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After Globalism

opinion

As I write President Trump and NATO Secretary Rutte have announced a framework of a deal on Greenland, which makes it a fun time to step back and think more broadly. Since it's entirely likely that Greenland will soon be displaced by something else, here's a brief reminder of the last week:

The Greenland saga is a telling example. On Saturday Mr. Trump issued his demand to own the icy island and he vowed to impose tariffs on Europe to compel a sale. Opposition built over the holiday weekend, and financial markets cast a decidedly negative vote on the tariffs and threats on Tuesday.

Members of Congress spoke against the use of military force in Greenland, with even GOP leaders expressing doubts. One Senator told us that, if Mr. Trump had gone ahead, Congress would have voted to cut off funds for an invasion, and with veto-proof majorities. European leaders also made clear that taking Greenland by force, military or otherwise, would break the NATO alliance.

And what do you know? On Wednesday in Davos, Mr. Trump issued his familiar criticisms of Europe’s weakness, many of which are accurate. But he disavowed the use of force. And by the end of the day he had canceled the tariffs and claimed victory over what he called a “framework” deal over Greenland that he said will make everyone happy. wsj

No one is saying this, but what if we have in China, Covid, Trump, tariffs, and now Greenland, the natural emergence of a post-globalist order?

Briefly recounted, we have in the rise of China a systematic exploitation of international markets, one that has not been corrected by those markets. This has been built on the fiction that it does not matter where something is produced, leading to a race to the bottom on labor and environmental standards for reduced production cost. When Covid19 came around and we had to scramble to locate basic medical supplies, it revealed to a worldwide audience how precarious our long supply chains had become, and how dependent we now are on Chinese production.

These vulnerabilities 'required' massive stimulus to bridge which predictably led to inflation. There followed the Inflation Reduction Act, which did little to actually tame inflation since it added even more money to the supply, but did fund many elements of Progressive Democrat's failed Green New Deal. Beyond medical supplies, Covid also significantly disrupted chip supply, hence the CHIPS Act to subsidize construction of new domestic chip fabs. Neither the IRA nor CHIPS succeeded on anywhere near the timescale their boosters claimed possible because both were loaded up with irrelevant tending toward mendacious requirements on how the funding could be spent, and what diversity, equity, and inclusion standards the grantees needed to attain.

While we suffered Biden's befuddled ineptitude, Trump prepared for his second term and hit the ground running with a slew of executive orders that served to quickly shake up the status quo. As dramatic as most of these were, the majority were constitutionally defective in attempting to solve problems that were only solvable by Congress. How did he try to solve China's assault on our productive capacity? Through tariffs on international trade of manufactured goods. But due to Congressional sclerosis these were not levied in a robustly legal way, but by stretching executive power in a way that will likely be invalidated soon.

The past year's application of significant tariffs has shown, however, that our economy can survive a post globalist world: prices haven't responded to tariffs nearly as much as doomsayers claimed. The institution of tariffs is obviously most felt in their immediate aftermath, fading slowly as the market discovers how they affect prices until finally incenting new domestic production capabilities that replace those lost internationally. Americans can get back to work again, and wages can rise, but only if we let the market deliver it.

This is what post-globalism may look like: the destruction of international 'markets' and the rise of subsidiarity within nations. Why would we prefer to trade in goods when instead we can share ideas and then build it ourselves, locally adapted. That is, if we can share ideas we do not need to trade manufactured goods; I don't care where Bananas come from but I would like the entirety of our pharmaceutical supply to be produced within our legal system.

Globalism failed to curb Chinese excesses or reform its politics, it failed to knit the world into one economic system with converging societal standards. Premised as it was on a vague notion of the end of history, it lacked the structure to bind nations together into real mutual dependence and shared prosperity. Many European minds are still groping in this direction, but their inability to understand sovereignty and national difference, let alone ameliorate these shows how poorly designed this era has been.

Trump's impulsive actions on Greenland show, poorly, the other path, that instead of international markets and treaties, security requires national sovereignty. (There has been no specific proposal for Greenland; for simplicity I'd make it a full-fledged state and not some awkward, intermediate territory. And that precedent would pave the way for the admission of Canada... ) Without being part of the same nation, the territory can never fully participate in the economic, political, and cultural systems that bind that nation together. Globalists tried to paper over this deep integration with treaties far above the daily lives of constituents, it failed; the better way is old-fashioned nation building with all of the benefits and obligations that entails.

This would be a serious change in direction, one I don't think Trump is capable of conceiving nor executing, but some in his administration may be working in this general direction. Regardless, this project will fail if Congress and other American institutions remain as sclerotic as they have recently been. There is too little can-do and far, far too much can't- and mustn't-do.

One thing that we need to do is to adopt a faster, more overt form of capitalism where our explicit goal is to accurately price as many things as we can, to turn first to pricing mechanisms in solving problems rather than bureaucratic forums.

  • Want to increase competition in some industry? Fund the development of data sources and models that de-risk the industry, flattening/commoditizing existing players while creating room for true difference to emerge.
  • Want better supply chain data? Negotiate to buy it! (We don't do nearly enough with the tax data that we have, and yet for all the time we spend on taxes the questions are terribly uninformative.)
  • Want to hedge on data center energy consumption? Project the future cost of power and work now to de-risk a portfolio of choices for future generation. Tomorrow is coming, why are we so asleep at the wheel?
  • Want to control PFAs contamination? Don't regulate them out of production, as they do have real industrial uses, but identify and price the risk of environmental remediation and communicate that price to customers as well as producers. It should be more expensive to throw out (recycle) a Teflon-coated pan than a cast-iron one! Teflon saved me time cooking and cleaning, make me pay (the actual, transparent cost, not some harebrained fee)!

Lastly, how does faster capitalism inculcate a stable global order? Well it's said that the best way to win a battle is to choose a battlefield that advantages you and weakens your adversary. The yearnings of the human heart are universal, but their satisfaction is attempted in many ways by different cultures. I think the Christian West has a lot of things right, more so than other parts of the world. I think this shows up in the happiness of our lives, the wealth of our communities, the character of our children, etc. We win by showing how our practiced beliefs lead to fulfilled lives, and how you can come to enjoy them too. Post-globalism we don't have to compete on material goods, we can produce domestically everything we need priced according to the resources, productive capacity, and environmental and labor standards we've chosen. We don't have to fight wars, since any nation can produce the goods it desires (...yes this is a stretch but taking material scarcity off of the table would do a lot to permit all nations to pursue higher things, to evaluate how they are achieving existential fulfillment).

This is to say that just as the advent of the airplane immediately showed that the old ways of doing things (transportation, trench warfare) were not the only ways, so too can the elucidation of societal dynamics by the market show new paths to prosperity. By traipsing across borders globalism muddled the differences of different societies, reinforcing and distorting certain aspects (designed in California, made in China) to the detriment of the whole. Only by respecting these differences and working within them can we hasten the dawn of tomorrow.