2 October 2018

Inequality In China

Sonali Jain-Chandra

More than two decades of spectacular economic growth in China have raised incomes dramatically and lifted millions of people out of poverty. But growth hasn’t benefited all segments of the population equally. In fact, China has moved from being moderately unequal in 1990 to being one of the world’s most unequal countries.

Inequality is likely to rise further without additional policy changes.

The Chart of the Week tells the story. It shows that the Gini coefficient, a widely used measure of income inequality, has risen by 15 points since 1990 to 50 (a reading of zero would indicate that everyone has the same income, while a reading of 100 would mean that the richest person gets all the income.)

Dragon’s claws with feet of clay

by Morgan Dean

Oliver wrote a piece that discussed the rise of the dragon. But it was long on rhetoric and short on details and as a result the author presents a fear mongering view of China, likely to solicit more funding for programs, instead of a nuanced view that will lead to greater understanding.

(Unless otherwise noted or linked, at quotes are from his article.)

Oliver starts by citing a nonmilitary asset: “China has the world’s largest economy, it is the largest exporter and trader, it is the second largest importer, and is the largest trading partner of 130 countries (including the US).” This spending supposedly leads to military power and what the author calls “neo colonialism” in Africa and an increasing political power and sphere of influence.

Why So Many Underestimate China’s True Economic Power

China’s economy is so large – and growing so rapidly – that it’s difficult to get a true read on the size of its influence on the world stage, according to this opinion piece by David Erickson, a senior fellow and lecturer in finance at Wharton. Before he taught at Wharton, Erickson was on Wall Street for more than 25 years, working with private and public companies to raise equity strategically.

Some of the rhetoric out of Washington recently has been suggesting that the U.S. is “winning” the trade war because the U.S. stock market is near all-time highs as China’s domestic equity markets have declined significantly. While the domestic Chinese equity markets have suffered since the trade tensions started earlier this year, I think that premise underestimates the economic power of the rapidly growing number-two economy in the world and really needs a bit of context.

The China Backlash


US President Donald Trump’s headline-grabbing trade war with China should not obscure a broader pushback against the country’s mercantilist trade, investment, and lending practices. In fact, China’s free ride could be coming to an end.

On a recent official visit to China, Malaysian Prime Minister Mahathir Mohamad criticized his host country’s use of major infrastructure projects – and difficult-to-repay loans – to assert its influence over smaller countries. While Mahathir’s warnings in Beijing against “a new version of colonialism” stood out for their boldness, they reflect a broader pushback against China’s mercantilist trade, investment, and lending practices.

How Jack Ma Changed the Chinese View of Entrepreneurs

When Alibaba co-founder and chairman Jack Ma announced earlier this month that he was stepping down as head of the Chinese e-commerce giant, the move reverberated in multiple directions. The 54-year-old Ma has not only taken Alibaba to a market capitalization of around $430 billion over a span of 19 years, but also inspired a wave of entrepreneurship in China. He especially demonstrated a knack for finding ways to both cultivate the government and to circumvent stringent laws.

CEO Daniel Zhang will succeed Ma as chairman in September 2019, but Ma will stay on the company’s board until 2020, when his term ends. Trained as a teacher, Ma said he has “lots of dreams to pursue,” including returning to education and continuing as a founder of the Alibaba Partnership, a group made up of founders and company managers.

“The growth of Alibaba from tiny start-up to New York Stock Exchange darling depended on its strategic agility above all else,” said Wharton management professor Michael Useem, who is also faculty director of the Wharton Center for Leadership and Change Management and the McNulty Leadership Program.

Can Europe Become a Nuclear Power?

By Manuel Lafont Rapnouil, Tara Varma and Nick Witney

Only if Europeans resume a serious debate about their responsibilities for their own security

“Do we need the bomb?” asked the front page of Welt am Sonntag, one of Germany’s biggest newspapers, last month. In an essay in the paper, political scientist Christian Hacke answered “yes”, arguing that, “for the first time since 1949, the Federal Republic of Germany is no longer under the United States’ nuclear umbrella.”

It is extraordinary that the anti-nuclear, peace-loving Germans should be toying with such ideas. For 70 years, the NATO alliance has ultimately rested on the belief that, in extreme circumstances, the US president would be willing to risk the destruction of Chicago to protect Berlin. Yet Donald Trump’s catastrophic summer foray into Europe – in which he mused to alliance leaders that, unless Europeans shaped up, the US might “go our own way” – has rendered any such belief untenable.

How Assad Won the Syrian Civil War Before it Began

By Eric Mosinger

In recent months, many observers of the still-smoldering civil war in Syria have concluded that Bashar al-Assad’s triumph, once unthinkable, now appears inevitable. How did the Syrian regime accomplish such a come-from-behind victory?

Most analysts emphasize how Assad benefited from extensive international support from Russia and Iran, as well as non-state militias like Hezbollah. They also credit Assad’s deft deployment of a divide-and-rule strategy, in which he sought modus vivendis with some opponents—ISIS and Kurdish rebel groups carving out autonomous spaces far from Damascus—while unleashing the full weight of his military strength on moderate Western-backed rebel factions. Yet the most important factor in Assad’s victory was neither his international support nor his wartime strategies; rather, Assad triumphed because Syria’s armed domestic opposition was hopelessly fragmented from the beginning to the closing stages of the conflict.

Russia's Plans to Deter Israeli Airstrikes in Syria Could Backfire

Russia will bolster the Syrian air defense network in the wake of the accidental loss of its IL-20 surveillance plane in Syria.

Its measures to enhance Syria's air defenses will not stop Israel from conducting further airstrikes in the country.

Israel's insistence on continuing to stage attacks in Syria, combined with Russia's increasing efforts to prevent it from doing so, will improve the chances of the Syrian civil war escalating into a larger conflict.

Reforming Southern Europe: What's Next?

Italy will likely respect the European Union's deficit limits in its new budget, but the change of direction from deficit reduction to deficit increase could frighten financial markets about the sustainability of the country's debt.

A controversial pension reform proposal in France will create temporary economic disruptions as different groups protest the measure, but Paris will likely push ahead with its plans regardless.

The new Spanish government will aim to reverse some of the austerity measures of its predecessor, although the administration will face the constant risk of collapse.

Re-Emergence: A Study of Russian Strategy in Syria, the Middle East and Its Implications

By Harrison Manlove

Earlier this year, The Strategy Bridge asked university and professional military education students to participate in our first annual writing contest by sending us their thoughts on strategy.

Now, we are pleased to present a third-place essay from Harrison Manlove at the University of Kansas.

Russian strategy in Syria and the broader Middle East consists of supporting what it considers legitimate institutions through extensive foreign aid programs, including economic and security assistance, political support and, as seen in Syria, direct military intervention. However, there are caveats to this strategy that include history, policy goals, and the ability to exploit lack of foreign attention to Russian activities and capabilities.

Where Is America's Outrage over China's Treatment of the Uighurs?

by Peter Harris

The Trump administration is reportedly considering sanctions against China in response to Beijing’s mass detention of ethnic Uighurs in its western Xinjiang province. This comes after a bipartisan group of lawmakers called the situation an “ongoing human rights crisis” and urged the White House to act. Yet it will take much more than a letter from Congress for President Donald Trump to become a champion of the Uighurs’ human rights. He and his advisers will have to be convinced that elevating the plight of Chinese Muslims above other elements of the U.S.-China relationship would clearly serve the president’s agenda.

American Attitudes Toward China And The World Are Changing

Dan Steinbock

In the past few years, American attitudes toward China have been shifting. The change/shift did not start in the Trump era, as US observers argue. It began with President Obama’s effort to militarize and split Asia.

As the veteran journalist’s Bob Woodward’s new book Fear: Trump in the White House is shaking the Trump administration and the polarized America, Washington’s trade hawks threaten to escalate their tariff wars. Historically, times of trade wars and protectionism tend to go hand in hand with negative attitudes toward other nations - and our era is no exception.

According to newly-launched survey by Pew Research Center, American attitudes toward China have become somewhat less positive over the past year. Overall, 38% of Americans have a favorable opinion of China, down slightly from 44% in 2017. In recent years, something similar has also been reported in America regarding the attitudes toward other countries, particularly emerging and developing nations.

Changing dynamics threaten America's global leadership

Steve Corbin

Of the 195 countries the United States interacts with, three countries are not fazed when President Trump rails against NATO, NAFTA, United Nations, World Trade Organization, climate accord, European Union, Iran’s seven-nation nuclear agreement, TPP and imposed trade tariffs.

They are China, North Korea and Russia, which have common borders and house 21 percent of the world’s population. (China has 90 percent among the three.)

China is the biggest exporter to the U.S. ($502 billion annually) and only imports $122 billion of American products. Should China feel threatened by the litany of Trump’s unprecedented policies?

China Has a ‘Space Force.’ What Are Its Lessons for the Pentagon?

The U.S. military must find new ways to leverage commercial innovation in order to contend with China in space.

The Chinese military seems to agree that the current U.S.approach to space is hindered by some serious shortcomings.

If the United States is to maintain military advantage in space, as President Trump has promised – and as his new Space Force is meant to do – U.S. policy and strategic decisions should be informed by an understanding of China’s ambitions to become an “aerospace superpower” (航天强国) – and how the Chinese military has reorganized itself to seek dominance in space (制天权).

In Argentina, One Candidate's Crisis Is Another Candidate's Opportunity

Argentine President Mauricio Macri's administration will likely try to continue its efforts at economic reform, despite their unpopularity.

By pursuing further austerity measures, Macri will lose support, dimming his prospects for re-election and casting doubt on the future of Argentina's economic liberalization.

A corruption investigation involving Argentina's main opposition figure, Sen. Cristina Fernandez de Kirchner, could mar her presidential campaign, leaving fellow Peronist candidates in good stead to win the race and temper the country's economic reforms.

The Myth of the Liberal Order

By Graham Allison

Among the debates that have swept the U.S. foreign policy community since the beginning of the Trump administration, alarm about the fate of the liberal international rules-based order has emerged as one of the few fixed points. From the international relations scholar G. John Ikenberry’sclaim that “for seven decades the world has been dominated by a western liberal order” to U.S. Vice President Joe Biden’s call in the final days of the Obama administration to “act urgently to defend the liberal international order,” this banner waves atop most discussions of the United States’ role in the world. 

About this order, the reigning consensus makes three core claims. First, that the liberal order has been the principal cause of the so-called long peace among great powers for the past seven decades. Second, that constructing this order has been the main driver of U.S. engagement in the world over that period. And third, that U.S. President Donald Trump is the primary threat to the liberal order—and thus to world peace. The political scientist Joseph Nye, for example, has written, “The demonstrable success of the order in helping secure and stabilize the world over the past seven decades has led to a strong consensus that defending, deepening, and extending this system has been and continues to be the central task of U.S. foreign policy.” Nye has gone so far as to assert: “I am not worried by the rise of China. I am more worried by the rise of Trump.”

What it takes to get an edge in the Internet of Things

By Michael Chui, Brett May, and Subu Narayanan

Three practices can help differentiate successful companies from those that struggle to gain traction.

Internet of Things (IoT) technologies have evolved rapidly in recent years and continue to change how we interact with our surroundings. For companies, IoT brings new ways to monitor and manage objects in the physical world, while massive new streams of data offer better avenues for decision making (often mediated by machines). The steady fall in prices of sensors and communications technologies, combined with a parallel rise in understanding of how they can be applied, have raised the strategic importance of IoT. As we have shown elsewhere, this can produce immense value in settings ranging from retail and healthcare to manufacturing and technology.

Mattis predicts DoD will one day offer cyber protection to private sector

By: Justin Lynch

Secretary of Defense Jim Mattis predicted the U.S. government will one day offer cyber protection to businesses that work with critical infrastructure and may even extend such a buffer to some individuals.

The top Pentagon official said during a Sept 25. speech at the Virginia Military Institute that he envisions a voluntary program that would be spurred by the rapid change in technology.

“Because the Department of Defense has about 95 percent more of the capability to protect the country on cyber, we are probably going to have to offer to banks, to public utilities, (to) electrical generation plants and that sort of thing, the opportunity to be inside a government protected domain,” Mattis said. “It’s not going to be forced and there are constitutional issues, but I think we should also offer it to small businesses and individuals.”

Thin Heads and Fat Tails: Understanding the Crypto Reinvention of Capitalism

The open application ecosystems of the internet are dominated by a handful of tech giants today, but crypto technologies could level the foundations of the modern web to establish free and open access to information, connection and exchange, according to this opinion piece by Philipp Stauffer, co-founder and general partner of FYRFLY Venture Partners.

In Zug, Switzerland, the annual Carnival celebrates Greth Schell, a folk hero who carried her husband home in a basket on her back after he drank too much at the inn. Zug, now known as Crypto Valley, plays the role of Greth for an internet that appears to be inebriated and in need of help — that is, if you judge the internet by its founders’ intentions.

Located just outside Zurich, Zug is pioneering Web 3.0, a new internet architecture based on crypto technologies. Local startups like Ethereum Foundation, Bancor, Xapo, Dfinity, and Status.im are challenging Web 2.0, the architecture we have now, or that has us, depending on your perspective.

In Cyberspace, Governments Don’t Know How to Count


NATO’s governments can’t agree on what constitutes a cyber attack, and that’s a big problem.

Estonia’s new ambassador-at-large for cyber security, Heli Tiirmaa-Klaar, recently explained to the Wall Street Journal that “compared to many other security fields, in cyber we have reached maybe 10 percent of total readiness to understand the threats, to respond to threats and also to prevent the threat or maybe deter the threat. We have lots of room for development.” She’s right; just look at the most basic of metrics: How do governments count cyber attacks? How do they classify them?

New strategy: let’s not miss out on quantum science

By: Kelsey Atherton 

Uncertainty is the heart of quantum information sciences. Drawn from 20th century work in quantum mechanics, computer science and cryptography, quantum information science promises better and more secure computing, but the exact nature of the benefits will have to be sussed out through scientific research and then refined into technology.

In anticipation of some great benefit from this work, earlier this month the National Science and Technology Council released a grand strategy for how the United States. It is an inherently strange document, a draft of the future posture written in the sterile and analytical language of the strategy form, all hinged around a science whose future benefits remain unknown.

Infographic Of The Day: How APPLE Came Back From The Brink

With Apple devices in pockets and on desktops and wrists around the world, it's hard to imagine modern life without them. But in the late 1990s, after a series of failed product launches, the tech giant was losing money and "90 days from being insolvent," according to Steve Jobs.

The big turnaround began with his return to the fold, as he reduced Apple’s product lineup by 70% and let go of about 3,000 employees. His new strategy was to focus the company around four key items: one desktop and one portable device each for professionals and consumers. A year after his return, the company turned a $309 million profit. This success was followed by the launches of the iMac, iPod, iPhone and iPad, all of which transformed not only Apple’s fortunes, but the way we live our daily lives.

How Serious Is the New Facebook Breach?

By Evan Osnos

At Facebook headquarters, in Menlo Park, California, no tour is complete without the story of the big sign at the front gate: when Mark Zuckerberg, the founder and C.E.O., moved his company to the site, in 2011, he did not remove the sign of the former tenant, Sun Microsystems. In the nineties, Sun had been a giant so dominant that it considered buying Apple, but Sun later sank into a long fadeout, and it was acquired by Oracle, in 2009. Zuckerberg turned Sun’s sign around and fastened Facebook’s name to the other side—a reminder to himself and his employees that success is fragile.

The US Military Must Lighten Warfighters’ Loads


Five suggestions to reduce injury and increase combat efficiency.

In World War II, being an infantryman was the third-deadliest job in the American military, behind bombardiers and submariners. In the years since, technology has woven a cloak of stealthiness around bombers and submarines, yet the infantry remains a deadly profession. Over 80 percent of U.S. combat deaths since World War II have been in the infantry, a community that makes up just 4 percent of the force. Survivability in combat has improved dramatically in recent wars because of advances in body armor and combat medicine, but more could be done. The thousands of servicemembers killed, tens of thousands evacuated from theater, and hundreds of thousands suffering from traumatic brain injury point to the dire need to increase the survivability of dismounted ground troops. To address this problem, Secretary of Defense James Mattis has created a Close Combat Lethality Task Force to strengthen the “lethality, survivability, resiliency, and readiness of infantry squads.”

Regard Your Soldiers

Family or team? It is becoming the organizational culture version of the born or made question in leadership. 3×5 Leadership recently ran a great piece that broke down two competing theories on the topic. I recommend you read “Are We a Family or a Team?” and the books he references (Dan Coyle’s The Culture Code and Todd Henry’s Herding Tigers). This post will focus more on a personal view with the only expert invoked being Sun Tzu.

Soldiers with 1st Squadron, 82nd Cavalry Regiment, conduct live-fire exercises late into the evening during their annual training at Orchard Combat Training Center near Boise, Idaho, July 25, 2018. U.S. Army photo by Staff Sgt. Zachary Holden, Oregon National Guard – Oregon Military Department