By Álvaro García Linera on February 25, 2023
img: Bloomberg Financials LP
US President Joe Biden is a self-confessed Catholic. He regularly attends the religious services of his congregation and, like every US president, he has sworn to his office by placing his hand on the bible. Therefore, it is safe to say that he is aware of the negative moral charge that the word “hell” has among his people. It is the execrable par excellence; that which must be rejected without appeal. That which must be fled from in every personal act.
And that is the adjective he has decided to use to reject the claims of free trade by his European partners. On January 27, 2023, a meeting with labor unions in Springfield he has declared, “Ladies and gentlemen, we are being criticized internationally for focusing too much on America. To hell with that. The supply chain is going to start here…it doesn’t end with us.” In the simplicity of the paragraph, there is an entire economic policy program. Sure, over the last 40 years, under the slogan of “efficiency,” supply chains of goods production were decentralized away from the major powers (except Germany), to start and extend where wages were lowest, labor rights nonexistent, and taxes minimal. This led to the “globalization” of the links of productive activities, turning the USA and Europe into a great supermarket for the final consumption of products made in China, India, Mexico, Singapore, Taiwan, etc. Those were the “golden years” of free trade and “comparative advantages”.
But now this globalist ideology is decrepit and tired; the economic growth of the great Western powers is in decline. Their middle and working classes have seen their incomes stagnate for decades. The gluttony of its population sustained by the import of cheap products has numbed its productive system and has allowed the rise of Eastern powers ready to dispute world leadership. Worst of all, the disaffection of its voters with cosmopolitan narratives has become directly proportional to the gross inequality that hits their pockets. The collective mood has changed. Historic optimism has given way to anger, disappointment and uncertainty.
The Trump phenomenon and his band of parliament assailants were a symptom that has struck a blow to the pride of a nation that believed itself to be the universal protector of democracy. And Biden knows it perfectly well. That is why the invocation of Satan’s house, previously reserved for condemning communists and radical Muslims, is now used by him to defend himself against his globalophile “allies”. It is not another symptom of senility. It is the blueprint for a new model of organizing the economy.
In mid-2022, the Biden administration passed two anti-inflation and climate change laws that mobilize $465 billion in subsidies for local industry. These are the Reduction Inflation Act (IRA) and the Chips and Cience Act (CHIPS), which subsidize, the former with 52 billion dollars to entrepreneurs who install microprocessor factories (FABS) on US soil; and the latter, which subsidizes with 7,500 dollars each US buyer of electric vehicles manufactured in and with components made in the US.
As a result, in an article in Project Syndicate on December 22, Anne Krueger, former chief executive of the World Bank, lamented the now inevitable “collapse of the international trading system” due to this unleashed war of taxes and subsidies, first between the US and China, and now between the US and Europe. And no wonder, because on December 8, 2022, the US representative to the World Trade Organization (WTO), Adam Hodge, rejected the conclusions reached by that institution regarding China’s claim against the tariff barriers erected by the US State on its exports of aluminum and steel. And the reasoning was unequivocal as to the premises of the new era: “The Biden administration is committed to safeguarding US national security by ensuring the long-term viability of our steel and aluminum industry, and we have no intention of eliminating tariffs”.
How far gone are the little phrases of “cost efficiency”, “comparative advantages” or “zero tariff barriers” with which the value chains were globalized. Today, “national security”, “our industries”, “friend shoring”, “subsidies”, “energy sovereignty”, etc., are the new flags of an emerging neo-protectionism in the decisions of the capitalist powers. In the words of the chagrined editorial of The Economist of January 12, 2023, “national profit is back”. It is not the end of globalization, but its slowdown, geopolitical fragmentation and subordination to the demands of the domestic market.
Nobel laureate Paul Krugman has pragmatically conceptualized the outlines of this new “Washington consensus”. In his December 12 article in the New York Times, without hiding his joy, he wrote: “Biden is quietly changing the basic foundations of the world economic order” by subsidizing the domestic production of semiconductors and clean energy and by limiting China’s access to advanced technology. He claims without qualms that this is a new kind of “economic nationalism,” which does not worry him. Moreover, when asked whether all these measures could lead to “growing protectionism in the world”, he answers: yes. He could have said “yes and what,” or in biblical tune with President Biden “yes and what the hell,” but perhaps his academic prurience prevented him from doing so. But the normative emphasis is the same. The protectionist spirit has begun its new cycle.
The World Economic Forum in Davos in January 2023, where business leaders, political elites and mainstream intellectuals gathered, could not escape the shock of these new winds. P. Gelsinger, CEO of Intel, the world’s largest microprocessor manufacturer, admitted that for the industry “it was a mistake” to be dependent on Asia. In turn, IMF Director Kristalina Georgieva, speaking on January 19, acknowledged that globalization was accommodating to the “winners” but did not do enough for the “losers”, who are the majority; and now, “public support for an interconnected global economy has weakened”.
Albeit more slowly and hypocritically, Europe is beginning to dance to the same protectionist beat. First came the United Kingdom’s withdrawal from the European Union and some countries’ veto of China’s 5G technology. Then, in 2022, the manipulation of the gas market by displacing the cheaper Russian gas with more local production of coal, nuclear energy and the much more expensive American gas. The geopolitical containment of Russia and China is above the “invisible hand” of the market. Then France nationalizes Europe’s largest energy company; Spain caps electricity tariffs; Germany provides 200 billion euros to subsidize the price of gas to its population; and former Prime Minister Brown, a known globalist social democrat, calls for nationalizing Britain’s electricity generation system. Finally, on January 17, 2023, the Davos hearing will be used by the President of the European Commission, Ursula Von der Leyen, to state that Europe will also promote its “own clean energy industry”. She even spoke of the possibility of a new package of “sovereign wealth funds” to protect its investors. There is desperation to prevent an exodus of European industries behind US subsidies. As Larry Flink, head of Blackrock, the world’s largest investment fund, put it, we are witnessing “the end of the globalization we have lived through for the last three decades”.
Seventy-nine years ago, following the effects of nineteenth-century liberalism that led to the 1930 depression and fascism, Karl Polanyi, in his work The Great Transformation, reflected on this pendulum swing between protectionism and free trade in the dynamics of modern society. He called it the “double movement” that led to the continuous expansion of the market, which ultimately destroyed the social fabric, being countered by a counter-movement of defense of production itself, nature and society.
Whether it is the downward phase of a Kondratiev “long wave”, cyclical processes between self-regulating market countered by the defense of society or a presidential demonization, what is certain is that a new type of molecular protectionism is beginning to take hold of part of the planetary public policies. What is comical in these times of historical inflection is to see the Creole fossils of Latin American liberalism repeating with quasi-religious faith the frayed neoliberal mantra of the “minimal State”, “public austerity”, privatization and free markets. They are pathetic melancholic specters of a world “gone with the wind”. And that, if for some social tragedy it temporarily returns, it will only be able to do so by riding on the back of hatred and infernal violence.
Álvaro García Linera is the former Vice President of Bolivia
Source: Pagina12, translation Resumen Latinoamericano – US