BY ED ANDERSON
Only the deluded could think letting the Chinese into your computer systems and steel industry is a good idea.
September 11th obviously has a lot of important anniversaries. For the United States, it’s the terrorist attack on the World Trade Centre; for Catalonia, it is the fall of Barcelona in 1714; and for Chile, it was the day their democracy was bombed out of existence. Appropriate, then, that Arthur Laffer, of the Laffer Curve, was speaking on Friday, September 11th, in the Spanish Congress at the invitation of Vox-owned think tank Fundación Disenso.
Having popped into Congress a few times, these seminars are normally sparsely attended affairs, but this time the queue was out the door twenty minutes beforehand. It was probably helped by Abascal being there, but I also feel it was because of just how much of an almost-celebrity Laffer is in these circles. I did wonder whether, after last week, when he was speaking with UK Conservative members, he had confused Vox with a similar party and been hoodwinked, if you will, by the think tank label. But within one minute of Laffer’s opening remarks, that doubt was quickly erased.
“Santiago Abascal, you are my hero.” Nope, we were among the true believers here. I was expecting to hear a lot about the Laffer Curve and some tax-cut talk, but as we went on, it became very clear that a sensible idea of not taxing people out of productivity had turned into a Trojan horse for surrendering your state to the Chinese Communist Party.
In his defence, Laffer is an engaging speaker and was generous with his time at 80 years-plus, with the many people wanting handshakes and selfies. Nor does he espouse no tax at all, with the theory being that you want the rate that prevents people avoiding paying taxes. “The last thing you want to do is tax work, output and employment.” Maybe it’s throat-clearing, but “we all know we need government, we need militaries. Too much or too little government can kill an economy. We do need regulation” is stated nonetheless. This is where the compliments end.
I could’ve written about how culturally homogeneous societies are more likely to have a higher Laffer Curve, or talked mostly about tax, but we aren’t in the early ’90s. There were some interesting mentions of Bitcoin, private currencies and going back to the gold standard, but the language of priorities is the religion of socialism, so it’s the dangerous Chinese cheerleading that worries me.
Before we get to that, there is the blasé attitude towards running deficits every single year that seems like a terrible idea unless you are the USA. We did hear about the Ricardian gains from trade (a man who probably best represented that Christian utilitarianism of the time), but also how countries with lots of savings don’t have the investment opportunities and vice versa: the global capital market. “Everyone’s better off.”
The example given by Laffer is that from 1640 until 1870, the US ran a trade deficit. “We built the United States machine on foreign investments.” Bar the seven years he mentions, including jokes about shooting the British that probably didn’t make it into his Conservative Party meetings. Nor, I suspect, did his cheerleading for the Argentinian President now threatening an invasion of British territory. He did mention 1840–43 and how the fact that Europe started to re-invest in America, after they threatened not to, is an example of how it’s all fine to run massive losses.
There’s one problem with this American obsession, and it’s that the UK or Spain are significantly smaller in financial and military muscle to get away with that kind of policy. The UK population is 70 million; the population of Spain we can call 50 million. The USA? 342 million. It’s the equivalent of Shrewsbury Town running a wage bill akin to Manchester United and then being surprised that the bank called in the loans and there was no interest forgiveness. Markets tolerate the USA’s deficits because they have to; it’s the Highlander effect of “there can only be one”. In this case, one of the largest economies in the world, where the dollar is the reserve currency. Nations the size of Spain or the UK playing this permanent-deficit, credit-card economics will, I think, be absolutely torn apart. “Forgive me for always using an American example,” were his words. I don’t think the people loaning the UK money to fund these losses at ever-higher rates of interest will be forgiving anything, to be honest.
Moving back to China, this view of global markets is fundamentally naïve and can only be held by people who believe China is a benign actor. In Laffer’s world, countries indenturing themselves to Chinese state debt is fine because you get the product. On the other hand, Brahma Chellaney coined “debt-trap diplomacy”, highlighting that China took over a port in Sri Lanka when the debt couldn’t be paid. Perhaps when the Indians are staring down the barrel, Laffer can tell them that global economic gains will protect them. India itself now has a port in Sri Lanka, presumably not for the economic benefits.
Just on the national politics, I can see why Vox kept this man safely secluded in a think-tank seminar. Any rural Vox voter who heard about the glorious idea of opening up all the agriculture to Moroccan products covered in literal faeces (see previous Country Squire article) is not going to be a fan. Or an urban Vox voter who can’t afford children due to the deregulated immigration and housing market would drop the party like an anchor if they heard this.
After the talk, I asked him how allowing the Chinese into your steel industry could be a good idea (after he quoted Keith Joseph about how difficult privatising steel in the UK was). He responded by saying, “Would you rather have the goods in your country?” He must not have known, or cared, that the Chinese state had attempted to eradicate steel in the UK and that, when the government moved to block that, the ‘private’ Chinese company said the UK was “trampling on international investment rules”. Aka, the language of Laffer. There is no such thing as a private business in the Chinese Communist Party state. Laffer is a fantasist. After telling him that I wouldn’t want the Chinese in computer systems either, he looked like I’d just shot his dog.
Now, of course, Laffer is an incredibly accomplished economic genius and I am just a peasant, but there is someone who does really understand China better than either of us. Frank Dikötter is the historian who has dived into archives across China, was Professor at the University of Hong Kong, and whose works, from Mao’s Great Famine to this year’s Red Dawn Over China: How Communism Conquered a Quarter of Humanity, mean we can say he literally wrote the book on the Chinese state.
In an interview last year, Frank’s thoughts on Americans like George W. Bush cheerleading China into the WTO were: “He should’ve known better.” On China becoming a fair player? “Promises have been made and broken. Greater protection of intellectual property rights, floating currencies, etc.” Letting someone into a game where they never have to follow the rules is a fast way to get cheated.
One thing that I am glad I did make the effort to do at university was to hop along to events organised by those whose politics I disagreed with. If they are right, you have your mind changed, and if they are wrong, then you build back up your resistance. Of course, with so many British universities dependent on Chinese cash, when we know the Chinese state threatens universities that publish the wrong ideas (Chinese intimidation stopped UK university from publishing human rights report), there is no such thing as an intellectually free education when you let the Chinese tentacles into that system either.
Sitting at Congress in Madrid, it was as if reality hadn’t put this fantasy to bed. The fact that Laffer can say with a straight face, “Do you think China is your enemy?” after they have wiped every democratic trace in the former liberal poster boy of Hong Kong off the map is delusional. After that, I’ve never been more steadfast in my belief in being a reactionary, nuclear-weapon-supporting Bevinite.
Edward Anderson is currently living in Madrid covering Spanish life /politics and can be found online @MetinMadrid on Twitter or https://metinmadrid.com/