We’ve been hearing about the debt limit for months, but familiarity makes it sound sort of normal. That is spectacularly wrong.
We all know it would be a disaster for this country to foreclose on its debt. That would not only have massive economic impact, beyond that it would undermine international confidence in the United States for any of its commitments. That the Republican Party is playing chicken with those consequences shows just how divorced it is from the well-being of the country. What’s not to like about a forced recession in a Democratic President’s election year??
However even that doesn’t do justice to what is going on. The issues under discussion are not merely financial. McCarthy is going after specific parts of the Biden legislative agenda with his own alternatives. The debt limit fight is an effort to replace our Constitutional form of government with a new Republican agenda forced upon the country at gun point. That is not an exaggeration.
There is a fundamental misunderstanding of democracy that undermines much domestic and foreign policy. One way to put it is that democracy is seen as a kind of natural way for societies to organize themselves. What could be more normal than a bunch of people getting together for mutual benefit? Just get rid of the autocrats, and the people will rule.
Unfortunately it’s the autocrats who are natural, and democratic societies are fragile, rare, and in dire need of careful cultivation.
For starters we can go back to the classical Greek models. Democracy in Athens was both a sham and a disaster. The Athenian democracy was created by Pericles as a way of wresting power from aristocrats. Under its auspices he ruled with enormous personal power, and when he died things went to hell quickly. The chaos led first to an authoritarian takeover (stopped only by the army) and then to the defeat of Athens by Sparta in the Peloponnesian wars. Plato, writing later, dismissed democracy as nothing more than a prelude to dictatorship.
As another example, a whole raft of new democracies were created in eastern Europe in the wake of World War I. By the end of the 1920’s every single one of them was a dictatorship. Once you’re in power there’s no reason to give it up. And without a broad societal commitment to democracy, there’s nothing to prevent that. Hitler of course was installed by a democratic election, and the conversion to dictatorship followed quickly and easily.
In the US today we’re so accustomed to this idea of democracy as normal, that we’re unprepared for today’s anti-democratic Republican party. Since we don’t even ask why democracy is good, the question “why should we give up when we’re winning?” has no answer. Republicans today and their Supreme Court are unapologetically all about winning and maintaining power indefinitely. We’re surprised how easy it is to subvert our institutions, but that‘s what happens if society is not prepared to fight.
There are in fact a strong arguments for democracy. We can look today at what goes on in China and Russian. With authoritarian leadership you can never correct disastrous mistakes or deal effectively with corruption. Further, autocrats once installed are beholden to no one. Rule of law goes out the window, so there is no protection from the rich and powerful. As we’ve pointed out here before, the enemies of democracy are no one’s friends. One problem is that people tend to think that the status quo is permanent, since they’ve always lived it. So real consequences tend to come as a surprise. Think of Brexit and the Supreme Court Dobbs decision.
Democracy is important, fragile, easily lost, and very hard to recover. The powers that be (e.g the ever-present Koch organization) will always want to stand above rule of law. They have enormous powers to sway the population, and once the population loses interest it’s hard to keep them out. It is everyone’s responsibility to stand up for democracy. There’s plenty of publicity these days about the threat to democracy in Israel, but the threat is just as real here and now. It may take the same kind of mass movements to fight it. As we all know the Supreme Court already has an end to democracy on its docket, and we can expect to hear about it in June.
Finally it’s worth recognizing that this same misunderstanding of democracy contributes to foreign policy goals that are to say the least delusional. Most countries are corrupt dictatorships, and they’re going to stay that way. Further our own attempts at state building (as in Iraq or Afghanistan) will continue to fail in chaos and corruption, because belief in self-evident democracy means there is no recognition of the magnitude of the job (or our own contributions to the problems). In one of Elena Ferrante’s novels she speaks of the power of expectations in controlling behavior—you cannot suddenly have democracy and the rule of law if that’s contrary to the everyone’s experience:
“It was a world of favors, of services exchanged for other services, of debts contracted and debts called in, of concessions obtained and never returned, of pacts that could be broken and others that held until death. It was a world based on friendships and animosities, on associations and affiliations, on old enmities and new alliances. How could one change that world? By oneself, no one could. There was only one possibility: to become part of it, accept its conditions, go along with it to survive.”
Our biggest responsibility to the world is to build a working democratic society. At the moment that’s a tall order, but that’s the job we’ve got. In this juncture in history the US and EU are critical–the West is on the line to show it is a model that can be believed in. That’s not self-evident.
It seems to me that the discussion of TikTok is distorted by the kind of xenophobic paranoia that frequently gets in the way. It’s not that there isn’t a problem, it’s that the real problem is not solved by a fixation on nasty foreigners.
There are two frequently discussed problems (that often get confused with each other):
We’re giving a whole lot of information to TikTok that could be used by the Chinese government for nefarious purposes.
The Chinese government could use their state-sanctioned control of TikTok to propagandize to TikTok’s base of customers.
The first point is pretty close to nonsense. Monumental amounts of information on the American population are already being collected, organized, and merchandized by companies who do this for a living. The last time I looked at this issue, more than ten years ago, you could already match what TikTok knows. Today it’s far worse. We need legal controls on information gathering. The fixation on TikTok for this issue is a distraction.
The second point is a more serious issue, as we’ve had more than enough experience with the coercive effects of social media. The problem, however, is that the dangers from TikTok are not an awful lot different than the dangers from good old American social media. There’s nothing that stops the Chinese government from putting propaganda on TikTok, but we’ve already had the Russians (and the Koch people) doing the same thing on Facebook. Unless we put up legal barriers to deliberate manipulation, social media are for sale to the highest bidder. Banning TikTok is just plain not the issue. (To my mind, any network operator that selects content for unsolicited distribution to users should be legally responsible for that content.)
You can even say flatly that the reason there is such bipartisan agreement on banning TikTok is that it is a handy way to make it seem that you’re doing something about a serious problem–without upsetting the real perpetrators much at all.
We’re not paying enough attention. This midterm election hides a real danger of Depression. We’re stumbling into exactly what happened in the 1930’s.
The Great Depression of the 1930’s occurred when the financial authorities of the day responded to a sudden downturn with the opposite of what was needed. A straightjacket of fiscal austerity was applied (by the self-protecting upper classes) in place of the stimulation that would have enabled recovery. That shut down everything in the US and much of the western world.
We are currently fighting inflation. That’s a tough battle and will cause a slowdown that is some variety of recession. It’s what happens next that matters.
The only reason we got out of the 2008 recession was that there were enough Republicans to join Democrats in passing a stimulus package early on. Already by 2010 there were few of those Republicans left, and any further stimulus was blocked in the name of the bogus “balanced budget amendment”. The goal was national pain ahead of the 2016 election. It worked.
We’re in that situation again, but the dangers are much worse. To state the obvious, the worldwide economy is in extremely fragile state: inflation is everywhere (we’re actually on the low side), there is war in Ukraine (with direct consequences for many countries), energy prices are rising from Saudi greed, there’s even a dictatorship-induced slowdown in China, and (compared with 2008) there is very little international cooperation. Forced austerity is exactly what brought the world economy down last time, and we’re going to get it again.
For today’s Republican Party a recession is an opportunity. A Republican (Trump) Congress will do anything to bring back their hero. As in 2014 there will be no possibility of stimulus no matter how bad things get, because pain is the goal. By 2024 it will be too late for any short-term way out.
The Great Depression was so bad, that it seemed that people would always remember what happened and never do that again. Unfortunately we’re there.
Monotheism amounts to an imperialistic assertion of primacy. That sounds like one of those wild-eyed slogans from the radical left or right. But in fact it is a simple statement of what drives quite a lot of policy, both domestic and international.
Let’s start close to home. In both Britain and the US there is a big problem with past imperial grandeur. The Brits just can’t get over their lost empire, and they keep doing completely illogical and crazy things (e.g. Brexit) in hopes of getting it back. The fact that the world has changed since then, with new powers and new bases for strength doesn’t register. Since the empire is taken to be an expression of British superiority (and of God’s grace raining down on Britain) there is no reason why it can’t just happen again. There is only one God and he’s ours.
The US has a similar problem, just a little later in time. We had the 1950’s and even 60’s when in the years following the destruction of the World War II the US was unquestionably the world’s only remaining superpower. If anything we were more dominant than the British as their peak. And we’re just as blind in looking back to it. Our dominance was a result of national superiority and God’s grace. We are the chosen rulers of the world and there’s nothing that ought to stop that.
The Chinese and the Russians have similar issues. Having lived in Italy at one point, there’s more than a bit of it (going back several centuries) there too.
The Old Testament (as I understand it) had a more limited notion of monotheism: each nation had it’s own god or gods and international struggles were also struggles of those gods. That sounds a little more accurate. Contemporary monotheism amounts to assertions of primacy. An astounding percentage of Americans are ready to talk about God’s protective shield over the US and our God-given role in running the rest of the world. That gets in the way of any notion international cooperation or any workable national objectives. With God on your side, reality just doesn’t matter.
The Brits have already driven themselves to at least a short-term future of poverty. It is relevant to notice—although seldom mentioned—that the pre-EO version of Britain was much slower than the continent in recovering from World War II and generally poorer per capita.
The US is on the brink of doing the same thing. We’ve got a dictatorial theocracy going, as well as a “we don’t need anyone” ethos on the right that denies any need to interact with the rest of the world except under terms of dominance. Furthermore the pervasive xenophobia denies the (currently enormous) contribution of foreigners to the economic strength of the US.
However the biggest problems are not even that. As climate change and also Covid and the Ukraine crisis show us, we have only one world. All the national gods are going to have to cooperate if we’re going to get out of this mess. Enough with national monotheism.
Inflation is—by common agreement—the primary issue faced by American voters today. However when you ask people what’s causing inflation, things are quickly not so clear.
Republicans will say immediately say that it’s all due to overspending by the profligate Democrats. Democrats will talk about worldwide trends that are beyond the scope of what the Biden administration can control. In neither case do you turn the important issue of inflation into useful steps going forward. That needs to be done, and we give it a shot here. The result may be a little different than expected.
First of all inflation necessarily involves both supply and demand, and both are clearly in play here. The Democrats’ desire to keep people whole at the end of the pandemic did put extra money in the hands of consumers., and that extra money was chasing a limited supply of available products and services. But it also turned out that as the pandemic eased, we became conscious of all kinds of production bottlenecks that people hadn’t anticipated. Some of those bottlenecks have gotten a lot of press, integrated circuits required for production of new cars for example. Other bottlenecks involved consequences of Covid, such as the breakdown of daycare systems.
The Covid payments certainly had an initial effect. However at this late date, when any Covid benefits are long-gone, the continuing pervasiveness of bottlenecks has got to be viewed as the major issue. Car prices for example represent a third of measured inflation. What are we to make of bottlenecks persisting even now? (Gas and food prices are now directly tied to the Ukraine war, so they are their own story.)
The most prevalent reaction has been xenophobia. We’ve got problems because we’ve let ourselves get too dependent on the Chinese. Bring it all home and we’ll be fine. That sounds nice, and we certainly do have continuing problems with Chinese sources, because of their zero-Covid policies today.
But that conclusion is actually wrong. We give two examples. One example we’ve given before: the single worst problem during the first stage of the Covid crisis was a lack of testing equipment—because the American manufacturer with a CDC contract to produce the tests had decided they could make more money doing something else. The second example is active today—the baby formula crisis. Consolidation in the industry was such that a single vendor’s contaminated equipment led to a massive shortfall in supply. Without rules of fair play “our people” aren’t necessarily going to be so much better than the Chinese. Furthermore the idea that we are somehow going to deliver the best of everything available worldwide to our own businesses is manifestly false.
There are two simple facts to be acknowledged:
1. Unbridled capitalism is simply NOT robust. Consolidations, monopolies, and risk-blindness are private sector facts of life. Even Adam Smith understood that.
2. The much-expressed desire to decouple from some or all of the rest of the world is both unworkable and unproductive.
There is no substitute for solving both of these problems. We give examples for each:
1. The SEC has got to do a better job of making companies confront risk. Climate change is a good example where work is underway. Anti-trust activities are also clearly relevant. Then there is the need to limit the power of the consolidated financial sector over the companies they own. It is established fact that companies today invest less and return more of their profits to their investors—which directly affects robustness. What all of this comes down to is that today’s inflation is another example of the dangers of unfounded faith in a deregulated private sector.
2. The world needs a working system of international trade so that international corporations can be transparent and effective. The Biden administration’s work on international taxation is an important step. Turning todays moribund WTO into an effective organization is another necessary goal.
It is most important that we stop using inflation as just one more excuse to search for scapegoats. Even in the near term, we should be looking for more, not less, cooperation with China, as the bottlenecks hurt both countries. And in the longer term, there really are lessons from today’s inflation that can make the world a better place for us and everyone else.
There have been many articles about how the plans to provide US natural gas to Europe will undermine progress on climate. This is a false conflict between climate progress and support to Ukraine.
First of all there is a timeframe difference. What matters for Ukraine is a show of Western resolve now. Even a year from now the situation in Ukraine will hopefully be different. It’s going to take at least that long for much to happen with natural gas terminals here or elsewhere. There is no reason to undermine the support for Ukraine now.
Second the argument that anything we build will be used for years afterwards—however frequently it is made—is wrong. Terminals will be used as long as there is demand for their capacity. If Europe, for whatever reason, weans itself off natural gas, then those terminals will not be used even if we want them to be.
Third the gas to be provided by the agreement is both insufficient and expensive. We would only be providing one third of the current demand and the pricing is expected to be twice what is currently paid. The agreement in fact provides a very strong incentive for the Europeans to get themselves off natural gas.
People who fight this agreement on climate grounds are doing no cause a favor.
The dangers in Ukraine are enough to make one wonder about the current world order. We’d like to believe that it’s beyond the pale for one country to invade and take over another on the flimsiest of pretexts. Despite some current rhetoric, Crimea was not that: it had been an essential part of the Russian military infrastructure for centuries. Ukraine is different—what does it mean?
Regardless of how the Ukraine affair ends, the change it signifies is enormous. In the wake of the horrors of World War II, the US as remaining unscathed power helped put together a system of rules and organizations aimed at preventing another one. The idea was to prevent economic collapse and to resolve conflicts before they became wars. We got a UN, an IMF, and rules to govern international trade. The result was an extended period of world prosperity. The communist bloc stood outside all of that, but even in the days of the Cold War overt seizures of other countries were avoided.
Over the intervening years much of that liberal economic system remained, even as the world became much more complicated. Standards for permitted behavior lived on. In some sense, the Paris climate agreement was a kind of last hurrah. There was no enforcement mechanism, but the idea was that unanimity would shame the cheaters into compliance.
Trump broke that idea in a way that only an American President could. He asserted that there was no reason to obey any of those (US-initiated) international rules, and he got away with it. Until Trump people cared about WTO trade rules, climate progress, and democracy worldwide. Now essentially all of that is off the table. And the powerlessness behind many international institutions has been laid bare. If Putin decides to invade Ukraine, we’re in a world where the only consequences are the ones we manufacture for the event. The UN is manifestly irrelevant. Shaming has no force. There are no rules, and your friends can cover for you. It’s just the way things are. Military threats can be the first not the last of options.
This is a problem generally and for us in particular. Under Trump we developed adversarial relationships with just about everyone, with the view that they were all against us, and we had to show who’s boss. That limits our power. Most serious is what happened with China. Xi may be a megalomaniac and an autocrat, but we empowered Chinese hardliners and contributed to his nationalistic program by delivering threats echoing the imperialist past. When Trump said he would destroy the Chinese economy they took it seriously. The newly-revived alliance with Russia—a thorn in our side for Ukraine—was at least in part our own doing.
We have replaced our successful efforts for peace and stability with a new world view where we need no one, and any constraint on our ability to act is unacceptable. It’s easy to say (and many do say) so much the better. Every country needs to stand up for itself, and all of that international stuff just gets in the way. That’s an appealing slogan. It wasn’t just Trump’s line; it was behind Brexit and all the populist movements of the both the left and the right. However we’re not the only ones playing that game. That “freedom” is a freedom for any country to do anything, and the Ukraine affair is an early indicator of where that goes. We seem to have forgotten World War II and the Depression, and that’s just for starters.
Our own history gives an excellent example of what happens. That ocurred after the American Revolution, under the so-called Articles of Confederation. It took only a few years for the American states that had fought the British together to be at each other’s throats, torpedoing economic progress for everyone. Things got so bad that the states had no choice but to give up power to a new Constitution and a national government. In Europe there were centuries of wars that only ended when cooperation became manditory in the post World War II recovery.
It’s a fact that the liberal economic system has gotten a bad name in this country—”Bill Clinton let China in the WTO and there was nothing we could do about the Chinese assault on American jobs”—but that universally-repeated story is false. (It’s one example of what you might call bipartisan revisionist history—the left and right united against the center!) The main issue raised with China’s behavior has always been currency manipulation, which was in no way permitted under WTO rules. And as the following job loss chart makes clear, the loss of American jobs was 100% a phenomenon of the George W. Bush presidency:
That’s no accident. The radical neocons had us preoccupied with fighting a $3T war, and the same deregulation mania that produced the 2008 crash had us actually encouraging outsourcing abroad. For the business-friendly Bush people cheap off shore labor was good. All subsequent efforts to help the people hurt by that process were blocked by Congressional Republicans bent on sowing dissatisfaction ahead of the 2016 election. The liberal order conspiracy is a convenent fiction for both the right (to cover its tracks) and the left (to attack the center).
If we’re going to avoid economic and even potentially military disaster, we’ve got to get past the electoral propaganda and understand what we’ve done right and wrong. In particular we’ve got to wean ourselves from the siren-call of nationalism. We’re not going to “win” the future, but we can certainly all lose it. The real challenge is getting internationalism right, so that everyone has a stake in the action. We built unprecedented peace and prosperity after World War II. That job needs to be done again before we give it all up—in a way that has happened many times before. Both prosperity and peace are in question.
One important lesson of history is that economics precedes politics. The EU, for all its imperfections, is a vast improvement over centuries of status quo. What got that going was a step-by-step economic union, long before there was anything political on the table. In that sense, strangely enough, you can argue that the WTO is more important than the UN. Getting the WTO back on track is going to take considerable doing, but it has to happen. And perhaps climate change can yield an appropriate model.
Climate change is an unusual situation in that practically every country has veto power of the result. We all share the same atmosphere, and the CO2 concentration is only controlled when everyone cooperates. So the solution has to get a buy-in from everyone, rich countries and poor. In fact it can only work when rich countries recognize that—like it or not—they’re going to have to help the poor ones. Everyone will have to get used to the idea of an international project where the focus is less on who gets the best deal than on whether it delivers the necessary benefit for all.
A functioning WTO is a similar balancing act. As starting point there is one basic reality to be acknowledged: self-sufficiency is not a desirable or realizable goal even for large countries. Despite all the discussion of the evil Chinese, we would be vastly worse off if they just went away. Just in general, we are not always going to be the best at making everything, and our own industry will be crippled if we can’t build on what’s best.
Furthermore discussions of self-sufficiency tend to include a strong dose of the always-dangerous delusion “my people aren’t like that.” In fact domestic manufacture does not guarantee availability, quality, price, or appropriate technology. The single worst problem during the first stage of the Covid crisis was a lack of testing equipment—because the American manufacturer with a CDC contract to produce the tests had decided they could make more money doing something else. Similarly, self-sufficiency can do little to guarantee the well-being of the national workforce, as there is no substitute for government dealing with all relevant labor issues. Trade is more like climate change than it seems—it’s something we’ve got to make work.
The balancing act is in the many factors that have to be taken into account for fair trade: labor conditions, environmental rules, government involvement, and so forth. Those are both impediments and opportunities—they make the negotiations harder, but they are also leverage opportunities for a better world. Elizabeth Warren in her Presidential campaign made a long list of items she wanted to make as preconditions for trade with the US. Her standards were very high—it was pointed out at the time that no country met them—but her list was an indication of potential opportunities. Also, it is important that these rules should apply to everyone—including to us.
What this comes down to is that globalization, despite the rhetoric, is only anti-labor if we make it so—which is precisely what happened under George Bush. Instead of using it to establish worldwide labor standards, we used it deliberately to undermine workers everywhere. In other words thus far we’ve had globalization exclusively for the rich. If we don’t step in to control it, it will stay that way—populist movements or not. And if we don’t start learning how to create a world order for the benefit of humanity, no amount of national chest-beating will save us.
The Ukraine affair is dangerous in its own right, but even more dangerous as a symbol of a world out of control. What the world needs now is neither uncontrolled chaos nor world government, but a set of mutually-agreed rules to forestall a fight to the bottom. As with climate change, there is no way out other than to acknowledge we are now one interconnected world, and we will all either stand or fall together.
on the outside 