Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: The Twilight of Neoliberalism Page 1 of 11

Understanding the Core Goal Of Western Governments & Western Decline

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On February 27, 2025

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I was talking with a friend the other day and he said the problem with democracies is that policy can swing 180 degrees with each election.

And in some ways that’s true: Trump’s switch on Ukraine is a good example.

But it’s not true when it comes to the core goals of western government since 1979 or so.

The ur-rule of neoliberalism is that the rich must always get richer.

Trump’s budget cuts 600 million from Medicaid and other health care in order to give tax cuts to the rich.

Trudeau’s big change from previous Prime Ministers was to massively increase immigration. The effect was to depress wages and increase rent and real-estate prices.

When European countries talk about increasing military spending there is the inevitable comment that this will require slashing social spending. Somehow the idea of taxing the rich and corporations more is never raised, even though that would easily cover the cost.

DOGE’s civil service cuts will lead to massive outsourcing of whatever the government really has to do, which will cost more than doing it in house and profit the rich.

Starmer’s extate taxes on family farmers will force them to sell their farms to agri-business or developers (and, overall, make the UK even less able to feed itself.)

Trump’s proposal to cut the military budget massively in concert with China and Russia would open up more room for tax cuts. The savings won’t be used to help poor and middle class Americans, you can be sure of that. (It also isn’t going to happen that way, because China can easily afford its military budget. More on that in a later article probably.)

This isn’t to say there are never exceptions, but they are exceptions.

This is quite different, by the way, from China.

China used to be willing to mint billionaires, but they figured out it was harming the majority of the population, so they are dealing with it. This is one of the reasons why China has won, and the US has lost. (Another part is that China doesn’t talk about free markets, but actually has them, while the West talks about them but makes sure they never happen.)

Neoliberalism is in the process of ending, but until the ur-rule of always making the rich richer by screwing everyone else ends, the most important part of the oligarchical state will continue. What’s really happening under Trump is the tech-oligarchs taking lead trace away from the banking oligarchs. It’s an internal shuffle of power, while the looting continues.

Since a board prosperous population combined with massive industry is what actually makes post-industrial revolution societies powerful, American and Western decline will continue as long as the determination to fuck over ordinary people remains.

 

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End Of Empire: Effects & Theory Of Trump’s Tariffs

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On February 3, 2025

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Let’s deal with the big, almost certain effects first.

This is the beginning of the end of  the American alliance system, empire and world economic system.

Trump is planning on putting tariffs on Europe, too. He put higher tariffs on Canada, supposedly one of America’s closest allies, than on China. Hitting the majority of America’s vassals/allies all at more or less the same time, with them retaliating with their own tariffs means an end to the American created world economic system. It will also lead to the end of NATO and, in time, other alliances. Europe’s mainland isn’t practically subject to threat of invasion from the US the way that Canada and Mexico are, they don’t have to put up with this, but threats to Greenland make it clear that the US is more likely to invade an actual EU member than Russia is.

Hard to have an alliance with a nation you’re in a trade war with who is threatening to invade one of your countries and who, by all accounts, is serious about it.

And while the tariffs are all justified on “national security” which is “letter” legal, everyone knows that’s bullshit. Trump is violating the purpose of the WTO, USMCA/NAFTA and other trade treaties the US has signed.

There’s no way the world trade order survives this and no way the American empire does either, since it’s based on an alliance system and bases around the world, many of which are in countries Trump is declaring his trade war on. Even countries who escape tariffs for now can’t feel secure. Ironically it’s the tariffs on Canada which will do the US the most international harm: everyone knows that Canada has been a completely supine vassal giving to the US everything it wants. Canadian exports, minus oil and gas, are less than its imports from the US, so there’s no legitimate re-balancing argument, even. Foreign leaders have read reports making this clear.

Alright, enough about the top-line effects. Let’s look into the theory of tariffs Trump appears to believe.

Trump has nominated Stephen Miran American to be chairman of the Council of Economic Advisers. Stephen is a senior strategist for Hudson Bay Capital management, and he wrote a 40 page brief, primarily on tariffs, called “A User’s Guide to Restructuring the Global Trading System.“

The most important part of his thesis is the following argument about the effect of tariffs.

1) The currency of the exporter will depreciate to make up the difference in cost.

2) Consumer prices will not go up, therefore;

3) the exporting country is damaged, the importing tariffing country is not.

4) But the tariffing country does get revenue! Free lunch, in other words.

5) Importer profit margins take any hits hits not covered by the exporter’s currency depreciation, not prices, or at least they did last time.

This argument is given empirical backing by looking at what happened when Trump imposed tariffs during his first term: the Yuan depreciated and consumer prices didn’t rise.

Let’s run thru this.

  • China tends to control the price of its currency. If the Yuan depreciated, it’s because the Chinese government chose to depreciate it. They may not choose to do so this time.
  • America has no option but to buy from China. From machine goods to basic electronics to parts for America’s defense industry, there are no domestic or European alternatives for much of it.
  • China doesn’t, therefore, have to depreciate its currency. It might sell less goods, but it will still sell tons. It’s a political decision.
  • If the exchange rate does drop, or balance, which is not a sure thing, even with non-controlled currencies, then US exports to that country become more expensive, and the exports to that country drop. In the case of Canada, which imports more goods from the US than vice-versa, what is likely to happen is import substitution: Canadian importers will probably switch to China.
  • In fact, this will be a general issue. Any country the US puts tariffs on will replace a lot of imported US goods with Chinese goods.
  • Not all importers can eat the losses. The reason Trump put only 10% tariffs on oil and gas is that American refiners have thin profit margins. Any increase in crude prices from tariffs will be passed on to consumers. (Aside: this is clearly the Achilles heel and Canada should put an exit-tariff on crude to hurt the US as much as possible.)
  • Importers also don’t have to eat the price increases. In the pre-Covid world, there was a lot less consumer inflation. But when Covid happened, prices increased faster than costs because Covid supply shocks were a good excuse to raise prices. Some importers may eat the increased costs, others may pass them on, and even raise prices more than the tariffs. If they have pricing power, if people must buy from them, then why not? Fear of Trump might cause some to eat the difference, but there are a lot of obscure, little importers. Apple passing on costs or gouging will be noticed so they’ll probably eat it. Others won’t.
  • The money the government receives comes from Americans, really, not foreigners. They pay the tariffs. There are elites who are going to be hurt by Trump’s tariffs.

What Miran doesn’t talk much about is the idea of import substitution. The real reason to do tariffs is to protect and nurture internal producers. This is important to Trump, he’s talked about it often.

With respect to Mexico, the idea is to get factories in Mexico to move to the US. They exist in Mexico primarily because Mexico used to have tariff free access to America, and has lower costs than America. There will be some effect here. The calculus will mostly be about uncertainty, though, not costs. In most cases producing in Mexico is probably still cheaper, even after a 25% tariff, than producing in America. But given how erratic Trump is, and that he’s indicated there may be more and higher tariffs, it may make sense to move factories to the US. The US won’t tariff itself.

But this is more complicated than it looks, because the US doesn’t make most of the parts any factory will need, so those have to be imported, and tariffed, or a supply network needs to be built in the US.

That’s what the US wants. If you want sell to us, you have to make it here, not just assemble it.

This is fair enough, actually, but it’s based on an assumption of continued dollar privilege.

Take a look at this chart:

The US is able to run these long term, consistent trade deficits because of dollar privilege. It can print dollars and everyone will take them.

But if the US world economic system is breaking up, if NATO is likely to die, and if the US is tariffing its allies, will dollar privilege survive? After all, you don’t really need dollars to buy from the US, because the vast majority of what you buy from the US you could buy from China instead, and Chinese prices are cheaper. If America doesn’t want you to export to them, well, what good are the dollars?

This is why Trump has been making horrific threats to BRICS about replacing the dollar. BRICS has reassured them it doesn’t intend to do that, but it’s not clear they aren’t lying and in any case, what BRICS has mostly been doing is changing from using the US dollar in trade to just using bilateral currencies. More and more, BRICS members trade with each other in their own currencies, without using the US dollar.

This chart, again from the Visual Capitalist, is worth staring at a bit:

As the chart notes, the US dollar is still , but that chart isn’t comforting. Remember that China, not the US, is the trade partner of the most nations in the world. And note that while the US is China’s export destination, exports to the US accounted for 2.9% of Chinese GDP, down from 3.5% in 2018. Eighteen percent of China’s exports went to the US in 2023.

The point, here, is that if you can’t sell to America because of tariffs, and if the US doesn’t have much you want to buy because China is cheaper, why do you need the US dollar?

If the US dollar loses privilege, if people won’t accept it because it can be used in trade with any country, then America has a problem: it can’t just print dollars any more and if it can’t print dollars any more, Americans can’t keep massively over-consuming.

This means a massive demand drop from Americans: they will have to consume much less. You might think that means an opportunity for American firms to step into the breach, but this will happen with very little demand from in the American market (and with the trade war, no one else is going to be buying from the US as their first, second or third choice.)

The American cost structure is high and American “capitalists” prefer to play financial games to make things. The American competency crisis is real, and not caused by DEI. The market has high barriers to entry, incumbents addicted to oligopoly profits and no basic machine industry and almost no basic electronic parts manufacturing.

The transition period will be ugly. Beyond ugly. Quite likely “economic collapse” level ugly.

There was a way to use tariffs and industrial strategy, but starting a trade war with half the world all at almost the same time was not the way to do it. You pick sectors (start with machine tools and basic electronic and machine parts), tariff that, put in subsidies and restructure the market for those goods. Once that’s going, you move back up the chain.

That’s how you use tariffs and industrial policy to reindustrialize.

Trump’s tariff plans are based on assumptions that are not going to hold in the real world, during a global trade war. Tariffs are important and often good and I support their use, but like everything else, they must be used intelligently.

Enough for today, we’ll talk about the effects (almost entirely positive) of Trump’s tariffs on everyone else in the world next. Trump is doing what no one else could: destroying the American empire and the neoliberal world order. I’m very thankful and as long as we can avoid war Trump’s actions are positive in the middle to long term for far more people than they’re bad for. Just, well, not Americans in the short to middle term or anyone who gets invaded.

More soon.

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Tracking the Signs of Decline in America

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On January 2, 2025

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If you want to be a decent analyst, let alone a forecaster, you need to know how to find real information. A lot of official statistics are either useless (inflation, unemployment numbers) or misleading.

Russia, with assists from Iran and North Korea and China (in non military goods, though often useful for making military goods) is out producing NATO in war material. If you just look at the GDP of NATO vs. Russia/China/Iran/NK you’d predict that couldn’t happen and you’d be wrong and like a lot of people you’d think Ukraine might or would win the war.

Most people go on and on about how the US still has a bigger economy than China, but China has way more industry and leads in about 80% of technological fields even as the US can barely build ships, is losing its steel industry and is only creative in biotech and infotech. These same people will tell you how well the US economy is doing. China’s shifting its house building to primarily government. Meanwhile:

Eighteen percent last year.

Since 2020 billionaire wealth has doubled.

GDP tells you how much activity in your country is conducted thru money, as opposed to unpaid labor. That tells you much economic activity you can easily tax. That’s all it tells you.

It doesn’t tell you how well off your people are. It doesn’t tell you how healthy they are. It doesn’t tell you (directly) how many tanks you can build, or planes or missiles. It doesn’t tell you if you can feed your population if foreign shipments are disrupted. It doesn’t tell you how many of them have homes and how many of those homes are good. it doesn’t tell you how many people do or don’t have healthcare. It doesn’t tell you how advanced you are technologically. It doesn’t tell you if your flagship airplane company can’t design and build good planes any more.

It also doesn’t tell you that America is doing better than Europe and its other allies because US economic policy is set up to cannibalize their industry. When Germany loses energy-intensive firms, a lot of them move production to the US. Burning down America’s allies to slow America’s decline isn’t a sign of strength.

America’s in decline because its entire political-economy is set up not to be productive or to spread wealth around, but to funnel money to the rich without them having to produce much of anything. China’s stock-market trades sideways, like America’s did in the 50s and 60s. Americans make money on housing and stocks without having to do a thing. Private Equity makes money by buying companies with debt, loading the companies up with that debt and then driving them into bankruptcy, destroying real productive economic activity in exchange for dollars in a declining country.

Real power comes from real production, technology, a healthy and loyal population, and the ability to turn all of that into military power when necessary. America’s military, for years now, has been unable to meet recruiting goals. Its enemies are ahead on missiles and drone, catching up on airplanes and outproducing it massively in ships.

China’s rising. Russia’s rising. America and its allies are in serious decline.

THE END

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Democrats will not adapt to this defeat

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On November 6, 2024

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There won’t be any introspection.

Empires, like fortunes, are lost slowly and then all at once.

I’m afraid what is coming is going to fall on every American fairly equally like the snow on the graveyard at the end of James Joyce’s “The Dead”

Yes, the newspapers were right: snow was general all over Ireland. It was falling softly upon the Bog of Allen and, further westwards, softly falling into the dark mutinous Shannon waves. It was falling too upon every part of the lonely churchyard where Michael Furey lay buried. It lay thickly drifted on the crooked crosses and headstones, on the spears of the little gate, on the barren thorns. His soul swooned slowly as he heard the snow falling faintly through the universe and faintly falling, like the descent of their last end, upon all the living and the dead.

Democrats who have themselves not yet fallen into precarity or the economic abyss can not and will not accept that our system is completely rotten and we need to change course and leadership.
It took the GOP from 2008 to 2016 to admit that the Reagan/Bush playbook and leadership class was bankrupt and had to go.
It will likely take multiple election cycles before some figure or movement arises that can win a Democratic primary. And given that the Democrats have a long and proud history of sabotaging the most popular and most likely to win the general election candidates it might require a whole new party emerging.
Democrats had their chance at a new direction and likely multiple administrations and an even longer dominance of the Congress with Bernie Sanders but rejected the clear will of the overwhelming majority of the young voters of their party.
Those young voters are drifting away in multiple directions.
Of my comfortably retired upper-middle classic acquaintances none are even willing to admit publicly (some will in private) that the Democrats make poor tactical choices, much less admit that the whole party and every individual needs to really re-evaluate their approach and even core beliefs.
Trump is at least a wild card which presents some chance of positive change, but the odds of radically negative change are much higher.
Regardless, the status-quo has been thoroughly rejected by the majority of the American public.
That is a fact people need to accept in order to try and steer that majority in the least self-destructive direction possible.
It’s unfortunate that the members of professional-managerial class (and those of us who have pretensions to it) have never truly accepted the idea of majority rule.
We’re going to lose a war in humiliating fashion — with an outside chance that it will be over quickly — which will trigger economic collapse (and that’s if we don’t start nuking people).
Then and only then will our ruling elites turn on each other in something that will be like a post-modern parody of the first American Civil War.
Hopefully it’ll be over in 5-7 years and some of us will be alive to adjust to the new normal and enjoy a few decades of relative peace as we adjust to penury, plagues, and rapidly worsening climate change.
Jonathan Cook had some good observations:

Kamala Harris didn’t lose because she’s a woman or because she’s black.

She lost because, if your political and media system – rigged by donors – limits the choice to two hardline neoliberal candidates, with anything else denounced as “communism”, the most hardline, neoliberal candidate has an edge.

Over time, the system keeps moving further to the hardline, neoliberal right. You can’t stop that relentless shift by voting for one of the two symptoms of your diseased political system.

You have to rise up against the diseased system itself.

As did Freddie de Boer:

You can’t blame losing the popular vote and all seven swing states on Jill Stein.

You can’t blame losing the popular vote and all seven swing states on Putin and the Russians.

You can’t blame losing the popular vote and all seven swing states on Bernie Sanders and his supporters.

You can’t blame losing the popular vote and all seven swing states on Joe Rogan.

You can’t blame losing the popular vote and all seven swing states on Glenn Greenwald and The Young Turks.

You can’t blame losing the popular vote and all seven swing states on the decision to run with Tim Walz.

You can’t blame losing the popular vote and all seven swing states on the New York Times and its occasional Democrat-skeptical opinion pieces.

You can’t blame losing the popular vote and all seven swing states on Joe Biden for getting out of the race too late.

You can’t pull all the usual Democrat tricks. You have to actually figure out what’s wrong with your party, root and branch. Because you called the guy a fascist, again, and he walked right through that insult to the Oval Office, again. And the eternal question presents itself: what are you going to do about it?

No Gods, No Demons, No Superpowers

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On October 30, 2024

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The era of the superpower is over. The new missile and drone technologies have made naval dominance impossible and ended the ability to devastate relatively advanced nations without them being able to shoot back. There is no power in the world that has the capabilities and might of the old USSR and the USA from 1945 to 2010 or so.

We have three great powers: China, the US and Russia.

There are regional powers: Brazil and Iran and the EU and Turkey and Japan and even India, which punches way below its population numbers.

But even a backwards, bombed to hell country like Yemen can defy America’s hold on the seas.

(This blog is for understanding the present, making educated guesses at the future, and telling truths, usually unpleasant ones. There aren’t a lot of places like this left on the Web. Every year I fundraise to keep it going. If you’d like to help, and can afford to, please Subscribe or Donate.)

The EU is particularly amusing, in that they could have been one of the great powers, but over and over again chose austerity, contraction and vassalage to America. The ship is sailing out of port, it’s theoretically possible they could turn it around, but politically impossible. Their day: indeed, their centuries, are done. Pathetic.

This is going to be a fair different and more constrained world. There will be more wars and revolutions. Great Powers will actually have to seriously compete for the allegiance of important minor powers, though China’s been doing this for a couple decades now, offering huge benefits compared to the US.

Russia’s getting in on the game. Where China offers development, Russia offers to fix your military problems for you, or at least make them manageable and to sell you oil and grain cheap.

America and its allies offer your elites membership in the club, in exchange for impoverishing or otherwise screwing over your own population. If you don’t do what they say, they lecture the hell out of you and try to sanction you into an early grave, if they don’t launch a coup or use you as a cat’s paw in a war.

If America wants to compete, it’s going to have to start offering some deals that don’t suck.

Nations will be more free to act as they choose than they have been in, literally, centuries. Since they were forced into unnatural shapes and relations by the great powers and superpowers, this will lead to significant changes, especially in places where ridiculous borders were drawn which ignored geography and ethnicity. (This is most true in Africa, but not only there.)

But the most important thing is simply that the age of the military colossus is over. China is the new industrial colossus, but climate change and environmental collapse is likely to spike that before they reach their full growth.

Welcome to the post-European Age.

Postliberalism, Liberal Apogee, Routine Elite Failure and Then?

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On October 23, 2024

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I was alerted to Nathan Pinkoski’s “Actually Existing Postliberalism,” by N.S. Lyons’ response “The Post-Cold War Apotheosis of Liberal Managerialism,” and enjoyed both tremendously.

Pinkosi’s piece is an excellent short history of the public-private partnership currently aiming for absolute global cultural control via the weaponization of finance that he calls postliberalism.

I thought it would be fun to excerpt all the times Antony Blinken’s name appears in the piece.

First mention:

When Bill Clinton took office, he continued the pursuit of openness. In 1993, he ratified NAFTA and relaxed the ban on homosexuals in the military. However, he made it clear that the old liberalism was not enough. Eager to extend the reach of democracy and confront foreign enemies who stood in its way, his administration developed new tools to advance America’s global power. In September, National Security Advisor Anthony Lake outlined a new paradigm. His speech, “From Containment to Enlargement,” bespeaks a political revolution. It provided the blueprint not only for the foreign policy agenda of nearly every U.S. president since then, but for the convictions of every right-thinking person. Lake’s speechwriter was Anthony (sic) Blinken.

Second mention:

After Biden was sworn in as president, his administration shelved a plan to overhaul sanctions policy. A consensus held that if the kinks of the past could be worked out, then the Americans and Europeans had all the weapons in place to launch a devastating financial first strike against their preferred targets. Planning began in the first year of the new administration, with Secretary Blinken’s State Department taking the lead. So by February 2022, just as the Russian invasion of Ukraine faltered, the arrangements were already in place. The strategic possibilities seemed limitless. Russia could be brought to its knees; Putin would follow in the ignominious footsteps of ­Milosevic and Gaddafi.

The execution of the strike was dazzling. The scale, especially the involvement of SWIFT and the targeting of Russia’s central bank, caught the Kremlin by surprise. It was ­Barbarossa for the twenty-­first century. Yet the first strike did not yield the promised results. Nor did the second, third, or fourth. Putin’s approval ratings soared, Russia’s industrial output increased, and its military continues to grind away at the Ukrainian army. Despite implementing nearly 6,000 sanctions in two-plus years, the euphoria of spring 2022 (let alone that of the holiday parties of 2011) is long gone. Although American policymakers have said again and again that they have mobilized a global coalition against Russia that has left the country isolated, that is not the case. The map of the countries that have imposed sanctions on Russia closely resembles the map of the countries that have legalized same-sex marriage. Economic warfare against Russia has exposed the limits of the global American empire.

Lyons applauds Pinkoski’s essay but rejects the notion that this is a revolution against liberalism — instead, it is its apogee.

Sadly, he doesn’t mention Blinken, but he does elaborate on the frightening ambition of this movement:

The managerial ideal is the perfect frictionless mass of totally liberated (that is, totally deracinated and atomized) individuals, totally contained within the loving arms of the singular unity of the managerial state. To achieve its utopia of perfect liberty and equality, liberalism requires perfect control.

This ideal is, of course, the very essence of totalitarianism. Yet if we wonder why the distinction between public and private has everywhere collapsed into “the fusion of state and society, politics and economics,” this is the most fundamental reason why. Perhaps, for that matter, this is also why the U.S. and EU now habitually sponsor LGBT groups in Hungary or India, and finance human-trafficking “human rights” NGOs in Central America and the Mediterranean: because managerialism’s blind crusade to crush any competing spheres of social power has gone global.

In response, a comforting tonic from The Archdruid, John Michael Greer at Ecosophia, whose reader “Dave” asks him:

I’ve noticed a growing and extremely worrying trend of the “elites” of politics and entertainment pursuing reckless and (to me) clearly wrong courses of actions that blow up in their faces, and then instead of honestly looking at the situation they’ve had a large hand in creating and doing a mea culpa, either doubling down and getting mad at regular people when they’re less keen to do what the elites tell them, or trying something else without ever really honestly accounting for their mistakes. The actions remind me of signs of elite collapse that this blog has talked about for years now and it’s very surreal and worrying to see happening in real time. What is going on and why can’t the “elites”, the people with access to more data and resources and advisers than anyone else, seem to realize what’s going wrong? Do they not care or are their actions part of a larger plan, not to sound conspiratorial?

Greer’s response was just what I needed to hear:

Dave, I don’t think that it’s any kind of plan. Quite the contrary, this is normal elite failure, the thing that comes right before an elite replacement crisis. Just as the capitalist elite of the 1920s crashed and burned, and was replaced by a managerial elite in the 1930s and 1940s, the managerial elite of the 2010s is crashing and burning, and will be replaced by an entrepreneurial elite in the 2020s and 2030s. The entitled cluelessness of a class that has remained in power too long is a familiar thing; comparisons to French aristocrats just before the French Revolution also come to mind.

Although, honestly if this means that Elon Musk and company are going to win what Chris Hedges calls “The Choice Between Corporate and Oligarchic Power”…eek!

Kamala Harris, anointed by the richest Democratic Party donors without receiving a single primary vote, is the face of corporate power. Donald Trump is the buffoonish mascot for the oligarchs. This is the split within the ruling class. It is a civil war within capitalism played out on the political stage. The public is little more than a prop in an election where neither party will advance their interests or protect their rights.

And what do the oligarchs want?

Warlord capitalism seeks the total eradication of all impediments to the accumulation of profits including regulations, laws and taxes. It makes its money by charging rent, by erecting toll booths to every service we need to survive and collecting exorbitant fees.

Trump’s cohort of Silicon Valley backers, led by Elon Musk, were what The New York Times writes, “finished with Democrats, regulators, stability, all of it. They were opting instead for the freewheeling, fortune-generating chaos that they knew from the startup world.” They planned to “plant devices in people’s brains, replace national currencies with unregulated digital tokens, [and] replace generals with artificial intelligence systems.”

As much as I eagerly anticipate the long-overdue fall of our current elite, I truly dread what’s coming up in their wake.

The End of Austerity & Reindustrialization

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On October 23, 2024

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Austerity Is Mostly Stupid… Mostly.

This blog is for understanding the present, making educated guesses at the future, and telling truths, usually unpleasant ones. There aren’t a lot of places like this left on the Web. Every year I fundraise to keep it going. If you’d like to help, and can afford to, please Subscribe or Donate.

But there is some logic to it, especially in places like Britain. The fundamental problem is de-industrialization. You can print as much money as you want, sure, but if almost everything you need is made or grown or dug somewhere else well, you have a problem. The US avoids this thru having dollar hegemony, for now, but the UK doesn’t have that and the Euro ain’t what it used to be either. The solution is simple in concept: you need to re-industrialize with than printed money.

(This is a theme and topic we’ve covered before, but forgive me running thru it again from another angle.)

Industrializing or reindustrializing is hard, especially with open markets. You need very careful use of tariffs and subsidies, and you need to cut deals with the current hegemonic industrial power: aka. China. You need real industrial policy, in other words. And neoliberalism doesn’t believe in that.

Instead neoliberalism believes in this weird idea that markets are self-correcting and that whatever markets do is right. Nor does it believe in increasing wages for domestic demand, because it came to power during the oil shocks/stagflation period.

Raising wages and thus general domestic demand when you don’t produce enough domestically means money flooding out of the country. This isn’t necessarily bad. A lower pound or Euro is an export subsidy and helps reindustrialize, but it’s still a hard sell and it has to managed.

You can’t let the trade and balance of payments deficit grow too large. And you have to manage domestic demand: pushing people to buy what is produced locally and making imports for consumer goods expenisve, while funneling import buys towards capital equipment.

This playbook has been run many times. Japan, South Korea, Taiwan, the US in the 19th century, China most recently. We know how to do it. But it does require discipline and an ideological change from neoliberalism, plus a willingness to cooperate with the main industrial power

It’s damn near impossible to industrialize or re-industrialize without aid from the current industrial hegemon. That means getting into a trade war with China is counter-productive. You need to import capital goods from them, and sell them what you produce at competitive prices.

Japan and the USA had Britain. Japan (2nd time), South Korea, China and Taiwan had the United States. You need the markets, knowledge and capital goods.

This mean, in effect, that you need to cut a deal with the current industrial power. They don’t precisely have to be good deals (China offered to make American rich people richer), but the deal has to be something they want.

For US/China one obvious deal is to let them get goods like EVs into the US without tariffs if they build branch plants and help create a supply network in the US. Another obvious deal is to stop supporting Taiwan so much & another is to let them have the South China sea. The EU and Britain can make the same deals.

If the last two bother you, well, look at it this way: they’re going to get Taiwan and the South China Sea anyway, you’re just making it easier for them. You’re giving up things you’re going to have to give up anyway.

This requires a psychological change among Western elites. They need to be willing to admit that they are no longer the top dogs, at least economically and that they can no longer just impose the terms they want.

The longer you leave cutting deals with China to help you reindustrialize, the worse deals you’re going to get. Leave it too long, and reindustrialization may be essentially impossible.

Of course there’s much more to it than this. A complete rejiggering of internal markets is necessary. You have to gut finance and put it at the service of industry. Private equity has to be destroyed wholesale. People can only get rich by exporting or making goods for the domestic market which replace imported goods. Anyone doing significant import of anything but capital machinery (with an eye to building your own) can only be allowed to survive, not prosper.

Generally speaking, to use econo-speak, incentives have to be aligned for re-industrialization, and dis-aligned for anything predatory. Betraying elites must be crushed.

There is no solution to declining standards of living in the Anglosphere and the EU without re-industrialization (maybe Canada and Australia could find another way.) You’ve got to either produce what you need, or produce what others want to buy from you. It’s that simple.

 

The Rise & Fall Of Higher Education & The Medieval Universities Crisis

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On September 20, 2024

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This is based mainly on “Crises and Decline in Credential Systems”, found in Sociology Since Midcentury, Randall Collins, 1981.

We’re currently in the late-middle stage of a higher education crisis in the West. This isn’t a worldwide crisis: the Chinese system is still in its expansion phase, but it’s very real here. Recently I was talking to a friend in Norway, who noted that most young people want a trades education and to avoid university.

I’ve noticed when discussing this that most people are resistant to the idea that this isn’t the first time it’s happened. We have this weird idea that before the modern era, there weren’t large post-secondary education sectors: that degrees and credentials from schooling are something new. This isn’t even slightly true: heck, if we had the data I’m sure we could find something similar in Ancient Egypt, and for sure the massive university systems of Buddhist India went thru more than one cycle. This before we even get to China, a civilization which was based on a credential system for something like two millennia.

But neither is it new in the West.

Schools produced standard culture (and standardized people, as far as that goes.) Culture allows the creation of longstanding institutions: not just the universities themselves, but bureaucracies of various forms, including corporate bureaucracies. It’s not an accident that companies demand degrees, especially for managers.

This culture creation is used in political competition. Think the medieval church vs. various kings, or the kings v.s their feudal lords, or Confucian scholar officials v.s hereditary nobility. In the modern world consider what happened when university trained, mostly Ivy league, degree holders took over the media, or the effect of MBAs taking over from engineers in companies. Boeing is a good example of the consequences, but so is the entire shipping of industry out of the US, and the enablement of China.

Education is one of the sinews of political conflict.

Universities (or credential systems in general) go thru four phases. All four don’t always happen, sometimes the cycle is stopped before it reaches its end.

Expansion. Lots of new students pour in. More institutions are created. Formal requirements for professions are credentialized thru the institutions. In the Medieval era this was civil law, canon law, medicine and theology. In the modern era it includes much more, but of particular note are engineers. During this period having a degree means an almost complete certainty of getting a job. Think of the 50s: a BA was all you needed to vault into management.

Cultural Production Outstrips Positions. An end to the easy early period. You have to compete for positions, there aren’t enough. Credential inflation starts: what once required a B.A. now requires an M.A. The amount of time for higher degrees gets longer and so on. (Back in the early 90s a friend taking a PhD in psychology told me that a PhD alone was no longer enough. Ten years earlier, it had been.) The price of getting an education increases, and in this and the third stage, it tends to skew more and more to the wealthy.

This, I note, has obviously happened in our society. Back in the sixties, education was practically free, now it requires a loan students may not pay off for decades, or ever.

All the positions are filled. (We are here.) There isn’t just a lot of competition, the degrees are increasingly worthless unless you also have clout from something other than education because the positions are filled. The number of people who live off the productive system but don’t contribute to it goes up.

This goes in phases: right now BAs get you nothing but a chance to apply and be rejected, and BA enlistment is falling, but STEM still offers a decent chance. (This won’t remain true in the West for much longer.) During this period alternate culture production really gets fired up: intellectuals who can’t get positions produce books, pamphlets, blogs, podcasts and so on. They attack academia and seek forms of legitimacy other than credentials.

Finally, collapse. The state stops enforcing monopolies, university enrollment drops and many institutions fail entirely. Other forms of cultural production become dominant.

The Medieval University Cycle

The rise really gets going in the 1100s, though some institutions are created earlier. By the 1200s they are accredited by the Church of the Holy Roman Emperor. This makes the credentials valid throughout Christendom, which no other higher credentials are. At this time both the papacy and various kings and principalities are expanding their administration, and there are tons of positions. As with the Confucian scholars in the early days, these administrators are used to expand central authority: feudalism begins its decline. In addition the monopoly of law, medicine and theology works against feudal nobles.

Every major pope from 1159 to 1303 held a degree in law from a university. One of the signs of the end of the reign of the medieval scholastics is when other ways of training come to the fore. In England in the 1400s, for example, lawyers no longer learn and OxBridge, but in London in what amounts to an apprenticeship system. By the 1500s OxBridge no longer teaches physicians, this moves to the Royal College of physicians and soon after the monopoly of clergy on medicine is ended.

The height of the system is significant: two thousand to four thousand students were enrolled at Oxford and Cambridge, for example. This is 4x as many, proportionally, as were enrolled in Elizabethan England and as a proportion of the population the medieval height wasn’t surpassed until after 1900. At this height at least five percent of the male population attended university and it could have been as high as 10%.

The medieval system, note, goes into decline fifty years before the black death: so it wasn’t caused by declining population.

As the medieval system goes into decline, the humanists rise. They work outside of universities often as publishers or authors and rely on noble patronage. They mock the old academics as rigid, fusty and out of date.

But the decline isn’t good for ordinary people: as mentioned in our own case, education becomes less and less available unless you have money and stops being a major way for people to rise. This was very much true in the medieval university decline: at the beginning many poor individuals could attend, but as time went on this became much less true.

Signposts of Decline

  • smaller institutions folding. (The closure of many of the small liberal arts colleges in our time, for example.)
  • a fall in the number of students.
  • decline in number of institutions.
  • loss of monopolies over credentials.
  • widespread attacks on what is taught and how it is taught. (We see a great deal of this now, and it has progressed to politicians passing laws.)
  • Increase in the cost of education, with poorer students being cut out.
  • Cheap degrees which are mere formalities: degree mils and so on.

Note that phases three and four also can feed into political instability. In recent years Peter Turchin has popularized this, and many think he created the idea but it’s long been discussed as important in revolutions such as the French and Russian ones. People who are highly educated but didn’t get the positions they wanted are vastly destabilizing: they feel betrayed and they have the tools to fight ideologically and often the understanding of how to administer movements and other organizations.

Raise someone’s expectations, train them, then let them rot in poverty and you’ve made yourself a potential enemy.

These cycles are dead common. Collins identifies a number, just in the West:

  • The Medieval cycle – starts in the 1100s, peaks in the 1200s, over in most places by the 1400s.
  • English cycle from 1500-1860
  • Spain from 1500-1850
  • France 1500-1850
  • Germany 1500-1850
  • US 1700-1880

The various national ones, though they start at about the same time, other than in America, are separate and have different patterns of rise and decline. Not all of them go all the way: the American universities never go thru phase four, for example.

Education Systems Rise and Fall like all else in human society. What is happening now in our system is very similar to what has happened before and if we want to understand what will happen to our system, the best way to know is to see what happened before. It will never be a one-to-one match: the details will differ, but the pattern will hold.

The obvious thing to do for those who want to slow the fall and end it before collapse is to figure out what sort of training they can produce which isn’t in oversupply. For individuals the question is where the new form of cultural production is and how to legitimize it and reap the benefits of that legitimization. One might wonder if the rise of podcasting intellectuals who use their celebrity to sell their books is a fad, or a sign of something greater, for example. I may return to that in the future.

In the meantime: it’s all happened before.

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