Global capitalism is hoisted by its own supply chain …

Who is at least supposed to benefit from economic and trade policy? Much has been written about the extraordinary speech delivered earlier this month by U.S. Trade Representative Katherine Tai on resetting China-U.S. Trade relations.

However, what may have been missed is how fundamental this is to the emergence of a new narrative about what trade and economic policy is actually supposed to do.

For the past four decades, until the election of Donald Trump, US trade and economic policy had one goal in mind. It was the era of the Washington Consensus, the neoliberal agenda. Neoliberalism, as Philip Roth put it, simply meant socialism for the rich and capitalism for everyone else. The primary goal was to keep one person happy: the big American consumer.

When Francis Fukuyama wrote the essay The End of History and the Last Man, he was only stating what was widely accepted as obvious: human political thought had miraculously fallen into a sort of Hegelian paradise. Political and economic perfection was liberal democracy supported by a capitalist economic system.

Of course, the vector for the inexorable growth of this doctrine has been globalization. In 2021, as post-pandemic globalized supply chains creak and collapse, with stranded ports, rising fuel prices, demand for coal outstripping supply, and a global shortage of computer chips, it is worth worth thinking about how we got there.

In his seminal essay Unmade in America, published in Harper’s Magazine in 2002, Barry Lynn succinctly summed up all the arguments for and against globalization. “Either you see globalization as a good thing because it diffuses what exists in America, like a liberal approach to business, and McDonald’s. Or, you see globalization as bad because it is spreading what exists in America, like a liberal approach to business and McDonald’s. “

It is wrong to see Donald Trump as a self-proclaimed proxy who tried to stop this force of globalization in its tracks. Rather, it was the product of the backlash against globalization and the shift of mainstream wisdom from the first to the second.

Listening to Tai, it’s clear that the tide has really turned. We are witnessing a bidenization of Trumpism, such are the undeniable similarities between the two administrations in terms of economic and trade policy. During the last half century, the emphasis has been on capitalist consumers by order of all; now the focus is on the welfare of citizens at the request of any capitalist consumption program.

Discourse represents another issue at the heart of neoliberalism. America no longer expects China to make structural changes to align with what it plans to be a global Elysee of free trade, because it too has given up. Tai made it clear that the United States has left the era of Ricardian fantasy in which countries happily and successfully pursue their respective competitive advantages for the benefit of all, without any of the messy side effects that might appear in the economy. real politics.

David Ricardo of course lived before supply chains were as extraordinary as they are today. It is one thing to prescribe the mutual benefits of trading Portuguese wine for English wool, it is quite another to cede your entire manufacturing and employment base to Asia.

And yet this response from the Biden administration that came through a Trumpian ballyhoo is likely to be wrong, for two reasons. First, beggar-thy-neighbor policies have only ever had one kind of effect: bad ones. No country has ever managed to systematically increase its productivity over the long term by turning in on itself.

Second, when listening to Tai, one thinks of horses running through fields with hastily slammed stable doors. We find ourselves in a globalized economy in 2021 with unimaginable levels of interdependence and supply chain complexity. In fact, the key here is not the approach to trading, but the way the capital is managed.

When Minister Ebrahim Patel follows Biden’s (and ironically Trump’s) example in pushing for “localization” and local content requirements for everything from cement to steel, one shudders to imagine the political effects and most importantly economic aspects of these new orthodoxies of trade policy.

Faced with the mess of the post-pandemic economy, it is worth quoting Lynn again. “For years Sovietologists debated whether Lenin ever said ‘A capitalist would sell rope to his own executioner’. Change the rope to ‘supply chain’, and whether Lenin made the statement or not, this is still clearly true. DM168

This story first appeared in our weekly Daily Maverick 168 which is available for R25 from Pick n Pay, Exclusive Books and airport bookstores. For your nearest dealer, please click here.

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