Martin Wolf: America's Return to Interventionism or Contrary to World | Economy | America
On June 27th, the Financial Times website published an article titled "The United States is feeling" buyer regret "towards the world it has created," written by Martin Wolf, the newspaper's chief economic commentator. The full text is excerpted as follows:
When the United States speaks, the whole world will listen. After all, it is the most influential country in the world. Not only because of its size and wealth, but also because of the power of its alliance and its core role in establishing the system and principles of today's order. The United States played a decisive role in establishing the Bretton Woods system, the General Agreement on Tariffs and Trade, and the World Trade Organization.
Now, tormented by buyer remorse, the United States has decided to start over. On April 20th, US Treasury Secretary Janet Yellen outlined the economic aspects of the new vision for the United States in her speech. Subsequently, Joe Biden's National Security Assistant Jack Sullivan delivered a more macro, albeit supplementary, speech on "Revitalizing America's Economic Leadership.". It is a critique of past policies. It can be seen as a return to Alexander Hamilton's interventionism.
What did Sullivan say? What may this mean for the United States and the world?
The starting point is in China. Therefore, the constantly changing global economy has left many American workers and their communities behind. The financial crisis has shaken the middle class. The pandemic has exposed the fragility of our supply chain. The constantly changing climate threatens life and livelihoods. Russia's invasion of Ukraine highlights the risk of excessive dependence. More precisely, the US government believes it is facing four major challenges: hollowing out the industrial foundation; The rise of a geopolitical and security competitor; The accelerating climate crisis; The increasing inequality has an impact on democracy itself.
The key statement is that the response will be "a foreign policy that serves the middle class.". So what should this mean?
Firstly, there is a "modern American industrial strategy" that will support industries that are considered "the foundation of economic growth" and "strategic from a national security perspective.". Next is to collaborate with our partners to ensure that they will also build capacity, resilience, and inclusivity. The third is to move beyond traditional trade agreements and towards innovative international economic partnerships that focus on the core challenges of our era. This includes establishing diversified and resilient supply chains, mobilizing public and private investment to promote the "clean energy transformation," ensuring the credibility, security, and openness of our digital infrastructure, stopping bottom competition in corporate taxation, strengthening labor and environmental protection, and combating corruption. The fourth is to mobilize trillions of dollars of investment into emerging economies. The fifth is a plan to protect basic technology with high walls and small courtyards. So we have carefully implemented tailored restrictions on the export of the most advanced semiconductor technology to China. It also includes strengthening the review of foreign investment in key areas related to national security. Sullivan insists that these restrictions are "tailor-made measures" rather than "technological blockades".
This is indeed a fundamental shift in the goals and means of US economic policy. But the depth and persistence of this transformation will depend on to what extent it reflects the new US consensus.
Can these new goals make sense? Will it really help make Americans and the rest of us richer and safer?
One of the doubts is related to volume. Sullivan claimed that "it is estimated that the total amount of public capital and private investment from President Biden's agenda will reach approximately $3.5 trillion over the next 10 years.". At best, this amount is 1.4% of the gross domestic product during the same period, which is far from transformative. Another concern is that it is very difficult to make industrial policies effective, especially for economies at the forefront of technology. There is also a doubt about how destructive this new strategy will be to relations with other countries around the world, especially China, especially trade relations.
It will be very difficult to distinguish between pure commercial technology and technology with security implications. It is also extremely difficult to distinguish American friends from enemies. Especially, convincing China that this is not the beginning of an economic war to suppress China will be very difficult. And China already has many means to deal with such struggles.
This new strategy will only be effective when it brings about a more prosperous, peaceful, and stable world. If it will bring about a divided world, environmental collapse, or complete conflict, then by our own standards it will be a failure. The initiators of this new strategy need to carefully grasp the execution of their new strategy. It may have unintended consequences.
