Alex Brandon/AP Photo
President Joe Biden speaks about domestic manufacturing, unions, and electric vehicles, in the South Court Auditorium on the White House complex, February 8, 2022.
The Prospect has long been a magazine of the labor left. Our editors covered supply chains, trade agreements, and declining union density before they were in vogue, and published early warnings about the disastrous consequences of deindustrialization, low investment, and offshoring.
The past three years’ shocks to production have reshuffled the position of American workers in global affairs, setting off a period of economic retrenchment. The foreign-policy establishment has hardly begun to digest the depth of this shake-up. Changes to U.S. geopolitical strategy will shift the balance of power between labor and capital, at home and abroad.
Particularly worthy of scrutiny is a false choice being set up between neoliberal globalization and a new protectionism that has become fashionable on parts of the left and right. If you are not with these new mercantilists, you are said to support a romantic doux commerce theory of globalization resoundingly disproven by the war in Ukraine.
There is a better way. We can enthusiastically support the new industrial policy—bringing the public sector out of the shadows, embracing the state’s role in steering investment—while rejecting the new economic rearmament of a world fracturing into trade blocs. We can oppose the liberal free-trade agreements of the past, while supporting open commerce with real trade adjustments for workers. We can build resilient supply chains for critical materials without supporting an inflationary, autarkic regime in which every country is competing to indigenize production.
The United States is a country dotted with extraordinary concentrations of oligarchic wealth alongside internal stretches of developing-world poverty—a pattern one agricultural economist at the University of Missouri has called “economic colonization.” President Trump crassly but wisely gave voice to many of these legitimate and long-ignored grievances.
President Biden has carried forward Trump’s America First policy with new coherence. Instead of symbolic and counterproductive tariffs, we have seen systematic investment in industrial giants, such as semiconductor chip manufacturers, that this administration hopes will reanimate domestic production. This hard pivot will only accelerate with the president’s aggressive slate of executive actions planned for this coming year, internally called the “protect agenda,” including unprecedented federal authorities to regulate investments in China by U.S. companies.
But the U.S. should be wary of stomping around like a hyperpower in a new age of multipolarity. New efforts to slow Beijing’s development of advanced semiconductors, for example, are an aggressive step that Martin Wolf has aptly called “an act of economic warfare.”
The potential pitfalls of this escalation have not been fully internalized. Even as the dollar overtook the British pound sterling in the first quarter of the 20th century, becoming the dominant currency for financial transactions and international reserves, British elites insisted that the United States simply did not have the institutions to replace its role at the nerve center of the global economy.
U.S. elites today are similarly dismissive of non-Western financial infrastructure, even as the Chinese build payment systems robust to U.S. sanctions. Of course, the dollar eclipsed the pound while permitting free flows of capital not only in trade financing but also in debt. China seems unprepared to authorize the same. But consider that Dubai is now handling swap transactions between India and China for Russian oil, as even once-neutral Switzerland joined Western sanctions against Russia. These developments, and the broader consequences of a revolutionarily aggressive sanctions regime, have been largely ignored by an American policy elite overconfident in dollar dominance.
THE BIGGEST MISSING PLANK in Biden’s bid for new American leadership is partnership with the developing, industrializing, and poor countries of the world. This is both a strategic blunder and a moral abdication.
As we enter a world where the old Bretton Woods institutions of the World Bank and IMF have decreasing importance, edged out by the growing share of investment from the private sector, China, and the Middle East, Biden talks of creating a club of democracies and Treasury Secretary Janet Yellen is promising a new period of “friendshoring.” At best, these have been low priorities, marred, for example, by recently bungled summits with Latin American leaders.
At worst, Biden’s rally to democratic allies is a thin veil to disguise decoupling and full-on nationalism, as opposed to regionalism. The guest list of Biden’s democracy summit was riddled with inconsistencies, including Pakistan and the far-right regime in India while excluding Bangladesh and Sri Lanka. The Buy American investments of his signature Inflation Reduction Act promise to inflame trade tensions with Europe in the short term more than they hit China.
Large middle-income countries that are potential American allies—Brazil, India, South Africa, Indonesia—have declined to join U.S.-led sanctions on Russia, and increasingly see themselves as part of a new nonaligned movement in a more multipolar world. Indonesia is exploring a “Lithium OPEC.” Mexico and Zimbabwe are among the nations curbing raw exports of rare earth metals. The G77 group of developing countries is exerting new muscle, extracting a Loss and Damage fund at the last COP27 global climate conference that took the United States by surprise.
U.S. efforts to compete with Chinese global institutions like the Belt and Road Initiative (BRI) have been embarrassingly small. Take the U.S. International Development Finance Corporation (DFC), run by a political appointee who was a former vulture fund investor. With a fraction of BRI’s spending, the DFC’s new CEO says openly that it will not attempt to compete at scale with Chinese international investment but is aiming instead for a small portfolio of higher-quality loans. According to Biden’s logic of strategic competition, this makes little sense. Does the U.S. want to be a serious player in the developing world?
The Bretton Woods system was set up with great aspirations. Franklin D. Roosevelt spoke of “one-worldism,” a vision for global governance from the United Nations in which world security, as Franz Schurmann put it, “had to emanate from an institution less esoteric than an international monetary system and less crude than a set of military alliances or bases.” That vision was supplanted by Truman’s doctrine of “free-worldism,” focused on containing the USSR and choking off the spread of communism.
Domestically, there are many parallels between FDR’s historic investment program and Biden’s ambitious restoration of industrial policy. Abroad, the Biden administration risks falling short even of building a convincing coalition of so-called “free-world” countries—let alone achieving anything like FDR’s vision for progressive internationalism.
As we enter the second half of Biden’s term, the administration would do well to consider striking fairer partnerships with a developing world that has so far seen little reason to back its unprecedented Russian sanctions regime and its escalation of hostilities with China.
