President Donald Trump has threatened tariffs against China. According to Dr. Jonathan Leightner, an economics professor at Augusta University and author of “Ethics Efficiency, and Macroeconomics in China”, the trade war is the small problem. There is a greater issue at hand that relates to national security.
Brad Means: What about China? A lot going on between the U.S. and that nation right now and to talk more about it we have Dr. Jonathan Leightner. He’s a professor of economics at Augusta University. Dr. Leightner, thank you for being with us. Also, before you respond to that, noted author of this book. Ethics, Efficiency, and Macroeconomics in China. So we couldn’t think of a better person to have on The Means Report than someone who not only knows his stuff at the collegiate level, but has also written about it. So he has immersed himself in his career in this and we thank you for sharing some of your life’s work with us. Also kudos to your son for that excellent illustration on the cover of that book. I think that’s beautiful artwork and I think that you should reach out to Dr. Leightner if you want to see more for where that came from. It’s great, great stuff from your son. Dr. Leightner, first of all, let’s talk about the relationship with China and the recent suggestion that President Trump may levy tariffs against this country for their exports, or the Chinese goods that we allow into this country. Why is this happening? Should it have happened sooner? Should it be happening now? Or is that too much of a political question?
Dr. Jonathan Leightner: What you need to understand is a lot of times people argue about simpler questions when there’s a bigger issue behind that is much harder to be solved. For example, my mother and father would argue about the weather in North Carolina when the real issue was she did not want to leave Dallas, Texas away from her friends and move to North Carolina, but they argued about a minor issue because it was more minor and the big issues cannot be solved.
Brad Means: You think the trade war’s the minor stuff.
Dr. Jonathan Leightner: I think the trade war is the minor stuff.
Brad Means: Why?
Dr. Jonathan Leightner: I think that the real issue is is that the Chinese government is sponsoring technological advances in ways that could threaten us in serious fashion, so Xi Jin right before this trade war started, Xi Jinping announced China in 2025 in which he said that he wants China to be the world leader in artificial intelligence and high-tech things by 2025 and he was going to put state funds into that and help develop those industries.
Brad Means: So when you talk about, you’re talking about spying.
Dr. Jonathan Leightner: Yes.
Brad Means: Hacking.
Dr. Jonathan Leightner: Hacking.
Brad Means: But not hacking and spying as we know it, this is kind of like the level of hacking and spying that we can’t stop.
Dr. Jonathan Leightner: This is true. China has, for about the last 10 years, been researching quantum communications. Now for those of you that remember your days in physics there was a man by the name of Heisenberg that came up with the Heisenberg uncertainty principle.
Brad Means: Wait, that’s not that guy from Breaking Bad?
Dr. Jonathan Leightner: No.
Brad Means: All right, Heisenberg.
Dr. Jonathan Leightner: Heisenberg came up with, actually the Breaking Bad guy was named after this Heisenberg.
Brad Means: Right, I wanna make sure, we have some younger viewers. You know, just wanna make sure that they stay in tune with what you’re talking about. This is the original Heisenberg.
Dr. Jonathan Leightner: This is the original Heisenberg.
Brad Means: Yeah.
Dr. Jonathan Leightner: Heisenberg came up with the uncertainty principle in which he said, if you can identify where an electron is you cannot know its speed. If you know its speed you cannot know where it is. So if you gain certain information you lose the ability to get other information. If you can have communications that use quantum physics then the idea is if the U.S. tries to hack it immediately when they locate it, it will disappear.
Brad Means: So it’s not only, you’re not gonna be able to know what we’re talking about, U.S., says China, but if you try to know what we’re talking about we’ll instantly know and we’ll move in another direction.
Dr. Jonathan Leightner: Exactly, and you won’t be able to actually read it. Now if they are able to get to this type of technology first then they could hack into our communication stuff, which they have been doing. We know that China’s hacked into the Pentagon and hacked into all kinds of company data in the United States. They could hack in and know our plans. They could intercept our plans, but we would not be able to hack into theirs.
Brad Means: All right, so here’s what we’re gonna do. We’re going to catch up with them because our technology is better. We have Silicon Valley, what do we lack? The government funding that they have?
Dr. Jonathan Leightner: When it comes to technology, there are two types of forces that are two types of approaches that give you different types of advantages. So in the old Soviet Union or in China when the old Soviet Union wanted to create their space program, they sent their space people to the best universities in the Soviet Union and asked their teachers, who are your best students? And they’ll get a list of those students and they would contact those students and say, when you graduate you will work for us. Now, they pay them better than the average student, the average worker, but those students had no choice, but they could put the best minds together to work on developing their space program or their military equipment and that is how they beat the United States.
Brad Means: So are they sending Chinese people here to learn all you can then come back home, or are they plucking our people?
Dr. Jonathan Leightner: Both, they’re doing anything they can. They’re reverse engineering things. They’re sending their people here to study.
Brad Means: Are they stealing things?
Dr. Jonathan Leightner: Oh, all the time. They will take…
Brad Means: Should I be scared?
Dr. Jonathan Leightner: There is some reason to be concerned that a lot of our military equipment uses chips that were made in China, and could those chips have been hard-wired so that if China sends out a message it could shut down our airplanes, our submarines, our ships?
Brad Means: OK, so here’s the question. If they are already using physics to talk in secret instead of the old fashioned, old school binary code that everybody else uses, sanctions aren’t gonna stop them. Tariffs aren’t gonna scare them. Why are we even going that route?
Dr. Jonathan Leightner: Because the big issue is one, that it’s like I said, my parents argued about the weather. So Trump started all this trade war issue when he read a report about China’s advances in technology and about how China requires our companies that come to China to give them the source code for their computers and give them the technology. So take the case of GM. When GM and our other auto manufacturers ran into major trouble in 2007 to 2008 in the Great Recession, the United States gave TARP funds to our auto companies to help them weather the problems.
Brad Means: Yeah, to bail ’em out.
Dr. Jonathan Leightner: To bail ’em out. But we required that those TARP funds only be used for their U.S. manufacturing facilities. Well, GM had manufacturing facilities all around the world. GM had a joint deal with Shanghai Motors in China 50-50. Well, when they had trouble, Shanghai Motors said, we’ll buy the golden share to make us have 51% and you have 49% for this huge amount of money and we’ll arrange for loans from our government and all this sort of stuff, which bailed out GM’s China operations. After that the payoff has been huge. China has suggested that GM shut down their South Korean operations, and they did. China suggested that they shut down their Australian operations and they did. China suggested that GM be a way of China exporting cars into the U.S. and GM is cooperating.
Brad Means: If quantum communications is the headline here, how is the U.S. doing on that front, and does it just need more money from the government to subsidize those efforts?
Dr. Jonathan Leightner: I honestly do not know how the U.S. is doing with quantum communications, but–
Brad Means: I mean, I can’t see that China’s lapping us on it.
Dr. Jonathan Leightner: Oh, they are. China has put up a quantum communications satellite. China has communicated between long distances with quantum communications and we have not. So what I’m saying is, the U.S. with our technology has an advantage when we have competition. So for example, Augusta University has a cancer center and we are trying to come up with the cure of cancer before any other cancer center does, and if we do that will make us famous and give us great, great amounts of funding and be wonderful, it’d be historic.
Brad Means: Sure.
Dr. Jonathan Leightner: But we’re competing with all these other cancer centers and in essence we’re duplicating efforts. And all the minds across the United States are not working on curing cancer together. So there’s an advantage with competition because it spurs us on.
Brad Means: Right.
Dr. Jonathan Leightner: But the other side is, if you have a state sponsored organization like the Chinese government or the Soviet government putting all the best minds together you lose that push of competition, but you can also have a gain from the best minds cooperating and working on it. So Trump is concerned that China’s sponsoring this type of technology, getting all the best minds together could end up giving them an advantage like the Soviet Union had getting into space before us. Though we beat them to the moon.
Brad Means: Dr. Leightner, we’re gonna have to wait to see who wins this race when it comes to quantum communications, but thank you for shedding a lot of light on it. We appreciate it, and the next time you hear the word tariffs on TV, think about what’s going on behind the scenes based on what you just said. We appreciate you.
Dr. Jonathan Leightner: Thank you for having me.