Seventy years ago the nation was engulfed in the paranoia of McCarthyism; the “Second Red Scare” reminded Americans that there was no room for communism in the United States. It is ironic that, today, the American economy is incrementally dependent on China, a country with a communist government and a market-driven economy. This outcome, incrementally constructed by Republicans and Democrats close to thirty years ago, ultimately gave rise to a new wave of nationalism that views China as a national threat. The tariff war initiated by President Trump’s administration, in order to deal with this threat, has not diminished this dependency, on the contrary, it forced the Chinese government-business partnership to re strategize around the protectionist policy, moving aggressively toward Foreign Direct Investment in the United States. By investing directly in our economy, they have not only been able to bypass the restrictions imposed by the tariffs, but they have also been able to win the hearts and minds of disenfranchised American blue collar workers, while at the same time accessing and controlling key strategic resources, such as lumber in Maine. The case of Nine Dragons Paper (Holdings) Limited illustrates how the Chinese government-business partnerships has not only revived the paper industry in Maine, but the communities dependent on this historic commodity as well. I wonder what former Senator Joseph McCarthy would think about the recent dynamics of Chinese expansionism into our own market.
Who could have imagined seventy years ago that a Chinese company, backed by the Chinese Communist Party, would become the backbone of mill towns such as Old Town and Rumford, Maine. ND Paper, a wholly-owned subsidiary of Nine Dragons Paper, began operations back in 2018, specializing in key products demanded by the Chinese economy. Rumford’s operation, now vertically integrated to the Old Town plant, supplies it with pulp necessary for the specializes production of unbleached softwood kraft pulp exclusively exported back to China.
Maine’s lumber, once destined for the diversified production and supply of products for the American and global paper markets, now supplies the specialized needs of the Chinese economy. Maine, in essence, has become an extension of China’s Belt and Road Initiative; the long-term global development strategy designed by the Chinese Communist Party, that involves infrastructure development and investment initiatives in Asia, Europe, the Middle East, Africa, and the Americas.
States like Maine, that lag behind the economic growth patterns of dominant national markets, such as California and Texas, are behaving more like emerging markets than integral parts of an advanced industrial economic machine. Maine, like many other states across the nation, is selling its strategic resources to foreign interests, while attracting Foreign Direct Investment (FDI) through race-to-the-bottom economic development strategies engineered to benefit the foreign investor at the expanse of long-term economic development strategies that would benefit the local economy.
Capitalizing on the lack of awareness of constituents, that are more concerned about local than global issues, state representatives and other local authorities went above and beyond in order to attract foreign capital investors, such as Nine Dragons Paper, providing them with fiscal and non-fiscal incentives that eventually come at the expense of the average tax payer. Political strategies that are no different than those implemented by emerging economies across the world in order to attract FDI.
As in the case of Colombia, Nigeria or Vietnam, that have gone above and beyond in order to attract Chinese FDI, Maine’s authorities and the American federal government were able to put aside the current “security” threat, opting instead to loosening their control over the forest resource and industry. Seventy years ago, McCarthy would have seen this as a sign of the eminent threat of Communist expansionism; today, it is seen as the daily dynamics of global business. Strategic resources in the hands of foreign interests is no longer seen as a threat to national security, at the end we preached this same justification when our capital and our multinational corporations expanded across the world in order to control foreign strategic resources throughout the twentieth century.
While our government uses tariffs as a temporary remedy to a systemic problem, the Chinese government-business partnership continues to take advantage of the accelerated globalization of the market in order to control global resources, and develop the same system of capital dependency that we constructed in the last century. As I have mentioned in previous blog entries, we are losing at the game of globalization that we engineered during the second half of the Twentieth Century. We are so confused as citizens, consumes, and policy makers, that we do not understand, collectively, that if we do not play the game right then we will be defeated by our own creation.
The Chinese government-business partnership is not only outpacing us in the global market but it is slowly building leverage and strengthening its capabilities within our own domestic markets. Meanwhile we sit idle, while we engulf ourselves in domestic social and environmental debates that only polarize us even further, as the long-term vision of the Chinese Communist Party unfolds in front of your eyes, here in our own back yard.
The presence of Chinese FDI in Rumford and Old Town is just the tip of the iceberg. Its presence may be found across all sectors of the US economy, imposing a business culture that collides with American principles, as clearly depicted in Julia Reichert and Steven Bognar’s documentary “American Factory.”
McCarthy would have never believed that America’s corporate sector would sacrifice the nation’s economic stability for the sake of greater profits and capabilities overseas, while opening the domestic market to foreign interests. The push of multinational corporations for the globalization of the market eventually tore down the taboo against Communism, putting politics and ideology aside and replacing them with free market principles of capitalism that were sold by representatives across the aisle to their constituents back home. This long endeavor of close to thirty years is what eventually allowed Chinese FDI to take over key strategic markets across the United States.
Emerging economies were the traditional target of global multinational corporations looking for cheap labor, unregulated markets, and vast natural resources. Now, states such as Maine, find themselves on the radar of these same global companies, as our policy makers open up our natural resources to the global market system. This is why today our electricity belongs to Canadian and Spanish companies, our aquifers to Nestle, our farm-raised salmon to British and Norwegians, our lobsters to the Canadians, and now our lumber to the Canadians and the Chinese.
I am not arguing that we should block FDI from entering our country, at the end it is the salvation for many markets across the United States that were abandoned by American investors that opted to invest in foreign markets in exchange for greater returns and access to greater capabilities and resources around the world. What I am recommending is a more responsible and accountable approach to FDI that does not send our local economies into a downward spiral, but that instead demands higher standards, and social and environmental accountability, as the price to pay for doing business in states like Maine. ND Paper is welcomed as long as they are respectful of our cultural value systems, accountable to our labor force, and committed to the sustainability of our forests. Maine could become the benchmark for new patterns of globalization, a race to the top model that could be replicated by markets across the world.