China's Long March Through The Global South

The first is AI applications to manufacturing. It can produce a $9,000 electric vehicle at a profit, or 2,400 5G base stations a day
in a plant
with
50
workers – I saw this. It also claims to have a
factory
that can make 1,000 cruise missile motors a day.

We can't produce enough artillery shells to supply Ukraine. China can make as many ship-killer missiles as it wants.
That's the biggest
change in relative firepower since muskets replaced crossbows.
A
US destroyer can carry 100 missile interceptors. There's no limit to how many missiles China can launch from the mainland.
We talk about prioritizing China: With what?

We're just rearranging the deck guns on the Titanic.

China has 3 million 5G base stations. We have 100,000. China dominates key industries-telecom infrastructure, EVs, solar power, drones, steel and shipbuilding - and it's aiming at semiconductors. Biden's Treasury Secretary goes to China and says,“Please, you've got too much industrial capacity, don't export so much!” What about OUR capacity?

The other big thing China got right is the transformation of the Global South. It doubled exports to the Global South since Covid – now exports more to the Global South than to all developed markets. Assimilates billions of people into its economic sphere. It did this with 200 soldiers deployed outside China versus our 230,000.

We spent $7
trillion on forever wars. China spent $1 trillion
on Belt and Road Initiative investments.
Who got more influence?

Forty countries have applied to join the BRICS group.

This isn't about authoritarianism versus democracy. China's exports to democracies like India grew as fast as exports to Russia. The Chinese are incurious about how barbarians govern themselves. They want to make the world dependent on Chinese technology and supply chains.

This is a gigantic undertaking: Four out of five workers in the Global South are immured in the so-called informal sector. They pay no taxes, receive few services, have no access to capital and world markets.

China is assimilating them with digital and transportation infrastructure. That connects people to world markets. Huawei and ZTE now deliver more than half the world's telecom infrastructure and more than two thirds of the market in the Global South.

BYD is building EV plants in
Mexico,
Brazil, Thailand, Turkey and Hungary. The $9,000 EV is today's equivalent of the Model T for the Global South – a car the average family can afford.
That's as big as the Model T was for the United States.

Meanwhile our position deteriorates.

When Donald Trump left office, our trade deficit in goods was $800 billion a year. Now it's half again as big, at $1.2 trillion a year.

Most of the new imports come from the Global South.
We put tariffs on goods from China, so China instead shipped components to Mexico, Vietnam, India and a dozen other countries, which sold the finished goods to us. We import less from China but we're more dependent on Chinese supply chains.

Like the
Sorcerer's
Apprentice, we smashed the enchanted broom that was flooding us, and now we have a dozen.

The Fed's Industrial Production Index is lower than it was before COVID.
Capital goods orders are down more than 10% after inflation.

Worst of all: We now import more capital goods - the goods that make other goods - than we produce at home. To produce more and import less, we need more capital goods, but we'll need to import more capital goods today in order to import less in the future. That's why across-the-board tariffs may do more harm than good.

We
cut off China's access to advanced chip technologies, but China has worked around most of these barriers. It can produce the chips it needs for industrial automation, 5G
telecom, and other real
economy applications. Again and again,
we overestimated the impact of our sanctions and underestimated China's ability to adapt.

Taking potshots
at the elephant
hasn't done much good.
We have to get our own elephant.

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We need a national effort on the scale of the Kennedy Moonshot
or the Reagan Strategic Defense Initiative.
In 1965 12% of all federal outlays went to R&D.
Today it's 2.4%.

We get industrial policy right when we have a national emergency.

Trump's
missile defense is the way to go.
Reduce our forward deployment
and concentrate resources on high-tech defense.

We have faster chips. But it's not just about processing speed:
It's know-how, education, an industrial culture and industrial
communities, and we've let these slip.
Trump is right to impose high tariffs on Chinese EVs – we have to protect our manufacturing base. He's also right to invite Chinese auto companies to build plants in the US. China is ahead of us in industrial automation. Let's appropriate some of China's IP.

Two simple proposals:

We should combine with Japan, South Korea, and Germany to compete with China's
Long March through the Global South. Together we have more resources and more capital.

We should invite our NATO partners to join us in
creating the technologies that will
determine the outcome of the 21st
century. We won't persuade them to rebuild conventional armies. But
joining us at the cutting edge of technology is an offer they can't refuse.

As a young researcher for Reagan's National Security Council, I produced a study saying that SDI would pay for itself through civilian spinoffs. I was wrong: It paid for itself ten times over. This isn't our first rodeo. We can do it again. We are more in need of reminder than of instruction.

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