The first moves by the new US president, Donald Trump, have demonstrated that he is taking his campaign promises seriously and is working to fundamentally restructure the American economic system.
Changes that were seen immediately after Trump’s inauguration: the official White House website deleted its pages that formerly proclaimed support for sexual minorities and the fight against climate change, instead reaffirming its commitment to the goals of energy independence, increased economic growth, and bringing jobs back to the US.
An executive order was signed to withdraw from the Trans-Pacific Economic Partnership. This presidential decision received the immediate and unqualified support of the biggest American labor unions – the AFL-CIO and the Teamsters – once considered Democratic strongholds and which had previously been wary of Trump. Geopolitics is giving way to geoeconomics.
On Jan. 24 Trump met with the heads of the three largest US automakers: General Motors; Ford; and Fiat Chrysler, urging them to expand production in the US rather than abroad. He warned that he would attempt to introduce a 35% import tariff on any company that moved its manufacturing overseas and then imported its products back into the US.
But if they agreed to his demands, he promised «big league» regulatory and tax relief in order to give American companies an incentive not to move their plants abroad.
All of these actions are evidence of Trump’s determination to limit the expansion of the virtual economy and to begin the country’s reindustrialization. The transformations he has envisioned are so sweeping that it is more fitting to speak of a whole new stage of technological evolution, rather than merely a new approach. It appears that herein lies the root causes of the fierce resistance to Trump found among the ranks of the «global elite».
It would be an oversimplification to think that the new president is bent on taking America backward. His logic is the logic of a new industrialism, in which material production retains its innovative features, but produces tangible, rather than virtual assets. It is, in any case, a move away from a «bubble economy». According to Trump, the economy of a powerful country like the US should be deeply diversified, not one-dimensional as it has become.
There is currently quite a popular school of thought that claims that our society is at a particular stage of technological evolution (some consider this the «third», while others – the «fifth»), which is based on the development of digital technology. A transition to the next phase should be in the offing, which will be dominated by nano- and biotechnology. And the first to make the transition wins.
The US has structured its development since the 1970s in accordance with this linear blueprint. It seemed attractive to focus on the high value-added information business, relegating dirty and labor-intensive manufacturing to other countries. The prevailing view – supported by the ideology of globalism – held that since IT-technology originated in the US, Americans would always call the shots.
This self-confidence has undermined the economic foundations of US power. The rest of the human race has risen to meet the Americans’ challenge successfully. A plurality of economic «poles» is appropriate for a politically multipolar world, but the fact that other economic «power centers» are banking on building more multifaceted economic systems is even more important.
Many years ago the US lost its position as a world leader in the production of material goods, and it survives mainly as a broker of financial and technological services, and also thanks to its virtual economy. Manufacturing and agriculture make up only 20% of US GDP – approximately $3.6 trillion out of $18 trillion.
In China, those sectors are responsible for half of GDP, or $5.5 trillion out of $11 trillion. In this respect, the Chinese are already seriously outpacing the Americans – and that is according to the current exchange rate, without adjusting to take into account purchasing power parity, which would show that China is even further ahead of the US.
Liberal economists will say that in today’s economy, national wealth depends not so much on material output as on the development of the tertiary sector – the provision of services to final consumers or to other businesses, as well as the securing of patents, standards, etc.
And this is true when speaking of the prosperity of the general public, but sovereign power is predicated upon quantities of material goods. And that low output affects, for example, export figures, and consequently – a nation’s ability to maintain an economic presence in the world.
America’s total foreign-trade numbers now lag behind those of China, but even those indices are mainly based on imports – when it comes to exports the US is not even in second place.
The EU exported $2.26 trillion worth of goods in 2014 (excluding intra-EU trade), China (in 2016) – $2.02 trillion (plus exports to Hong Kong – $0.49 trillion), and the US – $1.47 trillion. The global leader, which is only the third-largest exporter, is condemned to rely on military force to preserve its status, which is in turn detrimental to its ability to remain competitive.
There was an assumption that the decline in material production would be offset by the IT sector, but that is not happening. The Chinese company Lenovo became the global leader in PC sales in 2012, overtaking its biggest rival – America’s Hewlett-Packard. And in 2014, Lenovo took top honors for its sales of laptops as well.
The world’s largest manufacturer of telecommunications equipment is also a Chinese company – Huawei, beating out the international giant Ericsson in 2012. And India is on its way to dominating the global software industry.
The emphasis on the virtual economy has also had unforeseen political consequences. For example, the concept of «soft power» is widely believed to be able to offset certain weakened or absent elements of a state’s traditional economic power. But conversely, the enthusiasm for «soft power» has evolved into an ideologization of foreign policy, replacing standard diplomatic tools with ubiquitous manipulation.
As a result, US foreign policy is now faced with an even larger number of problems and conflicts. Paradoxically, despite its proclaimed «softness», Washington has increasingly been forced to resort to «hard» interventions abroad in order to maintain its global hegemony.
Trump’s answer to this appears quite reasonable. A country that is fully developed does not need additional proof of its power in the form of interventions. The rest of the world will recognize its real power and always take that into account. As international politics become less ideological, they will also become less prone to conflict.
But it is still too early to judge whether Trump is up to this task. Given the global dissemination of information technologies, it would hardly be possible, for example, to completely «reverse» financial globalization.
Trump’s America needs partners, but they should not be chosen with the idea of «teaming up against someone», but with the goal of «teaming up for the sake of something». And there can be no question that Russia has its own interests and its own niche in that.
DMITRY MININ | SCF