Foreign Entanglements Are Risky Business

"Linda Sun is under federal indictment for, among other things, allegedly acting as an unregistered Chinese agent. This is more than a personal tragedy for Ms. Sun and an embarrassment for Gov. Kathy Hochul, for whom Ms. Sun served as deputy chief of staff. It is a sign of a changing climate around Americans' engagement with foreign governments. As challenges to the Pax Americana mount, close ties with America's rivals carry reputational and legal risks for individuals and firms.

In the 1930s, Ford Motor Co. struggled to keep its German business viable after Hitler came to power. To curry favor in Berlin, Ford's German subsidiary fired Jewish employees and had to accept Nazi influence in hiring managers and setting policies. In the end, Ford lost control of the subsidiary and its assets. The company suffered lasting reputational damage for its connection to heinous acts (including wartime use of slave labor) that its American-based directors were powerless to prevent.

Today, American companies with significant footprints in countries like Russia and China face pressures similar to those Ford did in the 1930s. Then as now, what looks like the cheapest course -- accommodating foreign government pressure to protect in-country assets and market access -- carries large but hidden and unpredictable costs.

The rules can change fast. During World War II, the Soviet Union was America's most important military ally, and many liberals and Democrats agreed with Franklin D. Roosevelt that postwar cooperation with Moscow was the road to lasting peace. The battle over whether America should align with Britain (still an imperial power struggling to hold onto as many of its colonies as possible) or "progressive" powers like Stalin's Soviet Union tore Democrats apart in the early years of Harry Truman's presidency.

During the period of friendly relations, many influential U.S. officials tried to tilt America's postwar policy in a direction favorable to, or at least compatible with, Stalin's interests. Some of these people were conscious agents of the Soviet Union. Others acted out of a mistaken belief in a community of interests between Stalin's Soviet Union and the U.S.

But the rules changed as Stalin's true purposes became harder for all but the fuzziest-minded to ignore. Those who had favored U.S.-Soviet accommodation were seen to have been wrong. Those who gave information or assistance to the Soviets were seen as dupes at best, traitors and spies at worst.

Some found themselves in a terrible trap. The Soviets weren't above using blackmail to keep their old friends in line. Those who as hotheaded young people fell for the allure of communism in the 1930s and enjoyed chatty relationships with Soviet officials in wartime could be blackmailed into further cooperation by threats to reveal embarrassing or incriminating details about their past activities.

As the public woke up to the degree of Soviet penetration of key American institutions ranging from Hollywood to the Manhattan Project, the determination to identify and punish pro-Soviet traitors became a driving force in American politics.

 Like so many waves of passion in mass democracies, this went too far at times, triggering McCarthyite excesses as well as healthy reforms that enhanced national security.

There are some differences. In the old days Red and Pink Hollywood screenwriters and directors made pro-communist movies out of conviction; today Hollywood executives kowtow to Beijing to make money. Nevertheless, amid today's populist skepticism about Wall Street and big business on the left and the right, companies that have deep links with China will, like Ford in the 1930s, come under increasing pressure from both sides.

If U.S.-China relations continue to deteriorate, actions, advocacy and relationships that looked normal and benign in the warmer climate of the past will begin to appear sinister. And public opinion is likely to turn with a vengeance on those who crossed or are believed to have crossed the line into becoming assets of a hostile autocratic regime. It won't be only about China. As American society adjusts to a more threatening international climate, all relations with foreign governments and entities will come under closer and less sympathetic scrutiny.

If 30 years ago the key to business success was embracing the opportunities of a rising China, today the key to avoiding catastrophe is navigating the dangers of decoupling. Prudence as well as patriotism should lead companies and individuals to stick closer to the flag as the global scene darkens. Those who fail to move with the times could face serious consequences in the new environment that is, unfortunately, taking shape." [1]

 McCarthyite excesses were results of a fight for primacy. Is the post industrial West in a position to fight anyone for primacy? No? So what are we here talking about...

1. Foreign Entanglements Are Risky Business. Walter Russell Mead.  Wall Street Journal, Eastern edition; New York, N.Y.. 10 Sep 2024: A.13.