Tuesday 18 October, 2022
In my favourite Provencal village. And I didn’t use a drone to get the shot!
Quote of the Day
”I don’t think there was ever a piece of music that changed a man’s decision on how to vote.”
Musical alternative to the morning’s radio news
Billy Taylor Trio | I Wish I Knew How It Would Feel To Be Free
Long Read of the Day
Deja Vu all over again.
I know history isn’t supposed to repeat itself, but sometimes one can’t help feeling that it does.
Exhibit A: Readers with long memories will remember that in October 1956, Anthony Eden, a Tory prime minister, launched an invasion of Egypt after cooking up a conspiracy with the French and the Israelis. His aim: to show how the British Empire dealt with an upstart Arab Colonel and coup leader who had the temerity to nationise the Suez Canal (a critical strategic waterway owned by the British and the French). The Eisenhower administration, which had opposed the invasion, threatened to start selling America’s holdings in British government bonds. The UK’s Chancellor of the Exchequer, Harold Macmillan, told Eden that the Yanks were serious and that the country’s foreign exchange reserves would be unable to sustain the value of the pound sterling if the threat was carried out. British, French and Israeli troops were withdrawn. Egyptian sovereignty and ownership of the canal was confirmed by the United States and the United Nations. Eden resigned in January 1957, and Britain discovered that its days as a great imperial power were over.
What brings this to mind is a fine column in the Guardian by Jonathan Freedland which suggests that that particular message hadn’t got through to some people in the Tory party. Here’s the money quote:
This week Sanjay Raja, chief UK economist of Deutsche Bank, told a Commons committee that Britain was facing a unique form of trade shock: “We haven’t seen this kind of trade deficit since 1955, since national account records began.” It was odd, because I too had been thinking about the mid-1950s, specifically the Suez crisis of 1956. The failure of that military adventure is now seen as the moment when a bucket of cold reality was thrown into Britain’s face, a humiliation that stripped the country of its imperial delusions, forcing it to accept that it was no longer a global superpower that could act alone. For a while, Britain learned that lesson: just five years after Suez, the country was knocking on Europe’s door, asking to join the club.
But some, especially in the Conservative party, never shook off the old delusion. By 2016, it was back, the Tories high on Brexit talk of a global Britain once again sailing the world’s oceans, free of the constraining hand of the EU, ready to return to its rightful grandeur. The Tories have been breathing those fumes for six years, and the Truss-Kwarteng mini-budget was the result: the Suez of economic policy, a disastrous act of imagined imperial sovereignty.
As several economists have noted, Truss was acting as if Britain were the US, issuer of the world’s reserve currency, with markets falling over themselves to lend it money. Like Anthony Eden before her, she could not accept that Britain’s place is not what it was: it can never be sovereign like a king in a fairytale, able to bend the world to his will. That kind of sovereignty was always a fantasy, one that both fed Brexit and was fed by it. Yep.
Exhibit B: The US has declared economic war on China. Not your old-fashioned kind of war, mind, but a modern one in the field of semiconductors, i.e. the core technology of the digital world. The Biden administration announced sweeping export controls on China’s entire chip sector. There are three main planks to the policy:
A ban on the export to China of specialised chips used for AI, or equipment to make these chips
Restrictions on exports of high-end semiconductor manufacturing equipment to China
Making a new list of Chinese companies that can be quickly banned from buying various U.S. exports without a special licence.
“The primary purpose of these export controls,” writes Noah Smith, in a fine analysis of them,
is not to protect U.S. industry or to stop the leakage of intellectual property to economic competitors. Their purpose is to kneecap China’s semiconductor industry — to slow down the country’s push for technological self-sufficiency.
Well, well. Now spool backwards to the Cold War, when the policy of the US and its allies was to deny the Soviet Union access to cutting edge technologies of the day, especially those involving digital technology. The tool for doing this — CoCOM (the Coordinating Committee for Multilateral Export Controls — was established in the early years of the Cold War and maintained until at least 1994. And, funnily enough, it mostly worked, though it had some counter-intuitive effects.
The one that struck me most forcibly involved cryptographic software. When in 1991 Phil Zimmermann came up with PGP (Pretty Good Privacy) a program that used public-key cryptography to enable anyone to protect the privacy of their emails with military-grade security, it was initially defined as a munition under CoCOM rules, which meant that anybody seeking to export it from the US would require a special licence. But one day I was in the stacks of the university library looking for a reference on cryptography when I stumbled on a thick blue hardback volume with the letters ‘PGP’ on the spine. It turned out to be a facsimile of a lineprinter printout of Zimmermann’s code! It seems that while nobody in the US could export a magnetic tape or computer disk with the code, nobody had thought that it would be just as effectively exported via Gutenberg’s ancient technology!
In retrospect, trying to ban the export of computer code might have had a Canute-like charm. But, as Noah Smith explains, doing what the Biden Administration has decided on will have a really damaging impact on the targeted adversary. “For the past two or three years”, he writes,
China has been embarked on an all-out effort to build a domestic chip industry that can rival that of the U.S. and its East Asian allies (Taiwan, South Korea, and Japan). China’s effort has involved plenty of waste and mismanagement, but also some startling successes. China analysts have expressed confidence that the country would eventually be able to achieve its goal of self-sufficiency, probably more quickly than scoffing Americans expected.
This was probably why Biden took action now. If he had withheld the threat of semiconductor export controls as insurance against a possible future invasion of Taiwan, there’s a good chance that by the time China was ready to attack, it would have largely immunized itself against this economic weapon.
Interestingly, the US measures seem to involve not just the export of kit but also the export of know-how that resides in the brains of US citizens. Smith says that the new export bans include a rule that U.S. citizens aren’t allowed to work in the Chinese semiconductor industry. They have been given a bleak choice: give up your job or lose your US citizenship. It seems that many have already made their decision. Smith’s hunch is that the rationale for this is because working for Chinese companies is deemed to represent an export of intellectual property to those companies.
It’ll take time to figure out how this new kind of economic warfare will pan out. But for now it looks awfully like going back to the early years of the Cold War. History repeating itself. Somehow, though, I can’t see Xi’s China imploding like the Soviet empire did.
My commonplace booklet
Harvard’s endowment fund has lost money for the first time in six years
Harvard University’s endowment is worth $2.3 billion less than last year.
The Harvard Management Company (HMC)—a nonprofit, wholly owned subsidiary of Harvard University that has managed the University’s endowment portfolio since 1974—posted a 1.8% loss on its investments in the year ending June 30, 2022, a financial report released Thursday (Oct. 13) shows.
One’s heart bleeds for the poor dears.