Russia and China Get Married
Guess who turns out to be the jilted party.
It’s an open question whether the policies of the Biden Administration do more damage to Russia or America. There is no question, though, that they are a gift to the People’s Republic of China.
Russia is pretty much an energy export economy. So when the West cut off its purchases, ever so slowly, Russia turned to its Eastern neighbor, which has an insatiable demand for fossil energy.
Prices may not be as good, but China provides a solid and reliable floor under the Russian economy. Plus, of course, it’s a great deal for an energy starved China, supposedly our most serious global rival.
So let’s get this straight: We have modestly inconvenienced Russia, whose economic demise has been greatly exaggerated, but in the process, enormously advantaged, in China, our major global adversary. The only upside is that with more oil and gas, China will build fewer carbon-spewing, coal-fired power plants.
Meanwhile, at home, President Biden’s war on America’s finest industries, and, ultimately, America’s all important economic growth, rattles on. With the Inflation Reduction Act, the very name a triumph of false advertising, the Administration has ratcheted up its war on the pharmaceutical industry.
By authorizing Medicare to dictate prices of small molecule drugs after nine years on the market and biologics after 13 years, the 20-year protection offered by our patent laws has been effectively nullified. This means drug development will be less profitable, QED, fewer drugs will be developed.
Mr. Biden’s budget office, in an obvious, tendentious underestimate, tells us it will result in only 11 fewer new drugs. At the opposite end of the spectrum the Pharma industry estimates more like 150.
It’s true Medicare will save money by not paying for the drug which was never invented, but it will get to continue paying for the hospitalization, rehabilitation and long-term care which the missing drug might have averted.
Generally, this is a bad trade. In addition, it’s bizarre that Mr. Biden would decide to undermine the economics of one of America’s global leading industries. Most people remember during the Covid pandemic that no one lined up to get the Russian or Chinese vaccine. Maybe if Mr. Biden has his way, it will be different next time.
At the same time, the attack on America’s energy industry, another indisputable global leader, continues in force. No, the cancellation of the Keystone pipeline hasn’t been reversed. No, Federal lands are still mostly off limits to new drilling.
No, there has been no relaxation of policies discouraging banks from lending to the fossil fuel industry. Even gullible Senator Manchin didn’t get his promised pipeline deal, for which he traded what remained of his sacred honor when he cast the deciding vote for the Inflation Reduction Act.
What about Mr. Biden’s support of the semiconductor industry? Isn’t that good for American business? As the Wall Street Journal noted in a recent editorial, there are so many social welfare, and union-inspired strings attached to semiconductor handouts that any ensuing new capacity is guaranteed to be the world’s high cost producer.
High cost, of course, is what drove the chip industry offshore in the first place. Since the Biden Administration has nothing approaching a supply side remedy for inflation, it has left the Federal Reserve to fight alone with the only weapon it has, higher interest rates.
These will work, as Paul Volcker proved, but as someone observed, it’s the economic equivalent of chemotherapy. Some of the patients are starting to drop. We wouldn’t say higher interest rates were the sole cause of the collapse of the Silicon Valley Bank, but it didn’t help that the bank took a $2 billion loss in its Treasury bond portfolio.
That happened as it liquidated Treasuries in its desperate search for liquidity. It also didn’t help that SVB’s loans were heavily weighted toward wacko green investments. Well, maybe this was helpful in procuring a bailout for the uninsured depositors.
Over the past few years, the liberal press has spent its remaining credibility trying to persuade us that Mr. Putin was key to Mr. Trump’s 2016 election. The press also gave top billing to the assertion by a host of national security luminaries that the Hunter laptop was Russian disinformation designed to re-elect Trump in 2020.
They must take Mr. Putin for a fool. Mr. Biden has been the best friend Russia has had in our presidency in years. Now Communist China’s investment in the Biden family enterprise appears to be paying off well.
Whether Mr. Biden recognizes the results of his handiwork is not clear. He is old enough, though, to remember President Nixon’s geo-political triumph, his trip to China to exploit the widening rift between China and Russia.
Nixon’s clever maneuver gave America a generation of advantage over its potential adversaries in Moscow and Beijing. Now that advantage is history. Russia, faute de mieux, has become the answer to China’s energy prayers, and China the answer to Russia’s economic isolation. Such a happy marriage.