Posts Tagged ‘geoeconomics’
“Neoliberalism: An ideology to absolve banks, landlords and monopolists from accusations of predatory behavior”*…
Neoliberalism has undoubtably contributed to remarkable economic growth, but it has also fostered inequality and “enshittification.” In any case, neoliberalism is, to put it politiely, showing strains. What’s next for the structure of the economy in the U.S. and the world? The estimable Branko Milanović…
Why did neoliberalism, in its domestic and international components, fail? I ask this question, in much more detail than I can do it in a short essay here, in my forthcoming The Great Global Transformation: National Market Liberalism in a Multipolar World. I am asking it for personal reasons too: some of my best friends are neoliberal. It was a generational project of Western baby-boomers which later got adopted by others, from Eastern Europe like myself, and Latin American and African elites. When nowadays I meet my aging baby-boomer friends, still displaying an almost undiminished zeal for neoliberalism, they seem like the ideological escapees from a world that has disappeared long time ago. They are not from Venus or Mars; they are from the Titanic.
When I say that neoliberalism was defeated I do not mean than it was intellectually defeated in the sense than there is an alternative ready-made project waiting in the wings to replace it. No: like communism, neoliberalism was defeated by reality. Real world simply refused to behave the way that liberals thought it should.
We need first to acknowledge that the project had many attractive sides. It was ideologically and generationally linked to the rebellious generation of the 1960s, so its pedigree was non-conformist. It promoted racial, gender and sexual equality. By its emphasis on globalization, it has to be credited by helping along the greatest reduction in global poverty ever and for helping many countries find the path to prosperity. Even its much-reviled Washington consensus—while some of its commandments were taken to an extreme length and other ignored—is fundamentally sound and has much to recommend itself. Not least that it provides an easily understandable shortcut to economic policy. It does not require more than an hour to explain it to the most economically ignorant person.
So, to go back to the original question, why did neoliberalism not remain the dominant ideology? I think there are three reasons: its universalism, hubris of its adherents (which always comes with universalism), and mendacity of its governments.
That neoliberalism is universal or cosmopolitan requires, I believe, little convincing. Liberal ideology treats, in principle, every individual and every nation the same. This is an asset: liberalism and neoliberalism can, again in principle, appeal to the most diverse groups, regardless of history, language or religion. But universalism is also its Achilles’ heel. The pretense that it applies to everybody soon comes into conflict with the realization that local conditions are often different. Trying to bend them to correspond to the tenets of neoliberalism fails. Local conditions (and especially so in social matters which are products of history and religion) are refractory to the beliefs founded under very different geographical and historical conditions. So in its encounter with the real world, neoliberalism retreats. The real world takes over.
But all universalists (communists among them too) refuse to accept that defeat. As they must because every defeat is a sign of non-universalism. That’s where the intellectual hubris kicks in. The defeat is seen as due to moral flaws among those who failed to adopt neoliberal values. To its votaries nothing short of its full acceptance qualifies one as a sane and morally righteous person. Whatever new social contract its votaries have determined is valid, were it only a week ago, must unconditionally be applied henceforth. The morality play combined with economic success that many proponents of neoliberalism enjoyed due to their age, geographical location, and education, gave it Victorian or even Calvinist undertones: becoming rich was seen not only as a sign of worldly success but as an indication of moral superiority. As Deng Xiaoping said, “getting rich is glorious”. This moral element implied lack of empathy with those who failed to find their right place within the new order. If one failed, it was because he deserved to fail. Faithful to its universalism, Western upper middle-class neoliberals did not treat co-citizens any differently from foreigners. Local failure was no less merited than the failure in a faraway place. This contributed more than anything else to the neoliberals’ political defeat: they simply ignored the fact that most politics is domestic.
The hubris which comes from success (and which got elevated to unheard-of heights after the defeat of communism) was reinforced by universalism—a feature shared by all ideologies and religions that by their very construct refuse to accept that local conditions and practices matter. Syncretism was not in the neoliberals’ playbook.
Finally, mendacity. The failure to observe, especially in international relations, even the self-defined and self-acclaimed “rules-based global order”, and the tendency to use these rules selectively—that is, to follow the old-fashioned policies of national interest without acknowledging it, created among many the perception of double standards. Western neoliberal governments refused to own to it and kept on repeating their mantras even when such statements were in glaring contradiction with what they were actually doing. In the international arena, they ended in a cul-de-sac, manipulating words, reinventing concepts, fabricating realities, all in the attempt to mask the truth. A part of that mendacity was present domestically too when people were told to shut up and not complain because the statistical data were not giving them reason and thus their subjective views were wrong and had to be ignored.
What next? I discuss that in The Great Global Transformation. I think there is one thing on which most people would agree: that the past fifty years have seen the debacles of two universalist ideologies: communism and neoliberalism. Both were defeated by the real world. The new ideologies will not be universal: they would not claim to apply to the entire world. They will be particularist, limited in scope, both geographically and politically and geared toward the maintenance of hegemony wherever they rule; not fashioning it into universal principles. This is why the talk about global ideologies of authoritarianism is meaningless. These ideologies are local, aiming at the preservation of power and of the status quo. This does not make them averse to the old imperialist temptation. But that temptation can never be extended to the world as a whole nor can various authoritarianisms work together to accomplish that. Moreover, since they lack universal principles, they are likely to clash. The only way for authoritarians not to fight with each other is to accept a very narrow set of principles, essentially those of non-interference in domestic affairs and absence of aggression, and leave it at that. Xi Jinping’s proclamation of five such narrow rules at the recent Shanghai Cooperation Organization meeting may be based on such a calculation…
Neoliberalism in crisis: “Defeated by reality,” from @brankomilan.bsky.social.
For a less certain perspective: “Will Trump Bring Neoliberalism’s Apocalypse, or Merely a New Iteration?” (source of the image above).
And apposite: “Why Neoliberalism Needs Neofascists,” “Has Liberalism’s Very Success in Delivering Human Flourishing Doomed It?,” and “The future of the world economy beyond globalization – or, thinking with soup.”
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As we rethink, we might recall that it was on this date in 1975 that New York City came within two hours of bankruptcy. The city had payments due of $350 million, but had only a fraction of that available. Washington had refused craft a bailout package. It was estimated by some that 100 banks would fail if the city went bankrupt. A notice had been drafted and signed by the mayor:
But at the last minute, as creditors were lined up at government buildings and teachers were being notified to stay home, the teachers union pension fund came to the rescue, buying city bonds and giving the city the lifeline it needed to avoid default.
More at: “The Night NYC Saved Itself”
“Stand firmly in the present and focus on the future”*…
In a widely-cited article from May, Gillian Tett marks a fundamental shift– accelerated by the Trump administration, but underway beforehand:
… in the 20th century free-market intellectual framework — which is the one in which most western professionals built their careers — it was generally assumed that rational economic self interest ruled the roost, not grubby politics. Politics seemed to be derivative of economics — not the other way around.
No longer. The trade war unleashed by US President Donald Trump has shocked many investors, since it seems so irrational by the standards of neoliberal economics. But “rational” or not, it reflects a shift to a world where economics has taken second place to political games, not just in America, but many other places too…
…this phenomenon is not simply about one man (Trump), but rather marks a much bigger turning point in the intellectual zeitgeist — of a sort we have seen a few times before.
One such shift occurred just over a century ago, when the globalist, Imperialist vision of capitalism that reigned before the first world war was displaced by nationalist, protectionist policies. Another came after the second world war, when Keynesian economics took hold. Then, in the 1980s, free-market neoliberal ideas displaced Keynesianism.
The fact that the intellectual pendulum is now swinging again, towards more nationalist protectionism (with a dose of military Keynesianism), thus fits a historical pattern — although few predicted that the swing would take quite this form…
… one important facet of this zeitgeist shift is that governments are no longer “just” focused on their country’s absolute wellbeing, but on their relative positions too. This distinction might sound subtle. But it matters deeply, as a paper co-authored by Aaditya Mattoo, a World Bank economist, along with Michele Ruta and Robert Staige, spells out.
That is because an “absolute welfare” mentality supports trade co-operation, but unravels “if rivalry eclipses any consideration of own- country wellbeing,” the authors say. Trump’s angry rhetoric about America being “ripped off” by competitors, in other words, reflects a bigger mental shift… an (obvious) factor behind this rivalry is that China is now challenging America’s incumbent dominance…
It’s worth reading Tett’s piece in full (gift link)– and noting that the real-world evidence supporting her thesis is clear. Here, let us look more closely at China. Adam Tooze offers a primer– all-too-appropriate to Tett’s argument– on how to see China’s historic development through the veil of macroeconomics…
In the global economic conjuncture there are few if any factors more important than the state and future prospects of China’s economy. In purchasing power parity terms, it is the largest economy in the world, with a 20 percent share of global GDP. Measured in terms of current exchange rates, China comes second to the US.
China impacts the world economy as a huge market for exports from other countries. China’s imports range from raw materials, to Europe’s luxury brands. The share price of LVMH, Europe’s largest company by stock market valuation, bobs up and down in response to the spending patterns of Chinese women, the world’s most rapidly growing segment of luxury consumers.
China’s exports are a huge part of global markets. And when China’s domestic demand is less buoyant, there is a surge of anxiety about “excess capacity”, the pressure of exports increases and we start talking about “China shocks”.
In the macroeconomic balance, as discussed in World Economy Now of May, China’s huge surplus is the counterpart to the huge deficit of the USA.
China’s currency is pegged against a basket of other world currencies. This is backed up by some of the more effective capital account regulation in the world economy today. Funds cannot easily be transferred out of China on a large scale. So, there is structural uncertainty about what the exchange rate of the RMB should be. The trade account would suggest stronger. The scenario of mass capital flight in the event of a loosening of capital controls would suggest a much weaker currency, as happened during the crisis episode of 2015. A sudden adjustment in the Chinese exchange rate has the potential to destabilize the world economy as severely as Trump’s trade wars.
For all of these reasons, China is at the heart of global macroeconomics.
And there are a lot of news to be concerned about…
[Tooze reviews the decline in China’s growth rate…]
… But as useful as it is, this macroeconomic approach also minimizes the drama of history and qualitative transformation. China’s economy is huge because it encompasses the material destiny of one sixth of humanity. In the 1970s, China’s national income per head was less than that of Sudan and Zambia. It was not just the most populous country in the world but also one of the poorest. China’s ascent during the age of globalization is not just one economic story amongst many. It is the single most dramatic development in world economic history, bar none…
… Today, with a per capita GDP in purchasing power parity terms of $24,569, China is officially classed as an “upper middle-income” economy. It has far outstripped India (which in 1990 was still ahead of China). It has overtaken Indonesia. It has surpassed Brazil and caught up with Mexico. China is now on the cusp of being promoted to the ranks of the “high-income” countries…
… So here we have two images of China: One, as a big part of global macroeconomics, the other as a world historic development story. The trick is not to play these two accounts against each other, but to figure out how they interrelate and condition each other.
If we can sensibly discuss China today as just another big economy, rather than a country struggling with basic development issues, it is because it has actually undergone something truly exceptional, namely, utterly radical economic development in the space of less than two generations.
Pause for a second to consider this twist.
Dialectics offers us a way of imagining the process through which quantitative change turns into qualitative transformation. And there is plenty of that going on in the Chinese case. For example, it is one thing to be a big player in electric vehicles, it is quite another to entirely dominate every facet of the global supply chain. At that point market share measured in percentage points, a quantitative metric, turns into power, a statement of qualitative distinction.
But China also spectacularly illustrates the opposite process, through which qualitative change on a huge scale – “opening up” and “market reform” – transform a society’s entire mode of being so much that it becomes discussable as “just another really big piece of the world economy”, no different in macroeconomic terms than the Eurozone or the US economy. A history of radical qualitative change gives way to bland quantitative metrication.
Social theorists and market practitioners both use the same word to capture this dialectic of quality into quantity – commodification. When your distinctive, branded product with its specific qualities and associated narrative becomes commoditized, it widens the market, but also erases distinctions. In intellectual terms, rendering China’s utterly radical, world-changing development story as a question of “global growth”, is something akin to “commodification”.
Of course, quantitative comparison enabled by commodification has many uses. No less than commoditized goods. But both accept as a cost the erasure of specific qualities. In narrative terms, it involves a kind of blindness to history – how we got here – but also to the wider social and political meaning of current trends and the network of social, political, cultural and material forces that may drive future development. We do macroeconomics no injustice, if we call it heuristic and algorithmic in its approach. Its metier is not the in-depth search for historical meaning.
If we are to have both we need to learn to shuttle back and forth in our economic analysis from quality to quantity to quality to quantity etc.
Of course, you might object that all I am describing in rather highfalutin terms, are the methods of any good economic journalist. A good economics story weaves back and forth between the particular and the general, the experiential and the GDP numbers. That is true. It is a familiar narrative style. But there is a difference between an anecdote that merely serves as a “hook” and the effort to actually find a keyhole or opening that allows us to enter into the complexity of historical reality. As Stuart Hall once put it, the challenge is to find ways of “breaking in” to the historical conjuncture we are trying to decipher…
… How does the quality-quantity dialectic help us to better understand China’s economic situation and its relationship to the world economy in the summer of 2025?…
[Tooze uses that dialectic to unpack four key issues for China: real estate/urbanization, youth unemployment/generational shock, trade surplus/manufacturing power, and deflation (the “accumulation regime”)…]
… This essay had been a forced march, the aim of which is to connect four points of common concern about China’s macroeconomic situation – real estate, youth unemployment, the trade balance and deflation – with broader questions of China’s recent history and development. Doing justice to any of these themes would require far more space and far more expertise than I have my disposal. My aim here is simply to demonstrate the value of this kind of approach. My aim is to alert us to the moments when quality flattens into quantity – when “world-changing hundred-millionfold urbanization” is recharacterized as nothing more than a real estate boom – and to suggest the possibility of different narratives. The aim is to allow us to see through the bare bones of the macroeconomic schema, to the more historically specific and ultimately more powerful forces that are at play.
I’m not original in suggesting this. This is just what good history and good critical social analysis ought to do when it wrestles with the limitations of familiar macroeconomic concepts. In this particular case I am indebted to the work of Lan Xiaohuan of Fudan university, whose book How China Works: An Introduction to China’s State-led Economic Development offers a fascinating developmentalist perspective on recent Chinese economic history.
But not the least attraction of this approach is that it actually allows us to hear – as in really hear – how the Chinese describe their own situation. China insists on referring to itself as “developing” and “development” as the key objective of policy. The phrase 发展 (fāzhǎn) recurs in the titles of the National Development and Reform Commission, the de facto center of Chinese planning, and the Development Research Council of the State Council.
All too often the question of whether China should be counted as a “developing economy” is treated as a matter of cheap gamesmanship. Western critics, allege that China shirks its responsibilities by insisting on its status as a developing country. But triviality aside, as I have argued here, the question is actually a fundamental one. China is a huge and complex society with a powerful regime undergoing the most dramatic process of socio-economic change in world history. To describe this ongoing process as one of development is, if anything, an understatement.
Indeed, the question is why we don’t learn from the Chinese. Would it not behoove Western advanced economies to consider themselves, as well, as “developing”. Or does the difficulty of doing so betoken a telling blindspot? Development as a conception of economic change embodies a notion of comprehensiveness, qualitative change and deliberate purpose that is a challenge to policy in rich countries. In the US the bold vision of the Green New Deal was reduced to the Inflation Reduction Act. Trump’s tariffs and Big Beautiful Bill are a parody of economic nationalism. The best that the EU could manage was NextGen EU in 2020.
As Wang Yiwei of the Academy of Xi Jinping Thought at Renmin University remarked to The Economist:
Development is a permanent “political identity” … The party’s legitimacy depends in part on the riches yet to come. “Once you are ‘advanced’,” says Mr Wang, “you are declining.
The frankness is disarming. But does the West really have an answer?
Eminently worth reading in full: “Whither China? – World Economy Now, June 2025 Edition” from @adamtooze.bsky.social.
Pair with: “The Two Chinas.”
And for context, “Structure and Interpretation of the Chinese Economy.”
(Image above: source)
* ancient Chinese adage
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As we synthesize, we might recall that it was on this date in 626 that Li Shimin ambushed and killed his rival brothers Li Yuanji and Li Jiancheng in the Xuanwu Gate Incident. Li Shimin went on to become Emperor Taizong of Tang– the second emperor of the Tang dynasty of China, ruling from 626 to 649. He is traditionally regarded as a co-founder of the dynasty for his role in encouraging his father Li Yuan (Emperor Gaozu) to rebel against the Sui dynasty in 617. Taizong subsequently played a pivotal role in defeating several of the dynasty’s most dangerous opponents and solidifying its rule over China proper.
“Only connect!”*…
… Mobile phone companies are doing their best to oblige– and so far over half of the world’s population is connected to mobile internet. But as Khadija Alam and Russell Brandom report (in the indispensable Rest of World) growing that number is getting harder. (Read to the end for a twist)…
When Facebook hit 1 billion users in 2012, CEO Mark Zuckerberg said that when it comes to getting another billion users, “The big thing is obviously going to be mobile.” In an interview at the time, Zuckerberg told Bloomberg, “As more phones become smartphones, it’s just this massive opportunity.”
Clearly, he was correct. A recent survey from Global System for Mobile Communications Association Intelligence (GSMA), the research wing of a U.K.-based organization that represents mobile operators around the world, found that 4.6 billion people across the globe are now connected to mobile internet — or roughly 57% of the world’s population.
Now, the rate of new mobile internet subscriber growth is slowing. From 2015 to 2021, the survey consistently found over 200 million coming online through mobile devices around the world each year. But in the last two years, that number has dropped to 160 million. Rest of World analysis of that data found that a number of developing countries are plateauing in the number of mobile internet subscribers. That suggests that in countries like Pakistan, Bangladesh, Nigeria, and Mexico, the easiest populations to get online have already logged on, and getting the rest of the population on mobile internet will continue to be a challenge. GSMA collects data by surveying a nationally representative sample of people in each country, and then it correlates the results with similar studies.
Max Cuvellier Giacomelli, the head of the Mobile for Development program at GSMA, said that large swaths of the world’s population still don’t have access to mobile internet primarily because of affordability. Although the cost of data has dropped radically in recent years, the International Telecommunication Union, a UN agency focused on information and communications technologies, notes that huge disparities between regions persist. The cost of data in Africa, for example, is more than twice that of the Americas, the second most expensive region…
… In countries including China, the U.S., and Singapore, a high share of the population is already connected to mobile internet — 80%, 81%, and 93%, respectively. So it’s no surprise that the rate of mobile internet subscriptions has slowed.
But the rate of new users has also slowed in countries including Bangladesh, Nigeria, and Pakistan — where only 37%, 34%, and 24% of the population currently use mobile internet.
Coverage continues to be a challenge, although data suggests that the issue is improving relatively quickly. Just 350 million people across the world, or 4% of the global population, still live in areas that are not covered by a mobile broadband network. According to GSMA, sub-Saharan Africa has the highest coverage gap of any global region. But between 2021 and 2023, mobile coverage in this area expanded from 83% to 87%.
Furthermore, recent advances in satellite technology have the potential to close this coverage gap by bringing mobile internet networks to rural or remote areas that lack mobile infrastructure. SpaceX’s Starlink, for example, is now available in over 100 countries and provides a roaming plan…
… Even in countries with high rates of mobile internet subscription, there are still stubborn pockets of people with no mobile internet access. In China, for example, 80% of the population has access to mobile internet. But subscription rates among the remaining 280 million people are slowing. Recent advances in satellite technology could bring mobile internet to new users in the country, especially in rural areas. In August, China began launching a satellite internet network [the Qianfan Constellation], set to rival SpaceX’s Starlink, in an effort to bring everyone online.
What happened to the “next billion” internet users? They’re already online: “New data shows the number of new mobile internet users is stalling,” from @khadijaalam_ and @russellbrandom in @restofworld.
Your correspondent finds himself pondering the final sentence in the piece: While the on-boarding of the unconnected 47% may be the result of a patchwork of local efforts, it’s clearly the goal of Starlink and the Qianfan Constellation to centralize connectivity… and the company– or government or culture– that controls the means of communication has a great deal of influence on what gets communicated and how. Nearly half the world’s population is in play, with all that that entails for geopolitics and geoeconomics; for example, see here (and the links therein)…
* E. M. Forster, Howards End
(R)D will be on its traditional Thanksgiving hiatus from today. Regular service will resume when we’re clear of Black Friday…
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As we contemplate connectivity, we might recall that it was on this date in 1995 that Microsoft released Internet Explorer 2.0…
Nearly 6 months to the day after Bill Gates sent his Internet Tidal Wave memo recognizing the importance of the Internet, and only 3 months after releasing version 1.0, Microsoft releases Internet Explorer 2.0 for Windows 95 and Windows NT 3.5. IE 2.0 was still based on licensed code from Spyglass Mosaic, but was the first IE version to support now-common features such as SSL, JavaScript, and cookies. It was also the first version to allow the importing of bookmarks from Netscape Navigator, which at the time had a virtual monopoly on the web browser market. This was the first inklings of the “browser war” that was soon to erupt over the next few years.
– source
“For every complex problem, there’s a solution that is simple, neat, and wrong”*…
Last year, in explaining the Biden Administration’s emerging new economic policy, National Security Advisor Jake Sullivan talked of a “small yard, high fence” approach to its trade with China. The idea: to place strict restrictions on a small number of technologies with significant military potential while maintaining normal economic exchange in other areas.
The estimable Henry Farrell argues that this approach to technology and China is working poorly (though, he suggests, it will work much worse if Trump wins and takes office in January). Self-reinforcing political feedback loops and self-reinforcing expectations are leading to breakdown.
The fundamental problem of managing geopolitics through manipulating technological trajectories is not readily solvable given existing means, Farrell suggests. We live in a much more complex world than existing state institutions are capable of handling. Therefore, he argues, we need to remake the state…
… Making the right choices in a complex policy environment requires an approach that is a world away from the application of brute force at scale. Your maps of the environment are going to be all wrong when you go in, and brute force is likely to have unexpected consequences. It isn’t just that you are going to make mistakes (you are), but your map of the actual problem you are trying to solve is likely to be utterly out of whack. As you try to catch up with China on EV, you discover that you don’t understand the market right. As you try to impose controls on military use of semiconductors, you find out that you don’t have the information you need to really actually understand how the semiconductor market works.
The problem – as Jen Pahlka’s book Recoding America explains at length – is that addressing such complex problems does not fit well with the way that the U.S. government works. When you are trying to impose order a vast sprawling bureaucracy, which is its own mid-sized global economy, and when your people don’t trust government much, you rely on rigid contracting systems, which define the problem in advance down to its finest details, even if that definition is out of whack with reality. You don’t build connections between the bureaucracy and outside actors, unless they run through cumbersome and rigidly pre-defined channels because it takes months or years to get approval for such connections. And you certainly don’t try to remake policy in realtime as your understanding of the situation changes. Pahlka’s book is cunningly disguised as an account of US software outsourcing practices. If it mentions either ‘national security’ or ‘economic security’ once, I don’t remember it. But it is arguably (along with Dan Davies’ similarly motivated The Unaccountability Machine) the most important book on these topics of the last twenty years. [Your correspondent heartily agrees.]…
… what do you do – is this. You start to think… about how to build economic security institutions that are designed from the ground up to manage complexity. If you want to take ‘small yard, high fence’ seriously as a policy approach, you need to build the apparatus to discover what lies inside, what lies outside, and what the barriers ought be. That apparatus – and its prescriptions – need to change over time both to match a better understanding of the policy environment, and changes in the environment itself.
And we don’t have the apparatus to actually implement small yard, high fence properly. Nor do we have it for pretty well every other plausible economic security policy you might imagine, short of a brute force decoupling of the U.S. and Chinese economies. And if you did that, you would need enormous capacity to manage the horrifically complex aftermath, if that aftermath could even be managed at all.
Clearly, it is far easier to make these arguments in the general than the particular. Saying that you need reforms is straightforward, but figuring out what they ought to be, let alone how to implement them in current political circumstances, is an altogether more difficult challenge. But it is where the debate needs to be going – and there is a role for technology in it. We are in a situation that rhymes in weird ways with the situation discovered by Vannevar Bush after World War II – recognizing that the needs of government had changed, that vastly better information and feedback systems were required to meet those needs, and that even if we didn’t exactly know what those systems were, we needed to start figuring them out, and quickly. That world had its pathologies. This one does too. But to prevent them becoming worse, we need better ways to manage them, and to ensure that the solutions are better than the problems that they are supposed to mitigate.
This is – obviously – a radical set of claims. But it’s one that is entailed by the diagnosis of the problem that I’ve presented. If we need to manage complex challenges – of which the U.S. China relationship is only one – we need a state that is capable of managing complexities. We don’t have one. And that remains a first order problem, regardless of however hawkish or dovish you are…
We need a new kind of state for the new geopolitics: “‘Small Yard, High Fence’: these four words conceal a mess,” from @himself.bsky.social (and @pahlkadot.bsky.social). Eminently worth reading in full.
* H.L. Mencken
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As we ruminate on restructuring, we might recall that it was on this date in 1954 (7 years after the transistor was developed at Bell Labs) that Texas Instruments introduced the Regency TR-1, the first commercially-manufactured transistor radio. Its performance was mediocre, but its small size and portability drove sales of over 150,000 units.
Further to Farrell’s and Pahlka’s points, it’s instructive to ponder what became of the transistor radio as a product category (and of the competitors in it) over the next few decades– and the altogether-unanticipated plethora of small, convenient, hand-held product categories it spawned: calculators, mobile phones, tablets… and whatever comes next…
“The only thing that will redeem mankind is cooperation”*…
Industrial policy is on the rise around the world, as nations (and sometimes regions) create laws and policies that prioritize domestic competitiveness and economic benefit over free trade, using tools like investment, regulation, and tariffs. Increasingly these policies are being animated not only by economic, but also security concerns. (See, e.g., here and here.)
The traditional worry about policies like these is that they create barriers (thus tensions) between countries… which, at a time when the world desperately needs collaborative responses to global challenges like climate change, could be deeply problematic. But Nathan Gardels argues that industrial policy might be precisely what we need to set the stage for meaningful cooperation…
The remarkable story future historians will tell about the late 20th and early 21st century is how inviting a Communist Party-state to enter a global economy built on the capitalist principles of free trade and markets ended up transforming the neoliberal West into a bastion of protectionism and state-directed industrial policy of the same kind now condemned as unfairly advantaging China’s rise.
They will also note the further irony that the logic of opening to China in the 1970s — and of China’s opening to the West — had a national security premise of checkmating the Soviet Union. Half a century on, the Middle Kingdom is more closely aligned with Russia than in the later stages of the Cold War, primarily as a way to do the opposite: checkmate America’s continuing dominance of the very world order that enabled its rapid ascent.
Adding more complexity to this reversal of history are the related global challenges that have arisen in both East and West: decarbonization of fossil-fuel dependency to mitigate climate change while coping with the disruptions of the digital revolution and the advent of artificial intelligence.
These threads of deglobalization, climate and technological revolution have all converged in the competitive assertion of “industrial strategies” in which nation-building is integrally bound up with international security concerns. China is driven by the fear of not catching up, the United States by alarm at losing the upper hand and Europe by the angst of falling behind both and losing its strategic autonomy.
China’s industrial strategy is called “dual circulation,” essentially a policy of self-reliance and resilience in the face of newfound Western hostility. It is aimed at bolstering domestic consumption and production, including conquering the latest AI technologies with its own resources, while off-loading manufacturing overproduction abroad and expanding trading ties in the global South.
The U.S. strategy, as crafted by President Joe Biden, encompasses a broad array of protective tariffs and subsidies. The CHIPs Act and related policies seek to foster homegrown microchip production while denying frontier technologies to China and restructuring supply chains to friendly nations. The Inflation Reduction Act promotes extensive new investment in the green energy transition. Incongruously, at the same time, a tariff of 100% has been imposed on the import of Chinese electric vehicles. Further tariffs on component inputs, such as batteries sourced in China, are already on track.
Following the U.S, the European Union is also set to raise its own stiff tariff hikes on Chinese EVs as it pursues a European Green Deal to transition to renewables on its own terms. Europe also seeks to blunt the impact of the “buy American” restrictions of the IRA so that fleeing capital looking to exploit the subsidized U.S. market does not hollow out its own green industries before they can be firmly established.
Earlier this month, the former European central banker and one-time Italian prime minister, Mario Draghi, has gone the next step and plotted out a detailed, long-term “industrial strategy” to close the gap with the U.S. and China, which he calls “an existential challenge” to the European way of life.
“If Europe cannot become more productive,” Draghi writes in his report, “we will be forced to choose. We will not be able to become, at once, a leader in new technologies, a beacon of climate responsibility and an independent player on the world stage. We will not be able to finance our social model. We will have to scale back some, if not all, of our ambitions.”…
[Gardels unpacks both European and Australian industrial policy..]
… For all these divergent industrial strategies to succeed in the end depends largely on whether sustained nation-building investment outstrips the duration of protective measures that ought to be only a temporary respite from asymmetrical conditions while they are rebalanced.
To the extent these decoupled initiatives do succeed, they will, paradoxically, come to be regarded not as the antithesis of global cooperation, but as the precondition for it. Only when the power centers of China, the U.S. and Europe are assuredly in control of their own destiny will they be secure enough to open up and cooperate on the global issues that impact them all equally…
The case that divergent “industrial strategies” in the U.S., China, and Europe can create the security to open up: “The Precondition for Global Cooperation,” from @NoemaMag.
* Bertrand Russell
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As we reconfigure, we might spare a thought for a man who provided an important part the foundation on which opponents of industrial policy base their arguments: Pierre Le Pesant, sieur de Boisguilbert (or as he is more commonly known, simply Boisguilbert); he died on this date in 1714. A French Enlightenment law-maker and economist, he was the first of the great continental liberals– a proponent of laissez-faire and minimalist government and an early opponent of mercantilist “Colbertisme.” He is considered one of the fathers of the notion of an economic market.
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