Carl from Chicago

Business executive interested in history, economics, taxation and energy policy.

America’s Alliance with Taiwan

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In the recent article of “Strategy and Tactics”, an excellent magazine that I highly recommend, they discussed the threat from China with a sobering assessment of the potential outcome of a war between the USA and China over Taiwan. China’s military is becoming more and more effective each year as the country gets richer, and China’s technical capabilities are increasing by the day (think of how much of your electronics are “Made in China”). As I read through the article I thought of all the casualties our carrier and air forces would suffer while repelling a Chinese attack across the Straits of Formosa, the open ocean separating Taiwan from the mainland, even in the “best case” scenario.

At the end of the article I had what was, for me, kind of a heretical thought:

“Why are we even in this alliance with Taiwan, anyways, and is it worth a war against China?”

In the past Taiwan has been seen, rightly so, as a bulwark against Communist expansion. In the years following WW2, when the Communists took power in China (in the late 1940’s), the USA was looking for dedicated friends in the region, not only for Allied troops but for bases that could be used to counter the Communist threat (both Russia and China).

Over the years, however, the situation has changed. China has gone from being a nearly-insane, Mao led “cultural revolution” type of society to one that is fiercely free-market based and where most forms of expression, with the exception of political discourse, is not too severely repressed.

Hong Kong was integrated into the fold, and while human rights haven’t increased in that country, they haven’t noticeably decreased, either. Certainly the hand off went pretty smoothly, much better than the doomsayers (such as myself) would have predicted.

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Not Getting It… On Expropriation

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In my life one lesson I learned is that there are three kinds of people:

1) those you trust

2) those you don’t trust

3) and those you can trust to f*ck you over

The WSJ, which is generally a fine publication, often is tripped up by the fact that their journalists are often myopic and even when they get the story right, they often miss the overall context. From the June 6 issue, here are two articles back to back, both good articles, but quite ironically placed.

The lower article is titled “Kremlin Seeks TNK-BP Detente”. British Petroleum (BP) is part of “a 50-50 venture with a group of Russian billionaires that is Russia’s No. 3 oil producer.” Per the article:

“People close to BP charge the Russians with trying to take effective control over the venture through pressure tactics, possibly ahead of a sale to a state-controlled company such as OAO Gazprom.”

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Water Today, Electricity Tomorrow

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WATER DISTRIBUTION COMPANIES

A recent Wall Street Journal article was titled “Calls Rise for Public Control of Water Supply”. This article described how the small town of Felton, CA cheered as their local water district (a municipal utility)

“Officially wrested control of the town’s water from a unit of American Water Works Co. Residents of Felton… had been unhappy ever since the company bought their water system from another corporation in 2002 and proposed a 74% rate increase.

The city threatened and cajoled American Water Works to sell them the local water utility, as described below:

“One common tactic that communities are using in this water fight is eminent domain, the power that cities and other local agencies have to seize a corporate water system in the public’s interest. Earlier this year, the cities of Fort Wayne, IN and Cave Creek, AZ condemned all or parts of water systems owned by private companies.”

WHY WATER COMPANIES ARE VULNERABLE

Water companies are vulnerable for a number of reasons. First of all, their assets are “in the ground” and plainly available for takeover. Water systems are also relatively simple to run, and the existing work force can just become city or local employees.

Water systems also require money for expansion and maintenance. The only way in which this money can be raised is through the local community’s water bills, so these costs are passed along right away to the community, and can result in a rapid rise for local citizens.

Water also appears to be a necessity. Some utilities are viewed as luxury items (i.e. cellular phones, internet service) but everyone “needs” water. This is a simplistic view, of course, because very little water is used for drinking when compared to the water used for washing, flushing toilets, and irrigation. However, there is generally a strong bias against the privatization of water utilities, whether rational or not, and this is supported by the fact that the vast majority of US citizens get their water from a locally owned utility and not a private company.

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The Cargo Cult Revisited

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The “Cargo Cult” is the name of a religion that sprung up in the far islands of the Pacific after the second world war. When the war was in full swing, the Western Allies came in and brought all kinds of different foods, technologies, and the like. To the natives on these islands, who didn’t have the concept of how these goods were manufactured, the term “cargo cult” was coined to define the religious connotations that they placed on these goods. To an educated Westerner, most people probably had a brief chuckle at the thought of people treating day-to-day manufactured goods as objects of religious reverence.

Bizarrely enough, it was the cargo cult that leaped to mind when I read this very interesting article in a recent issue of New York Times magazine. According to the article, girls suffer serious injuries while playing in competitive sports such as soccer and basketball at a rate significantly higher than men playing the same sport. On a typical soccer team of 20 girls, for example, the injury rate (ruptured A.C.L.’s, a major injury) would be on average 4 out of 20.
Hurt Girls
The article describes how a typical high performing traveling team generally has a large number of injuries, but the girls keep playing through the injuries, buoyed by the same “small group cohesion” that SLA Marshall wrote about in his analysis of US WW2 veterans (whether SLA Marshall was ultimately discredited is grist for another post). This cohesion bonds the girls to their team mates, and they keep playing through injuries despite the pain and risk of long term debilitating injuries.

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The Royal Navy

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One of my favorite Seinfeld episodes has George getting into a fight with a clown who doesn’t remember “Bozo” the clown, his favorite. The clown shoots back at George, saying:

“You’re living in the past, man!”

I had the same sentiment while reading my favorite magazine, “Strategy and Tactics“. This magazine covers military history and related articles from ancient times to the present day. Besides having great articles, the magazine also has very few advertisements, which means that it is quick and to the point. While we don’t shill for anyone at the blog, we do promote what we like, and every year I buy a subscription for myself, Dan and now Gerry on the blog (Gerry – if I never told you that, this is the reason for that yellow package you receive monthly).

The article I immediately jump to is called “The First Arms race: German-British Naval Rivalry and the Opening of the Great War.” This article covers the fascinating time from the 1890’s until the early years of WW1 when Germany attempted to build an ocean going fleet that could challenge Britain. The box on the upper left is a brief biography of Tirpitz, the “mastermind” of German naval power.

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