Hello Swamp Things. It’s winter break for many on the East Coast, and I am writing this note from 38,000 feet, on a United flight en route to Jackson Hole where I am sneaking away from the family for a few days of skiing with my best gal pal. My flight was significantly delayed, not because of weather but because the airline, which is under tremendous financial pressure, decided to outsource the catering to an independent company which took a full 90 minutes to get a few bags of ice on to the plane. As one flight attendant told me, “it’s just a total mess” dealing with outside contractors who may be cheaper but are certainly not better.
Why do I mention this? Because I’m thinking deeply these days about the compromises that we have made over the past 40 years of neoliberal market capitalism, chief among them being a total focus on consumer prices to the detriment of everything else. This is a topic I explore in my latest column. I’m also thinking about the consequences of those compromises. They include, but are by no means limited to, an increasing distrust of elites, the break-up of the old US-led world order, rising inflation, and a power vacuum that’s being filled by China.
That’s the topic of a really excellent long-form essay in Foreign Affairs by Michael Beckley, a professor of political science at Tufts University. The piece, “Enemies of My Enemy”, argues that from the 1960s onwards, the west focused too much on free markets and not enough on free societies. Capitalism itself became the foreign policy of the US, but as we know, the bet that the world would become freer as it became richer hit a roadblock with the rise of China. Beckley argues that the opportunity now is for a new liberal order (led by the US) to focus on democracy, rather than capitalism.
That’s basically what President Joe Biden is trying to do, but it’s a messy business, because it involves bringing together groups with quite varied interests. The EU isn’t crazy about US market dominance. India wants to hang on to its own brand of nationalism. America’s own politics make it hard to sell anything new at home. Asian nations such as Japan and South Korea have to play nicely in their regional sandbox since they are so close to China.
Still, Beckley cites a number of good historical examples showing that strong liberal orders generally result from a group of varied nations coming together in opposition to something — a country or an ideology. The end of the Soviet Empire was, in a funny way, a bad thing for liberal democracy in that it deprived the west of a polar opposite around which its own system could be shaped and tended.
A new source on my personal reading list, Bill O’Grady, the chief market strategist for Confluence Investment Management, would agree. He has written a terrific series on the history of American hegemony and where the world might be headed. His take is that with the collapse of communism, the west and the US in particular stopped being a constant gardener to capitalism. Markets became too tilted towards capital, and the public is now revolting.
“I believe that Charles Kindleberger was essentially right concerning his theory on hegemonic stability,” he told me in an email exchange about the breakdown of American hegemony.
“A superpower has two jobs; stabilise world security by preventing regional rivalries from becoming hot wars, which includes securing global trade routes, and providing the reserve currency. That means one has a global military and must be open to persistent current account deficits. The top 10 per cent of the population benefit greatly from these two factors. Due to global stability, they can auction their services on a global stage and outsource labour where it is cheapest. And the military projection is mostly provided by the bottom 90 per cent. The bottom 90 per cent have had enough. They don’t want free trade because it costs them jobs, and they don’t want to fight inconsequential wars overseas that leave them harmed for little personal benefit.”
I’d agree with that totally. The jury is out about whether we are heading towards a new bipolar order, led by the US and involving other nations that fear China’s growing influence (Beckley’s bet), or a tripolar world that will be much more of a power free-for-all, in which the strong do what they can and the weak what they must (O’Grady’s view).
Peter, do you have a view on that? I’m also curious about what will replace neoliberal economic theory, a topic that some important philanthropists and scholars are beginning to tackle (see a piece in The New York Times on their efforts). I suspect it will involve much more thought about the political economy (not just markets) and also more consideration of large-scale social and cultural values rather than mathematical calculations of individual rationality.
Personally, I also hope it will mean rethinking the kind of capitalism that leaves exhausted flight attendants being required to chop up ice cubes that have melted and refrozen into giant blocks during 90-minute delays. And all this due to cheaper outside contractors because of a system that forces us to nickel and dime each other.
Recommended reading
It’s not reading, but viewing — check out this new HBO documentary about Carl Icahn, in which I am a talking head. The take is a bit too rosy in terms of Carl’s impact, but it’s a very entertaining look at a larger-than-life figure in modern capitalism.
The saga of the 15-year-old Russian figure skater Kamila Valieva who fell apart in her long programme after her doping scandal is really heartbreaking. I used to be a competitive ice skater in an era in which quadruple jumps were nearly unheard of even for men. Now you can’t win a female competition without doing multiple quads, which means you have to have a prepubescent body to compete. Not good for the sport or the kids.
My favourite cartoonist, Roz Chast, nails the ennui of the moment.
Peter Spiegel replies
I don’t know if it’s my innate optimism or naive, middle-aged nostalgia, but if you force me to choose, Rana, then I’m going to continue to bet on a US-led liberal order over a multipolar free-for-all. If Michael Beckley believes that kind of “alliance of democracies” can only develop if it is arrayed against an autocratic China, then so be it.
It’s fair to say that four years of Trumpism shook my faith in the primacy of liberal democratic values and in American leadership on the global stage. You and I both came of age in the 1980s, a decade that started with a seemingly invulnerable Eastern bloc and ended with that hegemon disintegrating with barely a whimper. Watching those events unfold in real time leaves an impression — that individuals are innately predisposed to be free, and that American leadership can (and should) be the midwife of those freedoms.
But Donald Trump rejected those principles, and a whole lot of Americans seem to support him despite (because of?) that. You could almost feel the world make a collective recalculation: if the US was no longer going to be the reliable provider of global public goods — safe shipping lanes, a stable reserve currency, a nuclear umbrella — then it was every nation for itself. We appeared to be on the brink of Bill O’Grady’s free-for-all.
I like to think Americans — and the world — looked into that abyss and pulled back. That kind of “might makes right” balance-of-power geopolitics produced a half-century of European and Asian soil soaked with the blood of young soldiers.
Where I disagree with Beckley is his claim that postwar American-led hegemony was primarily about exporting neoliberal capitalism. It is true that the US foreign policy establishment felt that free markets helped bring about a world order that fostered free minds and free people. But I think it would be hard to find a consensus that free markets were the end goal, rather than the means to an end.
Some on the Reaganite right might have seen capitalism as a guiding construct, but they were hardly unopposed. From Dean Acheson and John Foster Dulles to Brent Scowcroft and Madeleine Albright, the overwhelming, bipartisan organising principle of postwar American foreign policy was the promotion of democratic values and human rights. Let’s hope that, in a post-Trump world, those values are “what comes next”.
Edward Luce is on book leave and will return in mid-March.
Your feedback
And now a word from our Swampians . ..
In response to ‘If Putin blinks, does Biden win?’:
“Is Putin blinking or winking? And is Biden winking back? A successful show of strength would benefit both, while actual conflict would not. If it were spun to Russians that Ukraine would remain beyond Nato’s pale, and to Americans that Putin ‘backed down’ from his armour-rattling, both presidents could take a bow to their domestic audiences. Europe would remain confused.” — Brantly Womack, Charlottesville, Virginia
“Both of you refer to Ukraine as a small country. Certainly in economic terms, but not in physical size. It was once the breadbasket of Russia. Something about Americans caring more about China’s economic juggernaut and not Russia’s or Putin’s imperial ambitions strikes hollow. I hate mentioning the domino theory that was so prominent in the 1950s, but will Putin stop in Ukraine, or does he fear Poland to the point of waiting everyone out to reach that objective?” — Duane Young, Mount Prospect, Illinois
Source: Economy - ft.com
