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Conflict Watch: U.S. and its Allies Believe Assad Used Chemical Weapons (But What Does it Mean?)

A little mix-up from our normal schedule. When I saw this article in the NYT this morning I could not concentrate on any economics related news, I will put something out on that front tomorrow.

“The White House, in a letter to Congressional leaders, said the nation’s intelligence agencies assessed “with varying degrees of confidence” that the government of President Bashar al-Assad had used the chemical agent sarin on a small scale.

But it said more conclusive evidence was needed before Mr. Obama would take action, referring obliquely to both the Bush administration’s use of faulty intelligence in the march to war in Iraq and the ramifications of any decision to enter another conflict in the Middle East.”

Senator Dianne Feinstein, Democrat of California, who is chairwoman of the Senate Intelligence Committee, said the agencies actually expressed more certainty about the use of these weapons than the White House indicated in its letter. She said Thursday that they voiced medium to high confidence in their assessment, which officials said was based on the testing of soil samples and blood drawn from people who had been wounded.”

“In a statement last summer, Mr. Obama did not offer a technical definition of his “red line” for taking action, but said it was when “we start seeing a whole bunch of weapons moving around or being utilized.” In Jerusalem last month, he said proof that Syria had used such [chemical] weapons would be a “game changer” for American involvement.”

“The timing of the White House disclosure also suggested the pressures it is facing. It came the same day that the British government said that it had “limited but persuasive” evidence of the use of chemical weapons, and two days after an Israeli military intelligence official asserted that Syria had repeatedly used chemical weapons.

In a letter to the United Nations secretary general, Ban Ki-moon, several weeks ago calling for a United Nations investigation, Britain laid out evidence of the attacks in Aleppo and near Damascus as well as an earlier one in Homs.

The letter, a copy of which was obtained by The New York Times, reported that dozens of victims were treated at hospitals for shortness of breath, convulsions and dilation of the pupils, common symptoms of exposure to chemical warfare agents. Doctors reported eye irritation and fatigue after close exposure to the patients.

Citing its links to contacts in the Syrian opposition, Britain said there were reports of 15 deaths in the suburban Damascus attack and up to 10 in Aleppo, where the government and rebels have each accused the other of using chemical weapons.”

“White House officials gave no indication of what Mr. Obama might do, except to say that any American action would be taken in concert with its allies.

While lawmakers from both parties swiftly declared that the president’s red line had been breached, they differed on what he should do about it.”

And I honestly could have quoted the whole article; I highly suggest you read it if you are interested in this matter (and if you made it this far you are, so go read it).

Before I dive into the article, a little background on why chemical warfare is different from conventional warfare. “Chemical warfare is different from the use of conventional weapons or nuclear weapons because the destructive effects of chemical weapons are not primarily due to any explosive force.”

This means that chemical weapons can be detonated without the natural warning that conventional and nuclear weapons carry (the explosion). Chemical weapons can be silent, indiscriminate killers, and have the potential to cause mass destruction (yes chemical weapons are considered weapons of mass destruction).

The U.S. unilaterally denounced the use of chemical weapons in 1969, ratified the Geneva Convention in 1975, and ratified the Chemical Weapons convention in 1997. The U.S. has put a lot of effort into winding down chemical weapon stockpiles both at home and abroad. These are just some of the reasons why a small number of deaths (around 25), in a civil war that has claimed over 70,000 lives, is a “red line” issue.

Why, after appearing to have his “red line” crossed, is the Obama administration’s response unclear?

Most immediately, I would think of the shortcomings of conventional warfare. The Iraq war was costly, and recent sectarian violence in Iraq shows how unsustainable “nation building” can be (if it is imposed from the outside, accompanied by war, or generally pushed in an unrealistically small time-frame; the process of democratization and modernization is gradual and must come from a countries own citizenry).

There also needs to be concrete proof that Assad used these weapons. There are some who would argue that the opposition has reason to use chemical weapons. If the opposition made it appear that Assad used the weapons, it could tip the fight in its favor. While this is a morally reprehensible thought, “all is fair in love and war”. Realistically it is unlikely that the Syrian opposition, which has been hampered by an arms disadvantage throughout the 2 year civil war, has access to such weapons, even if it wanted to use them to draw outside support. Still, this unlikely scenario must be ruled out before the U.S. gets further involved in the war.    

The Obama administration has said any response would be carried out in coordination with our allies—good! But how much of the response is going to fall on the U.S? France and Britain have been particularly outspoken about EU intervention in Syria. However, a recent article highlights that U.S. military expenditure accounts for about 75% of the NATO budget. The U.S. may want its allies to take a larger role, and our allies may want to take a larger role, but unless leaders can push military expansion in a time when austerity has constrained spending even on important social programs (which I am not certain is the right thing to do or should be these countries top priority given constrained resources), it looks like America will likely be footing most of the cost of any coordinated effort.

But let us not forget our recent $10 billion arms deal with Israel, Saudi Arabia and the United Arab Emirates. The stated purpose of such a deal was to deter a nuclear Iran, but such geopolitical allies would almost certainly have to play a significant role in any coordinated effort to support the Syrian opposition militarily.

Also, Russia and China, Syria’s two largest allies who have continually blocked UNSC intervention, have signed the Chemical Weapons Convention banning the use of chemical weapons. If there is evidence Assad used these weapons, China and Russia may allow a UN military intervention, ending an international stalemate almost as old as the war itself.

If allies in NATO, the Middle-East, and around the world (UN intervention) pitch in, the situation in Syria could change swiftly and drastically.

There are no easy answers. I would be shocked if the U.S. attempted unilateral and conventional warfare in response to this news (they have explicitly stated they won’t so I’m not exactly going out on a limb with that prediction). Likely, if it is confirmed that Assad indeed used chemical weapons, the U.S. and its allies would for the first time supply military aid to the opposition. NATO and strategic allies in the Middle-East would likely take up the majority of any ground forces deployed.

It will be interesting to see how this recent news plays out. The Syrian civil war has been stuck in a “hurting stalemate”, perpetuating a humanitarian crisis and causing regional instability. It appears that there may finally be evidence that demands multilateral international intervention that ultimately ends the war.

And when the war does end, a whole new host of issues will emerge…

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So Much To Do, And No Time To Do It

Dear Normative Narratives Community,

Unfortunately I will not be able to post my regular weekly updates this week. Between my internship at the UNDP, and my IPED comprehensive exam, there are simply not enough hours this week. After  5 months of regular updates, I probably deserve a break; but blogging has become so enjoyable for me that the only way I would take one is if I absolutely needed to (as I do now).

Hopefully over the past few months you have learned a few things, so that my absence will not to too costly (/sarcasm, I know you will all get on just fine). As for news sources, you should by now realize that 95% of the things I post come from two sources, The New York Times and Reuters. There certainly are other sources out there, but I find these to be the two most consistent sources.

So here is a little homework assignment while I am gone. Check up on news sources and try to apply Normative Narratives thinking to what you are reading. Challenge what the writer is saying. think analytically and critically; progress and change are not made by blindly following but by actively participating in public discourse. Do not be afraid to speak your mind and put you opinion out there, especially on subjects you are passionate about (I know I’m not!) .

I guess what I am saying is that I believe there is an inner blogger/ social commentator / news analyst in all of us. This would be a great time for me to renew my call for guest bloggers–I have not had any so far and really would like to see that change.

Also, there are only 29 days left to contribute towards my advertising campaign. I have already started an ad on Google and it has been working quite well; I would like to continue to advertise as long as possible but unfortunately this costs money. The more I raise, the more I can spread the Normative Narratives message.

Last but not least, be sure to check out my Facebook page, which I will continue to regularly update with stories I believe are important. I will be back to my regular blogging schedule in just one week, April 18th (mark the date on your calendars!!).

I’m sure there will  be lots to talk about between now and then, I look forward to getting back on a regular blogging schedule as soon as possible.

Best,

Ben Zupnick

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Transparency Thursday: Wal-Mart, a Microcosm of the U.S. Economy

Walmart is the nation’s largest retail employer. Walmart’s competitive advantage is no secret; by providing goods at prices lower than competitors, it has been able to capture market share by driving competitors out of business. This translates into savings for customers. But looking further into the specifics of how Walmart keeps its costs down, it may also translate into higher costs for consumers in the long run. As is often the case, the “devil is in the details”.

Take, for example, the fact that Wal-Mart systematically underpays their employees. The average Walmart associate makes $15,500 per year ($8.81 per hour). Walmart’s CEO Mike Duke will bring home over $23 million in salary and performance based benefits in 2012, a whopping 1034:1 CEO to employee pay ratio (by far the highest, the next being Target at 597:1, also this figure is based on a median Wal-Mart salary of $22,400, so based on which figure you use the ratio could be much higher). It is estimated that it would cost Wal-Mart shoppers on average another $0.46 per visit to if the company offered a minimum wage of $12 / hour.

On the flip side of this, it costs the nation an estimated $1 billion a year in social safety net use. Essentially, the U.S. taxpayer is subsidizing Walmart’s  low wages, which systematically produce full-time workers living below the poverty line.

Next, consider environmental degradation. One common way to keep costs down is through “supply chain fractionalization”, producing certain products in low wage countries. This leads to increased greenhouse gas emissions, as goods are transported all over the world; without a system of taxing carbon, nobody pays for these emissions. “In the U.S. Walmart’s reported emissions grew by roughly 7% between 2005-2009. In Asia, its greenhouse gas emissions have doubled. The company expects 13 million metric tons of cumulative growth in emissions by 2015”. For all the lip service Walmart pays to environmental sustainability, this amounts to little more than a PR move.

Supply chain fractionalization—or outsourcing—has cost the U.S. an estimated 196,000 jobs from 2001-2006 due to Chinese Imports. This number has probably continued to grow, and represents jobs lost to production in other countries (outsourcing), and smaller domestic firms who were priced out of the market by Walmart’s business practices.

How is Walmart a microcosm of the current U.S. economy? This issue is highlighted in a recent New York Times article. According to the article, “Walmart, the nation’s largest retailer and grocer, has cut so many employees that it no longer has enough workers to stock its shelves properly, according to some employees and industry analysts.”

“Labor groups and some employees say the low staffing levels are hurting the in-store experience.”

Like America in general, Walmart appears to be producing under capacity because of it’s reluctance to hire workers.

In an attempt to save money, Walmart has undermined consumer confidence in its produce—one of the bulwarks of Walmart’s profitability (“Grocery made up 55 percent of Walmart’s United States sales in 2012”). Does the concept of low consumer confidence sound familiar? It should, it is one of the things depressing aggregate demand and is related to stagnant wages, unemployment, and general pessimism of peoples belief in the economy.

“Before the recession, at the start of 2007, Walmart had an average of 338 employees per store at its United States stores and Sam’s Club locations. Now, it has 281 per store, having cut the number of United States employees while adding hundreds of stores.”

Walmart has undermined its consumer confidence, which threatens to hurt its bottom line in the long run (it has not in the short run, which I will address shortly). However, when questioned about the possibility of hiring more workers, “Ms. Scott [a manager at a Los Angeles Walmart] says she has pushed for additional staff or for more hours for existing staff, ‘and the answer that I receive is they want to focus on productivity with the workers that we do have.’”

Does this sound eerily familiar to an overall justification for stubbornly high unemployment in the U.S.? It should. Corporations (including Walmart) are sitting on record profits, yet have not increased hiring to post recession levels. Compounding the issue is that employee productivity and wages have diverged greatly. Employers, Walmart being the largest, are systematically relying on higher worker productivity to make up for a smaller labor force, with no inclination that the higher productivity they seek will result in higher wages.

Walmart, like many other large corporations, is answerable to its stockholders and high level executives. Executive pay is incredibly high, profit’s continue to rise, and stock prices are now well above their pre-recession levels. With all this positive reinforcement, why would Walmart change its practices?

Ultimately, market forces determine the success of a business. No-one is forcing people to shop at Walmart, they go there for low prices and good selection. However, there are systematic issues with how Walmart keeps its costs down—most notably paying low wages and increasingly relying on practices which damage the environment.

Some of these issues, such as minimum wage and environmental regulation, need to be addressed by government policy. People need to be aware of the facts, so they can vote for policies that hold large corporations responsible for the negative externalities they cause. More immediately, people can vote with their wallets, by shopping at Wal-Mart’s competitors (which, based on the breadth of their operations, can include almost all retailers).

If Walmart can post hundred-billion dollar profit margins, and pay its CEO over 1000x the median employee salary, it can afford a more sustainable and egalitarian business model. Walmart’s primary competitive advantage is taking advantage of economies of scale—there is nothing wrong with this. However, cutting corners in other ways unfairly shifts the burden of Walmart’s costs onto taxpayers and the environment. If Walmart’s profits begin to fall, they will rethink their corporate strategy. Until then, we can expect business as usual.

For the sake of it’s own profitability and the U.S. economy, Walmart should hire more workers at more livable wages.

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Transparency Thursday: Is Your Heating Oil Company Stealing Your Money and Making You Sick?

Hey everyone. It has been an exciting week for me, starting my internship at the UNDP. Lots of great people there working on some of the most pressing issues facing the world today (and looking forward into the future).

As for the blogging schedule, it will be as follows: Transparency Thursday, Friday Economic Outlook, Saturday Conflict Watch. No more sports analysis for now, as I need a little personal time, and I feel that quality unbiased sports analysis is readily available from a number of sources.

Also, between all the topics covered here at NN, sports was always the one that didn’t really fit in with the rest. Maybe one day I’ll get back to it, and certainly if there is an important enough story in sports it can crack the Transparency Thursday rotation, but for the foreseeable future that will be the schedule.

Back to the story at hand; a recent report from the NYT highlighted a criminal suit brought against some of New York’s biggest heating oil providers for illegally “cutting” heating oil with recycled or waste oil. “…companies that in recent years have sold tens of millions of gallons of oil to New York City and New York State for schools, housing complexes, universities, hospitals and other buildings.”

“As part of the criminal investigation, the authorities on March 12 raided at least five heating oil businesses in and around the city, including a delivery company and several businesses that deal in waste oil and some that are licensed to recycle it.”

“The businesses that were raided last week as part of the criminal investigation included Statewide Oil and Heating in Brooklyn — a company that is among several that deliver oil for Hess and that until 2011 delivered for Castle — and four interrelated companies that deal in waste oil: County Oil Company and J. B. Waste Oil Company in Astoria, Queens; New York Oil Recovery Corporation in Brooklyn; and Paradise Heating Oil in Ossining, N.Y.

During the raids, investigators from several state, city and federal agencies — some wearing bright yellow head-to-toe protective suits — tested oil and seized computers, reams of records and other materials, carting away more than 100 boxes of documents from one company alone, according to officials and people briefed on the matter.”

The criminal case coincides with a civil case brought against two of New York’s largest private heating oil providers: “Several commercial and residential building owners filed the two lawsuits, seeking class-action status. One accuses Castle Oil Corporation, which describes itself as the largest independent fuel oil distributor in the metropolitan area, of defrauding customers by mixing its fuel with waste oil. The other accuses Hess Corporation, among the world’s leading energy companies, of delivering fuel oil blended with waste oil to its customers, but one of the lawyers who brought the suit said in court last week that Hess might have been victimized by a trucking company or companies that it hired to deliver oil.”

“Last year alone, Castle sold more than 20 million gallons of No. 4 and No. 6 fuel oil — the grades burned in older furnaces — to New York City agencies, an official said. The lawsuit claims it was mixed with waste oil, like motor oil that has been used and discarded, sludge residue from commercial boilers and other used oil and lubricants.”

“But Castle, in its court papers, argued that the lawsuit’s contention that it mixed its fuel with waste oil was based on a single test of one delivery that it made last year out of 108,000, and that the suit provides no details on who conducted the test or how it was performed.”

Selling recycled waste not only is cheating customers by selling them an inferior product, it also poses significant health and environmental risks:

“Burning waste oil in furnaces could present a significant environmental hazard, and if the accusations that the companies cut their fuel are correct, it would mean that dangerous amounts of toxic pollutants had been released into the atmosphere, experts said.”

“Robert F. Kennedy Jr. — a senior lawyer for the Natural Resources Defense Council, the president of Waterkeeper Alliance and one of the lawyers who brought the lawsuit against Castle — said the environmental impact of the company’s actions were stark.

‘Basically, that company has turned every boiler or furnace that it services into a toxic-waste incinerator, ’Mr. Kennedy said in an interview. ‘When you burn waste oil, there is a tremendous amount of not only benzene, toluene and xylene, which are known carcinogens, but in addition, there is an inventory of heavy metals that are extremely toxic, including mercury, lead, arsenic, cadmium, antimony and zinc.’”

First, I would like to address Castle’s claim that the suit “was based on a single test of one delivery that it made last year out of 108,000”. The way I see it, there are only two possible scenarios which make sense here.

A)     There was a false positive on this one test, meaning Castle is indeed being wrongfully accused.

B)      Castle has been mixing in recycled / waste oil into their heating oil—systematically. It makes little sense that one shipment would be “cut”, as the oil is likely processed in huge quantities.

Of course this is all speculation until more details come back on the failed test. But is logical to assume either none of the oil is cut or all of it is.

Secondly, we will address the difference in the two cases. Presumably, the civil case is brought based on evidence that these 2 companies (Castle and Hess) had been involved in the process of selling “cut” oil to private customers. Whoever purchased the oil would have to bring a civil suit against the private companies. If enough people were affected, the case could turn into a “class-action lawsuit”.

In a criminal case, the government brings action against a party.  If cut oil was sold to schools or other public institutions, then it would be a crime against society as a whole. The criminal case makes sense as the victim in this case would be the government and ultimately the taxpayers. Add in the elements of environmental and healthcare concerns, which are regulated by the government, and a strong criminal case begins to form.

These two cases are both in early phases, so we will have to stay posted to see what comes of them. There are moral and ethical, as well as legal implications for misleading customers. The negative publicity from even being under investigation is likely already hurting these companies. Factoring in potential health and environmental degradation, it would not be surprising if ultimately these companies were forced to pay huge fines. Additionally, I would not be surprised to see stricter industry oversight in the future.

As the price of oil has risen, it seems the quality from some providers may be going down. All the most reason for people to consider more environmentally friendly and transparent forms of energy, such as geothermal and solar.

 


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Economic Outlook: An Austerity Program By Another Name Will Be Just As Painfull

Some of you may remember, way back when Normative Narratives started a few months back, a prickly little topic on every news outlets agenda–The Fiscal Cliff. The Fiscal Cliff was supposed to be an outcome so unthinkable that it forced congress to act and pass a reasonable budget by new years day 2013. While this is no easy task during a recession (partisan gridlock aside), congress had from the summer of 2011 to come up with some sort of deal. Unfortunately, the best our congress could do was kick the can down the road for a bit.

True important tax reforms we’re secured during the Fiscal Cliff debate (raising the top rate on incomes over $400,000 and raising the capital gains tax, as well as keeping Bush era tax cuts in place for everyone else). Not to take anything away from the significance of averting the “fiscal cliff”, but it was at best an incomplete victory. But on the spending side, nothing permanent was decided. Congress was able to agree that the economy would be unable to absorb the shock of spending cuts without causing a double-dip recession / increasing unemployment, and succeeded in kicking the can down the road for a few months. If congress couldn’t figure it out in the year and a half time period between the original debt-ceiling debate and the “fiscal cliff”, was it realistic to think they would be able to reach an agreement on mostly the same issues over the course of two months?

Whether it was reasonable or not, we are currently face-to-face with another austerity program that could indeed send the U.S. economy back into a recession / greatly increase unemployment:

“In less than two weeks, a cleaver known as the sequester will fall on some of the most important functions of the United States government. About $85 billion will be cut from discretionary spending over the next seven months…The sequester will not stop to contemplate whether these are the right programs to cut; it is entirely indiscriminate, slashing programs whether they are bloated or essential…These cuts, which will cost the economy more than one million jobs over the next two years are the direct result of the Republican demand in 2011 to shrink the government at any cost, under threat of a default on the nation’s debt.”

This New York Times article does a great job of highlighting exactly how and where the cuts would take place.

Initially I was going to go through the article piece by piece and explain how each cut could hurt a specific group of Americans. But this is pretty obvious from reading the article, so I will leave it up to the reader to read about specific cuts and make their own judgements. Much less obvious is why these cuts will hurt the U.S. economy overall (and not just specific groups withing the economy). There are two main reasons for this:

1) The Government provides “public goods” that cannot be adequately provided by the private sector

2) We are still in what economists call a “liquidity trap”

First #1. The government provides public goods, such as schooling, infrastructure, and security (military / policing). Public goods are public because they inherently suffer from the “free-rider” problem. Everyone benefits from public goods, there’s no way of excluding someone from benefiting from a better school system, or better roads, or more police officers.  These positive externalities mean that, left up to the private sector, investment in these goods will be insufficient. People will expect someone else to pay for the program and try to reap the benefits for free (hence the “free-rider” problem). Insufficient spending on public goods leads to higher crime (less law enforcement available combined with higher poverty rates due to cuts in social programs), and depresses both current (think poor infrastructure) and future (think inadequate schooling) economic prospects.

The private sector cannot decide to buy public goods just for certain people, as it cannot take advantage of “economies of scale” necessary for public goods to be  affordable. Think how expensive it would be for a rich community to decide to pave it’s own roads, or build it’s own schools, and the security bill needed to ensure other people do not use these services. These bills would be much greater than the taxes otherwise needed to pay for such goods.

But lets suppose that the private sector could make up for this government spending. This is where #2 comes in–the liquidity trap:

A liquidity trap is a situation in which despite very low interest rates (up against the “zero-bound”), private sector funds are not being adequately invested into the economy, but instead dumped into government T-bills (or other low yield but safe asset). A common argument against fiscal stimulus is that it will “crowd-out” private sector spending, and therefore cannot lead to growth. In times of economic growth, this is somewhat true (although not true for “public goods”, as explained above). But in a liquidity crisis, this argument does not hold. Even given incredibly low rates of return, the private sector is unwilling to invest the money needed to create the aggregate demand needed for economic growth / job creation.

If the private sector instead decides it is better to give this money to the government, it should be a strong signal that the government should be spending the money in productive ways (instead of letting it sit in the Federal Reserve, and for it’s part the Fed led by Ben Bernanke has done a marvelous job making sure the economic recovery has not been even more stagnant / non-existent by pursuing unprecedented expansionary monetary policy, known as “quantitative easing”. But this alone is not enough, expansionary fiscal policy is also needed. If stimulus is not politically realistic, contractionary fiscal austerity must be avoided at least.

There is no additional cost to the government spending money, as it essentially pays zero interest on borrowed funds. Given high unemployment, why not put that money to work, and worry about paying it back later? Economically speaking, with an interest rate near zero, and a fiscal multiplier > 1, stimulus spending can be a magic bullet of sorts. Government spending costs the government less now than it otherwise would, and the expansionary effects of fiscal spending are greater now then they otherwise would be. Currently, stimulus is both fiscally responsible and economically necessary to boost aggregate demand (and stimulate economic growth / reduce unemployment / increase tax receipts by growing the economy).

So again here we are; the G.O.P. is playing a game of chicken with “the full faith and credit of the United States of America” (which is one of the reasons we are able to borrow at such low rates despite a relatively high debt / GDP ratio, the fact that American debt is considered “safe”). The effects of a default on our debt  would cripple America’s ability to pursue meaningful monetary policy in the future. The effects of contractionary fiscal policy would depress an already weak U.S. economy (which would send out a ripple effect, depressing global economic growth) and raise unemployment. Yet the G.O.P. is willing to consider these unthinkable scenarios in order to push it’s tried and failed Austerian ideology.

America will have to reign in it’s deficit one day, especially with rising healthcare / social security costs, but that day is not today. Artificially forcing that day to be today, due to the sequester / debt-ceiling, will do nothing but hurt America’s credibility as an economic power both at home (by forcing the government to cut essential programs) and abroad (by making people reconsider whether U.S. debt is a “safe” investment or not).

 

 

 

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Conflict Watch: China, Friend or Foe?

I have written in the past about how China is not our enemy but our ally. In many ways this is true, but in some ways the two countries are ideologically opposed. While the rift between the U.S. and China is not as significant as the rift between the U.S. and the U.S.S.R was, China still has the potential to pose a significant threat to our national security. New technology, and the power for good that comes with it, also carries an intrinsic risk. As sensitive data becomes digitized, it can become a target for “cyber-terrorism”.

Before diving into the article, it is important to highlight the important ways the China is NOT our enemy. When a story like this comes out, people who dislike China will use it as evidence to vindicate their views that China is our enemy in whatever other sense they are trying to prove (or to argue for whatever protectionist policy they are advocating). The following are some of the ways in which China is our ALLY:

Economically: There are probably no two nations who are as interdependent economically then the U.S. and China. The largest and second largest economies in the world respectively, each nation has been able to grow and will continue to grow only if the two nations continue to work together. Since growth is essential for raising the standard of living, for financing important government programs (both social and military), and for keeping unemployment low, this relationship must be maintained and strengthened.

Trade disputes are to be worked out in the W.T.O.. Currency disputes (it is often argued that China manipulates the value of it’s currency make it’s exports cheaper) are unfounded. While it is no secret that the Chinese currency is not valued on the open market, this is the decision of the Chinese government. America, or any other nation, would not allow another country to determine it’s monetary policy (unless it chose to fix it’s currency’s value or “peg it” to the dollar, or joined a monetary union like the EU). An undervalued Chinese Yuan hurts Chinese citizen’s (they do not have as much purchasing power as they otherwise would); it is ultimately up to the Chinese people to put pressure on the Chinese government  to allow the Yuan to be fully “convertible”.

Global Security: China, along with Russia, finds itself as the modern champion of “national sovereignty”. Taken to the extreme, this position has unfortunately led to U.N.S.C. inaction against the Assad regime as China and Russia continue to veto international intervention in the Syrian Civil War. Many non-democratic countries align themselves with China, and sometimes these are countries we would consider “bad apples” here in America. Countries such as North Korea and Iran have or are pursuing the ability to build nuclear arms that could pose significant threats to global security. Also, human rights violations in less developed countries attract terrorist activities. China’s ability to ensure global security, and to act responsibly (unlike in the Syrian situation)  will go a long way in cementing China as a world power. It  would also allow the U.S. to focus more on domestic issues (instead of continuing to fund a disproportionately large  military budget to fight the worlds wars, which we can no longer afford to do). China must be our partner, not our enemy, in ensuring global security in a nuclear age.

Environmental Issues: The U.S. and China, being the two  largest economies in the world, are naturally the two largest emitters of greenhouse gasses. Issues such as capping emissions levels, and cap-and-trade / carbon tax policies, will require global coordination to ensure corporations cannot avoid stricter laws by simply moving operations to another country. Multilateral environmental talks have stalled in recent years; the developing world (lead by China) affirms that the developed world should pay for the majority of “green funds” to finance global environmental initiatives, as they are historically responsible for the majority of greenhouse gas emissions (you have to admit, this is a strong argument). The developed world (lead by the U.S.) argues that everyone has to pay their fair share. While the specifics are slowly worked out (as is always the case in multilateral negotiations), it will take coordination between the U.S. and China for any meaningful policy to take shape.

Back to the issue at hand–cyber security. A recent NYT article highlights that ” A growing body of digital forensic evidence — confirmed by American intelligence officials who say they have tapped into the activity of the army unit for years — leaves little doubt that an overwhelming percentage of the attacks on American corporations, organizations and government agencies originate in and around the white tower.”

This is disturbing new, if the Chinese military is indeed behind the majority of cyber-attacks on sensitive U.S. data, it could strain the already complicated relationship between the U.S. and China. For the reasons discussed above, it is essential for the global good for China and the U.S. to be allies, not enemies; global economic growth, security, and environmental sustainability depend on it. Hopefully the two countries are able to work this issue out with minimal damage to our important yet delicate relationship. Below are some key excerpts from the article, the whole thing can be found here:

“An unusually detailed 60-page study, to be released Tuesday by Mandiant, an American computer security firm, tracks for the first time individual members of the most sophisticated of the Chinese hacking groups…Mandiant discovered that two sets of I.P. addresses used in the attacks were registered in the same neighborhood as Unit 61398’s building[a Chinese military building].

It’s where more than 90 percent of the attacks we followed come from,’ said Mr. Mandia.”

“’There are huge diplomatic sensitivities here,’ said one intelligence official, with frustration in his voice.

But Obama administration officials say they are planning to tell China’s new leaders in coming weeks that the volume and sophistication of the attacks have become so intense that they threaten the fundamental relationship between Washington and Beijing.”

“The United States finds itself in something of an asymmetrical digital war with China. ‘In the cold war, we were focused every day on the nuclear command centers around Moscow,’ one senior defense official said recently. ‘Today, it’s fair to say that we worry as much about the computer servers in Shanghai.'”

“What most worries American investigators is that the latest set of attacks believed coming from Unit 61398 focus not just on stealing information, but obtaining the ability to manipulate American critical infrastructure: the power grids and other utilities.”

“Mr. Obama alluded to this concern in the State of the Union speech, without mentioning China or any other nation. ‘We know foreign countries and companies swipe our corporate secrets,’ he said. ‘Now our enemies are also seeking the ability to sabotage our power grid, our financial institutions, our air-traffic control systems. We cannot look back years from now and wonder why we did nothing.”

Mr. Obama faces a vexing choice: In a sprawling, vital relationship with China, is it worth a major confrontation between the world’s largest and second largest economy over computer hacking?

A few years ago, administration officials say, the theft of intellectual property was an annoyance, resulting in the loss of billions of dollars of revenue. But clearly something has changed. The mounting evidence of state sponsorship, the increasing boldness of Unit 61398, and the growing threat to American infrastructure are leading officials to conclude that a far stronger response is necessary.

‘Right now there is no incentive for the Chinese to stop doing this,’ said Mr. Rogers, the House intelligence chairman. ‘If we don’t create a high price, it’s only going to keep accelerating.'”

Mr. Rogers is correct, the U.S. has to make it clear that these actions are unacceptable, otherwise a dangerous precedent would be set. Whether the Chinese government is behind these cyber-attacks, or they are simply taking place under the government’s watch, it is up the the Chinese government to make sure these attacks are kept to a minimum. This story is likely to evolve as more information becomes available and as high ranking officials from the U.S. and China talk. I will do my best to keep the Normative Narratives community up to date on this important issue.

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