Huawei, Fortinbras and Xi Jinping

TS Eliot’s summary judgment on Shakespeare’s Hamlet – “So far from being Shakespeare’s masterpiece, the play is most certainly an artistic failure” – brands the Nobel laureate as a ninny. Eliot propounded a cramped, Aristotelian, pettifogging, aestheticizing view of art, and crouched tight-jawed and squinty-eyed before Shakespeare’s sprawling genius. Hamlet is both a tragedy – a national tragedy as well as a personal one – and a sprawling comic romp. It is a tragicomedy in the mold of the first great dramatic work of the modern period, de Rojas’ 1499 play Celestina.

Hamlet is also a play for our times, an object lesson for the United States and a solemn warning to us all.

Here is the plot of Hamlet in a nutshell: The soldiers who meet the Ghost of Hamlet’s murdered father on the ramparts of Elsinore Castle were not posted there by accident: As they explain in the play’s opening lines, the King of Norway, young Fortinbras, will invade Denmark soon, and they are set as lookouts. The Ghost comes along and distracts them and young Hamlet, and the dramatis personae engage in various machinations until, at the end, all of them lay dead on the stage. Just as Hamlet expires, who should enter but Fortinbras, who asks: “Who’s in charge here? Uh, everybody’s dead. I guess I am.”

Shakespeare’s audience doubtless rolled in the aisles. Fortinbras, the play’s shadow protagonist, typically is cut from modern productions (for example, the 1948 Laurence Olivier film version), which makes the rest of the action meaningless. Such is the atrophy of the modern sense of humor.

In our present version of Hamlet, the role of Fortinbras is played by Xi Jinping. China wants dominant position in what it calls the Fourth Industrial Revolution – the transformation of economic life by ubiquitous high-speed communications and artificial intelligence. Industrial robots that talk to each other and work out industrial processes without human input, mining robots operated via 5G by technicians with virtual reality visors, a global medical system powered by real-time uploads of the vital signs of a billion smartphone users and digitized health records, autonomous vehicles, e-commerce and e-finance links easing the retail transactions of billions of people will become standard over the next two decades.

Meanwhile, the United States has invested virtually nothing in the driver of this revolution, namely high-speed, infinite-capacity and zero-latency broadband. Less than 1% of all venture capital investments are now devoted to hardware. The American tech giants are content to invest in high-return, infinitely-scalable software and leave the physics to Asia. In 2015 America shipped about 30% of semiconductors worldwide, but barely 10% today.

No American company offers 5G manufacturing equipment, which has become a Chinese monopoly. Huawei dominates the market with a 30% market share, but its two largest competitors, Ericsson and Nokia, depend on a Chinese supply chain, offering equipment with the same components, but a Scandinavian label and a higher price.

The extent to which the balance of industrial power has shifted to Asia is clear from the abject failure of the Trump Administration’s high-profile campaign to stop Huawei. US restrictions on component sales to Huawei allowed the Chinese giant to substitute Japanese and Taiwanese suppliers, and produce smartphones and 5G equipment with no US inputs. Huawei now offers smartphone and server chips that compete with the best that Qualcomm or NVidia have to offer. China has hired a tenth of Taiwan’s chip engineers to speed the construction of mainland foundries that will ensure China’s autonomy. No American company produces 5G equipment.

And now British Prime Minister Boris Johnson, the closest friend and ally that President Donald Trump has among the leaders of major nations, has spurned Washington’s urgent demands –communicated in person by the American leader in a January 24 telephone call and on social media by Secretary of State Mike Pompeo – to exclude Huawei from the buildout of Britain’s 5G networks. When your best friends give you the cold shoulder, it’s time to consider whether you are the problem rather than they.

Washington’s threat to reduce intelligence sharing with countries that do business with Huawei rings hollow, because quantum cryptography will eliminate America’s longstanding capacity to intercept and decode satellite transmissions of voice and text communication. The screens will go dark at the National Security Agency in a couple of years, and the US will have little intelligence to share.

Former House speaker Newt Gringrich tweeted, “British decision to accept Huawei for 5G is a major defeat for the United States. How big does Huawei have to get and how many countries have to sign with Huawei for the US government to realize we are losing the internet to China? This is becoming an enormous strategic defeat.” Gingrich wants the United States to invest urgently in its own 5G capacity rather than merely blaming China, and wrote a powerfully-argued book on the subject which I reviewed here.

The United States borrows $1 trillion a year to fund its deficit. Seventy-five percent of federal expenditures fund transfer payments, which will rise as a rapidly aging US population receives more pensions and medical services. Extremely low interest rates, aggressive spending and low taxes have given the US a consumer-driven expansion. The trade war with China, meanwhile, has led to a mild industrial recession, with the output of physical goods falling during the last three quarters of 2019.

In real terms, US capital goods orders (excluding transportation and defense) are 10% below their recent 2012 peak.

Most alarming is that the major US telecom companies, Verizon and AT&T, haven’t increased capital expenditures as 5G becomes available. Their European counterparts have increased CapEx by 50% to 100%.

Fortinbras invaded Hamlet’s Denmark. His modern avatar Xi Jinping doesn’t covet Cleveland, but aims for a controlling position in the decisive technologies of the 21st century. The United States is busy with the twists and turns of a macabre political plot that serves as a distraction from the main thread of the plot. As I wrote on January 26, the Pentagon last week abandoned attempts to further restrict US component sales to Huawei, arguing (correctly) that they would hurt American tech companies more than they would hurt China. And now the United Kingdom has asked Washington, “What have you done for us lately?”

The United States should cancel an aircraft carrier or two and announce a whatever-it-takes, Manhattan Project-style program to build out its own 5G capacity. Short of that, it has no choice but to reconcile itself to the mediocrity of its circumstances.


By Spengler
Source: Asia Times