California Burnin’ — a Warning Against One-Party Rule

 Fires, blackouts, high taxes, poverty, scarce housing, urban squalor, lousy schools — it’s a wonder anybody stays.

It’s too big for one man. Photographer: Nic Coury/Bloomberg

It’s too big for one man. Photographer: Nic Coury/Bloomberg

“California, folks, is America fast forward.” Thus Governor Gavin Newsom, hoarsely, amid brown smoke at the North Complex Fire on Sept. 11. “What we’re experiencing right here is coming to a community all across the United States of America … unless we get our act together on climate change.”

I was with him all the way until he said the words “on climate change.”

As my Hoover Institution colleague Victor Davis Hanson put it last month, California is “the progressive model of the future: a once-innovative, rich state that is now a civilization in near ruins. The nation should watch us this election year and learn of its possible future.”

Let’s start with the fires. So far this year, they have torched more than five times as much land as the average of the previous 33 years, killing 25 people and forcing about 100,000 people from their homes. At one point, three of the largest fires in the state’s history were burning simultaneously in a ring around the San Francisco Bay Area. According to the California Department of Forestry and Fire Protection, or CAL FIRE, of the 10 largest fires since 1970, five broke out this year. Nine out of 10 have occurred since 2012.

 

No doubt high temperatures and unusual thunderstorms bear some of the responsibility for this year’s terrifying wildfires on the West Coast. It is deeply misleading to claim, as some diehard deniers still do, that temperatures aren’t rising and making wildfires more likely. But it is equally misleading to claim, as the New York Times did last week, that “scientists say” climate change “is the primary cause of the conflagration.”

In reality, as Stanford’s Rebecca Miller, Christopher Field and Katharine J. Mach argue in a recent article in Nature Sustainability, this crisis has at least as much to do with disastrous land mismanagement as with climate change, and perhaps more. Anyone who thinks solar panels, Teslas and a $3.3 billion white elephant of a high-speed rail line will avoid comparable or worse fires next year (and the year after and the year after) doesn’t understand what the scientists are really saying.

Most measures proposed by environmentalists to reduce carbon dioxide and other “greenhouse gas” emissions will pay off over 50 to 100 years, as the International Panel on Climate Change has long made clear. Even a best-case scenario of “stringent mitigation” (what the IPCC calls Representative Concentration Pathway 2.6) would not bring carbon dioxide emissions down to 1950 levels until around 2050. Nor would it lower global average temperatures; it would merely stop them rising.

And that’s only if the whole world — including China and India — takes action. California’s wildfire problem cannot be solved by the state’s citizens “getting their act together on climate change,” in Newsom’s words. The problem needs immediately effective action — and that means a return to sane forest management, if such a return is still possible. For decades, Democratic leaders in California have presided over a policy of leaving dead trees to rot, instead of the old and rational system of prescribed or controlled burns, not least because environmental and clear air regulations, as well as problems of legal liability, made controlled burns harder and harder to do.

In prehistoric California, according to a recent analysis in ProPublica, between 4.4 million and 11.8 million acres burned each year. California’s land managers burned about 30,000 acres a year on average between 1982 and 1998. Over the next 18 years, that number dropped to an annual 13,000 acres. The result has been a huge accumulation of highly flammable kindling. 

Miller, Field and Mach concluded that a total area of around 20 million acres — roughly one-fifth of the state’s territory — was in urgent need of “fuel treatment,” meaning prescribed burns, mechanical thinning and managed wildfire. It is hard to imagine anything remotely close to that happening under the current political dispensation. (The authors politely called for “fundamental shifts in prescribed-burn policies, beyond those currently under consideration.”) Or rather, it is going to happen, but at a time of Nature’s choosing, with catastrophic consequences.

A case in point: For a year and a half, red tape slowed down a forest-thinning project in Berry Creek, Butte County. The project covered just 54 acres but, thanks to the burdensome provisions of the California Environmental Quality Act, work had yet to start when the North Complex wildfire struck, devastating the town and killing 10 people.

I have some skin in this game. Four years ago, I moved from Harvard University to Stanford University. My family traded a solid, century-old professorial residence in Cambridge for a wooden house in a wooded area that to our wooden heads seemed most idyllic. A few weeks ago, our neighborhood was on the edge of the evacuation zone.

However, I have less skin in the game than Victor Davis Hanson. He lives on the fruit and nut farm near Selma, in the Central Valley, that his family has owned since the 1870s. The air quality index in Stanford rose above 170 on three days in the last month. In Selma last week it was 460. (Anything above 301 qualifies as “emergency conditions.”)

I write these words over 1,000 miles from our California home, but it’s no good: in recent days the smoke has found us, too. Hotel parking lots full of vehicles with CA license plates confirm that we are not the only eastward migrants. It’s like Steinbeck’s “Grapes of Wrath” in reverse: Now that the Golden State is the Char-Grilled State, Californians have become the new Okies, though a good deal less impecunious.

Yet wildfires are only one of the reasons people are fleeing California. In addition, the wrongheaded environmental policies of the sages of Sacramento have so undermined the power grid (for example, by shutting down gas-fired power plants and refusing to count hydroelectric energy as renewable) that residents have been subjected to rolling blackouts this year. The same policies have largely killed off the oil and gas industry. Newsom & Co. have failed to upgrade the water system to keep pace with the last half-century of population growth.

It’s not that California politicians don’t know how to spend money. Back in 2007, total state spending was $146 billion. Last year it was $215 billion. I know, I know: In real terms California’s GDP increased by nearly a third in the same period. And I know: If it were an independent nation it would be the fifth-largest economy in the world, ahead of India’s. But for how much longer will that be true?

California’s taxes aren’t the highest in the country — for the median household. But the tax system is one of the most progressive, with a 13.3% top tax rate on incomes above $1 million — and that’s no longer deductible from the federal tax bill as it used to be. The top 1% of taxpayers (those earning more than $500,000) now account for half of personal income-tax revenue. And there’s worse to come.

The latest brilliant ideas in Sacramento are to raise the top income rate up to 16.8% and to levy a wealth tax (0.4% on personal fortunes over $30 million) that you couldn’t even avoid paying if you left the state. (The proposal envisages payment for up to 10 years after departure to a lower-tax state.) It is a strange place that seeks to repel the rich while making itself a magnet for illegal immigrants by establishing no fewer than 20 “sanctuary” cities or counties.

And the results of all this progressive policy? A poverty boom. California now has 12% of the nation's population, but over 30% of its welfare recipients. By the official measure, based mainly on income and family size, California’s 11.4% poverty rate in 2019 was close to the national average over the past three years. However, according to a new Census Bureau report, which takes housing and other costs into account, the real poverty rate in California is 17.2%, the highest of any state. (Newsom gets one thing right when he says, “We're living in the wealthiest as well as the poorest state in America.”)

About a third of California’s poverty can be attributed to housing and other living costs such as clothing and utilities. As everyone who resides there knows, there’s a chronic housing shortage in the Bay Area (the median-priced home in San Francisco costs about $1.5 million), mainly because a plethora of regulations make the construction of affordable housing well-nigh impossible. In blithe disregard of all we know about rent controls — which discourage landlords from providing housing — that is, predictably, the solution the Democrats propose.

But that’s not all. The state’s public schools rank 37th in the country overall and have the highest pupil-teacher ratio. “Only half of California students meet English standards and fewer meet math standards, test scores show,” was a headline in the Los Angeles Times last October. Health care and pension costs are unsustainable. Oh, and they messed up on Covid-19, despite imposing the nation’s first shelter-in-place orders. Having prematurely claimed victory, California now leads New York in terms of cases, though not deaths.

Back in the 1960s, California was the world’s fantasy destination. “California Dreamin’,” “California Girls,” “Going to California” — you know the songs. But reputations have a way of outliving reality. Despite the economic miracle wrought in Silicon Valley, beginning with the genesis of the internet back in the 1970s, and despite the continuing strength of the state’s universities, the dream in terms of quality of life has slowly died.

When I first visited San Francisco in 1981, it was still one of the loveliest cities I had ever beheld. Now its streets are so filthy — human feces and syringe needles are the principal hazards — that I avoid it. (I was going to say “like the plague,” but that’s Lake Tahoe.)

Yet the Bay Area and its southern sister Los Angeles are only one of the two Californias. As Hanson argued 10 years ago, the Central Valley is another country, more “Caribbean” or Latin American, where “countless inland communities … have become near-apartheid societies, where Spanish is the first language, the schools are not at all diverse, and the federal and state governments are either the main employers or at least the chief sources of income.”

The principal reason for California’s decline is that the Golden State became a one-party state. The Republican candidate won California in every election but one (1964) between 1952 and 1988. But the Democrat has won California in every election since, with the Democratic vote share rising from 46% in 1992 to 62% in 2016.

Democrats now have 61 out of 80 seats in the California State Assembly. The last time Republicans had a majority (of one) was in 1994, but that was an anomaly. The Democrats have essentially controlled the State Senate since 1958, with rising majorities since the 1990s. Apart from 1994, the only other year since 1958 when they did not win a majority of seats in the Assembly was 1968.

When regular voting has no effect, people eventually vote with their feet. From 2007 until 2016, about five million people moved to California but six million moved out to other states. For years before that, the newcomers were poorer than the leavers. This net exodus is surging in 2020. And businesses (for example, Charles Schwab Corp.) are leaving too. Silicon Valley is going virtual, with many big tech companies thinking of making work from home permanent for at least some employees. (One tech chief executive told me last week that his engineers were pleading not to return to the office.)

People are getting out of the Bay Area as much and perhaps more than they are getting out of New York City. Texas is only one of the favored alternatives. Realtors in Montana are reporting record demand from West Coast refugees. The hotels are full, which is unheard of at this time of year. I also know a number of eminent Californians who are now Hawaiians.

The conservative writer and broadcaster Ben Shapiro, born in L.A., just announced that he is heading to Nashville, Tennessee. “I love the state, grew up in the state, married in the state and have had children in the state,” he told Laura Ingraham. But California was “not a great place to raise children and not a great place to build a company.” Now we know the true meaning of Calexit. It’s not secession. It’s exodus.

I cannot blame the leavers. When I moved West in 2016, it was in the naive belief that California was Massachusetts without snow and Stanford was Harvard with September weather all year round. How wrong I was.

But am I leaving? Well, maybe there’s no point. As Newsom’s predecessor Jerry Brown put it last week: “There are going to be problems everywhere in the United States. This is the new normal. It’s been predicted and it’s happening … Tell me: Where are you going to go? What’s your alternative?”

Great question, but — as with Newsom’s prophecy — wrongly framed. The big problem is not that climate change is coming to every state. It is, though most states will mitigate it better than California. The problem is that Democratic governance could be coming to the nation as a whole, starting on Jan. 20. And with the Democratic nominee, Joe Biden, turning 78 two weeks after election day, it is not a little troubling to me that his vice-presidential pick is a Californian, just as so many of his plans to spend, tax and regulate have “designed in California” all over them.

Yes, folks, California is America fast forward. Can someone please hit pause?

Joe Biden Could End Up Being a Wartime President

 Notwithstanding his pledges of uplift and healing, history suggests post-pandemic peace is rare, and Democratic wars are not.

Successful Democratic candidates for the presidency of the United States invariably campaign with promises of domestic largesse and moral uplift. They nearly always end up taking their country to war. Can Joe Biden be a rare exception to that rule, if he succeeds in defeating Donald Trump on November 3? That will depend not just on how well he and his national security team conduct U.S. foreign policy. It will also depend on how stable the world around them is. The bad news is that post-pandemic peace is another historical rarity.

First, the Democratic Party’s amazing century-plus track record of running on progressive policies and then going to war. Consider Woodrow Wilson, reviled by today’s progressives for his racist views, but nominated and elected in 1912 as a progressive.

Wilson’s acceptance speech at the Democratic convention in Baltimore was a classic in the genre of American uplift. “We must speak,” he told the delegates, “not to catch votes, but to satisfy the thought and conscience of a people deeply stirred by the conviction that they have come to a critical turning point in their moral and political development. We stand in the presence of an awakening Nation, impatient of partisan make-believe. … Nor was the country ever more susceptible to unselfish appeals to the high arguments of sincere justice.”

“The Nation has been unnecessarily, unreasonably, at war within itself,” declared Wilson. But now “the forces of the Nation are asserting themselves against every form of special privilege and private control, and are seeking bigger things than they have ever heretofore achieved. They are sweeping away what is unrighteous in order to vindicate once more the essential rights of human life.”

In office, Wilson offered progressive policy as well. His “New Freedom” agenda cut protectionist tariffs, introduced the first federal income tax, passed the Clayton Antitrust Act and created the Federal Trade Commission, not to mention the Federal Reserve. Reelected partly on a pledge to keep the United States out of World War I, however, he did just the opposite in April 1917.

The pattern repeated itself for the next hundred years. Franklin Delano Roosevelt was swept to power amid the Great Depression with the promise of a New Deal. “Let us now and here highly resolve,” FDR told his fellow Democrats at their 1932 convention in Chicago, “to resume the country’s interrupted march along the path of real progress and of real justice and of real equality for all our citizens, great or small.” Uplift was duly followed by a raft of legislation designed to reduce poverty and inequality by increasing the power of the federal government. Despite even stronger anti-war sentiment than Wilson had faced, Roosevelt led the United States into World War II in 1941.

Harry Truman’s acceptance speech at Philadelphia in July 1948 continued the tradition: “The Democratic Party is the people’s party, and the Republican party is the party of special interest, and it always has been and always will be. … In 1932 we were attacking the citadel of special privilege and greed. We were fighting to drive the money changers from the temple. Today, in 1948, we are now the defenders of the stronghold of democracy and of equal opportunity, the haven of the ordinary people of this land and not of the favored classes or the powerful few.”  Having won a famous surprise victory over Thomas E. Dewey, Truman unveiled his domestic “Fair Deal” early in 1949. Less than 18 months later, North Korea invaded South Korea and America was back at war.

John F. Kennedy and Lyndon Johnson between them set new standards for both rhetorical uplift (Kennedy) and progressive legislation (Johnson). Yet by 1968 neither his civil rights legislation nor the Great Society could salvage Johnson’s presidency from the wreckage of the war in Vietnam.

Subsequent Democratic presidents strove mightily to avoid LBJ’s fate. Yet the world would not leave Jimmy Carter, Bill Clinton and Barack Obama in peace to pursue their domestic agendas. Carter’s presidency was dealt fatal blows by the hostage crisis after the Iran Revolution of February 1979 and the Soviet invasion of Afghanistan ten months later. Clinton spent years trying to avoid foreign entanglements, in Somalia, in Rwanda and in Bosnia, until the last of these forced him into military intervention. Obama may still believe his decision not to intervene in the Syrian Civil War was one of his best, but the red line on the use of chemical weapons — which turned out to be a pink dotted line — was in truth the most ignominious chapter of his presidency.

Joe Biden’s speech on Thursday night was the continuation of a very long tradition in lofty Democratic rhetoric, traceable all the way back to Thomas Jefferson. “If you entrust me with the presidency,” declared Biden, “I will draw on the best of us not the worst. I will be an ally of the light not of the darkness. It's time for us, for We the People, to come together. For make no mistake. United we can, and will, overcome this season of darkness in America. We will choose hope over fear, facts over fiction, fairness over privilege.” Whoever wrote that speech had done their homework.  At times I wondered if an algorithm had mashed it up on the basis of all previous Democratic acceptance speeches.

The common feature of all but one Democratic acceptance speeches since 1912 is the tiny proportion devoted to foreign policy. The exception is John F. Kennedy’s “New Frontier” speech in Los Angeles in 1960, which was roughly half Cold War rhetoric designed to outflank Richard Nixon on national security. Biden didn’t go there. Less than 3% of his acceptance speech was on foreign policy, and it was bromidic as well as brief. Biden pledged to “stand with our allies and friends,” to desist from “cozying up to dictators” (mentioning no names), and not to “turn a blind eye to Russian bounties on the heads of American soldiers” or “foreign interference” in U.S. elections. That was it. The only mention of China was apropos of the need to make America less dependent on Chinese-made medical supplies and protective equipment. To listen to Biden’s speech, you would not know that the United States is already up to its neck in Cold War II, as I’ve repeatedly pointed out here and elsewhere.

No doubt a majority of people who tuned in to Biden’s speech share his unspoken wish that this Second Cold War will simply go away the moment he is sworn in. Biden it was who launched his bid for the Democratic nomination with the observation that the Chinese were “not bad folks, folks” and were “not competition for us” — and who earlier this month seemed ready to promise an end to U.S. tariffs on Chinese imports.

I have bad news. It wasn’t Donald Trump who started Cold War II; it was Xi Jinping. And, as I pointed out two weeks ago, his vision of a resurgent China challenging the United States not merely economically but ideologically and geopolitically is widely shared by Chinese intellectuals and (though it is hard to be sure) many ordinary Chinese people. Notice, too, that anti-Chinese sentiment in the United States has increased almost as much among Democrats as among Republicans in the past few years.

How likely is the world to be a peaceful place between 2021 and 2024, the putative first and likely only term of a Biden presidency? Not unreasonably, Biden’s speech last Thursday focused on the adverse impact the Covid-19 pandemic has had on the United States. Yet the key question for an incoming Biden administration will not be what to do about the pandemic, as I suspect — one cannot be certain — it will largely be over by January next year. The key question will not be — as many Democrats think — how best to spend all the money the United States can possibly borrow, now that all fiscal and monetary restraint has been cast aside. The key questions will be how generally unstable the post-pandemic world will be and how specifically toxic the Sino-American relationship will get.

History does not give much ground for optimism on these scores. More often than not, as in 1918–19, times of war have been followed by times of plague, but the direction of causation has also run the other way. The great plagues of the ancient world — smallpox in the Athens of Pericles (429–426 BC) or the Antonine and Justinianic plagues that struck the Roman Empire —did not usher in periods of peace. To give just one example, not long after bubonic plague swept through his empire, beginning in 541 AD, the Emperor Justinian waged a successful campaign to reclaim Italy from the Ostrogoths, as well as resuming his war with the Sassanid (Persian) Empire.

The Black Death of the 1340s was among the most disastrous pandemics in history, killing between one-third and three-fifths of the population of Europe. Yet it did not prevent one of history’s most protracted conflicts from getting underway. The Hundred Years’ War between England and France began on June 24, 1340, with the destruction of the French fleet at the Battle of Sluys by Edward III’s naval expedition. Six years later, despite the ravages of the plague, Edward launched a cross-Channel invasion, capturing Caen and marching to Flanders, inflicting a heavy defeat on Philip VI’s army at Crécy, and proceeding to conquer Calais. The French king’s ally, David II of Scotland, then invaded England, only to be defeated. In 1355, Edward III’s son, the “Black Prince,” led another force into France, winning a major victory at Poitiers. A third English invasion went less well, leading to a temporary peace in 1360, but the war resumed in 1369 and continued intermittently until 1453.

At the time, nobody knew that the two countries were embarking on a “Hundred Years War.” That phrase was not coined by historians until 1823. But such is history. Most people still do not grasp that Cold War II has begun. Cold War I was a forty-year affair. But who is to say that the U.S.-China conflict will not be another hundred years’ war?

One disaster begets another. A pandemic creates a cascade of economic, social and political problems, which in turn can often precipitate cross-border conflicts. Watch, for instance, as COVID-19’s disruption of food production all over the developing world, but especially in Africa, leads not just to hunger but to population displacements and political frictions.

For that matter, look around at what’s already happening. Since the outbreak of Covid-19, Russia and Turkey have effectively partitioned Libya, Chinese and Indian soldiers have skirmished hand-to-hand on their border, the port of Beirut has blown up, toppling the Lebanese government, revolution has broken out in Belarus and there has been a military coup in Mali. Is peace at hand? Well, there has been an unexpected breakthrough in the Middle East, with the normalizing of relations between Israel and the United Arab Emirates (a deal for which Jared Kushner deserves more credit than he is receiving). But anyone who thinks Iran is going to suspend its nefarious activities in the region just because Joe Biden is in the White House doesn’t understand the regime in Tehran.

The central issue at stake between the United States and China is not Trumps’ tariffs, nor his attempt to have a U.S. tech company take over TikTok, nor Xi’s suppression of pro-democracy movement in Hong Kong, nor his genocidal policies against the Uighurs in Xinjiang — nor even the extent of China’s culpability for the Covid-19 pandemic. The central issue is Taiwan and it is due to blow up in a few weeks’ time, when new U.S. regulations come into force that will cut off Huawei from all imported semiconductors made with either American technology or software. As my Bloomberg Opinion colleague Tim Culpan argued last week, this really is the “nuclear option,” because it “threatens to kill the company, which invites retaliation from Beijing.”

Ever wondered why it was that Japan attacked Pearl Harbor in December 1941? As Harvard’s Graham Allison recently reminded us, it was because of intolerable economic sanctions imposed by the United States. Yes, that’s right: under the Democratic President Joe Biden most wants to be associated with.

Last week’s virtual convention was a great opportunity to hate on Republicans, and especially on Donald Trump. But for all his many flaws, Trump has upheld a great GOP tradition — of not starting foreign wars. The exception to the rule of Republican dovishness over the past century was of course George W. Bush, who got America into two wars, in Afghanistan and Iraq. (George H. W. Bush’s war to liberate Kuwait was Bismarckian in its short duration and low cost in life.) The rest — Harding, Coolidge, Hoover, Eisenhower, Nixon and Reagan — were notable for the small number of young Americans they sent into battle: vastly fewer than their Democratic counterparts.

“Timeo Danaos et dona ferentes” is a line from Virgil, usually translated as “Beware of Greeks bearing gifts.” I feel the same way about Democrats when they make uplifting speeches full of promises about billions (sorry, make that trillions) of dollars to be spent on public health, education, health care and infrastructure. If there is one man I can readily imagine—inadvertently, of course, and with the best of intentions and the most uplifting of rhetoric—turning Cold War II into World War III, it is the self-anointed heir of FDR, Joseph Robinette Biden Jr.

1 According to Biden family lore, “allegedly the Robinettes came over with Lafayette and never went home.” Now remind yourself what Lafayette came over for.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

TikTok Is Inane. China’s Imperial Ambition Is Not.

 The U.S. won the Cold War by exporting its values, and China has a similar plan for Cold War II.

Not making his day.    Photographer: Hollie Adams/Bloomberg

Not making his day.    Photographer: Hollie Adams/Bloomberg
 

It’s hard to get past the initial sheer inanity of TikTok.

I spent half an hour trying to make sense of the endless feed of video snippets of ordinary people doing daft things with their dogs or in their kitchens or in the gym. I figured out the viral memes of the moment: animals dancing to Tono Rosario’s “Kulikitaka,” the suspenseful unveiling of hunks or hounds to the repeated words, “Please don’t be ugly.” I asked my eight-year-old son what I should look out for. He recommended the dancing ferret. I never found it.

Thirty minutes of TikTok left me with just one burning question: How can this thing be a threat to U.S. national security?

And then I had the epiphany. TikTok is not just China’s revenge for the century of humiliation between the Opium Wars and Mao’s revolution. It is the opium — a digital fentanyl, to get our kids stoked for the coming Chinese imperium.

First, the back story — which you’ll need if you, like me, never got hooked on Facebook, or Instagram, or Snapchat, and still use the Internet like a very fast version of your university library, and begin emails with “Dear …”

The year is 2012, and Zhang Yiming, a Chinese tech entrepreneur who briefly worked at Microsoft, founds ByteDance Ltd. as a smartphone-focused content provider. His AI-powered news aggregator Toutiao is a hit. In November 2017, he pays $1 billion for a lip-synching app called Musical.ly, which already has a growing user community that tilts young (12 to 24) and female and is established in the U.S. Zhang then merges Musical.ly with his own short-video app TikTok, known in China as Douyin.

The thing spreads faster than Covid-19: TikTok now has 800 million monthly active users around the globe. And it’s far more contagious: Just under half of U.S. teenage internet users have used TikTok. If it were a pathogen, it would be the Black Death. But it’s an app, so ByteDance is now worth $100 billion.


 

So what’s the secret of TikTok’s success? The best answers I’ve seen come from Ben Thompson, whose Stratechery newsletter has become essential reading on all the things tech. First, Thompson wrote last month, the history of analog media already told us that “humans like pictures more than text, and moving pictures most of all.” Second, TikTok’s video creation tools are really “accessible and inspiring for nonprofessional videographers.” Translation: Idiots can use them.

Third, unlike Facebook, TikTok is not a social network. It’s an AI-based algorithmic feed that uses all the data it can get about each user to personalize content. “By expanding the library of available video from those made by your network to any video made by anyone on the service,” Thompson argues, “Douyin/TikTok leverages the sheer scale of user-generated content … and relies on its algorithms to ensure that users are only seeing the cream of the crop.”

In other words, “think of TikTok as being a mobile-first YouTube,” not Facebook with cool video. It’s “an entertainment entity predicated on internet assumptions about abundance, not Hollywood assumptions about scarcity.”

So what’s not to like? The answer would seem to be quite a lot.

In February, TikTok was fined $5.7 million by the Federal Trade Commission over allegations that it illegally collected personal information from children under the age of 13. In April, the app was temporarily banned in India by the High Court in Madras for carrying child pornographic content and failing to prevent cyberbullying. (The ban was swiftly reversed.)

But Zhang’s real headache was elsewhere. Last November, the Committee on Foreign Investment in the United States (known as CFIUS) began a probe into ByteDance’s acquisition of Musical.ly on the ground that it potentially affected U.S. national security. Seriously? A teenage video app is a threat to the most powerful nation-state on the planet? Well, these days CFIUS regards just about any Chinese investment as a threat — in 2010, it forced the Chinese gaming firm Beijing Kunlun Tech Co. to sell the gay dating app Grindr.

I’ve written before in this space about Cold War II. Well, TikTok has become the Sino-American conflict’s latest casualty.

Unlike everything else in America, including Covid-19, Cold War II is bipartisan. Last October, the Senate minority leader, Democrat Chuck Schumer, and Republican Senator Tom Cotton jointly called for a national-security investigation into ByteDance. The issue, they said, is that as a Chinese entity, ByteDance is subject to China's cybersecurity rules, which stipulate that it has to share data with the Chinese government. TikTok admits as much in its privacy policy: “We may share your information with a parent, subsidiary, or other affiliate of our corporate group.”

Zhang Yiming is a great entrepreneur. Though he is personally no authoritarian, he is also a political conformist. ByteDance’s first app, Neihan Duanzi (“inside jokes”), was shut down in 2018 by the National Radio and Television Administration. Zhang had to apologize that its content had been “incommensurate with socialist core values.” He solemnly promised that ByteDance would henceforth “further deepen cooperation” with the Chinese Communist Party.

Until last month, Zhang’s game plan was voluntary separation of ByteDance from China. Like other Chinese tech giants, ByteDance is a “variable interest entity” incorporated in the Cayman Islands, positioning it for an offshore initial public offering in Hong Kong or New York. ByteDance claims that all American data from TikTok are stored in U.S. data centers and backed up in Singapore. The appointment in May of Kevin Mayer, a former Disney executive, as TikTok’s new chief executive and ByteDance’s chief operating officer, was the clearest signal yet of where Zhang was headed.

Then, President Donald Trump blew Zhang’s game plan apart.

On June 31, he threatened to ban TikTok in the U.S. On Monday, when Microsoft appeared set to buy TikTok’s U.S. operations, Trump made the characteristically unorthodox and probably illegal suggestion that the U.S. government should get some kind of arrangement fee. “It’s a little bit like the landlord-tenant,” explained the former real-estate developer from Queens. “Without a lease, the tenant has nothing. So they pay what is called ‘key money’ or they pay something.”

Then on Friday, he issued an executive order banning TikTok in the U.S. in 45 days unless it is sold to a non-Chinese entity. (Tencent Holdings Ltd’s even more popular messaging app WeChat will also be banned.)

Trump is wrong to ask for a piece of the action. But he’s right that TikTok needs more than an American chief executive to continue operating in the U.S. Vacuous though its content may seem, TikTok poses three distinct threats.

The first is a good threat: the one it poses to over-mighty, under-regulated Facebook Inc., which the Department of Justice should never have allowed to acquire Instagram and WhatsApp. TikTok has eaten Facebook’s lunch as a platform for video, prompting Facebook Founder Mark Zuckerberg to try to rip it off with Reels — launched on Wednesday — in the same way that Instagram’s Stories ripped off Snapchat.

Whatever else happens, Reels must not succeed. Nor should Facebook become the owner of TikTok. Facebook’s enormous and malignant influence in the American public sphere is a threat not to national security but to American democracy itself. Its efforts to regulate itself since 2016 have largely been a sham.

The second threat TikTok poses is to children. Like Facebook, like YouTube, like Twitter, TikTok is optimized for user engagement, algorithmically steering users to content that will hook them via its “For You” page. In essence, the AI learns what you like and then gives you more of it. And more. Future historians will marvel that we didn’t give our kids crack cocaine, but did give them TikTok.

Like crack, TikTok is dangerous. For example, TikTok’s users, who are still mostly young and female, love lip-sync videos. These have become a magnet for pedophiles, who can use the app to send girls sexually explicit messages and even remix videos and dance along with them using a feature called Duet. Cases of sexual harassment of minors are easy to find: In February, a 35-year-old Los Angeles man was arrested on suspicion of initiating “sexual and vulgar” conversations with at least 21 girls, some as young as nine.

TikTok’s third threat is geopolitical. For Ben Thompson, who is based in Taiwan, the past year has been revelatory. Having previously played down the political and ideological motivations of the Chinese government, he has now come out as New Cold Warrior. China’s vision of the role of technology is fundamentally different from the West’s, he argues, and it fully intends to export its anti-liberal vision to the rest of the world.

“If China is on the offensive against liberalism not only within its borders but within ours,” he asks, “it is in liberalism’s interest to cut off a vector that has taken root precisely because it is so brilliantly engineered to give humans exactly what they want.”

If you need an update on how the Communist Party is using AI to build a surveillance state that makes Orwell’s Big Brother seem primeval — it’s actually more akin to the dystopia imagined in Yevgeny Zamyatin’s 1924 novel “We” — read Ross Andersen’s recent essay in the Atlantic, “The Panopticon Is Already Here.”

As Andersen puts it, “In the near future, every person who enters a public space [in China] could be identified, instantly, by AI matching them to an ocean of personal data, including their every text communication, and their body’s one-of-a-kind protein-construction schema. In time, algorithms will be able to string together data points from a broad range of sources — travel records, friends and associates, reading habits, purchases — to predict political resistance before it happens.”

Many of China’s prominent AI startups are the Communist Party’s “willing commercial partners” in this, which is bad enough. But the greater concern, as Andersen says, is that all this technology is for export. Among the countries importing it are Bolivia, Ecuador, Ethiopia, Kenya, Malaysia, Mauritius, Mongolia, Serbia, Sri Lanka, Uganda, Venezuela, Zambia and Zimbabwe.

The Chinese response to the American attack on TikTok gives the game away. On Twitter, Hu Xijin, the editor-in-chief of the government-controlled Global Times, called the move “open robbery,” accused Trump of “turning the once great America into a rogue country,” and warned that “when similar things happen time and again, the U.S. will take steps closer to its decline.”

Ah yes, our old friend the decline and fall of American imperialism. And its corollary? In a revealing essay published last April, the Chinese political theorist Jiang Shigong, a professor at Peking University Law School, spelled out the imperial nature of China’s ambition. World history, he argued, is the history of empires, not nation-states, which are a relatively recent phenomenon. (By the way, this has long been my own view.)

“The history of humanity is surely the history of competition for imperial hegemony,” Jiang writes, “which has gradually propelled the form of empires from their original local nature toward the current tendency toward global empires, and finally toward a single world empire.”

The globalization of our time, according to Jiang, is the “single world empire 1.0, the model of world empire established by England and the United States.” But that Anglo-American empire is “unravelling” internally because of “three great unsolvable problems: the ever-increasing inequality created by the liberal economy … ineffective governance caused by political liberalism, and decadence and nihilism created by cultural liberalism.” (Come to think of it, I agree with this, too.)

Moreover, the Western empire is under external attack from “Russian resistance and Chinese competition.” This is not a bid to create an alternative Eurasian empire but “a struggle to become the heart of the world empire.”

If you doubt that China is seeking to take over empire 1.0 and turn it into empire 2.0, based on China’s illiberal civilization, then you are not paying attention to all the ways this strategy is being executed.

China has successfully become the workshop of the world, as we used to be. It now has a Weltpolitik known as One Belt One Road, a vast infrastructure project that looks a lot like Western imperialism as described by J.A. Hobson in 1902. China uses the prize of access to its market to exert pressure on U.S. companies to toe Beijing’s line. It conducts “influence operations” across the West, including the U.S.

One of the many ways America sought to undermine the Soviet Union in Cold War I was by waging a “Cultural Cold War.” This was partly about being seen to beat the Soviets at their own games — chess (Fischer v Spassky); ballet (Rudolf Nureyev’s defection); ice hockey (the “Miracle on Ice” of 1980). But it was mainly about corrupting the Soviet people with the irresistible temptations of American popular culture.

In 1986, the French leftist philosopher and comrade-in-arms of Che Guevara, Jules Régis Debray, lamented, “There is more power in rock music, videos, blue jeans, fast food, news networks and TV satellites than in the entire Red Army.” The French Left sneered at “Coca-colonization.” But Parisians, too, drank Coke.

Now, however, the tables have been turned. In a debate I hosted at Stanford in 2018, the tech billionaire Peter Thiel used a memorable aphorism: “AI is Communist, crypto is libertarian.” TikTok validates the first half of that. In the late 1960s, during the Cultural Revolution, Chinese children denounced their parents for rightist deviance. In 2020, during the Covid-19 lockdown and the Black Lives Matter protests, American teenagers posted videos of themselves berating their parents for racism. And they did it on TikTok.

Those inane-seeming words are now lodged in my brain: “Please don’t be ugly.” But TikTok is ugly, very ugly. And severing its hotline to Xi Jinping’s imperial panopticon is the least we can do about it.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Europe’s ‘Hamilton Moment’ Is a Flop. That’s Fine.

 Federalizing debt was what united the states, but don't expect the same effect from a European Recovery Fund.

Does the EU have a shot? Photographer: Theo Wargo/Getty Images

Does the EU have a shot? Photographer: Theo Wargo/Getty Images


Europe is boring. That is a great achievement.

Throughout the 20th century, Europe mass-produced history, most of it disastrous. The two most destructive wars in history began in Europe over obscure questions such as the governance of Bosnia-Herzegovina and the ownership of Gdansk (now in Poland, then the “free city” of Danzig). The most dangerous location in the Cold War was not Cuba but Berlin. If World War III had broken out, Europe would have been its principal battlefield. And let’s not forget that the most dangerous ideologies of the modern age — communism and fascism — were both of European origin.

So the fact that this weekend’s news is of a meeting in Brussels of 27 European leaders to discuss a bond-financed scheme to aid recovery from the Covid-19 pandemic, while not terribly exciting, is really a cause for congratulation. Even if the meeting’s inconclusive.

The fact that, despite an initial wobble between Feb. 26 and March 14, the European nations didn’t revert to sauve qui peut — every man for himself — as the novel coronavirus SARS-CoV-2 swept through northern Italy is another reason to be cheerful. And the fact that, in most European countries, right-wing populists have declined in popularity in 2020 is a huge relief for the continent’s political centrists.

Americans have reason to be grateful for European stability. The European Union is the biggest market for U.S. exports. Despite widespread fears of a crisis of globalization, cross-border flows of capital between the U.S. and the EU remain substantial. Until this year, European cities such as Paris and Florence were among Americans’ favorite overseas destinations.

Europeans like to give the EU credit for the fact Europe is no longer the world’s number one battlefield, but Americans understand that it has been the North Atlantic Treaty Organization and the presence of U.S. troops that have really kept the peace. They are rightly proud of that achievement.

Yet, at the same time, Americans don’t really understand Europe. President Donald Trump’s view is not mainstream, to be sure. “We’re in tremendous economic competition, including Europe, which has never treated us well,” he said at a press conference last week. “The European Union was formed in order to take advantage of the United States … I know that, and they know I know that, but other presidents had no idea.”

Most Americans also have no such idea. They are just happy that young Americans have not had to die in droves over Europe’s quarrels as they did in 1918 and 1942-45. And if Trump was alluding to the issue of NATO burden-sharing, U.S. presidents since Richard Nixon have been complaining that Europeans don’t pay their fair share.

The American elite misunderstands Europe in a different way. The working assumption has long been that the EU is essentially a first draft of a United States of Europe. They therefore interpret European politics by analogy, as the Chicago-born, Oxford-based political philosopher Larry Siedentop did in his 2001 book "Democracy in Europe." The American Republic, he wrote, “provides the crucial point of reference for the attempt to create a European federal state today. Any evaluation of the prospects of that enterprise should begin with American federalism.”

The latest example of this misconception is the claim that in contemplating an ambitious 750 billion euro European Recovery Fund this weekend, Europe’s leaders are having their very own "Hamilton Moment."

The deal, wrote the economist Anatole Kaletsky when it was first proposed by German Chancellor Angela Merkel and French President Emmanuel Macron in May, “might one day be remembered as the European Union’s ‘Hamiltonian moment,’ comparable to the 1790 agreement between Alexander Hamilton and Thomas Jefferson on public borrowing, which helped to turn the United States, a confederation with little central government, into a genuine political federation.”

“What is required is a policy leap guided by the Hamiltonian experiences at the birth of the American republic,” argued Pierpaolo Barbieri and Shahin Vallee in Foreign Affairs. That means “a common budgetary authority with democratic legitimacy … a truer, historically informed federal framework, not a patched-up union.”

The Hamilton Moment idea has caught on more because of the popularity of Lin-Manuel Miranda’s musical than because commentators have a deep knowledge of what exactly Hamilton achieved as the first U.S. Treasury secretary. “We need to handle our financial situation,” declares Miranda’s Hamilton. “Are we a nation of states? What’s the state of our nation?”

To give Miranda his due, he does a far better job of translating the early financial history of the republic into rap verse than I had any reason to expect when I went to see the show in 2016:

    THOMAS JEFFERSON

     But Hamilton forgets

     his plan would have the government assume state’s debts.

     Now, place your bets as to who that benefits:

     the very seat of government where Hamilton sits …

     HAMILTON

     If we assume the debts, the union gets

     A new line of credit, a financial diuretic.

     How do you not get it? If we’re aggressive and competitive

     The union gets a boost. You'd rather give it a sedative?

Still, it’s worth reverting to Ron Chernow’s biography, on which Miranda's musical was largely based, as well as to the leading historian of early American finance, Richard Sylla, to get the details right.

Hamilton himself was a serious student of financial history, and had drawn the correct conclusion that the U.S., heavily indebted after winning its War of Independence, needed to “restore public credit” by establishing a consolidated public debt, consisting mostly of long-dated bonds, on the British model.

At this point in its history, the U.S. was not much better off financially than a banana republic. Total liabilities were $54 million in national debt, coupled with $25 million in state debt. Around $12 million of the total was owed to foreigners, mainly the French government and Dutch investors. The face value of the debt was equivalent to around 40% of estimated gross domestic product. But so uncertain was the new republic’s future that by 1789 American bonds were trading as low as 15 cents on the dollar. (Think Argentina, except Argentine bonds are currently trading at close to 50 cents on the dollar.)

In his seminal Report on Public Credit of January 1790, Hamilton proposed that “an assumption of the debts of the particular states by the union and a like provision for them as for those of the union will be a measure of sound policy and substantial justice.” In other words, the bonds issued by the states would become part of a restructured federal debt.

The terms Hamilton envisaged for domestic bondholders were less attractive than for foreign creditors, who were paid in full, but the outcome was a win both for speculators who’d bought at the lows and the creditworthiness of the U.S. government.

Fans of the musical will remember that the only way Hamilton could get his debt plan through Congress was by agreeing — in “The Room Where It Happens” — to the proposal of Jefferson and James Madison that the future capital of the U.S. should be on the Potomac River, not the Hudson. (“The immigrant emerges with unprecedented financial power … The Virginians emerge with the nation’s capital.”)

To New York investors, Hamilton looked like a genius. Bonds that had traded at 15 cents on the dollar in 1789 reached par in 1791, and 120% of par in early 1792, just before the first American bond-market crash knocked 20 per cent off the price in the space of two months. (In May 1792, when the New York State government enacted a law to end speculation in the streets, brokers agreed to meet under a buttonwood tree in Wall Street — the birthplace of the New York Stock Exchange.)

But there was much more to Hamilton’s grand design than just a debt consolidation. He always saw the collection of significant federal tax revenue as a necessary corollary. In Federalist 30, he had described the power of taxation as “an indispensable ingredient in every constitution.” Without it, under the Articles of Confederation, the U.S. government had “gradually dwindled into a state of decay, approaching nearly to annihilation.”

It was equally important in Hamilton’s eyes to establish a sinking fund to earmark revenues for debt repayment, a Bank of the United States modeled on the Bank of England, and a new U.S. dollar based on a bimetallic (gold and silver) standard — to say nothing of his ambitious plans for the economic development of the North American continent.

In the South, and particularly to his political rivals, Hamilton looked like a villain. The debt deal appeared to benefit some states more than others. It seemed to replicate the British financial system, notoriously a vehicle for political corruption as well as imperial power. And the new excise tax was so unpopular that it precipitated an armed insurgency, the Whiskey Rebellion of 1791-94.

It’s no exaggeration to say, as Chernow does, that the origins of the American two-party system lie in the controversy over Hamilton’s debt restructuring, even if the original political schism was between Republicans and Federalists.

Now that we’ve got the U.S. history straight, we can see just how little of it applies to Europe today. First and foremost, there is not even the glimmer of a chance that the debts of the 27 member states will be consolidated or even slightly “mutualized.” The highest of these (that of Greece) stood at 177% of GDP on the eve of the Covid-19 pandemic, with Italy at 135% and Portugal at 118%. Put differently, Italy accounted for 22.2% of all EU-27 debt, more than France (22%) and Germany (19%). And the European Recovery Fund does very little to solve the problem of Italian debt sustainability.

Continental Divide
EU members' debt-to-GDP ratios, 4th quarter 2019


Source: Eurostat

​Second, whereas the charter of Hamilton’s Bank of the United States expired in 1811 and a second version was destroyed by Andrew Jackson — leaving the U.S. without a central bank until the Federal Reserve Act of 1913 — the European Central Bank came into existence more than 20 years ago, long before serious thought was given to the question of member states’ debts. Some of us predicted at the time that a monetary union without a fiscal union would inevitably lead to a crisis. We were right.

Third, Hamilton’s ultimate ambition was to propel American economic growth. But that is one thing that has been in short supply since the creation of the European Monetary Union. The latest International Monetary Fund projections for EU growth this year are grim: the euro area is projected to contract by -10.2%, compared with -8.0% for the U.S. The Organization for Economic Cooperation and Development’s projections are similar. The EU may have brought Covid-19 under control more rapidly than the U.S., but it simply cannot match the scale of U.S. monetary and fiscal relief measures. For example, there are already grumbles from Bundesbank president Jens Weidmann about the scale of ECB purchases of Italian bonds. This year the Fed’s balance sheet has grown roughly twice as much as the ECB’s has.


 

​Fourth, it is a near certainty that every step the EU takes to expand its tax base will be fiercely resisted, and not only by the so-called “frugal four” (Austria, Denmark, the Netherlands and Sweden), the countries least enthusiastic about the European Recovery Fund.

Fifth, the populists are not losing everywhere. Just look at which countries will be among the principal beneficiaries of the recovery fund, if it is approved. Hungary, whose prime minister, Viktor Orban, is the bete noire of West European liberals, will receive gross support equivalent to 10.4% of GDP. Poland, where the Law and Justice Party’s Andrzej Duda was re-elected president last weekend, could receive 12.2% of GDP. This is remarkable, considering how few deaths from Covid-19 these two countries have suffered.

Meanwhile, the popularity of the EU in Italy continues to decline. It is not helped by the lingering memory that, when things were really bad in early March, France and Germany each ordered a national export ban for protective medical equipment. The right-wing populist Lega may be losing supporters, but it is losing them to the even more right-wing Fratelli d’Italia. The pandemic has made the immigration issue go away. But it will be back.

It has been a delusion not only of Americans but also of the most ardent pro-Europeans that the ultimate destination of the EU is to be the USE. In reality, as the British historian Alan Milward argued three decades ago in "The European Rescue of the Nation-State," and as Princeton’s Andrew Moravcsik showed in 1998's "The Choice for Europe," the primary driver of European integration has always been the self-interest of the nation-states. For that reason, moves in the direction of federalism nearly always backfire.

Alexander Hamilton had a talent for making enemies, but he never did anything as foolish as the European leaders on whose watch Brexit was approved four years ago. The equivalent disaster in the 1790s would have been if Virginians had voted for “Vexit” from the U.S. (They finally did, of course, in 1861.)

It is still astonishing to me, as someone who opposed Brexit, that the continental Europeans — in particular Merkel and her then-finance minister, Wolfgang Schaeuble — so underestimated the probability of a "Leave" vote in 2016 that they offered British Prime Minister David Cameron next to no concessions on the key issue of free movement of people.

They may console themselves that Britain’s departure makes the path down the federalist road easier, as the U.K. was always the most vocal opponent of steps toward “ever-closer union.” Yet the damage to the European project of losing one of the top seven economies in the world, one of the key members of Anglosphere’s Five Eyes intelligence network, and one of the top two international financial centers, is incalculable.

This is not to predict an imminent collapse of the EU, another erroneous notion that is popular among Wall Street types, who — like nearly all the leading American economists — were convinced the euro area would collapse at the time of the 2012 Greek debt crisis. When Merkel refers to Europe as a “community of fate” and when Macron calls the European Recovery Fund decision a “moment of truth,” they are being as sincere as elected politicians ever are.

The EU will last much longer than its critics expect. I expect that it will continue to exist long after populist governments have established a veto position on the Council of Ministers, and long after the inevitable Italian debt crisis. There is a historical precedent for such a shadowy afterlife, but it is not that of the U.S. It is the Holy Roman Empire, which had long been moribund when Napoleon finally swept it away in 1806.

That was just two years after Aaron Burr mortally wounded Alexander Hamilton at Weehawken, New Jersey. The difference is that there is no musical about the Holy Roman Empire, just as there will be no rap version of the European Recovery Fund negotiations. They are, let’s face it, too boring.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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