The G7 is coming up in a few weeks and US policymakers are gaming out how to connect the dots of the Biden administration’s domestic economic policies with a new foreign policy. A meaty speech given last week by national security adviser Jake Sullivan at the Brookings Institution laid out a new approach to many things — from economic theory to trade to how to think about growth.
In particular, it started to tease out what Joe Biden’s industrial strategy means for allies and other nations, a topic I cover in my own column today. Hint: it’s not about keeping China down, but rather dealing with negative economic externalities (like climate change and rising inequality) and concentrations of power (be they in corporations or countries) that the markets simply aren’t handling well on their own.
One of the best parts of Sullivan’s speech dealt with how America hopes to engage with other nations on these goals. As he put it: “We will unapologetically pursue our industrial strategy at home — but we are unambiguously committed to not leaving our friends behind. We want them to join us. In fact, we need them to join us.”
What’s more, Sullivan added that “co-operation with partners is not limited to advanced industrial democracies. Fundamentally, we have to — and we intend to — dispel the notion that America’s most important partnerships are only with established economies.”
Some of the usual suspects have recently been sceptical of the administration’s efforts to re-engage with the developing world, trotting out the truism that “China gives Africa an airport, America gives it a lecture.” The fact is a bit more complex, as any number of countries who’ve been given loans via the Belt and Road Initiative in exchange for natural resources will undoubtedly learn. But let’s leave that one aside for now. Bringing developing countries along in the process of shifting from an “all growth is good” paradigm to one that prioritises inclusive and sustainable growth is the goal of the White House, and I think it’s an important one.
As my friend Barry Lynn, head of the Open Markets Institute, wrote recently in the Washington Monthly:
“We must relearn how to treat nations beyond the G7 and China as equals. The original promise of the financial and trading systems established after World War II was to develop the industry and skills of all peoples. For half a century, albeit imperfectly, this worked. Since the mid-1990s, however, the general practice of the richest nations has been to subject production and finance in the global south to ever more rapacious and authoritarian control by western corporations, banks, and ‘multilateral’ institutions, many of which in turn delivered these national markets to governance by Chinese industry and the Chinese state. Over the past decade, the problem has been made only worse by the political and social effects on these nations of unregulated communications and commercial platforms like Facebook and Twitter, and the more clearly imperial projects of China-controlled platforms such as Alibaba.
The moral reason for reversing this despoilment and disenfranchisement of half the world is obvious. There’s a more selfish reason as well. The swiftest way to fully engage the people of India, Brazil, South Africa, Indonesia, Mexico and other nations in the project of building a secure and resilient industrial system is to give each a full seat at the table.”
That won’t always be done via new trade deals — in fact, the trade for its own sake days are over, as Sullivan laid out in his speech, since all too many new trade deals failed to take care of either people or planet and led to concentration and fragility. Think not only rapacious American monopoly powers, but forced labour camps in China where ethnic minorities work in a highly polluting way to dig silica for use in solar panels that are dumped on the world at below market rates.
On the other hand, the US is offering an alternative to the Belt and Road system through a new Partnership for Global Infrastructure and Investment that will raise hundreds of billions for digital and physical infrastructure in developing countries. It’s also challenging China to help the US and Europe with debt restructuring for many emerging markets and to aid in revamping the world’s development banks — and, to some extent, the World Trade Organization.
We still need much more detail about the mechanics of all this. But I like the message. Ed, what kind of message do you think the US should come to the G7 with, and how might the White House better court developing countries without throwing out the better labour and environmental standards that are now at the core of domestic and foreign policy?
Recommended reading
In the FT, I really enjoyed this Big Read on the global luxury boom, which shows no signs of ending despite a looming recession.
The New York Times, I enjoyed hearing Ezra Klein interview Sheila Liming about the American crisis of loneliness. I’m also a huge Dan Savage fan (the MOST honest person on sex, ever) and the pairing with Ezra was particularly good. My favourite takeaway is what straight people can learn about sex from the LGBTQ crowd.
Finally, I am about halfway through the most wonderful book, Riverman, by The New Yorker writer Ben McGrath. It’s about how one man decided to turn failure to cope with our high-speed, late-stage capitalist consumption society into an opportunity for adventure, launching himself on a multiyear journey down America’s rivers. A beautiful, quiet, impactful read.
Edward Luce responds
Rana, I read Jake Sullivan’s speech in some detail, especially after coming across this line: “The idea that a ‘new Washington consensus,’ as some people have referred to it, is somehow America alone, or America and the West to the exclusion of others, is just flat wrong.” After a search, I am fairly sure I am the only person to have written of the new Washington consensus in a column the previous week under a headline of those same words. I am always prepared to be wrong, even flatly, and in this instance would be happy to be disproved. I know Sullivan and believe he’s a talented public servant, who is open to counterargument and self-questioning. This is rare in public figures. His speech was an important one.
My answer to your question on what I’d like to see emerge from the G7 very much depends on whether the initiatives trailed in Sullivan’s speech — supply-chain coalitions of like-minded countries on critical minerals, semiconductors and so on — have practical effect. He highlights the Indo-Pacific Economic Framework. At the moment it is a place holder. America’s capital commitments to IPEF would barely cover the missed interest on a Chinese loan to Zambia. It is true that many of the loans in China’s Belt and Road Initiative have gone sour. But Chinese outlays have supplied electrification, clean water and basic infrastructure to tens of millions of people. The US needs to match Sullivan’s words with real money. Weakening the World Bank’s balance sheet to enable more lending will only take us so far. We need Marshall Plan-scale largesse (public as well as private) to deliver the energy transition to the global south.
As regards the era of trade deals being over, that is clearly true for the US. The system served America for many decades. Now that it doesn’t — or is perceived not to — the US is arranging a funeral for the economic side of its rule-based international order. But most of the rest of the world does not agree and was not consulted. They are busy joining trade groups, negotiating bilateral deals and pushing for more market access. If America wants others to follow its emerging domestic consensus, it must incentivise them to do so. I did not see enough of that in Sullivan’s speech.
Your feedback
And now a word from our Swampians . . .
In response to “Never, ever, take your eye off the Murdochs”:
“Concentrating great wealth is about concentrating power to bend the rules of the game in both the marketplace and in the political governance structures to increase that power so that great wealth continues to concentrate. The Murdochs are players at this level and this level is limited to at most a thousand families or so in the United States. Everyone else is hoi polloi. What is the great wealth power play for 2024? A Republican will win the nomination and is reasonably likely to win the presidency. The Murdochs’ goal is to be on the winning side so that their wealth and power are protected and that it can grow unimpeded by government interference.” — Paul A Meyers
Source: Economy - ft.com
