Bill on Secure Freedom Radio 2/7/2022

Frank Gaffney (00:00):

Welcome to Secure Freedom Radio. This is Frank Gaffney, your host and guide for what I think of as an intelligence briefing on the war for the free world. A man who we have come to rely upon for his acumen about particularly the financial and economic dimensions of that war is our first guest, I’m pleased to say, as he generally is with us on Mondays, his name is Bill Walton. He is the host of a marvelous television podcast program entitled The Bill Walton Show. He brings to it considerable experience and acumen about the financial sector from his time on Wall Street, running Allied Capital Corporation. He has been also involved in, more recently conservative movement policy making with the council on national policy, which I’m proud to be a member. And he has been a very faithful contributor to this program for which we are, as I say, very grateful.

Frank Gaffney (00:56):

Bill Walton, it’s good to have you back with us. One of our favorite beats is China, and it is the gift that keeps on giving in a very diabolical way. I want to go through with you a number of topics that bear on this issue of its unrestricted warfare against us, and in particular Bill, the degree to which we are enabling it with our corporate support, sponsorship, technology transfers, either voluntary or involuntary transfer of intellectual property and the like. There are eight companies that have been particularly identified as complicit with China in these and other regards. Walk us through what we know about them and why this is such a [crosstalk 00:01:48].

Bill Walton (01:47):

Frank, what we’re talking about here is something called the corporate complicity scorecard. And it’s put out by Victims of Communism and the Horizon Advisory Group. And what they did was they took a look at some of the major corporations, multinationals based in the United States, and took a look at the work they were doing to aid and abet China in its global ambitions. And it’s an extraordinary report, I highly recommend everybody look at it, but the people that they, the companies they single out are Amazon, Apple, Dell, Facebook, GE, Google, Intel, Microsoft, and it turns out while they were all preaching to us about ESG, they’re working very closely hand in hand with the Chinese Communist Party to help them achieve their technological aims.

Bill Walton (02:38):

And also I think three or four of these companies have operations in the province where they’re performing, the Chinese are, they’ve got a genocide campaign against the Uighurs, so it’s bad stuff. And the only thing that these companies could say in defense is that 10, 15 years ago, the consensus was everybody ought to be going into China, but in the last three to five years, particularly since Trump became president it’s been red alert on doing business with China. And instead of cutting back on their operations, they’ve increased them.

Frank Gaffney (03:13):

Doubling down, or in some cases like Larry Fink of BlackRock tripling down is his recommendation. And Bill, I think just a word of explanation, we’ve talked about it a lot, but it seems to me in order again, the degree to which this whole notion of environment, social justice, and governance is absolutely at odds with how the Chinese Communist Party operates, its predations against the environment, its horrific repression of people, it’s hardly social justice. To say nothing of its lack of transparency in its business dealings, all makes a mockery really of the ESG agenda and yet these folks were busily, as you say, and the victims of communism, Memorial Foundation more to the point says so powerfully, this hopefully is another element in an effort to change course. It’s long overdue as you’ve indicated, but it’s really getting dangerous, I think, as these technology transfers and other assistance, financial, not least, is enabling our mortal enemies clearly now I think being recognized as such increasingly.

Bill Walton (04:30):

Well, that’s true. The interesting, the ESG investing world, there’s been some movement here. It was for a while the darling of all the investment companies and investor community, and people are waking up to the fact that this doesn’t really achieve very high return on investments. And when it comes to people’s portfolio, especially when we’ve seen an 11% decline in the NASDAQ since November, ESG investing is down 90% year over year in the last month. And so investors are waking up to the damage this could be doing to their portfolio and it will be intriguing to see how Larry Fink reacts to this. Now this is one month worth of data. We don’t know, we’ve got a long term trend, but I suspect that people are waking up to the illusion that ESG investing is creating high returns on capital. And that’s really what investments have to be about. You got to entrust your money to companies that want to increase your capital and put it into the stuff that grows.

Frank Gaffney (05:33):

One would certainly hope that, that’s what it’s about though, this whole idea of stakeholder capitalism, as opposed to shareholder capitalism has sought very explicitly really to turn that proposition on its head. Hasn’t it?

Bill Walton (05:47):

Well stakeholder, I’ve got an interesting take on stakeholder capitalism. As a recovering CEO I spent a lot of time thinking about delivering high returns to my shareholders and we paid cash dividends and it’s hard to disguise whether that they’re actually getting it or not. With stakeholder capitalism, what these CEOs are doing is they’re changing the subject. They’re saying, well, don’t look at our profits. Look at how much good we’re doing. And the thing about the “good” they’re doing, is you can’t measure it. And so they look virtuous, but in they’re claiming virtue, but I think shareholders may be increasingly looking at Brian Monahan at Bank of America and saying, well, it’s great you’re so woke Brian, but why don’t you get your return on capital up.

Frank Gaffney (06:32):

Our return on capital [crosstalk 00:06:34].

Bill Walton (06:34):

Our return. I’m sure some stock too.

Frank Gaffney (06:39):

Right. There is an interesting effort being made now in what’s known as the sunshine state, Florida, to really, it seems set the pace on decoupling from China. This is clearly a priority for the governor, Ron DeSantis, but his state legislature is now pulling in behind him. Talk a little bit about both what’s happening there and whether it’s likely to become a model for other states across the country.

Bill Walton (07:09):

Frank, we talked about this a couple of shows ago. There was a letter put together by the Consumer Research Organization, which is a highly reputable organization, it’s been around for decades. It’s a watchdog over nefarious activities. And they sent a letter arguing, or telling state pension fund managers to avoid investments in China and to take a look at their unwittingly investing in China. And, of course, BlackRock is probably the most notable example of how that would happen. They run a lot of funds. You’re never sure what you own and you look under the hood and discover that they’re an awful lot of Chinese based companies that are in the portfolio.

Bill Walton (07:52):

Well, Ron DeSantis and the people in Florida have taken up this and they’re taking up this cause, and they’re looking at their entire investment portfolio to look at disinvesting from China. If you look at the pension fund investments with BlackRock, Florida’s been number two in the list at almost $11 billion, the state of Washington’s number one at about 13 billion, New York, of course, is at about 10 billion, and so on down the list. West Virginia, which has already taken steps to divest from China is about a little over two billion. So, it’s a move in the right direction. And they’re increasing numbers of state treasures and pension fund managers who are looking at this China disinvestment quite seriously.

Frank Gaffney (08:45):

Well, we wish them well, needless to say, and as you say, a hat tip to another organization, like the Victims of Communism, Consumers Research, Will Hurt, I believe his name is, has been doing exceptionally important work in particular focusing much attention on the role of Larry Fink as the 800 pound, or 800 ton as the case maybe gorilla in all of this. And to the extent that you’re starting to see people, West Virginia is another state, beginning to pull their money out of BlackRock, the pension funds and so on, is in a very, very heartening development, I think it’s fair to say.

Frank Gaffney (09:26):

Bill, among other things, we’re also watching what China is doing in Latin America that is ominous for our interests. We’ve done a number of webinars lately and papers on what is really a neo-colonial operation there. It’s dressed up as the belt and road initiative of China, the Russians and the Iranians are aiding and abetting it as well, but the Chinese are really taking, it seems, the place by storm. And the implications for us are very dire indeed, I’d commend to our audience, both the webinar we did last week with the former first vice president of Peru, Francisco Tudela, and a very important paper that he wrote about the threat the new communist government of Peru is representing to the Western hemisphere. It’s very well done, and it has a lot about not just what the indigenous communists are up to, but what those from outside are up to as well. Bill, talk to us a little bit about the trade relationship the Chinese have been cultivating along with their infrastructure build out and, as I say, colonial presence there.

Bill Walton (10:41):

Well, it’s a cautionary tale for all of us, Frank. While we’ve been focused on the Middle East and China and Russia and Iran and Iraq, China has been playing increasingly in our own backyard and central and south America. And from in the last 20 years, China’s trade, their trade with China has gone from 12 billion to 315 billion. That’s over, I think, 15 times. And its bilateral changes last year grew by over 30%. And there’s some people that believe that, and I think it’s probably the case, that their numbers could get to 700 billion in another 10 years or so. And while we’ve not been paying attention the Chinese have, and they’ve increased their exports to, exports from Chile went up almost 40% to China in 2021, Peru is up 63%, they’re exporting a lot of fishing and mining. And, of course, in return, China is investing in manufacturing and port facilities and other infrastructure project in these countries. And [crosstalk 00:11:49].

Frank Gaffney (11:48):

Including in the case of Peru, Bill, just one aside, including in the case of Peru, a port that is believed to be of sufficient size and capability to support a Chinese carrier strike group in the not too distant future. And that has the potential, it seems to me to be a Cuban missile crisis on steroids, in what I think of as our front yard, not so much our backyard, but this bears our urgent attention and engagement, because as we talked about in the webinar, Bill, Columbia and Brazil are next. If these, well, the red green access, I call it, the Chinese communists and the Russian and their Islamist friends in Iran have their way.

Frank Gaffney (12:37):

Let me, Bill, let me just jump to one last thing. Before we run out of time, I just wanted to come to one last thing, which is this Compete Act as it’s called in the House, passed on basically a party aligned vote, strong opposition from Republicans going into a conference with a somewhat different, but similarly intended piece of legislation from the Senate, which does have Republican support that is intended, we’re told, to try to enhance our competitiveness with the Chinese. What’s going on here? Where’s the truth lie about these pieces of legislation, and what’s likely to come with all of this?

Bill Walton (13:19):

Well, as you point out, it’s a lot like the infrastructure bill, you slap a nice name on it, like infrastructure, in this case you slap a name called America Competes on a bill and it becomes a Trojan horse to bring in all sorts of a laundry list of bad stuff, which I won’t go through, which the Democrats are trying to bring about. In this case, and a lot like the infrastructure bill, it’s really unclear that the money they’ve got allocated, I think it’s roughly $52 billion to restore our dominance in semiconductor design and manufacturing. Like everything else they do, they want to throw a big number out there, but they have no plan, no operational plan for spending the funds.

Bill Walton (14:03):

What they’re trying to address is we produced 40% of the semiconductors about two decades ago, and now it’s down to 12%. But what they overlook here is that United States still retains an overwhelming lead in the intellectual property in developing semiconductor, although even that’s been coming to be eclipsed by the Taiwan semiconductor manufacturing company, but the money’s here, they want to create four new government organizations, a national science and technology center, a national advanced packaging manufacturing program, the US manufacturing Institute. And the odds of these new organizations actually putting enough wood behind the arrow to focus on really developing our semiconductor capabilities are highly, highly unlikely. And remember the money here is extraordinary. It costs $20 billion to put up a new leading edge semiconductor fabrication facility. And so it’s more and more and more the same. We do need to be thinking about our competitive edge and semiconductors. It is a strategic national resource, but this bill is a wrongheaded way to get.

Frank Gaffney (15:28):

Yeah. Industrial policy, I guess, is at the core of it. And a lot of other inevitably [crosstalk 00:15:36].

Bill Walton (15:36):

One other anecdote, Frank [crosstalk 00:15:37].

Frank Gaffney (15:38):

… thrown in to the mix.

Bill Walton (15:39):

… it took America four years with the Manhattan product to develop a nuclear weapon. It’s been seven years that the congressional semiconductor caucus has been drafting legislation.

Frank Gaffney (15:52):

Yeah. No, it’s, I think it is actually three years from start to finish with the Manhattan project, but the main point is you’re right. When we put our mind to things, we can get things done. The question is, is it best done by the government, or can we facilitate the private sector to do it? Bill, I just have to say, you’ve alluded to one of the things that makes the challenge from China’s, well, plans to take Taiwan so fraud, is those Chinese communists have in mind seizing those fabrication facilities in Taiwan, which are really the best in the world at the moment, we mustn’t let that happen I think for a whole host of reasons, but not least our competitiveness [inaudible 00:16:44], for sure.

Bill Walton (16:44):

Ukraine is the side show. Taiwan is the main event.

Frank Gaffney (16:49):

It is. It is. Stay tuned folks. We’re going to be talking more about that with Bill and others in the days ahead. Bill, thank you so much for your time today. Bill Walton of the Bill Walton Show. I know you’ll keep up the great work and we’ll look forward to talking with you next Monday. Next up, we will speak with Nina Shea about another front in the Chinese war on civilization, it’s human rights and crimes against humanity. We’ll talk about all that and more right after this.