avoid many of the pathologies suffered by other authoritarian regimes. Censorship never disappeared, for example, but party members could disagree and debate ideas, and internal reports could be surprisingly blunt.

No longer. Today, Xi is systematically undermining virtually every feature that made China so distinct and helped it work so well in the past. His efforts may boost his own power and prestige in the short term and reduce some forms of corruption. On balance, however, Xi’s campaign will have disastrous long-term consequences for his country and the world.

Xi’s efforts may boost his own power and prestige in the short term and reduce some forms of corruption. On balance, however, they will have disastrous long-term consequences for his country and the world.

Perhaps the most unusual feature of the system Deng created was the way it distributed power among various leaders. Rather than let one person exercise supreme authority, as do most dictatorships, Deng divided power among the Communist Party’s general secretary (who also gets the title of president), the premier, and the Politburo.

Deng hoped this system would ensure that no one person could ever again exercise the kind of control Mao had—since his unchecked power had led to vast abuses and mistakes, such as the Great Leap Forward (during which an estimated 45 million people perished) and the Cultural Revolution (during which Deng himself was purged and his son was tortured so severely he was left paralyzed). As Minxin Pei, a China expert at Claremont McKenna College, explains, the collective leadership model Deng designed helped weed out bad ideas and promote good ones by emphasizing careful deliberation and discouraging risk-taking.

Since assuming power in 2012, Xi has worked to dismantle China’s collective leadership system in several ways. First, in the name of fighting corruption—an important goal and one China badly needs—he has purged a vast number of officials whose real crime, in Xi’s view, was failing to show sufficient loyalty to the paramount leader. Meng Hongwei, the Interpol chief who China abruptly detained two weeks ago, is just the latest, high-profile case; his story is hardly unusual.




Staff look at an image of disgraced politician Bo Xilai at the Intermediate People’s Court after he was sentenced to life in prison on Sept. 22, 2013, in the country’s highest-profile trial in decades. (Mark Ralston/AFP/Getty Images)


In the last six years, a staggering 1.34 million officials have been targeted, and more than 170 leaders at the minister or deputy minister level have been fired (and most were imprisoned). Meng’s plight, like that of Bo Xilai—the powerful Chongqing party boss brought down in 2012—shows that no one is immune from Xi’s purges. Indeed, more members of the Communist Party’s powerful Central Committee have been disciplined since 2012 than in the entire period dating back to the Communist Revolution.

Not content to merely eliminate any competition, Xi has also consolidated his power by abandoning the term limits on his job and by refusing to name a successor, as his predecessors did halfway through their tenures. He’s also had “Xi Jinping Thought” enshrined in China’s constitution (an honor shared by only Mao and Deng); assumed direct control of the armed forces; and made himself “chairman of everything” by creating a large number of working groups on policies ranging from finance to Taiwan to cybersecurity—all of which report directly to him.


Not content to merely eliminate any competition, Xi has also consolidated his power by abandoning term limits, refusing to name a successor, and making himself “chairman of everything.”

A second important feature of the old system was that bureaucrats at every level could expect to be rewarded for good performance. This wasn’t quite a meritocracy, and the system included a fair degree of corruption and patronage. But both of those features actually served the common good in one key way: If an official performed well, he or she could expect a cut of the proceeds and steady promotion. Xi, by contrast, has “replaced this incentive-based system with one based on fear,” as Pei puts it. And there are two big problems with this shift. First, it has warped officials’ priorities, from showing results to showing loyalty. The second problem, according to Alexander Gabuev, a China specialist at the Carnegie Moscow Center, is that “when fear is all you have, bureaucrats become too frightened to do anything without explicit orders from the top. So the whole bureaucracy becomes passive. Nothing gets done.”

Another related asset of the old system was the way it encouraged local governments—at the village, county, and provincial levels—to experiment with new initiatives, from building free markets four decades ago to allowing private land ownership more recently. Such experimentation turned China into a country with hundreds of policy laboratories, enabling it to test different solutions to various problems in safe, quiet, and low-stakes ways before deciding whether to scale them up. This system helped Beijing avoid the kind of absurdities and disastrous mistakes it had made under Mao—such as when, during the Great Leap Forward of 1958-1962, central planners insisted that farmers in Tibet plant wheat, despite the fact that the arid, mountainous region was utterly unsuited to the crop.

Of course, Beijing had to tolerate a certain level of autonomy in order to allow local officials to try new things. Xi, by contrast, seems to view such independent thinking as an intolerable threat. At his behest, the government has begun discouraging small-scale pilot programs. Sebastian Heilmann of Germany’s Trier University estimates that the number of provincial experiments fell from 500 in 2010 to about 70 in 2016, and the tally has probably dropped even lower since then. In their place, policies are once again being dictated from the top, with little concern for local conditions.

One last example: Just as China’s tech industry is notorious for stealing and applying foreign innovations, Chinese officials long did something similar on the policy level, carefully studying what worked in other countries and then applying the lessons at home. (The best example of this process, of course, was the construction of China’s free markets themselves, which drew on models from Japan, Taiwan, and the United States.) Like Deng’s other innovations, Xi has curtailed this practice as well, by making it much harder for government officials to interact with foreigners. In 2014, authorities began confiscating bureaucrats’ passports. Like so many of the government’s other recent restrictions, this move has been justified in the name of combatting corruption—the idea, ostensibly, is to prevent dirty officials from fleeing the country. But the fact that the policy has recently been extended all the way down to elementary school teachers and reinforced by other, related strictures—officials now must apply for permission to attend foreign meetings and conferences and account for their time abroad on an hour-by-hour basis—reveals that the real priority is limiting contact with outsiders and their ideas.



Chinese President Xi Jinping inspects troops in Beijing on Sept. 3, 2015. (Xinhua/Liu Chan via Getty Images)


What does Xi’s crackdown mean for his country’s future and for the rest of us? While one should always be careful about betting against China—as the history detailed above shows, the country is remarkably good at finding its way around problems that theory dictates should hold it back—it’s hard to avoid the grim conclusion that Xi’s China is rapidly becoming a lot less exceptional and a lot more like a typical police state.

On the domestic level, Beijing’s policymaking is already becoming less agile and adept. Examples of this more rigid approach, and its downsides, aren’t hard to find. Consider last winter, when the government decided to force an abrupt nationwide switch from the use of coal to gas in heating systems. It sounded like a smart move for a country as polluted as China. But the edict was enforced suddenly across the country, with no exceptions. Thus in China’s frigid north, many coal-burning furnaces were ripped out before new gas ones could be installed—leaving entire towns without heat and forcing villagers to burn corn cobs to survive.

If China continues down its current course, expect many more cases where even well-intentioned policies are implemented in a rash and clumsy way, leading to still more harmful consequences. Since personalized dictatorships are necessarily bad at admitting fault—for nothing can be permitted to damage the myth of the omnipotent leader—China will also likely become less adept at correcting mistakes once it makes them. Or at confronting the underlying problems that are dragging down its economy, such as an overreliance on bloated and inefficient state-owned enterprises (SOEs), which have only grown bigger and more powerful since Xi took office; dangerously high debt levels, especially among local governments; and a tendency to react to every downturn by pumping more cash into the system, especially for unnecessary infrastructure projects. In fact, China is not only unlikely to address any of these shortcomings; it’s likely to compound them. That is just what it did on Oct. 7, when the People’s Bank of China announced yet another costly stimulus program: a $175 billion plan to shore up small and medium-sized businesses.

With each new budget-busting move, and in the absence of reform, the odds that China will experience a seriously destabilizing economic crisis—which China bears such as Ruchir Sharma, the head of emerging markets at Morgan Stanley, have been predicting for years—keep rising. “The big question is whether one of the ticking time bombs—bad debt, overheated property markets, oversized SOEs—will explode,” Gabuev says. “Because of Xi’s concentration of power, no one will give him advance warning if one of these bombs is about to go off. And because he doesn’t actually understand macroeconomics very well, and everyone is afraid to contradict the emperor, there’s a huge risk that he’ll mismanage it when it does.” Indeed, the government’s response to any instability is likely to be ugly. As Schell explains, “Xi has really put China at enormous risk. And because his only tool is repression, if things go wrong we’re likely to see even more crackdowns.”

Such predictions should worry everyone. China is the world’s largest economy by some measures, so if it melts down, the entire planet will pay the price. But the history of other autocracies, such as Vladimir Putin’s Russia or Kim’s North Korea, suggests that Xi’s relentless power play could produce even worse consequences. Since taking power, Xi has charted a far more aggressive foreign policy than his predecessors, alienating virtually every neighbor and the United States by pushing China’s claims in the South China Sea, threatening Taiwan, and using the military to assert Beijing’s claims to disputed islands.


If China’s economic problems spin out of control completely, the state could collapse—a typical occurrence among typical dictatorships when faced with economic shocks, external threats, or popular unrest.

Should China’s economic problems worsen, Xi could try to ratchet up tensions on any of these fronts in order to distract his citizens from the crisis at home. That temptation will prove especially strong if U.S. President Donald Trump keeps poking China by intensifying the trade war and publicly denouncing it.

And things could get scarier still, Pei warns, if China’s economic problems spin out of control completely. In that case, the Chinese state could collapse—a typical occurrence among typical dictatorships when faced with economic shocks, external threats (especially a defeat in war), or popular unrest—but one that, given China’s size, could have cataclysmic consequences if it happened there.

Which is why the rest of us should hope that China somehow finds a way to defy political gravity once again and remain an exception to all the rules—despite Xi’s ongoing efforts to make it normal in the worst sense of the word.



Jonathan Tepperman is the editor in chief of Foreign Policy.


How Robots and Drones Will Change Retail Forever

What if you could store and deliver goods as easily as data? Amazon, Walmart and others are using AI and robotics to transform everything from appliance shopping to grocery delivery. Welcome to the physical cloud

By Christopher Mims

https://m.wsj.net/video-atmo/20181012/101218physicalcloud3/101218physicalcloud3_1000.mp4


Amazon’s robots signal a sea change in how the things we buy will be aggregated, stored and delivered.

Amazon’s one-million-square-foot distribution center in Baltimore is a massive fulfillment machine. Stand at one end of the warehouse, and its titanium-white scaffolding and seemingly endless conveyor belts disappear at a vanishing point that is, somehow, within the building. The machine is a dazzling combination of chutes, ladders, rollers and 11 miles’ worth of conveyor belts. Customers’ orders move from shelving into bins and from bins into boxes as they travel via the machine straight into delivery vans, passing by stationary workers at various points along the way. Humans are rarely required to move around here. It’s much faster, and cheaper, to have stuff brought to them.

This is where robots come in. Resembling oversize Roombas topped with Ikea shelving, these Kiva robots can carry up to 750 pounds of goods in their 40-odd cubbies. After a customer places an order, a robot carrying the desired item scoots over to a worker, who reads on a screen what item to pick and what cubby it’s located in, scans a bar code and places the item in a bright-yellow bin that travels by conveyor belt to a packing station. AI suggests an appropriate box size; a worker places the item in the box, which a robot tapes shut and, after applying a shipping label, sends on its way. Humans are needed mostly for grasping and placing, tasks that robots haven’t mastered yet.

Amazon’s one-million-square-foot fulfillment center in Baltimore is one of the retail giant’s 140 warehouses in the U.S.
Amazon’s one-million-square-foot fulfillment center in Baltimore is one of the retail giant’s 140 warehouses in the U.S. Photo: Spencer Lowell for The Wall Street Journal 


Amazon’s robots signal a sea change in how the things we buy will be aggregated, stored and delivered. The company requires one minute of human labor to get a package onto a truck, but that number is headed to zero. Autonomous warehouses will merge with autonomous manufacturing and delivery to form a fully automated supply chain.

We are in the early days of what might be called the “physical cloud,” an e-commerce ecosystem that functions like the internet itself. Netflix caches the movies you stream at a data center physically close to you; Amazon is building warehouse after warehouse to store goods closer to consumers. And the storage systems at those warehouses are looking more like the data-storage systems in the cloud. Instead of storing similar items in the same place—a helpful practice when humans were fetching the goods—Amazon’s warehouses store multiples of the same item at random locations, known only to the robots. Trying to find an Instapot at one of Amazon’s warehouses would be like trying to find where in the cloud one of your emails is stored. Of course, you don’t have to. You just tap your screen and the email appears. No humans are involved.

Delivery is about to change drastically too. Amazon, Google, Uber and many startups are working on autonomous delivery drones that will one day connect us to the physical cloud. Remember the days before ride-sharing apps, when we hailed cabs with our hands or a phone call? Uber and Lyft made it easier. Now imagine summoning power tools or appliances delivered by drones. We may someday store objects we own in the physical cloud the same we way store photos in the digital one.

Thanks to retail’s low margins and the high cost of robots, warehousing has been slow to embrace automation, lagging behind industries like farming and car manufacturing. That changed when Kiva Systems, founded in 2003 in Reading, Mass., developed robots that could bring items to workers. At one point, Kiva’s clients included Gap, Saks Fifth Avenue and Staples. Then in 2012, Amazon bought Kiva for $775 million, took Kiva’s robots off the market and made them the backbone of its distribution centers. According to Deutsche Bank, acquiring Kiva reduced Amazon’s fulfillment costs by 20%, and it blew an enormous hole in the plans of its competitors. Because of patents and the difficulty of recreating Kiva’s deep well of expertise, new robotics companies weren’t able to offer comparable systems until the past couple of years.

Some of those retailers are trying to eliminate jobs, but Amazon is doing the opposite—for now. The company employs 575,000 people, up from 340,000 a year ago. Many of them work in fulfillment centers, performing tasks that robots haven’t mastered but could master soon.

Christopher Atkeson, a robotics professor at Carnegie Mellon, says a robotic arm capable of replacing Amazon’s warehouse workers will be available within five years.

This Amazon distribution center in Baltimore can fulfill a million orders in a day. It may not need humans for long.
This Amazon distribution center in Baltimore can fulfill a million orders in a day. It may not need humans for long. Photo: Spencer Lowell for The Wall Street Journal


Amazon is coy about its long-term plans. Tye Brady, the chief technologist for Amazon Robotics, says only that the company is always seeking to make its employees more efficient. Other retailers are more blunt. Richard Liu, the CEO and chairman of JD.com, a leading e-commerce company in China that relies heavily on automation, has said his goal is a 100% robot workforce.

A fully automated warehouse is just the beginning. Amazon and Walmarthave patented blimplike warehouses that will float 1,000 feet in the air, armed with drones ready to deliver toothpaste and toilet paper to your doorstep as if they were files. Welcome to the physical cloud.

Before we get there, robots need to be able to perform every warehouse task on their own. While no other retailer comes close to Amazon in terms of scale, Ocado ,an online-only grocer in England, has more sophisticated automation by far. In a brightly lighted warehouse about 70 miles southwest of London, a swarm of Ocado’s R2-D2-size robots scurry about on an elevated grid of squares, crisscrossing and coming close to crashing into one another without ever doing so.

Amazon’s fulfillment machine will create 1,500 jobs in total.
Amazon’s fulfillment machine will create 1,500 jobs in total. Photo: Spencer Lowell for The Wall Street Journal 


Beneath the grid are the groceries, stacked in bins 18 layers deep. After a customer places an order for, say, a gallon of milk, an Ocado robot comes to the appropriate square and reaches its arms downward to grab a bin containing milk. Then the robot sucks the bin into its belly and carries it to a conveyor belt, which conveys the milk to workers, who have the dexterity to grab the individual carton and pack it into a bag. Although neither Amazon nor Ocado has robots that can pack items efficiently, Ocado’s robots can autonomously move items from storage onto conveyor belts.

More impressive than the robots is the software behind them. Ocado’s system requires an AI of unholy complexity. The AI is trying to optimize every aspect of Ocado’s fulfillment: where to store its tens of thousands of items, which of those should be packed first and into which bags, which items should go on which trucks, which delivery route to take so that ice cream doesn’t melt on the way. The optimal solutions for different factors don’t always agree with one another: The fastest way to load a truck may not be the most efficient use of its space. As a result, adding just one more variable to the system increases the difficulty exponentially. And Ocado is optimizing for millions of variables.

Solving these problems strains the resources of Ocado’s cloud-computing partner, Google, which is one reason Google’s engineers like working with this system, says Paul Clarke, Ocado’s chief technology officer. It’s a never-ending challenge: As soon as Google’s engineers get closer to a solution, Ocado can add another variable. And with each new variable optimized, Ocado becomes more efficient and widens its advantage over its competitors—and moves one step closer to creating the AI that will be required to run the entire physical cloud.
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Ocado’s system takes a fundamentally human and Byzantine process—receiving shipments from food manufacturers, stocking and restocking a warehouse, assembling customers’ orders and placing them into baskets, scanning them and packing them into bags—and automates it to an unprecedented degree.



It took 18 years and many iterations to create this system, which has enabled Ocado to quickly deliver groceries to a customer’s front door for about the same price as they would cost at the store.

Selling groceries may be just the beginning for Ocado. The company also has patents related to using its system in indoor, vertical-farming operations. One day, food might be grown in the same facility that stores and delivers it. Companies like AeroFarms are growing greens in giant warehouses on the outskirts of major cities. In the future, a robotic hand could pluck a pint of strawberries from the bin they were grown in and then pass them to a delivery drone. Just as Amazon uprooted retail middlemen and made it possible for Chinese companies to sell directly to American consumers, warehousing and manufacturing—and farming—could also merge. It isn’t farm to table, but it might be called factory to door.

Ocado is already thinking bigger. According to Clarke, the company is exploring how to use a jumbo version of its robots to handle shipping containers. Because loading cargo onto trucks is so difficult, ports suffer from bottlenecks. Like increasing bandwidth to expand the capabilities of the internet, enlarging Ocado’s robots could make it possible for them to move on top of a grid of shipping containers and load them onto delivery vehicles.

Workers might lose out when robots like the one pictured below become more dexterous.
Workers might lose out when robots like the one pictured below become more dexterous. Photo: Spencer Lowell for The Wall Street Journal

How Robots and Drones Will Change Retail Forever
How Robots and Drones Will Change Retail Forever  Photo: Spencer Lowell for The Wall Street Journal 


After warehouses, delivery vehicles are the next target for automation. Amazon and Walmart are working on how to get packages from a self-driving van to you, whether that’s by deploying an even smaller autonomous vehicle or by delivering to a locker in your neighborhood.

When you remove the need for a human driver—and a steering wheel, an air bag and a seat belt—a delivery vehicle can take almost any shape. Mercedes-Benz’s concept for modular transportation is an autonomous electric “skateboard” chassis that can be the undercarriage for a passenger van, a cargo truck or a mobile home. During the day, the chassis could be attached to the body of a bus and used to transport passengers, and then at night it could detach so it could charge while stacked in a garage. Or it could be used to haul a whole shipping container in one direction and then swap out one body for another to carry passengers in the opposite direction on its return trip.

Instead of standard-size vans, fleets of small delivery “pods” could pick up packages from central depots and deliver them to your doorstep, using AI infrastructure similar to what’s currently being used in warehouses.

Although drone deliveries have already begun in rural China, Iceland and remote parts of Africa, landing cargo-carrying drones in densely populated cities could be a hazard and is against Federal Aviation Administration regulations. As a result, wheeled delivery systems are much more likely in the U.S. for the near future. But before long, the skies could become extensions of the physical cloud, connecting us the way our mobile phones connect us to cloud computing. Imagine a drone dropping out of the sky to deliver you an iced coffee on your walk to work. In fact, IBM already has a patent for that.


The “No-Growth” Prescription for Misery

Bjørn Lomborg  


A growing number of academics are claiming that economic growth must stop because the planet is crossing environmental boundaries, and inequality between humans is increasing. They are wrong on both counts, and their agenda is a recipe for keeping poor people poor.

low economic growth

LONDON – From their ivory towers, nearly 240 academics have declared that economic growth is bad for Europe and the planet. In two months, they and global supporters of the “no-growth economy” have held conferences in Mexico City, Malmö, and Brussels.

Their efforts herald a return to an earlier, thoroughly debunked form of alarmist environmentalism that is detached from reality and disdainful of billions of the world’s people.

The campaigners claim we must stop economic growth because the planet is crossing environmental boundaries, and inequality between humans is increasing.

But for the most important environmental issues, economic growth has solved problems, not created them. The cleanest places are not the poorest countries, but the richer economies that have cleaned up their act. As societies become richer, individuals can afford to stop worrying about food and sanitation, and to start worrying about the environment.

Indoor air pollution is the world’s biggest environmental killer, claiming lives because poor people burn dung and wood for cooking and heating. As societies get richer, people can afford cleaner technology. In 1990, indoor air pollution caused more than 8% of deaths; in 2016 it was 4.7%. Each year 1.2 million fewer people die from indoor air pollution, despite an increase in population.

Outdoor air pollution worsens as societies first leave extreme poverty. But then it declines markedly as growth, technological change, and public attitudes affect policies and regulations. In China, for example, sulphur dioxide emissions peaked in 2006 and have been declining since.

The world’s forests tell a similar story. For most of human history, trees were decimated wherever humans settled. Higher agricultural yields and changing attitudes have meant rich countries are increasingly preserving forests and reforesting.

Moreover, economic growth delivers improved access to all the vital things that most people on the planet demand or want: health, education, security, and mobility. Both within and between countries, life satisfaction increases with higher incomes. A study in Europe asking whether prosperity enhanced quality of life found that, “Europeans’ life-quality is better in wealthier societies.”

The no-growth campaigners claim that inequality is at the heart of their concern, but they studiously ignore the vast majority of the planet. The US has experienced a clear increase in inequality: the top 1% earned 18% of income in 1913; this fell to 10.4% in 1976, and returned to 20% in 2014. But the experience is markedly different in most of the world, including continental Europe and Japan, where the top 1% earn about half what they did 100 years ago. Globally, inequality has been declining, because many more people in the developing world have emerged from poverty.

Income is not the only indicator of inequality that is dropping. Half of all welfare gains from 1960 to 2000 come from us living longer, healthier lives. In the past half-century, the gap in life expectancy between the world’s wealthiest and poorest countries has narrowed from 28 to 19 years. As a result, lifespan inequality is lower than it has been for two centuries.

Global trade and economic growth have transformed lives on a scale that was once unimaginable. Two centuries ago, around 94% of the planet was impoverished. In 2015, the World Bank found that for the first time ever, less than 10% of the world’s population was living in extreme poverty. Between 1990 and today, the number of people living in extreme poverty fell by more than one billion.

The latter-day Malthusians are opposed to extending these tremendous benefits to more of the world because they believe that global warming will be so bad that it justifies stopping growth. This contradicts the United Nations Intergovernmental Panel on Climate Change (IPCC), which says, “for most economic sectors, the impact of climate change will be small relative to the impacts of other drivers” like changes in population, age, income, and technology.

According to the IPCC, the total impact of climate change amounts to about 0% of GDP now, and in 2100 will cost 2-4% of GDP. That’s a problem, but not one that remotely justifies blocking people’s opportunity to lift themselves out of poverty.

The solution to climate change – like so many other challenges – will come from technology. We need to work far harder to make green energy cheaper and more efficient than fossil fuels, so we can continue to lift millions from poverty without emitting carbon dioxide.

With blinkered analysis and misplaced concern, the academics essentially say that to reduce global warming slightly, we should end growth that can lift hundreds of millions out of poverty, avoid millions of air pollution deaths, and give billions the opportunity of a better life through improved health care, shelter, education, and income.

There is something deeply disturbing about academics’ telling others to forgo the benefits they have enjoyed. What the world really needs is far more growth and far less hypocrisy.


Bjørn Lomborg, a visiting professor at the Copenhagen Business School, is Director of the Copenhagen Consensus Center, which seeks to study environmental problems and solutions using the best available analytical methods. He is the author of The Skeptical Environmentalist, Cool It, How to Spend $75 Billion to Make the World a Better Place and The Nobel Laureates' Guide to the Smartest Targets for the World, and was named one of Time magazine's 100 most influential people in 2004.