Tariffs, artificial intelligence, semiconductors, electric cars: there is much to be said about the evolving relationship between China and the United States. While Donald Trump’s recent tariffs on the country are just the latest story, it is only a fraction of the news coming out of China that directly affects the U.S. and the future prospect for business and the government. Joining host Robert Scheer from China on this episode of Scheer Intelligence is Geopolitical Economic Report editor-in-chief and journalist Ben Norton.

The two discuss what the incoming Trump administration represents for U.S.-China relations as well as the state of China from the ground. Norton reports on his experiences living there and the local reaction to the U.S. political scene.

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Credits

Host:

Robert Scheer

Executive Producer:

Joshua Scheer

Video Producer:

Max Jones

Introduction:

Diego Ramos

Transcript

This transcript was produced by an automated transcription service. Please refer to the audio interview to ensure accuracy.

Robert Scheer

Hi, this is Robert Scheer with another edition of Scheer Intelligence, where the intelligence comes from my guest. In this case, it’s Ben Norton, who actually I first met when I was the guest and he was working for Real News and he interviewed me I guess it was about the selection of the one of the torturers in the CIA program, Gina Haspel, when I guess it was Donald Trump who made her the head of the CIA. And we talked about that, that’s quite a history. The reason I wanted to talk to Ben Norton now, he puts out—and on ScheerPost I use a lot of his material—the Geopolitical Economy Report. And for my money, this guy’s doing some of the best reporting about the international economics, the tension between BRICS and the United States, hegemony, multi-polar world, all of these issues. He had been in Latin America doing a lot of really interesting reporting, and now he’s in Beijing.

And there couldn’t be any better or more relevant place to be a journalist and an independent journalist. I want to stress he is an independent journalist and he has, you know, I’m sympathetic with that. I spent a part of my life being in that category, so I know it can be very sketchy, but he does incredibly good professional work. And what I want to talk about is there could be no more important story than the U.S.-China relationship now. And if this is not, this goes off the rails, it might be the end of humanity. It’s probably the fastest path to the end of humanity. Whether we’re talking about the tariffs that were just raised, amazingly enough, because China already had tariffs, it’s only what? 10% on China and 25% on Canada and Mexico, reversing what I thought was one of Trump’s great achievements from his first time, the renegotiation of NAFTA, which, at least, for the first time had some idea about workers’ pay and some other, we don’t have to go into that. But now NAFTA has been thrown aside. And then here’s China in the middle of it. And these are the major trading partners with the United States, China, Mexico and Canada. And Mexico, because there was strained relations with China, they picked up a lot of that. So let’s just begin with that. And then we could talk about TikTok. We could talk about a lot of other stuff, AI in general and the incredible success of the Chinese version. So let’s take those three topics and you take it where you will on that. But let’s start with the tariffs first.

Ben Norton

Well, first of all, thank you for having me. It’s a real pleasure. And I feel very honored hearing those kind words from a legend who worked at Ramparts and exposed the CIA’s operations around the world. So yeah, I think you started this conversation in a perfect place. I agree with you that US-China relations are extremely important in general, but especially at this moment where Trump’s tariffs are threatening a lot of economic instability, not only in the US, but around the world. So you mentioned that Trump has been threatening these tariffs against China, Mexico, and Canada, which ironically are the three largest US trading partners. And he’s been really going back and forth on this. He says he’s going to do it. He says he’s going to do it. People think it’s a negotiating tactic, but we’re recording now on the 2nd. Well, in my time, it’s February 2nd, I guess it’s still February 1st there, and allegedly they’re gonna go into effect on the 4th. So we’ll see what actually happens. It’s impossible to predict what goes on with Trump, but I think we can make a few observations that are important. First of all, this is going to result in higher inflation in the US, which ironically is actually one of the reasons that Trump won the election. It’s not that Trump’s actually popular, he’s not.

It’s that Kamala Harris was very unpopular and the Democrats were associated largely with the inflation. Now I would like to think that one of the reasons that the Democrats lost is because of the horrible crimes against humanity committed in Gaza. Certainly that was a factor, but if you look at polling done by the Washington Post and other outlets, they found that a majority of voters said that their most important issue was the economy and real wages were really hard hit by inflation, which official consumer price inflation hit 8%, which is probably a very conservative estimate. Some economists have estimated higher than 10%, which is the highest inflation we’ve seen since 1981. And you remember, the inflation of the 1970s was very destabilizing. Trump essentially won by claiming that he’s gonna bring down inflation and help to increase real wages. And one of the first things he does coming to office is threaten and potentially impose tariffs that will result in higher inflation. And let’s be real, let’s be honest about this. What are tariffs? Tariffs are attacks on consumption. Now, tariffs are not necessarily, I’m not necessarily in principle against tariffs. I’m not a free trader at all. I mean, no one on the left should be a free trader. However, we need, what Trump’s threatening, blanket tariffs, are a very bad idea.

Now, countries have always developed using targeted tariffs in certain industries. If you want to develop your productive capacities in a certain industry, it makes sense to use tariffs to develop your own infant industries to be able to compete internationally. But blanket tariffs are not that. Blanket tariffs are just a tax on consumption. And tariffs, that tax falls much more proportionately on low-income workers. So what Trump is doing is he’s going to continue to cut taxes on the rich. He’s going to extend his tax breaks on the rich. He says he wants to continue to cut taxes on corporations. And yet he says that he’s going to raise more revenue through tariffs. But tariffs are a tax on consumption that more directly impact working class people, especially the lowest income Americans. Because, a basic idea in economics that is talked about going back to Keynes is the marginal propensity to consume, which really means that if you’re a low income worker and you get paid higher wages, if you have a wage increase, your consumption is going to increase much more than a rich person. Because if you have billions of dollars and you get another billion dollars, you’re not really going to increase your consumption anymore because you’re already super rich. So if you increase taxes on consumption, which is what tariffs are—

Robert Scheer

Yeah, you should explain that the reason for that is that the people producing t-shirts or anything else, computers or so forth, whether they’re in Mexico or China, they’re going to pass that cost on to consumers. And for instance, the estimate is, the one I saw in The Washington Post, $240 more on a cell phone. These are substantial. And the reason they hurt consumption is they’re passed on to the consumer, making the prices of these things higher. Yeah.

Ben Norton

That’s absolutely right. Trump keeps claiming that it’s foreigners who pay the cost of tariffs. That’s not true. Technically, it is importers, US importers, pay the price of tariffs. Now, defenders of Trump’s tariffs, these blanket tariffs, not selected, isolated tariffs in industries, blanket tariffs, defenders of that policy would, they have two really talking points that they use. One, they argue that part of the cost of the tariff is offset by a depreciation in the currency of the exporting country. So they say the Chinese Yuan will go down against the US dollar and that will make up for the difference in the cost of the good in the US. That’s actually not wrong, but the currency doesn’t fall completely proportionate to the tariff amount. So if Trump puts—he’s starting with 10% tariffs on China. If he puts 25% tariffs on the Yuan, the Yuan’s not gonna fall 25% against the dollar. It might fall 5% or something, but it’s not gonna be completely made up for that differential there. And then the other talking point they use, so that’s not entirely correct. There’s an element of truth in it, but it’s not correct.

The other argument they use to justify it is they say that the exporting companies will simply, they’ll eat up that cost of the tariff through price reduction or something like that. They’ll reduce the price, they’ll reduce their profit margins, and then they’ll export it to the US. And even though there’s a tariff, consumers won’t feel it as much because the price was reduced. But that’s not true either, because what actually happens is in certain products where profit margins are high, they can do that. But a lot of these consumer products, you mentioned things like t-shirts and shoes, the profit margins are already very small.

So they can’t continue to reduce the cost that much, they reduce the price that much because then they would actually lose money because their profit margins are already tiny. It’s simply not true that in the US consumers won’t feel the impact of tariffs. They will feel the impact, especially at first. There will be a massive increase in price level. This is, mean, what we need to talk about is this is—Trump’s policy is reducing taxes on capital, on the rich, and increasing taxes on labor on workers, especially the lowest income workers.

Robert Scheer

Yeah, but there’s plenty to criticize about Trump, but I want to stick to what you really have written so effectively about the economic impact. And there’s really enormous contradictions here because what Trump claims he’s doing is trying to bring manufacturing back to the United States. And to do that, his argument would be you can’t just bring in these cheap lower wage rates even in Mexico, but certainly in China, it’s not fair to American workers. And that’s why you have to charge a more realistic price and so forth. And it goes to a very big question, I think, that is almost never discussed, why aren’t we therefore in favor of labor unions in China? And you have a perfect example in the business of Elon Musk, one of the key advisors here, and Tesla. Tesla is now making most of its cars in China. And Elon Musk is very clear about that. They’re better at it, it’s cheaper to produce and so forth. Okay, if you want to really improve the life not only of American workers, but of workers all over the world, you would say the right to form a union, the right to have a decent minimum wage, all of these things that Elon Musk is against, they love the Chinese market precisely because China is kinder to their activities, you know, needing to have to develop. And this goes back a long way.

And I would like you to address that because I think it’s a false argument to say you either hurt Chinese workers or if you want to help American workers. There’s an old thing, workers of the world unite, right? That was what Marx was supposed to be about. And the fact is workers people very rarely talk about the rights of workers as a human right. It’s probably the most important human right now to be asserted. And here is Trump, basically a populist demagogue from the right. But, if he were coming from the left, he might also be against trade, right? Unions and everything, they always said blame the Chinese worker. Why not call for international standards on the right to be in unions, the right to be paid?

living wage and so forth. So maybe you could address that if you agree. If you don’t agree, argue with me.

Ben Norton

Yeah, a few things you mentioned there. First of all, I think a lot of people still have the conception that China’s working standards are like they were in the early 1990s. The situation has improved exponentially. It’s so much better. So first of all, on wages, Chinese wages are actually not low at all. Chinese wages are the highest in the region. In the past 30 years, wages in China in general have increased by over 10 times, and especially for industrial workers, depending on what industry you look at, they’ve increased by well over 10 times. So Chinese workers are actually paid in many industries a similar wage at purchasing power parity to wages in the US, depending on what industries you look at. And they’re certainly way more expensive than neighboring countries, especially in Southeast Asia, which is actually why a lot of companies are no longer, foreign companies are no longer investing in China, trying to move to countries like Vietnam has become a very popular location for foreign direct investment. So wages in China are actually very high. That’s not why there’s so much investment and interest. It’s because of a few other things. First of all, the supply chain. China was very clever in how it developed the entire supply chain locally in the country, especially if you go to major industrial cities like Guangzhou. You can go to a street and you can find dozens of stores that produce all of these parts you go to the next street. They produce all of the other parts I mean you can produce everything not only within China, but within even one city.

They have everything that you need all of the parts all of the skilled workers even famously Tim Cook the CEO of Apple was asked about why he still have invested so much in China. And he pointed out that actually wages in China are very high. And worker protections in China are much better today than they were even 30 years ago. But the answer he said is that despite all of that, the reason is because they have so many skilled workers and their productivity is so high, a lot of these factories are very automated. I’ve seen some of these factories, at least the car factories. I haven’t seen the phone factories. But I’ve been to some of the electric vehicle factories. And they’re half automated at this point, or mostly automated. There are so many robots, and it’s very complicated. And they have all these skilled workers. And Tim Cook pointed out that, as he put it, in China, they have millions of these skilled workers who know how to do all of these very complex industrial production. Whereas in the US, said, you can’t even fill a football field with a number of skilled workers. And the reality is that this is a huge problem in the US because, you know, in the ‘70s and ‘80s with the rise of neoliberalism, there was a concerted decision made by capitalists with the backing of the government that they would offshore and outsource all of their production to other countries because, of course, they wanted to exploit lower paid labor.

And what actually happened is that not only did this lead to, of course, they wanted to break the back of unions. That was one of the big parts. You know, unions in Detroit and Cleveland, these major industrial hubs. But it also meant that in addition to losing all of these good unionized manufacturing jobs, you have entire generations of skilled workers in the US who have—you’ve lost these skilled workers, you have to you know, previously, you had these kinds of systems where you basically had apprentices who would work with the workers, they would get trained by the workers who knew how to do all these things. You’ve lost that for generations in the US and you can’t just rebuild that and you certainly can’t just magically impose tariffs and have that all come back. What’s really fascinating about China is the reason that production in China is so cheap is not because again of low paid workers or bad conditions. They’ve improved significantly and wages are very high. The reason that production in China is so cheap is because one, the production costs have been made very low by the socialization of the commanding heights of the economy. So in China, if you look at all of what used to be called the commanding heights, they’re still state owned. They’re still in public domain. You know, there’s this idea that in the era of Deng Xiaoping that everything was privatized. That’s not true. The slogan was grasp the big, let go of the small. So in China, they did do some privatizations, especially of unprofitable.

Robert Scheer

I’ve heard the one about common prosperity, but which I also think we should address. Tell us a little more about that. That slogan is—by the way, one reason I like doing these podcasts at my advanced age and we’re doing this now because of our time difference at an awkward hour for both of us, certainly for me, is I like being taken to school by people who know more than I do. So I’m still learning. I think you have to be a student. And even though I have the conceit of knowing quite a bit about China and its development, the fact is you just caught me because I am operating more on an older model of the cheap labor. And from what I have been following, I didn’t put it correctly. I think that’s an excuse. And while we’re talking about that, why don’t you throw in that a discussion because you mentioned robotics and everything, the surprise that in artificial intelligence that suddenly China could do, wow, you know, affect our whole stock market and the idea that what China is really trying to do—you’ve written about this before—the debate about, are they a threat? They don’t want the middle income trap. They don’t want to rely on cheap labor. They’re trying to get the high end so they get the profits that Cupertino gets. So, let’s address that. You’ve raised what I think may be the basic point here.

Ben Norton

Yeah, a few points. I just want to finish this thought about the reform because when, of course, under Mao, the entire economy was planned. I mean, there were also communes, but it was a completely planned economy. We needed to distinguish socialism from a planned economy because there have been socialists for centuries who have argued that you can have what they call a socialist market economy, not everything needs to be planned by the state. That’s the Soviet model, right? When Deng Xiaoping came into power in 1978, Mao died in ‘76, Deng came in, and he initiated what’s known as the Reform and Opening Up. But this was a lifelong communist. I mean, he was one of the founding members of the Communist Party from a young age. Deng Xiaoping didn’t just suddenly become like a capitalist and a liberal. I mean, his idea was that, and actually, it wasn’t even Deng Xiaoping who was the brains behind it. He was the political leader, but the economist who planned a lot of this and who was brilliant was Chen Yun.

was another lifelong communist, the second most powerful member of the Communist Party under Deng Xiaoping. And the idea was what they called a birdcage economy. It was that the most important parts of the economy, the commanding heights, would remain in state control. And they still are today. So in China, the biggest industries are state-owned. All of the major banks, the four largest banks in the world, are state-owned Chinese banks. Many of the pension funds and the insurance companies are state-owned. All of the telecommunications infrastructure is state-owned. The transportation is all state-owned, which is why China has the best and the cheapest high-speed rail in the world, where the US can barely build it at all. China’s infrastructure construction companies are state-owned.

Many of its mines are state-owned, its energy grid is state-owned. And because all of that is state-owned, they can reduce the production costs for other industries as much as possible. Whereas in the US, they privatized all of this infrastructure. Or in the UK, under Margaret Thatcher, they privatized it all. And of course, when you privatize it, what happens is you have these monopolies that emerge, and they jack up the cost. So in the US, electricity is very expensive. Public transportation barely exists. Transportation is very expensive. You have to pay tolls and toll booths. Water is expensive. In China, for instance, every month, I’m renting an apartment and every month I pay like $5 for electricity. I pay like $1 or $2 for water and gas. I pay like $7 for…20 gigabytes, no, I pay like $4 for 20 gigabytes of data on my phone because the telecommunications companies are all state-owned. I mean, so it’s almost, it’s pennies. I mean, you can reduce the cost of production by the nationalization of these important parts of the economy. And then I even talked about the banking system. And because the banking system is state owned, what the government does is it makes planning targets, they still have five year plans and what they do is they say we want to produce a lot of very good new energy vehicles. That’s the term they use for electric vehicles. So the government provides, they say we’re gonna have a trillion yuan available in cheap loans at what they call concessional loans, which are below market rates. They’re basically, these loans are, they have maybe 2% interest. Basically, it’s at inflation or even below inflation and they give these cheap loans to strategic industries where they want to develop. That way, they can use state control of finance to direct resources to industries. And then they have private industries and private competition for, so they have these industries that compete together and then they reduce the cost of production. They have low profit margins and you get very good electric vehicles for one fifth of the price of Tesla, right?

So the reason that China’s production is so low, its costs are so low, is not because of low paid workers. It’s precisely because of its socialist model, which wants to reduce the cost of production as much as possible to maximize consumer purchasing power, which is why—what’s so funny is you hear these neoliberal economists in the West who complain about deflation in China, but that deflation is not being driven by low purchasing power. Purchasing power has significantly risen, it’s multiplied by many times in recent decades, that deflation is being driven by the extremely low cost of consumer goods. So, I mean, it’s a completely different model. Now, as for blaming Chinese workers for the US workers losing manufacturing jobs and such, I mean, obviously this is just scapegoating. The real problem is that,

US corporations, US capitalists made the decision following their bottom line that it would be better for them to move overseas, not just to China, but to Bangladesh, to Honduras, to many other countries, right? It wasn’t, I mean, China took advantage of this and they were actually very clever because not only did China welcome foreign investment, but they did it under very specific circumstances. The Chinese government made a policy that was called investment for market, sorry, technology transfer for market access. So the idea was, yes, we will allow foreign companies to invest under two conditions. One, those foreign companies have to form joint ventures with Chinese companies, and the Chinese companies have to have at least 50% ownership. That way, they didn’t just open factories that were all owned by Volkswagen, and then their workers were exploited by Volkswagen without local development. 50%, at least, had to be owned by a Chinese car company, including state-owned car—there are still some Chinese state-owned car companies like Chery. People know about BYD and Xiaomi, but there’s a major Chinese car manufacturer called Chery, which is a state-owned company, and they make very good electric vehicles. So the deal was that Volkswagen would invest, but at least half of the company would have to be owned by a Chinese car company. And the other deal was they would have to share their technology, share the intellectual property. So there’s this idea in the West they call forced technology transfer, or the US claims falsely that China stole their intellectual property. That’s not true. Legally, these foreign investors were legally obligated to share their intellectual property with their Chinese partner, with the joint venture company.

And this is what Deng Xiaoping called it. He said, market access for technology transfer. You can get access to this big Chinese market and all these Chinese workers, but we want to benefit as well. So now the US is angry because China was very clever in how they, under very specific circumstances, allowed in this partial liberalization in foreign investment, and they have now become the world’s leading manufacturer, the world’s leading industrial power, and the US wants to blame China, but it was the capitalist class of the US following their own interests. The US government encouraged this, especially when China joined the World Trade Organization in 2001. So, I agree that the US needs to completely change this path, and that’s why I said I’m not a free trader. However, just putting blanket tariffs on everything is not a solution. I mean, I…

I think Joe Biden was one of the worst presidents in modern history. I’m not praising Joe Biden. But honestly, this idea of a green industrial policy, I think that’s a very, it’s a very good idea. I mean, he didn’t do it well, but the idea he had on paper of saying we’re going to do through the Inflation Reduction Act, the government is going to provide industrial policy incentives, subsidies, other investment in infrastructure in order to develop the production of local electric vehicles, of local solar panels. I think that’s a good idea, but I think Biden did it in a very bad way. It was basically half-baked industrial policy. It was basically just giving money to big companies like Tesla, but not actually. You have to follow the industrial policy being pursued by countries like China or Vietnam or Indonesia, and they’ve been able to do it very well. And it’s not simply because of low-paid workers, because again, if you look at wages in these countries, like in China or in Vietnam, wages have skyrocketed in recent decades. Again, the reason that people are investing is not because of low wages. That was true in the ‘90s. It’s no longer the case. They’re investing because they have very advanced infrastructure, very low costs of production, very favorable loans provided by state-owned banks. And the problem in the US is that Wall Street has financialized the economy. Everything’s been deindustrialized in the neoliberal era but the flip side of that deindustrialization is that the US economy became extremely financialized. 10% of US GDP comes from manufacturing production. And that includes weapons, which, I mean, obviously, that’s not helping people. It’s just killing people. 22% of US GDP, according to official data from the BEA, of the Treasury, the Bureau of Economic Analysis, 22% of US GDP comes from what they call the FIRE sector, which is finance, insurance, and real estate. That increases every year, whereas manufacturing production decreases every year in the US. And why can no one afford to buy a house? Because housing has become a speculative asset owned by the rich. Blackstone, the investment fund in Wall Street, is the largest real estate holder in the US. It’s the largest landlord in the United States and so what the US has done is the exact opposite of China. China, through socialization of the commanding heights of the economy, the natural monopolies, reduced production costs as low as possible. In the US, all of that was privatized and bought up by private equity funds and then they ratcheted up the costs and the price of everything. So even if you put tariffs on everything, the US can’t produce anything because one, they’ve lost all of their manufacturing workers. It’s gonna take generations to bring back. And because the costs of production are so high, because you have to give workers healthcare. You have to give workers education to their children. You have to give workers housing, but if all of that is insanely expensive because it’s all been privatized, it doesn’t matter if you have tariffs because those wages have to be higher to make up for the cost of education and healthcare and housing.

Robert Scheer

Right. I mean, I think it’s a great discussion, frankly, at least I’m learning from it. I hope others will. But and you’re really putting it, you’re reminding me that I’m thinking of China in older terms, because the assumption was that they could financialize the economy and people in Cupertino and everywhere else, you know, in the vineyard or whatever, Martha’s Vineyard, they could live well. And it was based on the exploitation of cheap labor and for everything, extractive industries, all that. I remember when I was at the Center for Chinese Studies in Berkeley, we were 6% of the world’s population, but we used 60% of its resources and everything. And what happened was that China, and now India is trying to do it, Brazil is trying to do it, escape what was called that middle income trap, where basically the mass of your population would be kept doing low-paid work and so forth. And what they’ve done, I say China is now the greatest capitalist success, because if you define capitalism more in Adam Smith’s terms rather than in Lloyd Blankfein and Goldman Sachs terms, China is actually using a free market to bring in accounting, respectability, transparency, and so forth, consumer sovereignty, consumer choice for the whole world, making goods available. And that’s one of the interesting things that even artificial intelligence, they came up with a cheaper product that people can use artificial intelligence without having to be one of the leading monopolies. And China, of course, has its millionaires or I guess they have billionaires also. In fact, the paper that I like reading, the South China Morning Post, is owned by Alibaba, right? And so, you know, the so-called advantages of capitalism that we celebrate—workers getting more pay, consumers having more choice, and so forth, China is succeeding at that. You know, that’s the interesting thing. And I just want to, one little footnote here. We made ideology sounds so important in a threatening way. Communism, socialism and so forth. The irony now is the US government wants Apple to take its production from China to communist Vietnam, a country that we fought the bloodiest war against. What, somewhere between four and six million people got killed in Indochina, mostly almost all civilians. And we do that in the name of this ideology. And the fact is now we want to be buddy-buddy with Vietnam and other countries, no matter what their political system. So this whole thing of identifying freedom, free market, free choice with this ideology of capitalism, when in fact, as you’re pointing out, it destroys free choice in so many ways, and even the economic well-being of people. I think it’s at the nub of the argument here, the irony, and now we’ll get circled back to Elon Musk and Trump and so forth.

Ben Norton

Can I make one quick point? Obviously, at the end of the day, these are kind of just debates about terminology, but I do think it’s important, on this issue of capitalism and socialism. I would say, fundamentally, these are political terms. They’re not just economic right? Because there’s no economics divorced from politics. It’s all political economy. And so China, I would still say China absolutely is still a socialist system, but it’s not the Soviet style command economy, where everything is planned by the government. China refers to its system officially as socialism with Chinese characteristics and as a socialist market economy. And Vietnam, by the way, refers to its system as a socialist-oriented market economy as well. And they both have very similar models. And essentially what they recognize is that the most important strategic parts of the economy should be publicly owned and controlled and managed by the state. And they are.

So in China, about one third of GDP comes from state-owned enterprises, which, as I mentioned, are concentrated in the most important strategic sectors. And about two thirds of the economy is private, although even that’s more complicated because a lot of large companies, even though they’re technically private, the government owns what’s called a golden share. So even though they’re not the majority shareholder, they have veto power over important decisions made by the company. So for instance, Alibaba, and Tencent, they’re not officially state owned, but the government has a golden share, which means that it has important veto power over what decisions are made by these major tech companies. The government essentially made the decision that instead of planning everything, we will allow market and the use of market competition, which can be good for innovation, right? If you wanna have consumer goods. So like, for instance, when Deng Xiaoping started the reform in ‘78, at that time everything was planned. They initially started by having some privatization of certain industries that were not strategic, like TVs, for instance. Famously, the Chinese government was making all of its TVs. And they said, we’ll allow in some investment, we’ll have technology transfer, we can have internal competition in the TV market. This is not strategic for the economy. We’re not concerned about that. And then they allowed it into cars and other sectors.

So today in China, and those non-strategic sectors that don’t determine the political orientation and direction of the economy, they allow lots of market competition and all these companies coming together. And you’re right, that they have this very intense internal competition. Unlike in the US where you have all these monopolies, the Chinese government tries to prevent the creation of monopolies to bring down costs of production. In that sense, it is very Adam Smith-like. It’s very Smithian. They recognize, as Marx did, that when you have this competition, it actually leads to a declining rate of profit. And that’s good for consumers because they want the return on investment and the return on capital to decrease over time to create more prosperity. But there’s also a political element. In China, capitalists do not have power. And you mentioned Alibaba, for instance. When you have capitalists who exist, but when they try to challenge government policy, they are very extremely disciplined in not only with fees and in prison, in some cases, death sentences. There’s obviously—I’m not a big fan of the death penalty and such, but the reality is that in China, a lot of billionaires have been executed. I mean, they’re very serious about this. So you can be a capitalist, but you have no political power. And as it’s often said in China, yes, we have capitalists, but the communist party is firmly in power.

Whereas in the US, the capitalists are in control of the state. In China, they have no control over the state. So I think that’s a very significant difference. I mentioned Alibaba. So Jack Ma, he was trying to create basically his own financial institutions offering loans that were at very high interest rates. They were very exploitative. And he was using his control, Alibaba’s control of platforms, like Alipay, to offer loans to people, which was challenging the state control over the banking system. And the government very extremely disciplined him for that, fined him a lot, he lost billions of dollars. And the Western financial press is constantly complaining about how in China the number of billionaires is shrinking over time. So again, there’s a huge difference. But I think China has been able to find a good balance between state ownership and market competition in a way that I think they benefit each other rather than the US system where everything’s privately owned and privatized or the Soviet system where everything is just a planned economy. And Vietnam has a very similar system to China.

Robert Scheer

You know, it’s interesting. I remember when Gorbachev was in power in Russia, I went over there on exchange. I was working at the L.A. Times and I went over and I did some writing for Moscow News, which was their international paper. Anyway, one thing I did was I reviewed Gorbachev’s book on Perestroika. So I wanted to refer to the Communist Manifesto, but they didn’t have a copy in English or French or German or anything that I could read. So I had to run around Moscow looking for the Communist Manifesto. I found one. I ran back because they were going to cut a quote I had in my article where I was quoting from Marx with the Communist Manifesto praising capitalism for building the big cities, ending the idiocy of rural life. That wasn’t an attack on people living in rural life, you know, that it prevented your education, it prevented your development. But I’ll never forget that. And the people at Moscow News said, no, they never said, I said, it’s in the communist manifesto. Capitalism built the great city, but you have to control it. You have to help. You have to save it from itself. I mean, look at someone like Donald Trump now, you know, and if that’s what capitalism is, who’s going to save capitalism from itself?

Now, I want to return and we’re going to run out of time because I can’t keep you up all the time. But the fact of the matter is there are some interesting contradictions even with someone like Elon Musk and Donald Trump, because these people know the reality of doing business and they know that the caricature that China is succeeding, what the European Union tries to put out all the time, they’re subsidizing, they’re artificially pricing things, it’s made up—they know that’s not true. Elon Musk knows how the Chinese economy works. He knows everything that you said today better than you do, right? He’s an employer there. He’s got to negotiate and so forth. And I think Donald Trump knows that, you know, he’s not naive about how the current international market works and so forth. And that is really, they use the popular jargon about communist capital, blah, blah, blah. But the fact is, we’re in this crazy situation. Now, maybe this is the best way to wrap this up for the moment. But whatever you think about Trump and Elon Musk and so forth, they have shown a certain sophistication and real world knowledge about what’s going on. I compare it to, for instance, Nancy Pelosi trekking off to Taiwan. You know, she’s going to support freedom in Taiwan, right? In China by going to Taiwan, totally ignoring the history, why the Guomindang was in Taiwan, all the trade agreements. Suddenly, she’s going to march over there and support this. An act of absolute folly and dangerous. We now have to worry about an armed passage there and all the most advanced weapons threatening the lives of people.

I’m hoping, maybe I’m just reaching for straws here, that these people might actually be able to do some business here in the way that Nixon did. After all, we had China pegged as this hopeless tyranny that would never change, little red ants, never be creative. Amazingly enough, Kissinger, because I was there around that time just before he went, amazingly enough, here was Richard Nixon who built a career on his bashing communism in China, particularly, and… They go over there with Mao and the whole world changed. And I’m just wondering, grasping for straws, maybe Donald Trump and his sidekick there, Elon Musk, maybe they at least know what the reality is. Am I being naive?

Ben Norton

No, well, there are so many contradictions in the Trump administration. It’s just waiting to explode. And we’ve already seen some of them even in the first week. Like, for instance, Elon Musk was supposed to be the co-chair of DOGE, the Department of Government Efficiency. What happened to the other co-chair, Vivek Ramaswamy? He mysteriously disappeared after he went on this rant about U.S. culture not valuing education and such. So there are all these internal fights going on. Now, as for China, you’re right that Elon Musk has a vested economic interest in trying to reduce tensions with China because over half of Teslas are made in China. And honestly, without China, Tesla would not be able to make its cars. It’s because of China and the supply chain and the very skilled workers that Tesla has been able to be a successful car company. Although even Tesla is one of the most ridiculous overvalued companies on Earth. That’s a whole other conversation. But the market cap of Tesla’s, it’s insane bubble territory, there’s nothing like it. But getting back to the Trump administration, now at the same time, surrounding Trump are a lot of China hawks, almost everyone’s a China hawk. Marco Rubio, Secretary of State, an extreme neoconservative China hawk. His national security advisor, Mike Waltz, an extreme China hawk and a neocon. His defense secretary, Pete Hegseth, not only is he a neocon, he’s just like a whole other—he’s a self-declared crusader. This guy’s crazy. And where did Trump find Pete Hegseth to be defense secretary? He was a Fox News host. So, I mean, the Trump administration is full of these crazy people who have no real experience. They’re complete ideologues. And when it comes to China, I mean, that really concerns me because, yes, Elon Musk, I have infinite criticisms of Elon Musk. I think he’s one of the most dangerous people on Earth. He’s obviously the richest man on Earth. He’s very far right. He’s supporting all the far right parties in Europe, the AfD. But it is funny to say that of all of the crazy people in the Trump administration, he’s probably the most level headed on China, but he’s one level headed person surrounded by hawks. And then Trump himself is very, very impetuous. Even if he thinks something, he may decide one day to do something else like when he killed Qasem Soleimani, the Iranian general. I’m honestly very pessimistic when it comes to foreign policy, including when it comes to China. I think there are people who are hoping that because Trump’s a businessman and all of this that he’ll be like Nixon and be more pragmatic. That’s true, maybe, but at the same time, he’s also—under Nixon, they used to talk about the madman theory, right? This whole strategy of portraying yourself as a madman, but Trump really is a mad man. He’s so unpredictable. So I really, I don’t know what will happen. A lot of people in China are concerned. Now, to be fair, I’m not saying that people in China all preferred the Democrats. The slogan that was very popular in the lead up to the election was that choosing between Biden or choosing between Kamala Harris and Trump, the Democrats and the Republicans, was choosing between two bowls of poison. So they’ve made it very clear that in China, they unfortunately recognize that things are only going to get worse.

US-China relations are only going to get worse. Biden was very bad for China relations as well, but it was Trump who started the trade war in 2018. So I think China has recognized that their future lies in deepening their economic and political integration with the Global South. In fact, China already trades more with the Global South than they trade with the US and Europe and Japan combined, which used to be called, Samir Amin referred to them famously as the triad, which was the US, Europe and Japan. And Europe and Japan become less significant, but the US is still a major economic power, of course. And yet China is now integrating more with the Global South through institutions like the Belt and Road Initiative and BRICS. And now BRICS represents 55% of the world population and 42% of GDP, and they’re trying to de-dollarize their trade. So I do expect that with Trump, I think relations will get worse. There will be more tariffs, there will be more restrictions, especially you mentioned artificial intelligence. China has made huge strides in AI, especially with its company DeepSeek. But not just DeepSeek, Alibaba, Tencent, ByteDance, all of these other major Chinese tech companies, they’re all developing their own AI models. They’re making huge progress and they’re releasing these models open source for everyone in the world to use for free. So, these US Big Tech companies in Silicon Valley, they’re very close to the US government. They all have huge contracts with the US government. Trump has made that as clear as possible. In his inauguration, he invited Mark Zuckerberg and Elon Musk and Jeff Bezos and Tim Cook and Sundar Pichai, the CEO of Google. They were all sitting there with his cabinet members at the inauguration. And then a day after Trump came into office, he had a meeting at the White House and he invited Sam Altman, the CEO of OpenAI, he invited him to come to the White House to announce this $500 billion AI initiatives, the Stargate project. So I expect that with Trump and with all these Big Tech billionaires in Trump’s ear, he’s going to crack down further on Chinese tech, impose more restrictions on Chinese tech. He’s going to put more restrictions on the export of Nvidia chips, semiconductors to China. I mean, this is all bipartisan, Biden did it too. But all of the momentum is pushing toward more antagonism toward China. And China has recognized that, which is why I think the US, unfortunately, they’ve made it clear that we’re in a new Cold War. And their strategy is to create a kind of new bipolar world, like we saw during the first Cold War, where you have to pick a side, you have to pick the US or China.

Now, what’s funny is the non-aligned movement was created in 1961 because most countries didn’t want to pick a side. But here we are today. And I would say the non-aligned movement is way bigger than it was even originally. And BRICS is following in the footsteps of the non-aligned movement. Most countries don’t want to just be firmly in the US camp. Basically, it’s Europe, South Korea, and Japan, and Australia who are in the US camp. But most countries, even long time US allies like Saudi Arabia, the UAE, Turkey, Egypt, even they are trying to hedge their bets and play both sides. This US strategy is not going to be successful. They’re now threatening Singapore. They’re saying, Singapore, we’re going to put restrictions on you because China is buying ships through Singapore. But even Singapore is trying to hedge both sides, China is their largest trading partner. It’s a very complicated geopolitical scenario. And I don’t think that Trump is going to succeed. But I do suspect that he’s just going to continue in what is ultimately a bipartisan trajectory toward trying to basically cut off China and to try to decouple economically, even though that’s basically impossible.

Robert Scheer

You’ve been very patient with your time. Can we just take a few more minutes?

Ben Norton

Yeah, there’s no rush.

Robert Scheer

OK, because I think you’ve really opened the door here to a really basic question. Who really believes, you know, in trade and commerce, because you talked about tariffs and free market and so forth. And we could go back to George Washington’s farewell address, which I think I’m the only human being that consistently quotes it. But there was one and he had it prepared, he thought he would be one term only. And it’s an incredible statement. And in there he says, I beseech my countrymen to beware the imposters of pretended patriotism. And he called upon them, yes, be involved in the world. He was not an isolationist. He said, be involved with the world, but through gentle means of trade, commerce and so forth. Now, if people really believe in the efficiency of private capitalists, incentive, creativity, consumer choice, which is an important measure, I think, in the United States, most people, when they talk about freedom, are really talking about consumer choice. What movies, what books can they watch? But yes, also what clothing and hopefully have the means to make the choice, to have the dollars and so forth. But it seems to me that’s the big struggle now in the world. And if I want to leave this interview right now, because of our time differences, getting to be, you know, 10 o’clock, it’s morning in Beijing, it’s nighttime here. And when I wake up in the morning, I do read the South China Morning Post to see if the world’s still here now from their point of view. And I think about it, the really big issue is, do we believe in this notion of international commerce? After all, Adam Smith was—his championship of the free market was an attack on the cartels that existed in his time. Everybody forgets that. The invisible hand was an attack on what we saw with that array of cartel participants of high tech. The invisible hand means no one can control it, not an Elon Musk, not a Tim Cook or anyone.

And so what’s really at stake, and it circles back to our argument about tariffs, the problem is not with tariffs or no tariffs or so on. The problem is do all the people in the world through whatever their governments are get to compete, to get to compete? And the none-align movement, which most people probably have forgotten as some sort of an anachronism if they ever knew about it, actually was inspired outside of the blocs. And India under Nehru, for instance, was the leader of it. Ironically, BRICS that you’ve referred to and many people listening to might not know what you’re talking about, is amazingly enough an alliance that includes both India and China. When I was growing up and in college and being a student as you were more recently are, China was supposed to be the great, well, it the evidence of totalitarianism if you go kind of socialism, India was gonna be the great hope for freedom and democracy. Now you find much about both of these systems that at least they can still cooperate in BRICS. And they’re trying to straighten out, avoid military confrontation. So in an odd way, most of the world wants what was proclaimed in the non-aligned movement, which is to let each country find its own way, whether it’s Saudi Arabia or it’s Brazil, find their own way and then have a fair, peaceful competition about who can produce things that the rest of the world wants. And it’s really odd to be at this moment where we’re afraid that zealots in the United States, in interest in preserving their power, will destroy choice for the world by ever a more aggressive military action. I mean, isn’t that kind of the odd footnote to this whole post-World War II period? I’ll let you have the last words.

Ben Norton

You raise a lot of very interesting points there, and I wish I could respond to all of them. A few quick thoughts. I agree 100% that the world wants the original goals of the non-aligned movement: respect for sovereignty, peaceful development, the ability to pursue your own independent path of development. Absolutely, that’s very popular, especially in the Global South, which is the global majority. It’s about 86% of the world population. As for free trade, this is a very complicated discussion and I’d be happy to have it continue at another time as well. But in a brief nutshell, what I would say is what I said earlier, which is that it’s funny because obviously I’m very supportive of the Chinese model. I think they’ve accomplished something incredible, I think 800 million people out of poverty, leading the world in the green revolution, in energy transition, in renewable energy, all of that. They’ve done a lot of amazing things. The best infrastructure in the world, high speed rail. But all that said, it does make sense, I think, for me, for the US government to engage in some protectionist policies. I’m not in principle against protectionism, like I said I’m not a free trader. And you know, we were talking about Smith. And if you go back to Adam Smith, and especially if you go to David Ricardo and the original arguments made in support of free trade, the idea that Ricardo made was that countries should trade according to their comparative advantage. However, this was one, according to the idea that capital and labor could not be mobile. And we see that both capital and labor are very mobile in the 21st century. The whole point of offshoring and outsourcing that was made possible because of the mobility of capital through new technology and then through migration, we’ve seen a lot of mobility of labor. It can’t move as much as capital in the neoliberal era. And then the other point of comparative advantage, another problem with this argument is, know, David Ricardo, his famous example was that the UK had a good industrial base and they should produce textiles, which is in their comparative advantage, and Portugal should produce wine, and then they trade with each other. And that’s all fine and good. However, he’s not wrong when it comes to that comparative advantage, and both consumers in both countries benefit. However, what actually happens is that over time, the country that simply, whose comparative advantage is to produce primary commodities, they never industrialize.

And then the industrial power maintains its industrial advantage. And this is exactly what happened with Portugal and the UK. This is what happened between the UK and India because the British Empire imposed free trade on its colonies. India had a very good textile sector before it was colonized by the British Empire. And then the UK imposed free trade and the UK used its more advanced textile sector to destroy the very promising textile industry in India and then India became an agricultural country completely deindustrialized. So what’s funny is that if you look at it from that perspective in the 1970s and ‘80s, the US capitalist class realized that it was in their comparative advantage to be a financial economy, not an industrial economy. So the US deindustrialized and offshored all of its jobs. And what did the US do? Wall Street became the global center of finance, replacing the city of London. Previously, the city of London had been the major banking hub of the world. And then the US Silicon Valley became the technological center for intellectual property. So they designed the products and they maintained a monopoly over intellectual property. But all of the products were produced in other countries. So the US deindustrialized because they decided it was in their comparative advantage to be the technological and the financial hub, not the manufacturing hub. I think that was a horrible, disastrous decision because what we’re now seeing in the US is that you need to have that manufacturing base inside your country, not to produce everything.

I mean, I don’t expect people in the US companies to produce t-shirts and shoes, but like, cars, engines, planes that don’t fall out of the sky, as we see with Boeing, has been completely destroyed by all these finance bros. They brought in all these guys from Wall Street with MBAs who fired all the engineers who knew how to actually make good planes, and they run it like private equity funds run the companies they buy up. What we see is that finance capital has cannibalized industrial capital, and now the US is slowly realizing that they have to re-industrialize. But in order to re-industrialize, you have to take on financial capital. You have to take on Wall Street. There is an antagonistic relation between the industrial capitalists and the financial capitalists, just as there is an antagonistic relationship between capital and labor. And the U.S. government, it wants to have its cake and eat it too. Trump has brought in 13 billionaires as top officials in his administration, including the richest man on earth, Elon Musk.

The Treasury Secretary, Scott Bessent, is a hedge fund billionaire. These are people who—they want to serve Wall Street. Trump, when he was president the first time, constantly tweeted about the Dow Jones breaking new records. So if they’re serious about reindustrializing the US, and I think it’s a good idea, reindustrializing, they would have to take on Wall Street. And that’s why I’m completely skeptical. They’re not gonna be able to do it. What they’re actually going to do, I think, at the end of the day is they’re going to reshore some of what they call “friend shore.” They’re going to move production from China and they’re moving to Vietnam and Indonesia and India and Mexico. those jobs are not coming back to the U.S. unless they take on Wall Street, they significantly devalue the U.S. dollar, which would anger Wall Street. It would be a major blow to any foreign investor. They would withdraw their capital because their U.S. assets would fall against their domestic assets if they devalue the US dollar, you have to take on Wall Street. And until the US government is willing to take on Wall Street, I’m completely skeptical about the possibility of reindustrialization.

Robert Scheer

Yes, and I wrote a book myself called The Great American Stick Up on the Banking Meltdown. And it really goes back to Bill Clinton, who did what Ronald Reagan or the people around him only dreamed of doing. It was Bill Clinton who destroyed—this is why I blame Bill Clinton for Donald Trump. And you know, it’s a serious comment because Bill Clinton was the one who said, end the New Deal restraint on Wall Street, Glass-Steagall and everything else. Free the financial—Lawrence Summers was the poet of this as Secretary of Treasury. They know what they’re doing and so forth. And of course, they knew what they’re doing to enrich themselves, destroy, really, the basis of a healthy capitalism that could make things and make fancy, phony Commodity Futures Modernization Act-approved packages of, you know, and destroy the whole housing market and still never recover. On that note, we’re going to wrap this up. I want to thank you, Ben Norton. I want to get people to check out the Geopolitical Economy Report. If you go to ScheerPost, I try to print everything they do practically. I’m a big fan. And that’s it for this edition of Scheer Intelligence. As far as posting at a KCRW, I want to thank Christopher Ho and Laura Kondourajian there. Our executive producer is Joshua Scheer. Diego Ramos writes the introduction, Max Jones posts the video cast. I want to thank the JKW Foundation in memory of Jean Stein, a fiercely independent writer who gives us some funding, as well as Integrity Media in Chicago. Thank you and see you next week with another edition of Scheer Intelligence.