The Wall Street Journal - 21.08.2019

THE WALL STREET JOURNAL. Wednesday, August 21, 2019 |A

T

he Hong Kong crisis is
something the world has
seen time and again: au-
thoritarian rulers seeking
to repress the innate hu-
man desire for freedom, self-expres-
sion and self-government. The scenes
remind us of Budapest in 1956 and
the Prague Spring of 1968, of Tianan-
men Square in 1989 and Moscow in
recent weeks. The next chapter is un-
folding today as the Chinese Commu-
nist Party terrorizes the people of
Hong Kong.
An estimated two million Hong
Kongers—about one-fourth of the
population—are demonstrating for
the freedoms and autonomy that
have made their city a global success.
They are protesting the government
in Beijing and its determination, in
violation of its promises, to chip
away at those freedoms.
The protestors want their liberties
preserved, the territory’s autonomy re-
spected, and justice for those the secu-
rity services have detained, brutalized
or murdered. Contrary to Communist

propaganda, this citizens’ uprising is
no foreign conspiracy. If anything, the
world’s leading democratic nations
have been slow to respond. Only one
capital is responsible for what is un-
folding in Hong Kong: Beijing. The
demonstrators are responding to its
efforts to exert ever more influence
and control over what is supposed to
be an autonomous region.
It is crucial to recognize that the
dynamics that led to this crisis didn’t
begin in Hong Kong and won’t end
there. The turmoil is the result of
Beijing’s systematic ratcheting up of
its domestic oppression and its pur-
suit of hegemony abroad.

Sooner or later, the rest of

the world will have to do

what the protesters are

doing—confront Beijing.

We Stand With Hong Kong

Years ago, it was reasonable to

think that China’s rapid development

and integration into the global econ-

omy might lead it to embrace prevail-

ing international rules, that success

would give Beijing a stake in the sys-

tems that uphold peace and prosper-

ity. Now it is clear the Communist

Party wants to write its own rules and

impose them on others.

For evidence of China’s hunger for

power, consider the fate of its other

supposedly autonomous regions. In

Tibet, Beijing’s brutal response to un-

rest in 1959 drove tens of thousands

into exile and killed tens of thou-

sands more. In Xinjiang, a mostly

Muslim province, the state has dis-

placed ethnic Uighur minorities

through population transfers and es-

tablished an elaborate architecture of

social and political surveillance, in-

cluding ethnic prison camps. Xinjiang

is no autonomous region; it is a mod-

ern gulag. In both cases, Beijing spent

decades methodically tightening its

grip.

Beijing has sought to write a sim-

ilar story in Hong Kong, albeit more

subtly. But Hong Kongers are not cut

off from the truth by China’s “Great

Firewall.” They recognized a bill to

allow extradition to the mainland as

a significant threat to their legal and

political autonomy. So China’s lead-

ers now face a choice. Will they in-

tensify pressure on Hong Kong,

gambling that the rest of the world

will look the other way? Or will Bei-

jing conclude that further repression

in Hong Kong would bring further

consequences?

China’s trading partners, including

the U.S., should make it clear that

any crackdown would have real and

painful costs. I wrote the Hong Kong

Policy Act of 1992, which extended

special privileges to the region be-

cause of its unique status. This spe-

cial access to the U.S. and other na-

tions helped drive the investment

and modernization that have en-

riched Hong Kong, and Beijing by ex-

tension. Beijing must know the Sen-

ate will reconsider that special

relationship, among other steps, if

Hong Kong’s autonomy is eroded.

I support extending and expanding

the law’s reporting requirements to

illuminate Beijing’s interference in

Hong Kong. And the Senate will do

more. I have asked Jim Risch, chair-

man of the Foreign Relations Com-

mittee, to examine Beijing’s actions

in Hong Kong and its efforts to ex-

pand the Communist Party’s influ-

ence and surveillance across China

and beyond. I am working with Lind-

sey Graham, chairman of the Appro-

priations Subcommittee for State and

Foreign Operations, to fund democ-

racy and human-rights programs

across Asia. I will maintain our

strong focus on rebuilding and mod-

ernizing the military, continuing the

huge strides of the past 2½ years, so

that our ability to project power and

defend American interests keeps pace

with this major competitor.

But it is not America’s task alone

to address these threats. The world is

awakening to China’s abusive and ag-

gressive practices, from unfair trade

actions to intellectual-property theft

to offshore expansion. Now Hong

Kong has plastered front pages with

yet another cautionary tale about

how the Chinese regime treats those

within its envisioned sphere of influ-

ence and disregards international

agreements that govern them.

Every trading nation and democ-

racy that values individual liberty and

privacy has a stake here. Their choice

is not between the U.S. and China but

between a free, fair international sys-

tem and the internal oppression, sur-

veillance and modern vassal system

China seeks to impose.

The U.S., for its own interests,

seeks international peace, a good re-

lationship with China, and a mutually

prosperous future for our peoples.

Hong Kong is only one piece of the

complex set of interests that makes

up the U.S.-China relationship. But

China’s treatment of the people of

Hong Kong will shape how the U.S.

approaches other key aspects of our

relationship.

As Beijing grapples with growing

domestic unrest and slowing eco-

nomic growth, it should pause before

threatening a key engine of its

growth and provoking the interna-

tional community. Beijing can step

back from chaos to pursue freer and

fairer trade and greater respect for

sovereignty and human rights. These

basic steps can ensure a more pros-

perous and peaceful future for all of

our citizens.

Mr. McConnell, a Kentucky Repub-

lican, is U.S. Senate majority leader.

By Mitch McConnell

ROMAN PILIPEY/EPA-EFE/SHUTTERSTOCK

Protesters outside Hong Kong’s Central Government Offices, Aug. 18.

OPINION

Recession

Fears Are

Overblown

By Andy Puzder

And Jon Hartley

T

he yield curve is upside down,

leading to worry about reces-

sion. Stocks declined last week

after the 10-year Treasury yield fell

below the two-year Treasury yield.

Yet while an inversion of the yield

curve has preceded all postwar reces-

sions, not all inversions signal immi-

nent recession. The curve was flat for

most of the 1990s, and even inverted

briefly in 1998, without a recession.

Today, given the economy’s underly-

ing strength, fears of immediate re-

cession are overblown.

U.S. gross domestic product grew

2.1% in the second quarter, and the

Atlanta Federal Reserve forecasts

2.2% annualized third-quarter growth.

The generally accepted definition of a

recession is two consecutive quarters

of negative GDP growth. GDP consists

of four components: consumption,

government spending, net exports

and business investment.

Consumption looks strong.

Through July, retail sales have in-

creased this year, consumer confi-

dence has rebounded, and productiv-

ity—output per hour worked—has

experienced some of the largest in-

creases in decades. When a recession

occurs, weekly unemployment claims

are first to tick up. They aren’t rising,

and there are more openings than un-

employed people. Given this labor-

market strength, an increase in con-

sumer spending—which accounted

for 68% of GDP in 2018—is far likelier

than a decrease.

Government spending accounted

for 18% of GDP in 2018 and grew 3%

during the first half of 2019 amid

growing deficits. Net exports reduced

last year’s GDP by 3.3%, down to 3.1%

so far this year.

That leaves business investment,

which represented 18% of 2018’s GDP.

Concerns about the impact of a trade

war with China on costs and supply

chains combined with slowing global

growth have dampened business in-

vestment. It declined 0.6% (season-

ally adjusted) in the second quarter

despite a 2018 surge following the

2017 corporate tax cuts.

Yet the trade war has not as yet put

the U.S. economy at risk. Any dramatic

impact remains far off as the Trump

administration announced a further

delay—until December—on a tariff

hike to 25% on $200 billion of Chinese

imports. Even with reduced business

investment, the data don’t signal a

significant economic decline.

So should an inverted yield curve

put us on recession alert? Maybe not.

There’s reason to believe it is an un-

reliable recession indicator. The post-

Great Recession era has seen unprec-

edented distortions in the Treasury

market. The Fed’s trillion-dollar bal-

ance sheet following its long-term as-

set purchases, known as “quantitative

easing,” has put downward pressure

on the long end of the yield curve.

Fed researchers estimate that quanti-

tative easing may be pushing down

the 10-year Treasury yield by as much

as 0.7 percentage point in 2019.

In addition to quantitative easing,

$16 trillion in sovereign bonds with a

negative yield are weighing down

longer-term Treasury yields, as even

low-yield U.S. bonds are a more desir-

able option for foreign investors.

Moreover, the Treasury has

elected to fund the rapidly increasing

U.S. debt by issuing a high volume of

short-term Treasury bills, putting

significant upward pressure on the

short end of the yield curve.

This combination of downward

pressure on long-term rates and up-

ward pressure on short-term rates is

distorting the yield curve, wholly

apart from the strength of the under-

lying economy, rendering it an unreli-

able harbinger of recession.

It’s also important to remember

that there have been two primary

causes of recessions in the postwar

period: financial imbalances (like

bubbles in the technology or housing

market) and aggressively tight mone-

tary policy. It’s hard to identify any

major imbalances (apart perhaps

from nonfinancial corporate debt),

and the Fed is reducing rates.

At this point, without materially

worsening data from the real econ-

omy, an inverted yield curve should

not be causing the exaggerated reac-

tion we’re seeing in the stock and

bond markets. Someday we’ll have a

recession, but not soon.

Mr. Puzder is a former CEO of CKE

Restaurants and author of “The Capi-

talist Comeback: The Trump Boom

and the Left’s Plot to Stop It.” Mr.

Hartley is pursuing a master’s degree

at Harvard’s Kennedy School.

The yield curve is no

longer a reliable predictor,

and other economic

indicators are strong.

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Why Conservatives Don’t Trust Facebook

F

rom the Ivy League to Holly-
wood and the mainstream me-
dia, Americans with traditional
morals or conservative politics have
often felt excluded from the country’s
elite, culture-creating institutions.
Facebook offered an alternative: a
place to express views and share
news that you couldn’t find in the
New York Times.
Over time, however, many conser-
vatives lost trust in Facebook, believ-
ing it discriminated against them.
The increasing scale and complexity
of Facebook’s content-moderation
practices made matters worse. In
2016 Facebook employees were ac-
cused of suppressing conservative ar-
ticles in the news feed’s now-discon-
tinued “trending” section. In April
2018 Congress grilled Facebook chief
executive Mark Zuckerberg about
anticonservative bias, from blocked
content to suspended accounts.
In response to mounting criticism,
Facebook asked me to conduct a sur-
vey to hear from conservatives di-
rectly. Following substantial public
interest in the project and in light of
policy changes Facebook has recently
made, we have decided to share our
findings at this time.
Facebook placed no restrictions on
how I could conduct the work. My
team at the law firm Covington &
Burling LLP began conducting inter-
views in May 2018. We cast a wide
net to include as many aspects of
conservatism as possible—from or-
ganizations focused on Christian val-
ues or protecting free expression to
those focused on tax policy and small
government. We identified individu-
als, groups and lawmakers who either
use, study or could potentially regu-
late Facebook, and interviewed 133 of
them. To encourage them to speak
freely, we told interviewees we
wouldn’t publish their identities. We
presented our preliminary findings to

Facebook in early August 2018 and

have been discussing them with the

company ever since.

We found conservatives’ concerns

generally fall within the following six

buckets:

• Content distribution and algo-
  rithms. Conservatives have expressed
  concern that bias against their view-
  points may be “baked in” to Face-
  book’s algorithms. In addition, inter-
  viewees argued that Facebook
  shouldn’t be in the business of sepa-
  rating fact from fiction in the news.


• Content policies. Facebook’s
  community standards prohibit hate
  speech, graphic violence, adult nu-
  dity, sexual activity and cruel and in-
  sensitive content. Several interview-
  ees pointed to the highly subjective,
  ever-evolving nature of some of these
  standards, in particular the term
  “hate speech.”


• Content enforcement. Interview-
  ees were concerned that the biases of
  Facebook employees who enforce the
  rules may result in disproportionate
  censoring of conservatives. Some
  midsize and grass-roots organiza-
  tions also believe their appeals are
  not taken as seriously as those of
  larger organizations.


• Ad policies. In the wake of strong
  evidence from the U.S. intelligence
  community that Russia attempted to
  interfere in the 2016 presidential
  election with fake social-media ac-
  counts and inflammatory content,
  Facebook required advertisers to reg-
  ister as “political” organizations in
  order to post ads with a political or
  policy focus. Some conservative in-

terviewees said this new rule jeopar-

dized their status as nonprofits under

Section 501(c)(3) of the tax code.

• Ad enforcement. As a result of
  Facebook’s new, more stringent ad
  policies, interviewees said the ad-ap-
  proval process has slowed signifi-
  cantly. Some fear that the new pro-
  cess may be designed to disadvantage
  conservative ads in the wake of the
  Trump campaign’s successful use of
  social media in 2016.


• Workforce viewpoint diversity.
  Several interviewees noted the over-
  all lack of viewpoint diversity
  throughout Facebook’s workforce and
  senior management.
  Facebook has made several
  changes that are responsive to our
  findings, and we understand more
  are being considered. For now,
  changes include:


• Oversight board. Facebook an-
  nounced plans last month for an
  oversight board to hear appeals of
  some more-difficult content-removal
  decisions. If structured to reflect ac-
  curately the diverse ideological and
  religious views of Facebook’s user
  base, the board may help ensure con-
  tent decisions are made thoughtfully
  and free from inappropriate bias.


• Explanations of news-feed rank-
  ings. To foster user trust in the algo-
  rithms that influence content place-
  ment, Facebook has launched
  transparency tools that explain to us-
  ers why they see certain content on
  their news feeds.


• Page transparency. Facebook has
  enabled page managers to see when
  their content has been removed for
  violating community standards, or

when distribution of a post has been

reduced because a fact-checker gave

it a “false” rating.

• Staffing.^ Facebook has hired four
  additional people devoted exclusively
  to working with smaller organiza-
  tions to resolve questions and com-
  plaints about content decisions.


• Ad labeling requirements. To
  avoid incorrectly branding ads as
  “political,” Facebook renamed its ads
  library and now refers instead to ads
  “about social issues, elections or poli-
  tics.”


• Ad policies. Facebook has
  changed its ad policies that prohibit
  images of patients with medical
  tubes as “shocking and sensational
  content.” This will make it easier to
  promote certain pro-life ads.
  We believe these and other mea-
  sures described in our interim report
  are steps in the right direction. Yet
  these are complicated issues, some of
  which involve conflicting opinions
  even among conservatives. For that
  reason, restoring trust fully may re-
  main an elusive goal. Conservatives
  no doubt will, and should, continue to
  press Facebook to address the con-
  cerns that arose in our survey.
  As Facebook considers additional
  changes, we will continue to help it
  understand conservative perspec-
  tives. To live up to its vision as a
  platform for all ideas, I believe Face-
  book understands it must do all it can
  to regain the trust of conservative
  users.

Mr. Kyl, a Republican former U.S.

senator from Arizona, is a senior

counsel at Covington & Burling LLP.

By Jon Kyl

My independent team of

investigators looked into

the complaints, and the

company has taken action.

From “The Social Responsibility of

Business Is to Increase Its Profits” by

Milton Friedman, New York Times

Magazine, Sept. 13, 1970:

In a free-enterprise, private-prop-

erty system, a corporate executive is

an employee of the owners of the

business. He has direct responsibility

to his employers. That responsibility

is to conduct the business in accor-

dance with their desires, which gen-

erally will be to make as much money

as possible while conforming to their

basic rules of the society, both those

embodied in law and those embodied

in ethical custom....

Whether blameworthy or not, the

use of the cloak of social responsibil-

ity, and the nonsense spoken in its

name by influential and prestigious

businessmen, does clearly harm the

foundations of a free society. I have

been impressed time and again by the

schizophrenic character of many busi-

nessmen. They are capable of being

extremely far-sighted and clear-

headed in matters that are internal to

their businesses. They are incredibly

short-sighted and muddle-headed in

matters that are outside their busi-

nesses but affect the possible survival

of business in general. This short-

sightedness is strikingly exemplified

in the calls from many businessmen

for wage and price guidelines or con-

trols or income policies. There is noth-

ing that could do more in a brief pe-

riod to destroy a market system and

replace it by a centrally controlled

system than effective governmental

control of prices and wages.

The short-sightedness is also ex-

emplified in speeches by business-

men on social responsibility. This

may gain them kudos in the short

run. But it helps to strengthen the

already too prevalent view that the

pursuit of profits is wicked and im-

moral and must be curbed and con-

trolledbyexternalforces.Oncethis

view is adopted, the external forces

that curb the market will not be the

social consciences, however highly

developed, of the pontificating exec-

utives; it will be the iron fist of Gov-

ernment bureaucrats. Here, as with

price and wage controls, business-

men seem to me to reveal a suicidal

impulse.

Notable & Quotable: Friedman