David P. Goldman: Steve Bannon Was Right About North Korea and China

Writing at Asia Times, David P. Goldman salutes his friend Steve Bannon – the former White House strategist now returned home to Breitbart News – for his perspective on the threats posed by North Korea and China. Goldman argues the world owes Bannon thanks for heading off a military confrontation with North Korea, but warns a longer, colder struggle against China is the “main event.”

Goldman approvingly cites Bannon’s interview with The American Prospect last week, in which he insisted there is “no military solution” for North Korea until “somebody solves the part of the equation that shows me that 10 million people in Seoul don’t die in the first 30 minutes from conventional weapons.”

Goldman says he does not agree with Bannon “on every detail,” but commends his “brilliant grasp of grand strategy” and “deep sense of urgency about its implementation.”

“I can state unequivocally that he has a better understanding of America’s vulnerabilities than any senior official I have met in a generation, and some excellent ideas about how to get out of the mess,” he writes of Bannon. “His departure is a loss for the Trump Administration, but not necessarily for the country. As he told associates over the weekend, he had influence at the White House, but as executive chairman of Breitbart News, he has power.”

The core point Goldman makes, beyond quoting his own earlier work to demonstrate that he has the same apprehensions about North Korea showering Seoul with artillery shells, is that China is the true adversary America faces in Asia, and quite possibly our most potent adversary around the world. 

“The economic war is not a matter of dumping steel or aluminum, or even pirating American technology: China is establishing a dominant position in high-tech manufacturing, including a new US$50 billion plan to build a domestic semiconductor industry,” he writes, backing this up with an excerpt from his own article in the Fall 2017 edition of American Affairs:

China and, to a lesser extent, other Asian competitors employ the full resources of state finances to fund capital-intensive manufacturing investment in the way that the West subsidizes basic infrastructure. In addition, China will commit $1 trillion to building infrastructure overseas to support its foreign trade, including exports as well as raw material supplies.

The problem is not merely the dumping of artificially cheap goods into American markets, but a state-supported capital investment program that erodes returns for American investors.

As a result, investment in the United States seeks capital-light venues such as software and avoids capital-intensive sectors such as chip production. We are being shut out of the global market for high-tech exports.

China is putting a lot of money behind a plan that would leave America largely exporting intangible intellectual property like software… which can be easily stolen by hackers and pirates, Chinese and otherwise.

Goldman advises against emulating the Chinese approach, which is what people on the left who worry about America’s position in the global marketplace usually recommend. He suggests supporting research that could inspire entrepreneurial innovation instead – research on the scale of the moon shot or the Reagan-era Strategic Defense Initiative.

Not only is the Chinese level of government control over private industry and the personal financial resources of citizens incompatible with American ideals of “political and economic liberty,” as Goldman notes, but it’s inefficient and hidebound, especially when the crud of American-style corruption and political neurosis is factored in. Say what you will about China, but they’re not prone to letting environmentalist groups paralyze huge industrial projects for frivolous reasons.

After listing a number of products invented by Americans that are no longer manufactured here – including LEDs, flat-panel video displays, flash memory, and even the solar panels so lavishly subsidized by the Obama administration – Goldman warns that we face both economic decline and “critical strategic vulnerabilities” by giving up our manufacturing base. He compares it to an empire in the Age of Sail losing its ability to produce steel and forge its own cannon.

The problem, to continue this metaphor, is that the companies selling off their ability to make cannon are raking in a huge amount of money in the process, and they spend a good deal of that money buying the political influence needed to keep their preferred trade policies in place.

“Most American companies are happy to trade know-how for access to the Chinese market, an exchange that boosts their bottom line within the tenure of the average CEO, but weakens the United States in the medium-term,” Goldman warns, anticipating a furious response from tech-industry and defense lobbyists if President Trump tries to change the game.

He suspects the defense industry would resist because an initiative to rejuvenate American manufacturing would empower prospective competitors to the small number of huge corporations who have currently cornered the market. For this reason, he believes a Secretary of Defense armed with “a single-minded determination to undo a generation of damage” is vitally necessary – in other words, someone who shares the vision of Steve Bannon.

Another portion of Goldman’s lengthy piece for American Affairs Journal introduces two seemingly paradoxical data points: the Western world is aging, as younger demographics surge in the Third World, and yet those aging Western populations have lost the ability to endure short-term hardship for long-term gain. This can be easily seen in the political debate over ending just about any U.S. government subsidy or welfare program, no matter how inefficient or counterproductive it might be; the number of people who would “lose” something in the process is cited, usually a number absurdly inflated by demagogues, and the conversation is over. That’s a cultural problem, a big one. It can only be addressed by people willing to shake up the culture and endure the backlash they will surely receive.

Goldman warns that Steve Bannon helped defuse the “sideshow” of North Korea, but America is “still unprepared for the main event” of China. China plays long games. It has positioned itself to take advantage of the coming productivity explosion in the Third World, while the United States has given up the manufacturing base it needs to compete in that nascent market. If Bannon was the only White House adviser who could suss out the rules of China’s game, we’re in deep trouble, whether or not we find a way to permanently deal with Beijing’s nuclear attack dog in North Korea.