When Conflicting Civilizations Collide

[SWJED]

18 April Real Clear Politics commentary - When Conflicting Civilizations Collide by Dennis Byrne.

In H.G. Wells' "Time Machine," the helplessly fattened Eloi spend most of their time waiting around their pleasant surroundings to be snatched away by cannibal Morlocks. Those succulent pinkish Eloi who luckily aren't invited for dinner this time can only wait their turn, not so much in fear, but--simpletons that they are--in resigned ignorance.

Though he wrote it more than 100 years ago, Wells nonetheless had many of today's Americans nailed. Today's Eloi are Americans whose only "strategy" for dealing with the dreadful and grisly terrorist assaults on us is to pull back and wait for the next one...

The Moussaoui trial should underscore the fact that we're fighting brutish enemies over more than power and money. We're fighting over values and beliefs. Moussaoui unapologetically claims that the Koran requires Islamic world domination and that non-Islamic nations must pay tribute to Islamic ones. "We have to be the superpower. You have to be subdued," he said. And in pursuit of that goal, his only regret is that he couldn't fly a planeload of innocents into the Capitol.

Moussaoui understands it better than Sen. John Kerry (D-Mass.) and others who see little of global import in our conflicts and counsel a vague sort of withdrawal. Moussaoui sees beyond the gotcha politics of the Beltway and correctly regards this as an engagement of fundamentally conflicting civilizations: One more advanced and compassionate against another--violent and monstrous--that still is fighting in the Dark Ages, against Crusader spooks.

The fight over how and why the Iraq war is being fought is a legitimate one. But Iraq is just one part of the larger and more important debate. That bigger debate should have been settled by now....

[Surferbeetle]

From Bloomberg

Anyone wondering why Americans show no signs of abandoning their vehicles as gasoline fetches almost $4 gallon can find the answer in Europe, where the price of petrol hasn't been that low in at least six years.

Gasoline rose 30 percent in the U.S. this year to a record $3.962 a gallon on May 29, according to AAA, the nation's biggest motoring club. In Germany, a gallon costs $8.33, more than double 2002 levels. The highest is $9.69 in Norway, where taxes are designed to curb consumption in the world's third-biggest exporter of crude oil, data compiled by Bloomberg show.

From the Economist (prices are in liters and there are ~3.78 liters in a gallon for us non-metric types )

HALF of the world's population enjoys fuel subsidies. This estimate, from Morgan Stanley, implies that almost a quarter of the world's petrol is sold at less than the market price. The cheapest petrol is in Venezuela, at 5 cents per litre. That makes China's pump price of 79 cents seem expensive, but even this is a bargain compared with $1.04 in the United States and $2.35 in Germany (see chart).

As the gap has widened between soaring international prices and fixed domestic prices, so has the cost of subsidies. Indeed, budgetary strains are now forcing some governments to lift prices.

[Abu Suleyman]

I agree that in the West in general we are beginning to resemble the Eloi, and seem to be far more concerned about the abstract (Global Warming) than the concrete (terrorism) threats. That said, I do believe that the premise of civilizations clashing is not really where we are at. If we were this wouldn't be a small war, it would be a big one. Until things become existential I don't expect us westerners to be any less complacent than we are. Re: the gas issue take a look at Charles Krauthammers interesting article. It seems that everyone has a tipping point.

[Surferbeetle]

From the LA Times

It takes about 7,000 tons of bunker-fuel to fill the tanks of a 5,000-container cargo ship for a trip from Shanghai to Los Angeles. Over the last year and half, the cost of that fuel has jumped 87% to $552 a ton, according to the World Shipping Council, boosting the cost of a fill-up to more than $3.8 million.

"To put things in perspective, today's extra shipping cost from East Asia is the equivalent of imposing a 9% tariff on East Asian goods entering North America," said Rubin of CIBC World Markets. "At $200 per barrel, the tariff equivalent rate will rise to 15%."

[Bill Moore]

Yep, pretty soon it will be a good idea to start investing in American manufacturing companies, maybe China will no longer be able to produce steel and toys at a competitive price?

[Watcher In The Middle]

Originally posted by Bill Moore:

Yep, pretty soon it will be a good idea to start investing in American manufacturing companies, maybe China will no longer be able to produce steel and toys at a competitive price?

...to happen. And, remember, China (PRC) subsidizes gas prices, but they have raised the street prices twice, but even after the increases, they are still only running to what works out to be in the $3.30 a gallon range for gas.

Even China, with their vast trade inbalance, was just seeing money evaporate due to the gas subsidy. They simply couldn't continue to afford it, but China is running some very serious risks right now, as their internal markets are undergoing major shocks (see their internal stock market for an example). Their leadership has got to be staying up nights worrying.

The problem isn't China's production cost, it's the transportation costs. That's the killer that they just cannot get around, and realize, that 's at $120 a Bbl. oil. Prices based on $120 a Bbl. are making a substantial piece of China's manufacturing cost ineffective for goods, including associated distribution/delivery costs. If it's just manufacturing, they are still ok. But exports where you have the associated transportation costs are a totally different story.

Just as a btw, at $200 a Bbl. oil, the price component for a gal. of gas is $4.67 a gal for just the oil component. Diesel is even higher. That's no refining, distribution, taxes, or transportation costs in there. So, say hello to $5.50 to $6.00 bucks a gallon for gas, even higher for diesel.

At $200 a Bbl. China is out of the manufacturing export business. Now the biggest non-OPEC beneficiary of $200 a Bbl. would actually be initially the NAFTA nations, followed by the CAFTA nations, because you would see a renewed trade growth between those parties, because goods and services (including transportation costs) would be affordable.

Something else to think about is that China is running up against a real problem because one of the ways that multinational corporations are attempting to alleviate the rapid costs increase in China's manufacturing goods is through more reliance on the internet for communications, but it turns out they've been running up against all sorts of different types of Chinese "limitations" on use of the internet for doing business-to-business communications. Wasn't a big deal before, but now, when every little thing counts, the ability to avoid sending a couple of execs out on business travel for a week can be the difference between a profitable contract and a loser of a deal.

Something for both our current and future leadership in DC to think about.

Because once China loses much of the business to places like both the NAFTA and CAFTA nations, it's going to be a lot harder to get it back going trans-Pacific. Business have long memories - rivers of red ink tends to do that.

[AmericanPride]

To address the original article (from 2006...), I think the author is wildly off the mark. He's professing a belief no different than Moussaoui and the other underlings of radical political Islam. What he fails to grasp is that politics always tames religion and culture -- the latter two are never static because someone is always trying to redefine it their advantage. That's even evident in the Axis-of-Evil "revisionist" Islamic state of Iran where the revolutionary cadre retained much of the same institutions and practices of the Shah (namely SAVAK and bonyads) because it was practical to do so. If it's a war of culture as the author suggests, how can the United States manage beneficial relations with a conservative Islamic monarchy, a liberal Jewish parliamentary republic, and an Arab nationalist authoritarian regime? Why are Iran, Saudi Arabia, and Pakistan advocating different forms of fundamentalism?

[Surferbeetle]

The June 30th WSJ has an interesting report on China's manufacturing sector

Many Chinese economists and officials think the country has relied too much on cost-cutting and simple production models to boost exports. "Such a high dependence on foreign trade is not good for China," says Yu Yongding, a Beijing-based researcher at the Chinese Academy of Social Sciences, a government think tank. For the U.S. and Japan, he says, trade is equivalent to around 20% the value of gross domestic product. For China, it is about 75%.

Meanwhile on this side of the pond Mr. Fisher of the Federal Reserve Bank of Dallas provides some insights on inflation...

It is only natural to cast about for a solution—any solution—to avoid the fiscal pain we know is necessary because we succumbed to complacency and put off dealing with this looming fiscal disaster. Throughout history, many nations, when confronted by sizable debts they were unable or unwilling to repay, have seized upon an apparently painless solution to this dilemma: monetization. Just have the monetary authority run cash off the printing presses until the debt is repaid, the story goes, then promise to be responsible from that point on and hope your sins will be forgiven by God and Milton Friedman and everyone else.

We know from centuries of evidence in countless economies, from ancient Rome to today’s Zimbabwe, that running the printing press to pay off today’s bills leads to much worse problems later on. The inflation that results from the flood of money into the economy turns out to be far worse than the fiscal pain those countries hoped to avoid.

Earlier I mentioned the Fed’s dual mandate to manage growth and inflation. In the long run, growth cannot be sustained if markets are undermined by inflation. Stable prices go hand in hand with achieving sustainable economic growth. I have said many, many times that inflation is a sinister beast that, if uncaged, devours savings, erodes consumers’ purchasing power, decimates returns on capital, undermines the reliability of financial accounting, distracts the attention of corporate management, undercuts employment growth and real wages, and debases the currency.

[Gringo Malandro]

Yep, pretty soon it will be a good idea to start investing in American manufacturing companies, maybe China will no longer be able to produce steel and toys at a competitive price?

China has lower production costs and they artificially deflate their currency to support the export sector. Also, they don't tax factories set up only for export, and make it difficult for them to sell domestically. http://www.nytimes.com/2009/01/01/bu....html?emc=eta1

In open market economies, mature countries can't compete with developing ones in cheap, mass-produced goods. Singapore, who made lots of money in cheap electronics realized this and is investing heavily in a transition to biotechnology. With high barriers to entry like the need for expensive precision equipment, they eliminate the competition from low-cost places like Malaysia.

High oil might hurt china some, but with the amount of goods that we import, we would have to foot much of that bill anyway.

There are certain sectors that we have retain for national security reasons, but for the US to compete in exports, we will have to rely more on "soft infrastructure" industries like business processes, consulting, as well as more technology-intensive businesses.

Ironically China is going to have some of these same problems as its standard of living improves, which is why they have to deflate their currency.

[Jrizzuto77]

I believe Mr. Thomas Freidman does a good job of describing the challenges of the clash of civilizations in his book "The Lexus and the Olive Tree." The central point to this book is that Civilizations must choose to between modernity, symbolized in the Lexus, and holding on to traditions (the Olive three) through globalization. This is not an easy process and institutions and governance are key to the shift toward modernity via globalization. Friedman defines Globalization as the international system that has replaced the post-Cold War system. This new system, (LEXUS) has broken down barriers and will lead to greater economic prosperity through the integration of markets, finance, technology and telecommunications. Central to this system is the US role. Moreover, the United States should bring integration, military might and partnership to deal with globalization. Friedman describes the United States role, through the use of the armed forces, as being the "hidden fist” that keeps the system operating and by maintaining an open hand in order to build partnership, inspire and lead. As civilizations inevitable collide I believe it is our role to model and assist those who want to join the modern international framework.
**The views expressed in this are those of the author and do not reflect the official policy of the Department of the Army, DoD or the US Government. **