The Manchurian Capacitor

The 1962 Spy Thriller

“Why don’t you pass the time by playing a little solitaire?”

In the 1962 thriller The Manchurian Candidate, a U.S. Army platoon is captured during the Korean War and taken to China. There, the platoon is brainwashed by Chinese and Soviet spymasters into believing that their sergeant, Raymond Shaw, rescued them all from the hands of the enemy. Not only that, everyone in the platoon believes (and repeats) that Shaw “is the kindest, bravest, warmest, most wonderful human being” any of them have ever known in their lives. Shaw is awarded the Congressional Medal of Honor. The nefarious Communist plot is to turn Shaw into a sleeper agent who will rise through the U.S. intelligence and political establishments. Once he’s in place, the Chinese can trigger him by suggesting that he play a little solitaire. When Shaw turns over a red queen, the sleeper agent is activated.

Fast forward to May 1, 2020: The Trump Administration issued Executive Order 13920, Securing the United States Bulk Power System.

The Executive Order acknowledges that the U.S. bulk-power system (shorthand for the interstate electricity transmission system) is a target of foreign adversaries of the U.S. who seek to commit malicious cyber- and other attacks on our bulk-power system. Historically, blackouts in the U.S. have affected areas or regions, but none have stretched from coast to coast. Still, anybody who has been through a blackout knows that the failure of the electricity grid is catastrophic, no matter how localized the outage. Electricity is the unnoticed platform that supports modern civilization itself.

The Executive Order prohibits the unrestricted acquisition or use in the United States of any bulk-power system electric equipment designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of foreign adversaries. Any such acquisition or use is a “transaction,” and such transactions are prohibited even if any related contract, license or permit was entered into or granted prior to the date of the order. (Executive Order 13920, Sec. 1(c)).

The order itself doesn’t name the foreign adversaries with whom transactions are prohibited, but the State Grid Corporation of China, the world’s largest utility, most likely tops the list.

State Grid has been on an acquisition binge for several years. As far back as 2012, State Grid became the largest shareholder in Redes Energeticas Nacionais, Portugal’s national power grid. In 2013, State Grid began acquiring interests in utilities and transmission and distribution networks in Victoria and New South Wales, Australia. In 2014, State Grid took a substantial equity stake in Italy’s CDP Reti, which operates both electricity and natural gas networks. Brazil, Laos and some countries in central Africa have also been recipients of State Grid’s interest, in particular with regard to the development of ultra-high voltage transmission facilities that can transmit power over very long distances with relatively lower line losses. (There are still line losses, however.) Many have viewed Beijing’s rapid international expansion of its electricity industry as a geopolitical companion piece to its Belt and Road Initiative.

Presiden Xi Jinping of the People’s Republic of China

A Manchurian Capacitor (used to improve power factors) is a distinct possibility. If China were to build into the grid equipment it sells in the U.S. sleeper mechanisms that could cause a breakdown in our electrical grid, the effects would be catastrophic on a historical scale. But even short of this, a threat by China to trigger a grid failure in the U.S. would be much more plausible, and therefore much more effective, than a threat made with ICBM’s that could end China’s existence as well as ours.

Executive Order 13920 signals a fundamental change in the perception of China since the outbreak of the global Covid-19 health crisis. Nobody wants electric grid equipment that Xi Jinping can tell to go play a little solitaire.

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Oh the Places You Won’t Go!

 

Note how young McGurk’s placement of elephants complies with CDC recommendations on social distancing.

Oh, the Places You Won’t Go!
by Paul G. Neilan (styled after Dr. Seuss)

You have brains in your head.
You have feet in your shoes.
And you thought you could go
Any direction you choose.

But then something happened
To up-end your plan:
Folks started dying
In a place called Wuhan.

With your shoes full of feet and your head full of brains,
You shouldn’t have to worry ’bout buses and planes.
In Wu-han things happen, and frequently do,
To folks who eat bats and pangolins too.

You never eat bat, so no need to take fright.
Kudlow said “We’ve contained this, pretty close to airtight.”
And the president asked “Why the long faces?
“It’s one guy from China, and just fifteen cases.
“I alone can fix it,” said Trump, like a hero.
“Inside of a week, I’ll bring that to zero.”
Our very stable genius said “Yes, we’re the best!
“And anybody who wants to can get their own test!”

Then Trump got real testy, and nasty, and grouchy
When warnings kept coming from Anthony Fauci.
Fauci said, “Of test kits we’ll need to get millions,
“Or the economy stands to lose multiple trillions.
But his warnings fell on deaf ears autocratic,
Which can happen when spreaders are a-symptomatic.

“Mr. Trump,” Fauci said, “it’s a danger, it’s a fact.
“You’ve got to trigger the Defense Production Act.
“I’m sorry to say, sir, but sadly, it’s true,
“That plagues and pandemics can happen to you.
“We’ll get all hung up in a prickle-ly perch
“With the GDP cratered and the Dow in a lurch.”

Then Trump said to Fauci “Don’t worry, don’t stew.
“Each year tens of thousands die from the flu.
“No,” said Trump, “you’re just a big whiner.
“I know what to do. I could do nothing finer,
“Than slap a big ban on travel from Chiner.

“Just look,” said Trump, “at that high S&P!
“And if things go south, I’ll just blame it on Xi.
“By April, you’ll see, when the weather gets right,
“This will all blow away like an old paper kite.”

Then he turned on his heels, pleased by his retort,
And flew off to play golf at a nice Trump Resort.

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China’s Slow-Down

Xi Jinping, President of the PRC and General Secretary of the Chinese Communist Party

Thus does le capitalisme dirigiste hit the wall.  CNBC reports that China’s economic growth edged down to 6.9 percent in the final quarter of 2015 as trade and consumer spending weakened, dragging full-year growth to its lowest in 25 years. Since virtually no self-respecting Western economist or business forecaster believes any official Chinese government-issued economic data, it’s a fair bet that China’s real growth rate is much, much lower than that.

Only a few years ago, foreign money flooded into China as one of the so-called emerging market economies, along with Turkey (which The Sparkspread addressed recently), Brazil, and a few other countries. Commodity prices boomed along with the China boom, although the China boom itself was a debt-fueled spree enabled by China’s banks — under state direction, of course. It made the 1980’s LBO boom in the US look like a sedate tea party. For example: China manufactured more cement between 2010 and 2013 than the United States produced during the entire 20th century.

That is mind-boggling. But the party has to run out of booze at some point, or else the guests reach the point where they lie insensible on the floor, unable to imbibe one more drop.

China’s banks funded all of the booze and buffet tables with huge loans, most of which will never be paid back. The “lackluster” 6.9% growth rate reflects in part the exhaustion of the country’s banks. How can they continue to lend the vast sums needed to prop up China’s exorbitant growth rates? The short answer is, they can’t. When China reports a 6.9% growth rate, it’s more likely that the country’s real growth growth rate is stuck at mid-1970’s levels, back when Mao Tse Tung held the reins.

This is coupled with something of a national identity crisis. What does it mean to be China in the world of the 21st century? It is building artificial islands in international waters and claiming that such construction makes them Chinese territorial waters. It has one aircraft carrier and wants a few more. Its economy did grow by leaps and bounds, every year, for the last few decades. But how does China reconcile all that money and muscle-flexing with its traditional victimology? True, China was a victim of past aggression, whether from the West in the 19th and early 20th centuries, or from Japan between 1931 through the end of WWII. But its recent and remarkable progress imports assumption of a greater responsibility for constructive leadership in the world. Whether the country lives up to that responsibility remains to be seen. It certainly won’t happen without internal stability. The legitimacy of China’s Communist Party rule depends in large measure on a continued impressive growth rate, and that is by no means a sure thing.

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