(Roughly) Daily

A couple of weeks ago, (Roughly) Daily took a look at the fall of neoliberalism. What’s to come? The estimable Noah Smith has a suggestion…

For years now, I’ve been thinking about what the next big organizing principle of U.S. political economy will be. By “political economy” here I mean the type of economic policies we carry out, and the ways that we expect those policies to reshape our economy. This will be the first in a series of posts laying out my predictions for what the new paradigm will look like.

From the late 1970s through the middle of the 2000s, our organizing principle was what some people call “neoliberalism” — deregulation, tax cuts, free trade, and the shift of the welfare state towards in-kind benefits and work requirements. The reasons we went down this road were complex, and the results were mixed. This replaced an earlier paradigm that people called “the New Deal”, which started to emerge during the Great Depression but really solidified during and just after WW2. That paradigm involved large-scale government investment, heavy regulation, high taxes, social insurance, and the encouragement of a corporate welfare state.

Ever since the financial crisis and the Great Recession of 2008-12, we’ve been looking for a new organizing principle. Obama didn’t really try to give us one; with the exception of Obamacare, he was mostly focused on crisis recovery and damage control (stimulus, financial regulation, boosting the welfare state incrementally along largely neoliberal lines).

But everyone knew a new paradigm was needed. The question was what it would be…

[After carefully considering, then sadly rejecting climate change as a candidate…]

So if it’s not climate change, what will be the thing that forces us to come up with a new policy paradigm? If it’s not the moral equivalent of war, perhaps it’ll be the threat of actual war…

“The War Economy,” Part 1

In a second post, he elaborates on how the U.S. and its allies might stack up against a “New Axis.” He dives into relative demographicc, economic, and social strengths, concluding…

I can’t say whether or not the New Axis is the most formidable military competitor that the U.S. and its allies have ever faced. The original Axis was certainly fearsome, and the USSR had tens of thousands of nuclear weapons ready to roast the world at the touch of a button. But I think that the comparisons above show that the New Axis certainly represents an economic competitor like none the U.S. and its allies have ever faced. And the reason is simply China. Russia is mainly a gas station with nukes. But China has three things going for it:

• China has far, far more workers than the original Axis or the Soviet bloc.
• China has advanced manufacturing technology that probably rivals the original Axis in relative terms, and far exceeds the Soviet bloc.
• China has the world’s largest manufacturing cluster, making it the “make everything country”, which neither the Axis nor the USSR managed to be.

He continues…

This is simply a unique situation in modern history. The Industrial Revolution began in Europe and spread to the U.S. and the East Asian rim. The aftermath of WW2 saw central Europe and the East Asian rim incorporated into a U.S.-led alliance that dominated global manufacturing in a way that the communist powers could never threaten. Now, with the rise of China, world manufacturing is divided roughly in two.

Much of the War Economy in the U.S. (and its allies) will therefore be about rediscovering the manufacturing capabilities they neglected during China’s meteoric rise…

“The War Economy, Part 2: Sizing up the New Axis“

The Brookings Institute recently published its own (and very resonant) assessment of U.S. readiness, “The Sources of Societal Competitiveness.” And Nathan Gardels followed with a trenchant reminder that consensus on national security is a double-edged sword…

In the end, the enduring vitality of any country must be built primarily on the wherewithal within, not on the shaky foundation of menacing adversaries without. George Kennan, architect of the containment strategy against the Soviet Union, understood that lasting vigor comes from the inner confidence of a nation that thrives on its own terms and doesn’t rely on enemies to hold it together. External threats may spur a welcome renewal, but it will remain fragile if that becomes its purpose.

Kennan believed correctly that the West would ultimately be victorious in the Cold War not on some battlefield but through the organic strength of a robust society that no adversary could match.

The same perspective applies today with respect to the challenge of assertive autocracies, especially China. The most important contribution democracies can make to fostering more freedom in the world is to demonstrate through their own institutional integrity and innovations how a governing consensus can be reached by non-authoritarian means.

“When Domestic Unity Is Built On Foreign Enemies“

We live in interesting times. Eminently worth reading all of the links in full.

* J.R.R. Tolkien, The Fellowship of The Ring

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As we return to first principles, we might recall that it was on this date in 1945 that the Japanese Foreign Ministry sent telegrams to the Allies (by way of Max Grässli at the Swiss Department of Foreign Affairs ) announcing that Japan would accept the Potsdam Declaration. The surrender of the Empire of Japan was announced by Japanese Emperor Hirohito on 15 August and formally signed on 2 September 1945, bringing the hostilities of World War II to a close.

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