Currently, there are two issues that the American public and the media, who make their living feeding into American’s sports frenzy that have captured their attention.  The first is Performance Enhancing Drugs (PED), and the second being the discovery that sports agents are involved in college athletics.  These are two issues that are going to be discussed from a contrarian perspective – the viewpoint which is different from that which the majority of talking heads on sports radio.

The argument against PED’s appears to be two fold.  First, when some athletes take them and others do not, there is no longer a level playing field.  The second argument, found mostly among baseball purists, is that the integrity of the statistical records is threatened.

The argument that PED’s does away with a level playing field is almost too absurd.  As one famous radio commentator, Colin Cowherd, aptly remarked, we are a capitalist, competitive society, yet is sports were favor socialism where no one or no team has a competitive advantage.  Every athlete who plays sports in college on a scholarship, worth a substantial amount of money, and every athlete who engages in any form of professional sports already has a competitive advantage.  It is called genetics.  There are those amongst us who are fortunate enough to have been born with certain genetic traits that translate into being dominant in sports – they have a genetic capability to run faster, or longer distances; they have better hand-eye coordination, they are taller than the average, their skeletal structure can support more or less weight with the importance of each depending on the sport, their strength varies, the ability to easily add muscle varies, and the list of variables is almost infinite.  Thus, in sports as well as in any other professional occupation, certain individuals start with a competitive advantage.

All that performance enhancing drugs can do is provide a person who takes them, and who is willing to work hard and train hard, with the chance to improve upon their genetic pre-dispositions.  That is all.  By themselves, these drugs will not make you faster, stronger, or produce a better body.  You have to work out and train your body much harder that those athletes who have been genetically blessed from the outset.  What is so wrong with this ?  In all other aspects of our lives, we applaud people who either take various medications or engage in plastic surgery to overcome what is perceived to be genetic shortcomings.  If a person has problems associated with attention deficit disorders, we prescribe drugs to help deal with this, and amongst those who can also afford it, engage in counseling sessions on how to turn what is perceived to be a malady into an advantage, or how to control it.  We use drugs to help those who are born with certain genetically based diseases or illnesses. 

In terms of improving appearances which can lead to better careers or career opportunities, we applaud plastic surgery.  Woman can have breast implants to be larger, or reduction surgeries to be smaller.  Whether or not they work, men are bombarded with advertisements for drugs or herbs that will increase their penis size.  We have liposuction to help remove fat from the body.  We inject people with Botox, a basically toxic substance, in order to remove wrinkles in our fascination with looking younger.  Bottom line, in all areas but sports, we support the use of drugs and/or procedures to improve our basic genetic code.

Drugs can kill you or shorten your life – so the argument goes.  That should be an individual’s own choice.  Why shouldn’t an individual have a choice of either (a) having a normal job and watching the sports he/she loves on television, and hopefully living a long life (also genetically predetermined); or (b) using PED’s to be bigger, stronger, faster, etc. in order to both play the game they love, earn an incredible amount of money, well beyond what an average person makes, enjoy fame and its privileges’, with the trade off being living a shorter life.  Shouldn’t that be an individual person’s own choice ?  Isn’t that what capitalism and a competitive society are all about – the freedom of choice to determine your own future, weigh the risks and rewards, and then act ?

Athletes get injured – a fact of live in every sport.  On the professional level, an athlete’s career is remarkably short, and time spent in the training room recovering from injury, or in rehab after surgery, is time that can never be recovered.  If you out with an injury too long, you are replaced.  It is also within the competitive make up of athletes to want to get back on the field as soon as possible.  Human Growth Hormone (HGH) promotes muscle and tissue growth and will reduce recovery time – end of argument.  The person injured on the job or in an accident can receive HGH by prescription under a doctor’s care in order to reduce their recovery time and get back to work.  Personally, I had shoulder surgery with the anticipated time for rehabilitation therapy being one year.  I took HGH and then followed the doctor’s physical therapy regimen.  I was released from the doctor’s care in four months – at the age when I am already receiving social security.  Individuals and teams have lots of money invested in the their athletic careers, why not allow HGH to help them recover from injury.  We use other drugs, such as anti-inflammatories, pain killers, and advanced recovery techniques that will even put athletes in chambers (hyperbaric) to try and increase oxygen flow and reduce recovery time.  HGH works, so if an athlete chooses to use it, why should it not be allowed ?

Sports agents and the support, including financial, that they provide to college athletes has created a furor in college football.  The sheer hypocrisy of would be laughable if the consequences were not so severe.  Everyone, from the NCAA administrators, college administrators at almost every level, the college and universities in terms of publicity, and professors in other departments all receive benefits when the college/university team is victorious thanks to the efforts of their “student-athletes”.  Universities make tens of millions of dollars from television, attendance, selling of sports gear, advertising, and increased alumni donations as a result of these young men playing football.  The success of an entire team in college may depend on a few extremely gifted young men whose talent is exceptional and who will have the opportunity to try and play in the NFL. 

What is so terribly wrong with these young men signing up early with a sport’s agent and receiving some financial support while they are in college honing and developing their skills ?  It is the agent who is taking the risk.  If the player gets injured and therefore cannot play in the NFL, it is the agent who has lost his investment.  If the player’s skill does not develop to what is perceived to be his potential, it is the agent who has erred in this judgment and will lose his investment.  What harm is there to the University ?  Please, do not raise the issue of the integrity of “amateurs” or student-athletes.  Coaches are supposed to be teachers, professors of a sport whose ability to teach and coach young men is on display on the football field rather than in the classroom.  Because of the public nature of their teaching profession, and because millions of dollars flow into the University if their students perform well, coaches receive millions of dollars in salaries and benefits.  And, all of these coaches have their own agents who assist them in a variety of ways.  If the Universities are not going to pay these student athletes for their performances, other than via scholarships, and yet reap millions of dollars in profit from them, why not let these athletes receive financial support from agents who are willing to bet their own dollars on the future success of these athletes.

While being honest and open about what now secretly transpires, it can only help the student athlete.  Their coaches and University administrators can inform them and guide them in terms of agent fees, and the relative merits and strengths of each agent or agency seeking to represent them.  Why not help the student ?

When I first began to study Chinese history and her culture, I had the sense that in so doing it also served as a looking glass, causing me to reflect upon U.S. history and western culture.  As I sought to understand the differences between China and the West, it caused me to reflect deeply on my own culture and civilization.  That sense of China also serving as a looking glass remains to this day.

My first sense is that the Chinese government has a true sense and a plan of how they are preparing for the future, and how to achieve their future goal of becoming a strong, modernized nation.  When I look at the United States, my sense is that we are floundering, that we have lost our footing, and has no plan for moving forward out of our current abyss.  An example of that was the announcement by the Chinese government that they were going to de-couple the Chinese Yuan from the U.S. Dollar.  The Yuan would be allowed to float within a specified range.  In effect, they are allowing an appreciation of the Yuan which has long been championed by American politicians as one of the steps that China needs to take in order to help stimulate the American economy and save/create new jobs.

The immediate effect of the Chinese announcement, on the eve of the meeting of the G-8 and G-20 government leaders was to take the issue of the Chinese currency off the table for discussion at these meetings.  From what I could ascertain watching television broadcasts of CNN, BBC and assorted other news shows available in my hotel, was an overriding sense that American pressure had worked and that somehow this would aid American business interests.  There was almost no discussion or attempted analysis as to the rationale for the Chinese change in policy in terms of understanding the longer term plans of China.

First, as I have previously written in an earlier blog, the problem that exists with an imbalance of trade between China and the U.S. has little, if anything, to do with exchange rates.  In the preceding three years, the Chinese have revalued their currency upward by twenty percent (20%).  Where the exchange rate used to be 8.2:$1.00, the rate for the past year has been 6.82:$1.00.  It produced no appreciable change in trade balances between China and the United States. The United States is no longer a manufacturing country, we are a service economy.  Statistics released while I was in China show that China is now the second largest manufacturing country in the world, following the United States and that within this year, the value of Chinese manufacturing will surpass that of the United States.  By the end of this year, China will be the world’s manufacturing leader.  Bottom line, except for agricultural products and technology, we have precious little to export.

Second, while the revaluation of the Chinese Yuan might have been announced at that point to take some pressure off China, the real reason for China’s change in policy had far more to do with a gradual shift taking place in China’s economic model.  And, yes – the Chinese do operate based on a plan and an economic model.  They do have a sense of what kind of economy they wish to create and how to do it.  China’s incredible economic growth has been based on being an export driven economy utilizing a cheap labor force.  With labor intensive industries established along China’s coast, tens, if not hundreds of millions of peasants left the interior and moved to the coastal regions to provide the labor needed in these industries.  Not only did it drive China’s economy forward the past two decades, but it also served to introduce the modern world to these peasants from the interior and to also train them in new production methods.

China’s plan now is to gradually shift the economy from being an export driven economy to one that will be better balanced between serving the expanding domestic market while having coastal China focus on more value added products utilizing higher technology.  Massive infrastructure projects are opening the interior of China and linking the interior with the coastal regions.  This will allow for both the migration of labor intensive production into the interior of China, provide for transportation means to allow the goods to reach the ports, but also, and perhaps more importantly, allow for the development of an integrated national economy fueled in part by increased consumer demand.

The peasants who previously migrated to the coastal areas and worked in coastal factories are now staying home, as they are finding good paying work in the interior working on these infrastructure projects.  Meanwhile, those workers in the coastal areas are demanding and receiving substantial increases in their salaries or wage scales.  While I was there, there were three major strikes at a large Taiwanese owned factory making electronic parts and employing over 5,000 workers.  There were also strikes at Honda and Toyota car plants.  By not intervening in these labor disputes, the government was tacitly supporting the worker’s demand for higher wages.  Higher wages means more disposable income to be spent within the domestic economy.

Third, as part of the plan to make Shanghai the financial center of Asia and one of the leading financial centers in the world, equivalent to New York and London, it is necessary for the Chinese Yuan to become a freely convertible currency.  This requires that the Yuan’s value be set by the world market and not pegged to the U.S. Dollar or any other currency, such as the Euro.  Having witnessed the economic crisis in Southeast Asia when “hot money” rapidly flowed into the tiger economies and then, just as rapidly pulled out, China learned a lesson and wants to proceed cautiously toward the total deregulation of the Yuan and making it a world currency.  Among other things, it will require China’s banks to become accustomed to floating exchange rates, and to also allow China’s exporters and importers to learn how to determine pricing and structure contracts to allow for adjusting exchange rates.  There is a learning curve, and by allowing the Yuan to float within prescribed limits, the government is preparing the economy for these changes.

I have learned upon my return to the States that very few people are aware of the very significant developments that took place while I was in China regarding the agreements reached between China and Taiwan.  In addition to agreements reached last year allowing for direct flights between China and Taiwan, and direct investments in China by Taiwan based companies, and direct investments in Taiwan companies by Chinese firms, the latest agreement was another significant breakthrough.  This new agreement allows approximately 450 different products produced in Taiwan to enter China duty free, and approximately 250 products made in China to enter Taiwan duty free.  This is truly a monumental agreement that was agreed upon and signed in China at the end of June.  The significance of which was not lost on a number of protestors in Taiwan. 

This tariff agreement allowing for a large number of goods to enter into China and Taiwan on a duty free basis is another step in the economic integration of Taiwan into that of mainland China.  The economic integration of Taiwan’s economy into that of mainland China is a precursor to the political integration of Taiwan, and should be accomplished in a similar manner to the return of Hong Kong to China which occurred in 1997.  Most pundits, myself included, believed that the manner in which China was handling the political integration of Hong Kong was meant to be a model for how they would integrate Taiwan.  Further evidence to support that view was also evident while I was in China.  Another significant reform step was achieved in Hong Kong which allows for a further development of democracy in Hong Kong with the agreement to increase the number of elected, versus appointed officials, in the Hong Kong government.  This was a major compromise agreement reached with the support of the government in Beijing.  It can easily be construed as a further signal to the people of Taiwan that they will be allowed to keep their democratic form of government when political integration occurs.  In my view, the political integration will probably occur in about five years, but not more than ten years from now.

On this trip, I visited three factories.  The first was in Nanjing, about 350 kilometers from Shanghai and easily accessible by a commuter train that took around two hours.  This factory manufactures heat exchangers.  It was particularly fascinating to me as around twenty years ago; I had a client looking to have this product manufactured in China.  I literally could not locate a factory that was familiar with this technology.  This Nanjing factory was incredibly impressive.  They have mastered the technology and have moved to the head of the line in terms of production capability.  It was told to me that they had produced one special unit made of a metal material (I don’t recall the name) which they imported from the United States at a cost of $220,000 per ton.  The emphasis was clearly on technology.

I then visited two factories in the Ningbo area producing wind turbine power.  Each was equally impressive in its own way.  The first factory had previously received my client’s specifications and had prepared a preliminary bid and power use analysis.  We went to the factory prepared to ask a multitude of questions.  Questions proved unnecessary.  We were treated to an in depth technical presentation unlike anything I have ever experienced.  Afterwards, we were invited to meet the General Manager of this large factory.  To my utter amazement, we were introduced to this stunning woman, in her early thirties, dressed in a classic, simple black dress that must have come from a designer’s showroom.  She is one of the most impressive executives I have ever met in my entire life.  Composed, articulate, friendly, looking my clients squarely in the eye when communicating, and having total control and knowledge over her products coupled with an incredible knowledge of the world market for her product.  Having taught classes in an MBA program in North China, in Tianjin, I was aware that China is producing a growing number of professional business leaders.  I was amazed to discover evidence of this so soon.

Both of these factories also shared something in common.  There are close relationships that exist between the Universities and domestic businesses.  This is not uncommon in the United States in the fields of biology and bio-genetics.  But, in China, it is not restricted to these fields but exists across every aspect of the economy.  Universities and Professors are encouraged to apply and share their knowledge and research with businesses and to become joint venture partners with these businesses to the betterment of both. 

The last factory I visited in the field of wind turbine energy was impressive, but for a different reason.  Here the General Manager was a man in his early 40’s and impressive for his intelligence and command of the technology.  As he proudly discussed his turbines, we were informed that he had already applied for eleven patents on his technological improvements.  Instead of the turbine blades being made of steel, he had developed them made of special plastic materials.  The advantage is that they are lighter and therefore begin to turn at much lower wind speeds.  He also showed us that he was able to extract the water from the atmosphere and capture it in a reservoir attached to each turbine.  In rural areas which are dependent on rain water, this would be an added feature to the introduction of turbine power for the production of electricity.

The fact that he has already applied for eleven patents was significant for another reason.  I have always held to the proposition that no amount of lecturing by the United States or Europe would convince China to protect intellectual property rights.  That change would occur only when the Chinese began to develop their own intellectual property rights and came to appreciate the importance and value of doing so for their own self interest.  That time has seemed to come, or at least, there is the beginning of that trend.

One of my clients in Southeast Asia has a contract to convert 28 kilometers of highway from using sodium street lights to LED street lights.  The reason being is that the LED lights use 50% less electricity at an incredible cost savings, and require the changing of the lights only every five years as opposed to every twelve months with standard sodium lights.  I attempted to contact a leading American corporation in the street lighting industry.  I wanted to know if they had LED street lights that could be used for this project.  Despite my attempt to contact the most senior executives at this American corporation, they never replied to my query.

In China, I have already received quotations from three different factories, and all of which meet my client’s specifications.  For the sake of my business, I was very pleased to obtain three quotations.  As an American, I am distressed.  Here was a perfect pilot project involved the purchase of around 1,000 street lamps with a value of around $700,000 and I could not even receive a return telephone call or e mail.  Is it that China wants the business and we don’t ? Or, is it that China has embraced the entire concept of going “green” and producing products that are more energy efficient and leave a smaller carbon footprint and we are just paying lip service to the idea ? 

I sat in my hotel room in the city of Ningbo and looked past and toward the future.  When I first visited this city in the winter of 1985-1986, the only way to get there was either a “fast boat” across Hangzhou Bay that was neither fast nor always on schedule, and took about five hours; or via train from Shanghai that seemed to stop at every little town, and took all night, around seven hours.  There was not a major hotel in this city at that time and foreign trade was almost non-existent.  There are now six 5 Star Hotels.  I now travel from the Shanghai airport to Ningbo via car in 2.5 hours going across the 36 kilometer long Hangzhou Bay Bridge.  Within the next year to eighteen months, the new high speed train will follow the route from Shanghai to Hangzhou to Ningbo in one hour.  The Ningbo port of Beilun already processes more freight than the port of Shanghai.  There is a new Rolls Royce dealership that is opening.  They had their “soft” opening last month, and the official grand opening will be in about one week.  They have already sold sixteen Rolls Royce sedans.

In the United States, we tax our corporations at the highest tax rate in the world.  Japan used to be the highest, but they have just lowered their corporate tax rate in order to stimulate the economy.  We burden our corporations with excessive regulations and bureaucratic red tape, and further burden them with the costs for health care.  We have used our stimulus funds to save jobs in the public sector and have done nothing in terms of job creation, re-building our infrastructure or providing incentives for corporations to be innovative and create new jobs. 

The looking glass contrast is therefore striking and scary.  I see the United States mired in lethargy and becoming increasingly a service economy where the majority of our efforts are directed toward a public sector workforce.  We seem to have lost our drive to be the world’s business leader.  I find China heading in the opposite direction.  If I am correct, and I believe I am, that China is now moving her economy into creating a greater balance between exports and developing her internal market, then we have merely witnessed the tip of the iceberg in terms of growth in China’s economy.

In the interest of full disclosure, I should also point out that having just read Mr. Dexter Filkins’s brilliant and personal account of his years in Afghanistan and Iraq, The Forever War, my personal beliefs in the fallacy of both of these encounters has been strengthened.  I am not a pacifist.  I have served in and been honorably discharged from the U.S. Army.  I do believe in a strong national defense.  I am also a strong believer in the school of foreign policy based on Realpolitik.  Specifically, this means that it is the duty of our nation’s leaders to clearly identify and be able to articulate the nature of America’s national interests.  And, once those interests are identified according to their importance, to match a response appropriate to the level of the interest.

A nation’s number one interest is clearly its own self preservation and to protect itself against a threatening military enemy.  When a military threat reaches the level where force must be used in response, it is entirely appropriate to use the full might our military power.  The classic example is World War II.  However, two other examples might also be considered.  In 1950 we were facing a more hostile Soviet Union who had installed their puppet ruler, Kim IL Song, as the ruler of North Korea.  A Civil War had just concluded in China which resulted in the victory of the Chinese Communist Party, about which we knew precious little and whose affiliation with Stalin was uncertain.  We had decided to make Japan the base for our presence in Asia and realized that if the Korean Peninsula were to under the total control of the Korean Communist Party, puppets of the Soviet Union, which would or could seriously threaten our position in Asia.  The Japanese were and still remain extremely sensitive to the issue of who controls the Korean Peninsula, the dagger pointing at the heart of Japan.  It made perfectly good sense to respond to the North Korean invasion of the South by committing our forces to the defense of the South.  We had a specific national interest that needed protecting and the military response was appropriate.  In the same vein, an attack on China as proposed by General Douglas MacArthur was inappropriate, and when MacArthur appeared insubordinate to President Truman, he was properly removed of his command.

When President Kennedy faced the presence of Soviet missiles in Cuba, only 90 miles from the United States, he considered this a hostile act.  His response was both appropriate and timely.  First, a naval blockade of Cuba, and if the missiles were not removed, he was prepared to invade Cuba.  Our national security was at stake, and the military response was called for and appropriate to defend our national interest.

I will make the unequivocal statement that we, the United States, had no definable national interest at stake in either Iraq or Afghanistan that was raised to the level of requiring the massive military response that we have made.  There was and is no national interest at stake in either country that required or continues to require the expenditure of billions of our taxpayer’s money, and the life of one single American soldier.

What is totally disconcerting about the article in Rolling Stones is that President Obama literally caved in to the demands of the professional military in acceding to their request for additional forces.  President Obama had campaigned against our foolish military ventures in Iraq and Afghanistan.  When he was faced with the choice of either increasing the level of our troops and involvement in Afghanistan or drawing down our forces and getting out, President Obama caved in to the neo-conservative military pressure.  There are probably no two more telling vignettes in the article than General McChrystal’s comments that President Obama looked totally uneasy when he met with the Joint Chiefs and leading military commanders.  He did not present himself or act with a command presence as befitting the Commander in Chief and President of the United States.  And, when he appointed General McChrystal to lead our forces in Afghanistan he had not met with him privately, had not taken the measure of the man, and when the meeting did occur, it was a ten minute “photo op”. President Obama did not and does not command the respect of our military leaders.  It is no accident that the comments of General McChrystal correctly reflect this lack of respect for our civilian leadership.

Thus far into his presidency, President Obama has shown himself to be a totally inexperienced executive leader, let alone a Commander in Chief.  It is time for him to change, if that is possible.  It is not enough to speak the words of President Truman, “the buck stops here”, but to act like a decisive leader.  President Truman flew to Wake Island and personally fired a Five Star General of the Army, Douglas MacArthur, who was extremely popular in the United States.  President Truman showed guts and leadership.  President Obama now has the opportunity to demonstrate that he is a leader.  For his total insubordination and contempt of the civilian leadership as evident in the quotes and actions attributed to him, General McChrysal must be fired.

But, that is not enough.  When President Obama approved an increase in our military forces for Afghanistan, he made it his war.  This is much in the same way that when President Lyndon B. Johnson approved an increase in forces for Vietnam, he made it his war.  President Obama now owns the war in Afghanistan.  He must end it. President Obama must order an immediate and complete withdrawal of American forces from Afghanistan.   He should let it be known that the United States will continue to use our “black ops” capabilities which involve Special  Forces, Navy Seals, and the wet operations of the CIA to hunt down and kill terrorists. We have done all we can in our support of President Karzai who has shown himself to be isolated in his palace, out of touch with the population, and the leader of a corrupt government.  Let the future of Afghanistan be decided by the Afghans.  Let them build their own nation.  It is not in our national interest to be involved in nation building in Central Asia, and not in our national interest to be wasting our money and the lives of our brave men and women in fighting over there.  Enough is enough.

Thus far, President Obama has demonstrated that he is a scared leader; he leads from the rear and evidently acts only when told what to do or when there is a clear consensus of support.  He needs to be a real leader – leading from the front – making tough decisions that are based on the national interests of the United States. If he fails to act then he is only reinforcing the perception that he owns the war in Afghanistan.  Merely replacing General McChrystal with another leader is not sufficient; there must be a change in policy. 

Addendum:  I wrote the above prior to President Obama’s press briefing where he accepted the resignation of General McChrystal and appointed General Petreus to take command.  The appointment of General Patreus only serves to underscore the lack of bold leadership in the White House.  General Patreus, while he might be a competent person, is a politically safe appointment and also serves to underscore the fact that we are not engaged in a war as much as we are engaged in nation building.

Let’s not waste our precious resources on nation building in Afghanistan were we have absolutely no national interests at stake.  Afghanistan falls in the natural sphere of influence of both China and Russia, not the U.S.  More importantly, our military forces are equipped, trained and prepared for their primary mission – to fight and win military battles.  They are not trained or prepared to engage in the task of nation building.  A people need to build their own nation and one nation cannot create one for another people, particularly given the disparate cultures and histories involved.

Instead of spending billions of dollars on a bunch of corrupt warlords and politicians in Afghanistan, shouldn’t we be focusing on our own needs in rebuilding our own infrastructure and creating jobs for our own people ?

 The problem with the pundits offering balance of trade figures as evidence of the need for China to revalue its currency is that they do not understand what is included and not included in the determination of the balance of trade figures.  These figures are based on data that dates back to the 19^th century, the age of mercantilism and ocean shipping.  Back then, trade figures were relatively easy to determine and calculate.  One merely counted the number of cartons or crates being unloaded from a ship and the value of each crate.  One did the corresponding counting for the number and value of crates or cartons being loaded aboard a ship for export.  It was truly a simple mathematical formulation and quite easily derived from a simple process of counting boxes and determining the value of each box either being imported or exported.  Believe it or not, that remains the basic system used today.

Balance of trade calculations were used to determine the net inflow versus the net outflow of goods and their financial worth.  If one country had more imports than exports, the difference was paid for in hard currency – gold or precious metal backed currency.  Since currency was to be hoarded under the mercantilist theory of commerce and finance, these balance of trade figures were considered significant.

 We are now in the 21^st century, and the concept and methodology behind the balance of trade figures has not changed and therefore they represent a distorted and fallacious view of the world of international trade and finance.  This is particularly true as we, in the United States,  live in a post industrial society.  There is precious little that is actually produced in its entirety in this country or in any country.  And, in the age of multi national corporations, it is almost entirely impossible to develop correct figures as to which country receives the benefit of trade.  In addition, it is almost impossible to properly calculate and include any meaningful data in balance of trade figures that relate to anything associated with a service industry.  The United States is primarily a service trade society.  The following are just a few examples.

 It is reported that there are approximately 100,000 Chinese students studying in the United States at our private secondary schools and in our Universities.  Based on personal knowledge of two students in a private secondary school, their parents not only pay tuition, but room and board expenses, and then have to provide additional funds to their children for miscellaneous expenses.  The parents remit to the United States, approximately $50,000 per student, per year.  That equal $5,000,000,000 per year for 100,000 students.  And, if the average student spends four years studying here, and many spend considerably more, the figures jumps to $20,000,000,000  for a four year education.  It has been suggested to me that the figure of 100,000 students might be too low.  I also know, based on my personal experience, that if the policies of the U.S. government were less stringent, we would have a far greater number of students who would want to study in the United States.  None of the above monies are calculated in the balance of trade figures.

 These students travel back and forth between China and the United States and at least one half of them (a very conservative number) fly on U.S. flag carriers, mostly United Airlines which has the largest number of flights to and from China of any carrier.  The air fare fees paid by these students are also not calculated in the balance of trade figures.  There are also a number of U.S. Universities that offer MBA courses or degrees in China for which they earn money for their home campuses in the United States.  Fees earned in this endeavor are also not included in balance of trade figures.

 Most many U.S. law firms and a couple of our brokerage firms (and there are only a few left) have offices in China.  Chinese companies will hire a U.S. based lawyer to handle some legal work for them when dealing with a U.S. client, and will often use these firms when considering doing an IPO (initial public offering on the U.S. stock exchanges).  These law firms are generating profits, otherwise they would not be there.  The profits generated by the law firm in Shanghai, Beijing or another major city in China are then sent back to the firm’s home office in the United States and included in the profit and loss statement of the firm.  None of the fees earned by the offices in China are included in the balance of trade figures.  If the Chinese firm hires an American brokerage firm to handle the initial public offering, the fees charged by these brokerage firms are rather substantial.  Some of the fees may be paid in China, but most are paid in the United States.  Regardless of where they are paid, they are paid by a Chinese company to an American company, and they are not included in the balance of trade figures.

 A Taiwanese firm opens a factory in China to produce widgets – a euphemism for a product, any product from a consumer item to an industrial item.  The product is made in China, exported from China, and the profit sent to Taiwan.  If the widget costs $8.00 to make and it is sold for $10.00, the Taiwan company is making a profit of 25%.  The balance of trade figures do not indicate this division.  The balance of trade figures show the export from China at $10.00 per unit.  There is nothing in the balance of trade figures that show that $2.00 went to Taiwan. The figures are illusory.

 A U.S. company enters into an Agreement with a Chinese company where the Chinese company buys the license, the right, to manufacture the product or to use the American brand name on the product – a standard licensing agreement.  The Chinese firm is successful and each year remits money to the U.S. company as agreed to in the licensing agreement.  The licensing fees done via a wire transfer of funds are not included in the balance of trade figures.

 There are probably many more examples that can be given, such as manufacturing using parts obtained by a company from its subsidiaries in different countries and then shipped to China for final assembly.  Perhaps the China component adds only 20% of the value to the final product.  What percentage of the export value is attributed to China in the export figures used in balance of trade, and do the balance of trade figures carefully compute the value of the components that were made in other countries ? – No.  The bottom line is that the figures used for balance of trade arguments are outdated, wrong, and dangerously so, since they provided a grossly unrealistic view of the world of international trade and finance. 

 One of the reasons why it is necessary to have more reliable data is that we need this data in order to more properly ascertain those areas in which we have strength and those areas in which we have weaknesses.  Once we can more properly appreciate the areas where we are strongest, we can then determine ways to maximize our strengths.

The issue that truly needs to be discussed is not whether or not equal justice equates to social justice, but the role of moral judgment in the application of laws that are the foundation of western civilization. It is not an easy topic or subject to grasp or grapple with, as it touches upon one of the most basic concepts regarding society founded upon the concept of law, rather than the concept of a society founded upon rule or subject to the whims of a ruler.
The biblical concept of “an eye for an eye and a tooth for a tooth” reflects the belief that justice must be equally applied and that the punishment inflicted must be impartial. It is predicated upon the assumption that we are all masters of our own will, that we are responsible for our own actions and behavior. The act we do is a reflection of our own will to engage in that act, and thus we must face the consequences that flow from our acts or behavior, and where the act involves breaking the law, that the law be applied equally and impartially.

In the criminal justice system, there are two elements involved when we analyze a crime, the actus rea (the actual act), and the mens rea (the mental aspect or the will to do the act). Without engaging in a long discussion of each component, for the most part the actual act demonstrated that the will was present. A simple example would be a person pointing a gun at another and demanding money. The acts involved demonstrated the mental intent and understanding of what was being done. Early on in our legal history, it was generally understood that if a person was insane, they did not have the necessary mens rea, the capacity to formulate the necessary mental will to do the act.

The entire concept of moral absolutism developed in early western civilization at a time when people were primarily agriculturalists and lived in relatively simple communities. Social pressures that might impact upon an individual were relatively minor and minimal. But, when societies underwent industrialization and urbanization, when we moved into the realm of modernization, modern societies, individuals, it was felt, began to lose control over their own lives, and their acts became subject to external or social forces beyond their control. As a consequence, moral relativism came to gradually replace or challenge the notion of moral absolutism. In the modern world, we no longer acted solely upon the basis of free will, rather our actions and behaviors were dictated by external factors over which we had little or no control.

In the criminal justice system, we have seen this development in two areas. First, in the determination of whether or not an individual had the intent, the mens rea, and secondly, when it came time to pronounce the sentence for the criminal behavior.  In the area of intent, we have seen an array of new defense theories raised that argue that an individual did not possess the mental capacity to form the requisite intent. Perhaps the most famous, or infamous case, involved the murder of Harvey Milk in San Francisco. Here the defense successfully argued that since the defendant has consumed a number of Twinkies cupcakes which contain sugar, it upset his body system to such an extent that he was no longer thinking rationally, that he could not and did not form the requisite intent to kill. We now argue that the intent was absent due to post traumatic stress syndrome, post partum depression, depression caused by the loss of a job, a loved one, etc. In other words, that in this modern society where we no longer can control our own lives, we more often tend to lack the requisite mental intent to commit the crime.

In the area of sentencing for crimes, we are becoming increasingly concerned with the socio-economic factors that led a person to commit a crime. Were they abused as a child, are they uneducated, did they commit the crime in order to feed their starving family, do they live in poverty, can their action be excused or explained by some mitigating socio-economic factor that should result in a more humane sentence, a reduced sentence out of a sense of moral justice.

We are a society battling and trying to deal with these competing views and neither has triumphed over the other. They are both present, moral absolutism and moral relativism, and a significant amount of our debate is how we apply these competing views toward diverse situations. An example of moral absolutism is found is states that have the three strikes law – when you are convicted of your third felony, it is life imprisonment. Or, in order to reduce the power of a judge in sentencing, we have more determinate sentencing laws where the judge is given little discretion in sentencing once the person is convicted of a crime.

In the case of our immigration policy, and specifically the recently enacted law in Arizona, we have this clash – head on – in regard to these two competing views. Mr. Beck’s position is simple, if an individual is stopped for questioning, with probable cause, the police shall ask for proof that they are here legally. If they cannot provide proof that they are legal residents of the United States, they are deemed illegal aliens and to be turned over to the Immigration and Naturalization Service to be deported. For Mr. Beck, it is a simple proposition; you are in the United States legally or not. There is no gray area. He is arguing moral absolutism. You chose, of your own free will, to leave another country and to illegally enter the United States. You knew the risks and the consequences. If you were apprehended, you would be sent back. Those immigrants who followed the legal path to come to the United States and are legal immigrants have followed the law. Those who did not follow the law are illegal and subject to the penalties.

Mr. Wallis’s position is one of moral relativism. There are approximately twelve million illegal immigrants in the United States and about 450,000 of them are in Arizona. There is no doubt that they are here illegally, but the position of those who believe in moral relativism argue that we must look at the socio-economic factors. These are poor, hard working people who were attracted to the United States in order to improve their own lives. They could neither afford the expense nor the long duration of time to apply and be accepted as legal immigrants. They are good people who work hard and good members of the community. If they have children while in the United States, their children are citizens of the U.S. for having been born here, and it would be unjust, inhumane, immoral to break up a family and deport the parents while leaving the children behind, or taking the children back with them to their own lands ridden with poverty and less opportunity for a better life. Thus, there is no argument that they are here illegally, but the argument is that we must consider the socio-economic factors in both their home countries and in the United States which drove them to seek a better life for themselves and their families. Thus, under the concept of moral relativism, we must excuse them for their crime of entering the U.S. in an illegal manner. Moral relativists therefore raise the banner of social justice, that there is a higher moral and social law that transcends and supersedes the laws of society.

We face this issue as an ongoing issue in our society and oftentimes our reasoning in one area is in conflict with reasoning in another area. In criminal law, there is the judicially created doctrine of “fruit from a poisonous tree”. The Fourth Amendment to the Constitution protects us from unlawful searches and seizures. Thus, a police authority must first obtain a search warrant, upon a showing of probable cause, before they can search one’s home, place of business or similar locale. There are exceptions, which are deemed exigent circumstances, limited in scope, which allow the police to conduct a search without a warrant. Unless it falls within an exception, if the police conduct a search without a warrant, it is considered an illegal search. The courts have held that absolutely everything which the police obtain from an illegal search cannot be used to convict a person of the crime. If the search is illegal, it is the poisoned tree, and the police and prosecutors cannot use anything. They are not allowed to partake of any of the fruit picked or obtained from the poisoned tree.

Does this provide limitations on the power of the police to investigate and the prosecutor to obtain a conviction – clearly so. But, the necessity to uphold the meaning and protection provided by the Fourth Amendment justifies this judicially created doctrine. Those who tend to be more liberal and/or those who are less trustful of government generally support this doctrine. Unlawful searches must not be allowed to occur and the most effective way of stopping them is to deny the police powers the right to use anything obtained from an illegal search. In the sense, they are absolutists, the law is the law, and it does not matter how heinous the crime might have been, an illegal search is an illegal search.

Contrast this with Mr. Wallis’s plaintive plea regarding separating families. The parent enters the U.S. illegally. An illegal immigrant is a criminal, they have violated the law. Yet, if they have a child, the fruit which is borne from entering illegally, the child is a citizen and the parents should not be deported. In this case, the fruit suddenly makes the poisonous tree non-toxic and no longer poisonous. In this case, social justice triumphs over the law, or at least it should, according to those who preach moral relativism.

In this issue of illegal immigration and the Arizona law, my personal perspective lies with the moral absolutists. Our immigration policies limit the number of people who can enter the U.S. legally. Whether or not our current immigration system for determining who and in what numbers can enter the U.S. as legal immigrants is proper may be the subject for a serious debate. However, to accept the argument put forth by Mr. Wallis and those championing social justice or moral relativism would seem to reward criminals, those who have entered illegally, and to base immigration policy on geographical propinquity to the borders of the United States.

The recently enacted Health Care Reform legislation enacted by the Democrats in Congress at the urging of President Obama, coupled with other legislative acts that have sought to bail out banks, investment houses, the automobile industry, and deal with toxic waste of derivatives based on home loans have led us to a flash point in our history.

All of this legislation which as resulted in an unprecedented increase in our national debt has generated an incredible amount of heat, passion, and discourse but has seldom been discussed within the historical context, both in terms of human history and that of the United States.

While the subject is complex enough to probably require a more scholarly analysis than possible in this blog, as one who has taught courses in both World Civilization and U.S. History, I am immodest enough to believe that certain of my insights might serve to place our current national debate in a broader historical context.

As human beings moved from the earliest phases of hunting and gathering into creating human settlements focused on sedentary agriculture, there was a recognized need for a corresponding development in terms of political, social, legal and economic structures to support these emerging civilizations.  By necessity, laws, both civil and religious, had to be created to promote a more civil form of behavior and move beyond the law of the jungle.  To create and support these laws, there was the need for a political structure, and for the emerging government to be involved in providing the framework for these civilizations to thrive and develop.  A sense of human compassion also began to emerge as sedentary agriculture was always subject to vagaries of the weather, and there needed to be a centrally administered granary to assist in times of poor harvests.  Once people moved into towns and then cities, and lives became more sedentary, it was no longer feasible for them to pick up and move to more favorable regions to hunt and gather food.

This historical question always has been couched in terms of determining the role of government, how intrusive it should be in the lives of its citizens, and in trying to strike a balance between the government’s obligation to provide for the structure necessary to support a developing society and, on the other hand, the needs and desires of the citizens to control their own lives and their own fortunes.

In Ancient Greece we have the competing examples of the two famous city-states of Athens and Sparta who offer compellingly different perspectives regarding both the nature of government and also its role in controlling the lives of its citizens.  In Ancient China, in the period beginning with the Spring and Autumn Period of the Zhou Kingdom, we have competing perspectives put forth by the Legalists and the Confucianists, among the two more prominent schools of thought who sought to grapple with these issues.

The general tenor throughout the course of history has been a rejection of the more totalitarian model offered by the Sparta and the Legalists in China.  While there have been exceptions, the model that seemed to work best in Western Civilization was for a more limited role for government.  Government was concerned primarily with issues of foreign affairs, national defense and creating an economic and legal structure that would allow for continued development.  There was a sense that in terms of social issues, broadly defined, that these would best be left to the area of religion and for the local lords to care for their subjects under the concept of nobles oblige.

Just as hunting and gathering gave way to sedentary agriculture and local, handicraft industry, then the latter began to give way to an industrial society.  One does not have to be a Marxist to appreciate the insight of Karl Marx in realizing that with the move toward an industrialized economy, there needed to be a change in the role of government.  There is substantial truth to Marx’s analysis that when the worker’s lost control over the means of production and became cogs in an assembly line; the common person was losing power to control their own lives.  One no longer knew the baker who was baking the bread, for if not done in the home, it was also not done at the local bakery, but by a company with whom one had no relationship.  If one decided not to work on a given day, or to work less or more, the consequences of that decision were immediate as it was the worker’s own choice of how hard he wanted to work or how much money he wanted to make.  That was no longer the case.  The worker became part of an assembly line, a cog who was easily replaceable and who almost no power in the employer/employee relationship.  If the worker quit, there were others standing in line who would replace him as a cog in the industrial machine.

While Marx’s answer was to advocate that the workers would own the means of production and do away with the capitalist class, there were others who advocated a less radical approach.  In the United States, our initial history was clearly for the less radical approach.  Government became involved with government agencies to regulate and assure the foods and drugs we consumed.  After struggles, unions were formed to try and give the workers a more equal footing with the owners of industry in negotiating wages and benefits.  The worker no longer stood alone, but found there was strength in numbers.  Government began to pass regulations providing for minimum working conditions, length of hours and a minimum wage.  The role of government was adapting to the changes in society and becoming more active in regulating economic activity. 

This increased role of government, both in terms of domestic considerations and the changing nature of foreign affairs and wars began to require that government have more funds at its disposal.  Thus, in the early 20^th century, the U.S. Constitution was amended to provide for a non- apportioned income tax.  The argument in favor of an income tax was that one no longer created wealth due solely to one’s efforts.  Rather, there was a societal contribution, such as a railroad system built with government support, roads, and a more regulated economic system that created a more balanced economy.  In addition, wars, as evidenced by World War I, were no longer local affairs but rather massive undertakings that required greater expenditure of funds. 

There is a story, perhaps it is apocryphal, that when the amendment for the income tax was being debated, one proposal was to cap it at 2-3%.  This was rejected, so the story goes, as it was felt that this was too great a percentage of one’s income to be subject to taxation.  Besides offering a good chuckle and perhaps a longing for the subject to be revisited, the story is interesting in that it does suggest that early in the 20^th century, during the height of the Progressive Era, there was still a sense that the role of government was still limited.

The next great debate regarding the role of government was precipitated by the Great Depression which began in 1929.  The Depression and the nature of the response to it was a watershed moment in U.S. history.  The Depression called into question the role of government and government’s responsibility to care for its citizens.  Regulatory relief was not enough, although new regulations were placed on banks and the stock market.  The nature of the response was significant not only due to the programs offered, but as to the person who assumed the mantle of leadership.

Franklin D. Roosevelt came from a very patrician family.  There was a sense of noblesse oblige – a sense that the “patrician/royal” family had a duty, a moral duty, to provide public service.  I therefore believe that Roosevelt’s approach was not motivated by a Marxist approach, although his Vice President, Henry Wallace, was clearly more Marxist that patrician.  Roosevelt’s approach was simply that the government, in a sense, the King, had to provide for the welfare of its/his citizens.  Trust me, Roosevelt seemed to declare, and I shall provide the means using government to overcome this economic disaster. 

People were put to work directly by the government via the WPA, the elderly who had no life savings and whose children were now out of work and could not longer provide for their parents, were taken care of with Social Security.  Electricity was brought to the rural areas of the country and in the case of the TVA; the government built and ran the company that provided the electricity.  This is not the place to list and discuss all of the New Deal programs pushed forward by Roosevelt.  Rather, to suggest that his response to a clear crisis was motivated more by a sense of noblesse oblige rather than identifying with a Marxist perspective. Thus, when World War II created the demand for people to serve in the military and demand for war time jobs, the role of government as the employer of last resort disappeared.  On a truly national scale, we were left with a government that provided more regulations and controls over economic activity, and Social Security as the major social program.

The Presidency of Lyndon B. Johnson marks a pivotal period in contemporary American history if, for no other reason, than his lying to the American people regarding the Vietnam War caused a major disconnect between the people and their government.  Government was no longer to be trusted.  On the social front, Johnson was responsible for the greatest increase in social expenditures since Social Security.  He pushed for Medicare – medical assistance to the elderly.  I cannot grasp or understand the motivation or ideology that led to this program.  And, whatever the original estimates of the Congressional Budget Office may have been as to the cost of this program; those estimates were merely guesses in the dark.  There was no way for them to factor in increased longevity, advances in medical technology, increased costs for drugs and medical care and assorted other factors that have led to Medicare costs being such a financial drain on the national budget. 

In essence, President Obama’s health care proposals and the new law are an expansion and continuation of Johnson’s notion of the Great Society.  But, that did not have to be the case.  And, it was precisely because a choice was available, that the healthy care legislation does mark a crossroads in U.S. history.  The choice was to develop a legislative program that placed its primary focus on government’s role as a regulator and to deal with some of the most specific issues that have led to rising health care costs, or to follow the program of President Johnson and Medicare, leading to an increased and direct role by government in providing for social services.

We could have scaled back Medicare to a more reasonable level.  We could have dealt with issues such as rising costs for drugs which are as much as 100% more expensive in the U.S. than they are in Canada.  We could have dealt with issues such as malpractice insurance which drives up the cost of medical care.  We could have dealt with the issues of more fairly or equitably dealing with coverage for people with pre-existing conditions in a broader insurance pool, just as we do with auto insurance.  We could have tackled such issues as caps on medical expenditures and treatment options.  We could have tried to figure out a way to reduce the fraud in the current Medicare program that, according to some experts, amounts to about 10 Billion Dollars per year.

Rather than on focusing on dealing with the problems that have led to an unsustainable increase in the cost of health insurance, the path chosen was to use Medicare as the means of expanding medical coverage to those not presently covered.  Taxes are to be increased to pay for providing additional coverage.  Just as the original Medicare cost estimates were a wild guess, so are the estimates for this expanded medical coverage. This legislation also created some 150 additional panels or commissions to study additional groups or social issues that will require direct government intervention in providing health coverage. 

Looked at solely on its own merits and program, the Health Care Act does not represent a commitment to socialism.  It does represent a movement of government beyond merely regulating industry, and clearly beyond an expression of Noblesse Oblige, but if properly dealt with in the future in terms of truly trying to contol health care costs, it does have to mean that we are society that has turned its back on the vision of our Founding Fathers and instead to chosen to return to a European heritage which is clearly Socialist. 

But, when it comes to the issue of how one will finance the cost for this program, that is when the issue of Socialist ideology does come into play and is worthy of further discussion. Part Two of this subject shall address the financial, economic and social ramifications of the decision made at this crossroads in history.

At the time of the founding of the U.S., this concept of a stake in society was manifest in certain ways.  The President must be a native born American and not a citizen by naturalization.  Only one born in the U.S. was considered sufficiently loyal to the country and without an interest or stake in any other country.  Until the national election of 1920, woman were denied the right to vote as it was felt they were incapable of understanding the “weighty issues” and therefore were incapable of having a stake in society.  In the States, voting rights were restricted by property qualifications.  Only those who owned a minimum amount of property and had a minimum amount of wealth were believed to have a sufficient stake in the governance of society.  It was not until the election of President Andrew Jackson that we began to break away from property ownership as a qualification for voting.  In the mid-20^th century, the age was lowered to eighteen years of age, as it was felt that those who were old enough to serve in the military were old enough to vote.  Lastly, the Civil Rights Acts enacted in the 1960’s did away with literacy tests and poll taxes as a precondition to voting.  We have now reached the point where citizenship is the only qualification for participation.  One does not even need to know the English language, for ballots are printed in others languages, from Spanish to Chinese.

The stake in society theory does need to be revisited, but from a slightly different perspective.  We have witnessed an incredible growth in the size of the government on both the state and federal levels.  Budgets are into the billions and trillions of dollars (on the federal  level), and we are running a massive amount of debt as our political leaders keep voting for ever expanding social programs in response to the needs of their electorate.  The problem that is increasingly arising is that the electorate can continue to demand more services from the government, both state and federal, with relative impunity as an increasing percentage of the population, the electorate, does not have to pay anything in taxes, and therefore never has to worry about paying for all of the programs desired.  Their stake in society is limited to the enjoyment of the entitlements. They have no stake in fiscal responsibility, in being responsible for the payment of taxes that funds these programs.  They increasingly enjoy the benefits, the entitlements, without any of the burdens, paying for the services they demand.

At the very essence and core of Marxist thought is the belief that the capitalist/bourgeois class was exploitative, contributed little if anything to society, and eventually had to done away with in order to create a classless society.  Marx’s ideal was simply stated – “from each according to his ability to each according to his need”.  Marx’s egalitarian idealism had no place in his thought for the concept of incentives, of motivating people to work hard to enjoy an increasing amount of wealth.  Rather, those with wealth had to give up their wealth to those who needed it.  It did not and does not matter if one works hard, studies hard or tries to improve one’s life or not.  Marx did not want any class differentiation in society. 

European socialism manifests this ideal with its onerous tax rates.  The government takes from each according to his ability – his wealth, and redistributes it according to the needs of others in society.  Take a look at current day Greece which is on the precipice of bankruptcy, the amount of their national debt exceeds the total of their gross domestic product.  They kept funding social programs hoping to pay for it via taxing the wealthy, until the wealthy decided either to avoid paying taxes or to leave Greece.  Spain and Portugal are not far behind. 

In China, Chairman Mao sought to create the Marxist ideal with his radical programs, such as the Great Leap Forward and the Cultural Revolution.  The former left some 30 million people dead from starvation, and the latter tried to obliterate from society anyone who was an intellectual or whose family had a bourgeois background.  Of all the reasons for the rise of contemporary China, none is more important than Deng Xiaoping’s rejection of classical Marxism.  “To get rich is good” became of important statements as he embraced the concept of personal incentives as a motivating factor. 

What concerns me deeply is the lack of responsibility within society and the lack of awareness among in increasing percentage of the population that there are costs associated with an increasing level array of social programs.  I am deeply concerned that we are becoming a society where an ever increasing percentage of society begins to feel “entitled” to these government benefits without ever giving thought to how they are funded and without any stake in paying for them.  I fear we are becoming a society that increasingly is demanding more and more from government programs with fewer and fewer people paying for them, and therefore fewer and fewer people having a vested interest or a stake in government being fiscally responsible.

I look to Greece as an example of a society that is fiscally bankrupt as the costs of its various programs exceeds the value of its gross domestic economy.  Yet, having provided its citizens with an array of social programs with no fiscal responsibility, demonstrations occur when the government must introduce austerity programs to try and gain control over its expenditures and bring about a more balanced budget.  The longer people feed at the public trough, the less they feel responsible for their own lives and the more they develop a sense of entitlement.  Government has to take care of them and somehow or someone will pay for it.  Greece may be the extreme example, but the problems are rife within any society whose social and political philosophy contains a Marxist foundation. 

Within the United States, here is the situation. Fifty percent of all American families pay no income taxes at all.  Whatever has been withheld from their weekly checks is now refunded to them.  While they pay social security and Medicare taxes, they do not pay one dime in Federal Income tax.  The top one percent (1%) of all American taxpayers account for twenty-five percent (25%) of all income tax revenue collected.  The top five percent (5%) account for fifty percent (50%) of all income tax revenue collected. 

Based on the current situation, there are innumerable potential problems that might arise.  The most obvious problem is that we currently have a deficit running over one trillion dollars.  Furthermore, unless there are immediate and effective limitations placed on these social programs that will prohibit the escalation in their costs, the amount of the government deficit will continue to increase beyond any reasonable expectation.  Lest anyone doubt this, merely examine the current Medicare Program whose costs far exceed what was anticipated or projected when passed by Congress.

Another potential consequence is that we are rapidly approaching the tipping point where a majority of the population, paying no income tax, has no vested interest in government being fiscally responsible.  Rather, we are becoming a society where a majority of the population becomes one of an entitled majority.  A society where more people enjoy the benefits of government largesse, and less are responsible for the financial burdens is a recipe for disaster.

There is another consequence which no one has considered – that we can develop a oligarchic form of government.  Where you have the top five percent (5%) of the population responsible for paying fifty percent (50%) they will find a way of insuring that they are in control of the government. They will pay just enough in taxes to insure that the masses who feel a sense of entitlement will receive sufficient games and social services to keep them content and not a threat to the wealth of the oligarchs.  But, they will also insure that society is structured and run for the betterment of the oligarchs.  There will be little if any incentive to share power in a truly democratic society.  Harbingers of this are already present in the discussion of banks and investment houses that are too big to fail.

At this moment in history where we are at a crossroads, it seems to me that a double pronged approach needs to be considered.  First, government needs to make hard decisions and to control the spiraling social costs.  This will mean caps of medical costs, limits on medical procedures, controlling the costs for prescription drugs, reviewing and rethinking our entire system of tort law to control egregious premiums for malpractice insurance and preventing fraud within the system. 

Second, we need to have more people involved in paying for government.  We need to have more people with a vested interest, a stake, in making sure that government is more fiscally responsible.  Our income tax code and system must be concerned with its primary goal, collecting enough taxes to pay for our programs.  The income tax system and the tax code should not be used for social policy.  If there are alternatives to insuring that everyone pays a minimum percentage of income tax, such as the value added tax, this should be considered.  We just need to have more people with a vested interest in a fiscally responsible government.

In the last two years, the Chinese Yuan has appreciated in value by twenty percent (20%) and nothing has changed.  From the Chinese perspective they have been the big losers as the value of their holdings in U.S. bonds (debt instruments) has declined in value equal to the rise in the value of the Chinese Yuan.  In other words, the Chinese have taken a hit on their holdings of U.S. bonds equal to the appreciation of the Chinese Yuan. 

Despite the protestations of Sen. Schumer and his cohorts, there has been no decrease in Chinese imports, no increase in American manufacturing and the trade imbalance has not noticeably improved.  The reasons for this is are quite simple.  First, we no longer have a manufacturing sector.  That is not the fault of the Chinese.  Before China, there were the Japanese, Taiwanese and Koreans who produced cheaper goods and began to capture the U.S. market.  The problem with our manufacturing sector predates China.  In any manufacturing job which is labor intensive, the cost of U.S. labor and the restrictive work rules imposed by our labor unions have priced our traditional manufacturing sector out of the market. 

This is a historical trend.  England was the leader in producing textiles.  Then the fledgling U.S. textile industry took advantage of the cheaper raw materials, cotton, an abundance of land and the absence of a traditional bound way of manufacturing to innovate with integrated textile mills and developing new technologies using less labor.  The U.S. became the world leader.  As U.S. labor rates increased and we no longer had the price advantage of the raw materials, cotton, textile manufacturing was exported overseas as American consumers demanded lower prices.

In the steel industry, we were the leaders after World War II but sat on our heels and did nothing to innovate or modernize our steel industry.  Along came the Japanese followed by the Koreans who built new, modern and more efficient steel plants.  While lower labor costs were one component in their price advantage, the major advantage was that their new steel mills were simply more efficient producing a higher quality at a lower cost.  Rather than reinvesting in our basic industries, we were more concerned with generating profits, higher stock prices and not reinvesting in our industries.

Labor unions were clearly a contributing factor with their ever increasing demands for higher wages and more restrictive work rules that precluded management from adopting more efficient and flexible methods of production.  The Japanese and Korean car companies who now manufacture in the U.S. in non-union shops are clearly more efficient and have a lower cost of production even though they pay wages at the comparable rates as union shops.  Their factories are more modern and more efficient.  They found it more economical to build their cars in the U.S. than to build them overseas and ship them here for the U.S. market.  Their cars were better made and clearly more highly desired by the U.S. car buying public.  Don’t blame the Japanese and Korean car companies for the failures of our U.S. auto companies, of which 2/3 are now owned by the U.S. government.

Our advantage is in technology.  Yet, we have strict limitations on the technological products that are allowed to be exported.  The Chinese and other nations desire them, but our laws preclude and prohibit them from being exported.  This is one major contributor to our trade imbalance.  Another contributor to our trade imbalance is that there are numerous categories that are involved in international trade that are not counted in trade statistics.  If a Chinese or any foreign company wishes to list their stock on the U.S. stock market, they employ the services of U.S. attorneys, accountants, and brokerage houses to whom they pay substantial fees.  None of these fees are counted when computing trade figures.

We have an outdated and outmoded method for financing our schools.  The wealthier communities with a higher property tax base get the better schools, with the newer computers and more modern libraries.  The poorer communities without the tax base are often left with no textbooks, outmoded libraries and barely any computers.  And, we then wonder why some of our service sector jobs that are decent paying jobs but require computer skills and a well spoken work force are then shipped overseas to India and other countries.

There is the hue and cry that the Chinese are failing to purchase our products.  Perhaps it is because we have little to sell them that are available for export.  China now ranks as the second largest market in the world for Rolls Royce and Bentley cars.  It is in the top five in the consumption of brand name goods.  Exactly what do we have to offer this market ? 

If China revalues its Yuan, it will hurt the Chinese economy but not help the U.S. economy.  China now holds approximately $800 Billion Dollars of our debt.  Do they want to devalue that debt by 10 or 20% ?  If we continue to put pressure on them for the sake of political expediency or because it is popular politics, will they continue to purchase our debt instruments ?  We are now a nation awash in a sea of red ink – we are deeply in debt and the amount of our debt is increasing at an alarming rate with all of these new bailout programs and entitlement programs being passed by Congress.  How can we finance this debt ?

From my perspective the problem is not China.  Rather, we have met the enemy and it is us.  We have to reinvest in America, rebuild our infrastructure with American made products, cease passing legislation that adds to our debt, curtail our entitlement programs, forget about following Europe down the path of socialism, focus on our own history of free enterprise, and invest in creating a labor force for the post-industrial world.

The desire for control over their own lives was manifested in diverse ways, be it the right of self defense in the formation of their own militia forces or the right to educate their children as manifested in local boards of education and schools paid for and governed by the local community.  There was this fear of an intrusive government.

Yet, the only model available for those who sought to govern this amalgam of freedom seeking and individualistic immigrants was the same European model from which they had fled.  To the victors belongs the spoils of writing the historical record which shall justify their deeds and programs.  Thusly, in the history of the United States, those who championed freedom from government intrusion, those who championed individualism not only lost the battle, but they also lost the right to write the history of their view as the accepted version of the nation’s history.

Smeared with the term as being “racists”, the Southern heritage lost in its epic battle to the Northern interests who championed, even then, an increasingly large role for an activist central government.  Racist sentiment was more overt in the South, but was equally strong in the North.  The Emancipation Proclamation did not free all of the slaves, only those in the Confederate states over which the Union has no control.  Plessy v. Ferguson, the infamous Supreme Court decision in the late nineteenth century was decided by a bench of northern judges, with the only Southerner, Justice Harlan, dissenting against the majority view that “separate but equal” passed Constitutional muster.

The real battle between North and South was over the role of the emerging and powerful central government.  Being forced into a corner, boxed in by Northern interests, the South fell into the trap of being forced to defend the pernicious institution of slavery and the right for it to exist in the western lands that were being opened as the only way to protect its interests.  The South lost and in the aftermath of the Civil War, northern interests enacted their revenge with a “pound of flesh” seeking to insure that the Southern interests who favored a much more limited role for a central government would never have the power and right to once again challenge the Northern interests, whose perspectives on government were more closely akin to Europe and the increasing power of a central government.

I sense all of this as I now reside in Texas.  I have been here for only four years, yet have developed an affinity for their perspectives and views on the role of the Federal government.  There is a sense of fierce independence and a true desire to be free from the tentacles of the federal government which is slowly suffocating, crushing the very idea embodied in the Tenth Amendment to the Constitution – to wit, those rights not expressly granted to the Federal government are reserved to the States.

Sometime today, a new Health care bill will be passed by Congress and signed into law.  While there may be no argument that we need to examine the true causes for our health care crisis, there should also be no argument that the legislation passed does not, in any meaningful or significant manner address the underlying issue of dealing with rising costs of health care.  The most significant feature of this legislation is that it will extend health care coverage to those who are not insured and make the federal government a health insurance provider.  The solution as to how to pay for this – quite easy and simple, have the Federal government mandate the fees which doctors may receive for their services.

Perhaps I am being a Don Quixote forever tilting at the windmill at the takeover of our lives by the Federal government.  Government intrusion into our private lives has now reached an unprecedented level.  We are prisoners of our own history.  When the Civil War decided the issue in favor of a federal government with increased power, the track of our nation became clear.  We would follow the European model.  Europe, for the most part, is an amalgam of socialist societies.  Europe even gave birth to the extreme forms of fascist socialism in the guise of the Soviet Union, Hitler’s National Socialist Party (the Nazi’s), and Mussolini’s national socialist movement.  Europe has recoiled away from the extreme of socialist thought, but the danger still lurks.

Within the last year, the powers of the Federal government have increased in a revolutionary proportion.  The Federal government now owns 2/3 of the American auto industry, one of our largest insurance providers, and an increasing number of our financial institutions.  As befits the ownership interests of the major shareholder, the White House has appointed a “czar” to determine compensation levels for the executives of these companies.

Founded in an attempt to escape our European heritage, we have, instead, historically embraced our heritage.  We are now Europe “writ large”.  Let there be no mistake.  Socialism is not, inherently, a “dirty word”, but rather descriptive of a economic, social and political philosophy embraced by Europe which views the role of the central government in a paternalistic, “nobles oblige” perspective that derives from its own history of being ruled by Kings who were supposed to care for the people.  Kings have given way to elected officials who operate with their own sense of entitlement and their own sense of “noblesse oblige”.  For they have their own health care, their own retirement programs and their own little kingdoms inside the citadel of government. 

History can be a cruel teacher.  Just as we are lured by the siren’s song of history to follow our European heritage, so shall we be compelled to follow this tragic drama to its final denouement.  We have moved from a society where individuals take responsibility for their own lives to a society where people have a sense of entitlement.  Government must provide for them.  We have long since crossed the Rubicon from government providing a sense of a “safety net” to government being the provider. 

Our government is now awash in a sea of red ink – we are deeply in debt and there is no way out of our debt that is foreseeable on the horizon.  Look to Greece as the extreme example or to France as a lesser example.  When governments seek to balance their accounts they can either cut services or raise taxes.  Eventually, as in the case of Greece, there is a limit to the amount that can be raised by taxes, and when services are cut, the entitled masses take to the streets. 

Socialism works until there is no one left to tax.  Our President has never held a job in the private sector.  Our legislators have lifetime pensions.  They shall forever feed at the pubic trough.  As we proceed to disincentive the private sector, we are forging forward toward bankruptcy

The problem that I have with figuring out our policy is that it seems another example of our policy of meddling, and other than adding to the bottom line of the defense contractors, seems to another example of our not having a real policy.

According to the Taiwan Relations Act, we have obligated ourselves to defend Taiwan in the event of an attack on the island by China.  My first question is simply this – is it in our national interest to go to war with China over Taiwan ?  The only time that a war would occur between Taiwan and China would be for Taiwan to declare its independence as a sovereign nation.  Since we have already agreed with China that Taiwan is part of China – the “one China” policy statement agreed to by President Nixon and every subsequent President – would we go to war over Taiwan independence and therefore go against our “one China” policy ? 

I suggest that any reasonable determination of our national interest would clearly indicate that it would not be in our national interest.  Therefore, if we are not willing to go to war over Taiwan, then why do we purposively try to antagonize China when we need to develop greater policies of engagement with China ?

I have also been giving some serious thought into trying to develop an understanding regarding the overall nature of our foreign policy.  While that  will be the subject of a separate essay or two, one concept that keeps reverberating is that our policy can, at most times, be summarized in terms of “meddling”.  We continually meddle in the internal affairs of other nations, want to engage in nation building in the hope we can duplicate “cookie cutter” other countries to emulate us.  It strikes me that our meddling does more harm than good.

A case in point is precisely the China-Taiwan issue.  It is clear that a number of years ago, when President Chen of Taiwan was posturing for Taiwan independence, relations between Taiwan and China were quite tense, and there was a real sense of unease in the Taiwan Straits.  Since then, the new government in Taiwan and the government in China have, without our involvement, and on their own, achieved not only a lessening of tension, but a true rapprochement.  There are now regular air flights between Taiwan and China.  Chinese companies are now allowed to invest in Taiwan companies.  There are direct cargo shipments.  There has been an increasing level of dialogue between the two, and to this scholar’s eye, a political reintegration is only a matter of time – a relatively short period of time.  The two economies are fully integrated.  Taiwan companies have invested billions of dollars in China and operate innumerable factories.  It has been estimated that there might be as many as 500,000 Taiwanese living and working in China.  Without our involvement, without our shuttling diplomats to and fro, the two sides have clearly worked out a modus vivendi that will ultimately lead to political integration based on the Hong Kong model.

All of this is clearly in our national interest as it has reduced tension in the Taiwan Straits, and the absence of arm sales during this period has allowed the United States and China to develop a much closer working relationship.  One of our complaints has been the lack of transparency in regard to the Chinese military.  Understandably, our military planners would like to have greater knowledge about China’s military as China would like to have about ours.  But, our need is much greater.  To achieve this end and allow dialogue to occur, there have been a series of high level and mid level exchanges that have occurred between our military leaders and theirs.  However, in response to the sale of the armaments to Taiwan, these exchanges have been indefinitely cancelled.

It is in our national interest to have China more involved on the world scene and more understanding of some of our concerns.  We need China, as well as Russia, to support our efforts in an attempt to impose greater sanctions on Iran in order to halt Iran’s nuclear program.  They are clearly less inclined now to do so.  We need China’s support and involvement in working out a solution to the nuclear crisis in North Korea.  On this topic, both the United States and China have a shared national interest, but it is China who has the greatest amount of leverage.  I would suspect that in response to the arms sale, there will be less urgency on China’s part to solve the crisis.

In the geo-political realm, we need China’s support in dealing with the Afghanistan situation.  Again, China’s self interests are also involved as China is equally concerned about Muslim extremists in the border region between Xinjiang and Afghanistan, and China has a strong interest in a stable Pakistan.  But, why risk any level or degree of China’s support for the sake of an arm’s sale to Taiwan ?

The United States is in a dire economic condition, and with our burgeoning deficit, we have, unfortunately, become dependent on China to purchase our treasury bonds and help finance our national debt.  Clearly, we wish it were otherwise, and that we were not already in debt to China to the tune of about one trillion dollars.  Until such time as we can straighten up our own financial affairs, and begin to get out of debt, our need for China to continue to both purchase future debt, and to support the value of the U.S. dollar is clearly in our self interest.  Why then do we wish to jeopardize a relationship for the sake of arms sales to Taiwan ?

Lots of questions, and have not able to develop a satisfactory answer.  I will accept enlightenment from all sources.