The US-China rivalry drives the market economy backwards


Old ideas are like old clothes – wait long enough and they will be back in fashion. Thirty years ago, “industrial policy” was almost as fashionable as bowler hats. But now governments around the world, from Washington to Beijing and from New Delhi to London, are rediscovering the joy of subsidies and praising it. Economic self-reliance And “strategic” investments.

The significance of this development goes beyond economics. The international embrace of free markets and globalization in the 1990s merged with declining geopolitical tensions. The Cold War was over and the government continued to compete to attract investment without dominating the region.

The resurgence of geopolitical rivalry is now driving a new fashion for state intervention in the economy. As trust between the United States and China declines, so does the dependence on any important product – semiconductor or other Rare-earth minerals – As a dangerous weakness. Security of domestic production and supply is the new watchword.

As the economic and industrial struggles intensify, so does the United States Forbidden Pushing for the export and repatriation of key technologies to China Supply chain. It is also moving in a direct direction State-funded Semiconductor production. As part of that, China is a “Dual circulation “ Economic policy that emphasizes the achievement of domestic demand and “major advances in core technology”. Xi Jinping’s government is also strengthening State control On the technology sector.

Arms competition is being argued, as each side justifies its move towards protectionism in response to the other party’s actions. In Washington, DC Strategic Competition Act, Currently leaning this path through Congress, accuses China of pursuing “state-led mercantilist economic policies” and industrial espionage. Beijing’s 2015 announcement “China Made in 2025”Industrial strategy is often referred to as a turning point. In contrast, Beijing argues that a faded America stands against globalization to prevent the rise of China. President Xi says the counter to globalization in the West means China needs to do more Self-reliant.

The new emphasis on industrial strategy is not limited to the United States and China. In India, Narendra Modi’s government is promoting a policy Filled with self-relianceT (self-sufficient India), which encourages domestic production Original product. The EU has published a paper Industrial strategy Last year, which has been seen as part of a drive towards strategic autonomy and less reliance on the outside world. The President of the European Commission is Ursula von der Lane Is called There is “expertise and ownership over key technologies” for Europe.

Even a conservative administration in Britain, led by former Prime Minister Margaret Thatcher, is turning its back on the Lassage Fire economy and seeking to protect the strategic industries. Whether the government is reviewing it Block Sale of UK chipmaker arm to Nvidia in the US. The UK government has also bought control of the failed satellite business, OneWeb

The Covid-19 has strengthened the fashion for industrial policy. Increasing domestic production of vaccines is being seen as an important national interest. Even they decree “Vaccine nationalism“Elsewhere, many governments have moved to limit exports and build domestic suppliers. Learning about national resilience from epidemics can now be applied to other areas, from energy to food supplies.

The national security argument regarding industrial policy in the United States is forging a massive response against globalization and free trade. Joe Biden’s statement is clearly protectionist. President Announced to Congress: “All investments in the American Jobs Plan will be governed by one principle: Buy American”

In a Articles Last year, Mr Biden’s national security adviser, Jake Sullivan, urged the security agency to “go beyond the neoliberal economic philosophy of the past 40 years” and recognize that “industrial policy is deeply American.” He argued that the United States would continue to lose China to key technologies such as 5G and solar panels, “if Washington relies so heavily on private sector research and development.”

Many of these arguments will seem like common sense to voters. Protectionism and state intervention often occur. But free market economists are disappointed. Swaminathan Iyer, eminent Indian commentator, Lament Returning to the failed ideas of the past, he argued: “What Nehru and Indira Gandhi tried to do in the 1960s and 1970s was self-sufficiency. It was a horrible and terrifying flop. Adam Pozen, President Peterson Institute For the international economy in Washington, recently Decreed “America’s self-defeating economic retreat,” argues that policies aimed at ending costly failures to build selected industries or regions.

As tensions rise between China, the United States and other major powers, it is understandable that these countries will look at the security implications of key technologies. But politicians claim that industrial policy will also create better-paying jobs and that a more productive economy is conducive to deeper skepticism. Sometimes the idea goes out of fashion for some reason.

gideon.rachman@ft.com



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