Foreign Policy 2021 03 Summer

SUMMER 2021 …and 12 other attempts to name our new era.

SUMMER 2021 Features Arguments 22 What’s in a Name? 3 Australia Is the We asked 13 economists and thinkers to define the post-pandemic era. New Hermit Kingdom 32 How Bidenomics AMELIA LESTER Came to Be 5 The End of Modi’s A transitional presidency Global Dreams could turn out transformational. MICHAEL HIRSH SUSHANT SINGH 40 Looking Out for Number Eins 7 Understanding China What the world misunderstood Is Getting Harder about Angela Merkel. MATTHIAS MATTHIJS JAMES THORPE AND R. DANIEL KELEMEN 9 How Israel Lost 46 Nibble Like a Silkworm, the Culture War Swallow Like a Whale ALIA BRAHIMI How China quietly occupied territory in northern Bhutan. 10 Why Eritrea Won’t ROBERT BARNETT Leave Ethiopia Review SEEYE ABRAHA HAGOS 73 Stabs in the Dark 13 Foreign Policy Is Local A new book on Rome depicts a state built on death. NINA HACHIGIAN JAMES PALMER 15 Give the Navy 76 His Own Tailor-Made the Army’s Money Chronicle BLAKE HERZINGER The Netanyahus is a parable of nationalism. 17 Big Agriculture Is Best JESSI JEZEWSKA STEVENS TED NORDHAUS 82 The Artist at Work AND DAN BLAUSTEIN-REJTO George W. Bush still 19 Industrial Policy Saved shows an eye for spin. D I A NA S E AV E G R E E N WA L D Europe’s Vaccine Drive Decoder CAROLINE DE GRUYTER 96 Age and the Agbayas NOSMOT GBADAMOSI Cover illustration by SEAN FREEMAN and EVE STEBEN

FEATURED CONTRIBUTORS Robert Barnett is a writer and researcher on modern Tibetan history and politics. Nosmot Gbadamosi is a He is a professorial research associate multimedia journalist. at the University of London’s School She has reported on human rights, of Oriental and African Studies, an the environment, and sustainable affiliate researcher at King’s College development from across London, and a senior research fellow Africa, Asia, and Europe. with Hong Kong Baptist University. Caroline de Gruyter is a Europe Nina Hachigian is the deputy correspondent and columnist mayor of international affairs for the Dutch newspaper NRC for Los Angeles and a former Handelsblad and a columnist at U.S. ambassador to the Association FOREIGN POLICY. She is the author of Southeast Asian Nations. of five books on globalization, democracy, and sovereignty. Alia Brahimi is a nonresident senior fellow within the Middle Diana Seave Greenwald is an East Programs at the Atlantic art historian and the assistant Council. She was previously a curator of the collection at the research fellow at the University Isabella Stewart Gardner Museum. of Oxford and the London School She is the author of Painting by of Economics. Numbers: Data-Driven Histories of Nineteenth-Century Art. 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FROM THE EDITOR WHEN U.S. PRESIDENT JOE BIDEN signed the $1.9 trillion Mazzucato’s. She writes that we might be on the ORIANA FENWICK ILLUSTRATION American Rescue Plan into law, he sanctioned a cusp of “A New Social Contract” in which govern- coronavirus relief package that was about as his- ments put common purpose at the center of how toric as the pandemic itself. The sheer size of the the public and private sectors interact. Betsey fiscal injection was greater than the annual eco- Stevenson, meanwhile, thinks we’re embarking nomic output of Australia, Brazil, or Canada. When on an “Age of (Re)Discovery,” as people emerge you combine that $1.9 trillion with the $900 billion from a year of loss and isolation. relief bill passed by Congress in December and the $2.5 trillion of aid authorized by then-President To me, these are all smart, thoughtful perspec- Donald Trump in 2020, you arrive at $5.3 trillion— tives. But for the cover, we went with the name an amount larger than the GDP of Germany, India, that encompasses these diverse takes in one new Japan, or the United Kingdom. word: “Fuzzynomics,” coined by Antoine van Agtmael, the investor (and FP advisor) who also In short, it’s an unprecedented stimulation of invented the term “emerging markets.” The one the economy. And the United States isn’t alone. thing that has defined the pandemic—and the Most rich Western democracies are pumping giant world’s response to it—has been uncertainty. We sums of money into their financial systems as they are all living amid a grand economic experiment try to fight off recessions, protect businesses, and with no clear end in sight, a state that Stephanie give their citizens unemployment benefits. Kelton aptly describes as “The Experimental Econ- omy.” My hope is that our cover package might help We’re living in a new era where the old eco- readers better prepare for where we could be headed. nomic playbooks no longer apply. Stimulus can fix almost any problem; the answer to crises is to Whichever term historians eventually settle on spend, spend, spend; big government is back. After to define our era, one thing seems clear to me: The all, the countries that have been able to vaccinate global response to the pandemic has been, and their populations fastest this year spent money to continues to be, profoundly unequal. Vast parts secure vaccines upfront. Poorer countries, on the of Africa, Asia, and Latin America remain woe- other hand, seem doomed to suffer. fully behind on vaccinating their populations. The West not only has a moral imperative to help but a In global crises, thinkers and historians often practical one, too. We’re still racing to prevent viral coin phrases to describe their turbulent times. mutations from forming in far-flung parts of the Think of “the new normal,” applied after World world. Let’s face it, the coronavirus will hardly be War I and the 2008 Great Recession, or, in the the last crisis the world will face. Trust built now last decade, “Chimerica,” to explain the eco- will come in handy later. nomic interdependence of China and the United States. How will our current economic moment be As ever, remembered? In our cover story this issue (Page 22), we attempt to name these unprecedented Ravi Agrawal times and asked 13 of the world’s best-known econ- omists and thinkers to help us out. Mohamed A. El-Erian picks “Government Unbound” to describe an era where policymak- ers have “no choice but to step in and stop a calam- ity from becoming a multigenerational disaster.” Along similar lines, Ruchir Sharma proposes “Era of Secular Stimulus” to describe what he calls a “drip feed of constant government support.” Other economists see things a bit differently. Jayati Ghosh believes we are in an “Age of Deadly Dis- parities,” a view that Vera Songwe reinforces with her choice of “Dynamic Divergence.” And then there are more hopeful takes, such as Mariana 2 SUMMER 2021

ARGUMENTS ASIA | CHINA | MIDDLE EAST & AFRICA | AMERICAS | EUROPE ASIA Residents observe a moment of silence at dawn to commemorate Australia and New Zealand’s war dead in front of the Sydney Opera House on April 25, 2020. DAVID GRAY/AFP VIA GETTY IMAGES Australia Buried in Australia’s 2021- any nation save for, perhaps, North Is the New 22 federal budget papers, Korea. Plenty if not most nations have Hermit released in May, was a pre- restricted nonessential travel since Kingdom diction that devastated the the start of the pandemic. But very million Australians who, few have forbidden their own citizens By Amelia Lester like me, live abroad and the millions from leaving, not even China, and cer- more at home who love them: The tainly none—except for Australia—that national borders are likely to remain are democracies. closed until at least mid-2022. There are up to 40,000 Australians Australia slammed its doors as soon around the world registered with the as the COVID-19 pandemic hit, and it Department of Foreign Affairs and has kept them more firmly shut than Trade who identify as “stranded”— 3F O R E I G N P O L I C Y. C O M

that is, they desperately want to in India who face criminal charges, five which the prediction was made placed return home, but they can’t. One rea- years in prison, and around $50,000 in blame on the very states the federal gov- son is money. The federal government fines under the Biosecurity Act if they ernment had shunted the responsibility decided early on that the responsibil- try to return home, due to fears over the of quarantine onto: “The rate of interna- ity for administering expensive quar- contagiousness of new variants. tional arrivals will continue to be con- antines, largely in hotels, belonged to strained by state and territory quarantine Australia’s states and territories, which But what about vaccines? One of the caps over 2021 and the first half of 2022.” put caps on international arrivals far richest countries in the world should exceeded by demand. A returnee must have had no trouble procuring enough The government’s alarmist messaging pay 3,000 Australian dollars (about doses for its 25 million residents. The often seems to exclude mention of the $2,300) to cover the costs of a manda- Australian drug regulator approved both medical miracle of vaccines and their tory 14-day quarantine. the Pfizer and AstraZeneca vaccines at protective effects altogether. In mid- the start of this year, but the numbers are April, around the time when all adult Some people just can’t find flights at well below that of Canada, the United Americans became eligible for their shot, all. Australia’s flag carrier Qantas was States, or the United Kingdom. Morrison said opening international bor- privatized back in 1993, and the few ders could lead to 1,000 cases a week “or airlines still making the long, barely Vaccinations got off to a slow start more.” In a country where a single case profitable trip cancel flights frequently, when Australians were told by Morri- can shut down a state’s borders, this prioritize business class and cargo son in December 2020 that there was no understandably made waves. over economy-class travelers, and are need for urgency because there were so charging triple the price, or more, that few instances of COVID-19 in the com- Moreover, when vaccines are men- they did before the pandemic. munity. (Never mind that epidemiolo- tioned, their effectiveness is under- gists think that the whole world should played. Citing a government source, Super-wealthy Australians such as be in a hurry, racing against ever more News.com.au reported in the wake of Lachlan Murdoch and Nicole Kidman virulent variants.) the budget announcement that “one have found their way back on private concern the [prime minister] and planes, been granted permission to In fact, Morrison said, Australia medical experts are grappling with is quarantine on their own properties, would enjoy a “front-row seat” to the whether or not people who are vacci- and are now enjoying life in a country rollout in the United States and the nated can still catch and transmit the largely untouched by the coronavirus. U.K.—a blithe wording that revealed virus—even if they no longer get sick Australia’s initial lockdown lasted all a telling detachment from global suf- and die.” Since mounting and increas- of six weeks or so; subsequently, Mel- fering. Australia benefited from soci- ingly overwhelming evidence is that bourne endured a harsher version for etal cohesion and good government COVID-19 vaccines do reduce transmis- several months and another one this early on but also from the sheer luck of sion and drastically reduce the chance May. Deaths from COVID-19 in Austra- being a remote island nation. Without of serious illness, fixating on asymp- lia are under 1,000, and overall deaths vaccines, though, Australia’s corona- tomatic cases seems, well, silly. from medical conditions are down on virus-free bliss is dangerously fragile. projections. This success story stems Unless, that is, as some have spec- in part from the initial national border The numbers are shrouded in mys- ulated, the border opening has been closure in mid-March 2020. Prime Min- tery, but it’s clear that Morrison simply strategically delayed to furnish Mor- ister Scott Morrison acted swiftly and didn’t sign enough contracts with drug rison with the best possible chances decisively, and he deserves credit for it. companies in the flurry last year. While in an upcoming federal election. (In the government scoffed at the insignif- Australia, prime ministers have a lot of But in addition to the Murdochs and icance of Italy blocking the export of latitude to call elections whenever they the Kidmans, the border has also proved 250,000 AstraZeneca shots to Austra- would like.) While the prime minister permeable for a bevy of foreign celeb- lia, that seemingly paltry number had has denied that he’s pursuing an elimi- rities, including Natalie Portman, Zac a material effect on the pace of the ini- nation strategy, the continued focus on Efron, Colin Farrell, Viggo Mortensen, tial rollout. The timeline for when the individual, asymptomatic cases makes and others. A few came to film in a coro- majority of Australians will get their it’s hard to see how the public will ever navirus-free setting; others, for the surf- first shot has been repeatedly pushed countenance anything but zero—nor ing breaks in the posh New South Wales back, with the latest estimate from the what a path to reengaging with the rest beach town of Byron Bay. government the end of 2021. of the world would even look like. For some ordinary people, though, Why the six-month delay between This is why I and so many other Aus- returning home is not just hard but ille- when the population is expected to be tralians abroad feel a sense of betrayal. In gal. There are 9,500 Australians stranded vaccinated and the international borders Australia in the 1990s, kids were taught finally reopening? The budget papers in 4 SUMMER 2021

ARGUMENTS that Australia’s multiculturalism was try made up 5 percent of the labor mar- “and we will take their help if needed.” not just official government policy. It It was a pointed political statement was what made our country special. ket. Contrast that with mining, which about India’s growing economic heft, As recently as this February, Morri- and it wasn’t the last. Singh’s govern- son claimed Australia was “the most employs just 2 percent of Australians ment offered aid to the United States in successful multicultural immigration the wake of Hurricane Katrina in 2005 country on the planet.” A big part of that but gets $29 billion a year in subsidies. and to China after the 2008 Sichuan depended on Australians’ connections earthquake. Seen as an indicator of self- to the rest of the world, through dias- Some industries in Australia are too sufficiency and a snub to nosy aid giv- poras from Greece to Sri Lanka. It rings ers, the practice continued under Indian hollow when nearly 10,000 Australian important to fail, but education and Prime Minister Narendra Modi. citizens risk jail time if they try to escape coronavirus disaster in India and tens tourism are not among them. Modi, who has consistently cam- of thousands more have no idea when paigned on virulent nationalism— they’ll set foot in their homeland again. The human cost continues to grow captured by the slogan Atmanirbhar Bharat (“self-reliant India”)—has been The lack of public outrage is striking. by the day. In the Sun Herald, Latika forced to abruptly change policy. In late Just one-third of Australians, according April, as the second wave of COVID-19 to a recent survey, think more should be Bourke, who was born in Bihar, India, overwhelmed the country and people done to repatriate fellow citizens. Only were dying on roads without oxygen and half are confident that vaccines will be and adopted as a baby to Australian par- crematoriums for pet dogs were being effective at stopping COVID-19. And, used for humans’ last rites, his govern- anecdotally, the comments section on ents, wrote: “I have shed many tears ment accepted offers of help from nearly any article written about the border clo- 40 other nations. “We have given assis- sure is a cesspool of complaints and para- over the past 12 months asking myself tance. We are getting assistance,” said noia. Some suggest throwing “spoiled Harsh Vardhan Shringla, the country’s expats,” their fellow citizens, in the same why, in its pursuit of stopping COVID- top diplomat, to justify the embarrass- offshore refugee detention centers that ing U-turn. “It shows an interdependent have so horrified the world—and violated 19 deaths, did Australia allow itself to world. It shows a world that is working human rights conventions—for years. with each other.” lose its humanity.” Now living in Lon- Vaccine failures in other countries The world may be working together, have prompted scandals and anger but don, Bourke is pursuing British citizen- but it is not working for Modi in the not for Australians. Instead, the head- realm of foreign policy. After seven line on a recent story in the Sydney ship because, she believes, Britain will years as prime minister, Modi’s hyper- Morning Herald, which I write for, was: nationalistic agenda—including his “Testing our defences: is hotel quaran- never try to lock her out as Australia did. ambition of making the country a vish- tine the nation’s Achilles heel?” News waguru (“master to the world”)—now reports frame the closed borders as an My mother, who has yet to meet her lies in tatters. issue purely of the privileged and for- eign trips as luxury items. Rarely are the granddaughter born last April, sent me India, which the United States has voices of separated parents and children envisaged as a lynchpin of the Quadri- heard, even though 7.5 million Austra- a photo the other day of Sydney Harbor, lateral Security Dialogue (or Quad) and lians, 30 percent of the population, were other efforts in the Indo-Pacific strat- born abroad. glinting in the sunlight as a ferry tra- egy to counter China, will have to work harder to justify that role. Meanwhile, And despite Australia’s first recession versed its light gray crests. Her caption China has redoubled its efforts in India’s in three decades last year, it’s even rarer neighborhood, strengthening its exist- to hear the economic costs of closed captured both Australia’s preciousness ing ties with South Asian countries and borders reckoned with. January 2020 contrasting its strength and reliability saw almost 100,000 international stu- and the persistent unwillingness of its with India’s limitations. dents arrive in Australia. Today, univer- sities already starved of public funds are leaders to share it: “Beautiful morning No doubt, New Delhi will be able set to lose around $3 billion in revenue. to regain a certain sense of normalcy, Until the pandemic, the tourism indus- here in the Hermit Kingdom.” n but the mishandling of the pandemic has dealt it a weaker hand in ongoing AMELIA LESTER is the executive editor of FOREIGN POLICY. The End of Modi’s Global Dreams By Sushant Singh In December 2004, when an earthquake and tsunami struck Asia, then-Indian Prime Minis- ter Manmohan Singh decided it was high time for India to stop accepting aid from other countries to deal with disasters and rely on itself instead. “We feel that we can cope with the situation on our own,” he said, 5F O R E I G N P O L I C Y. C O M

back-channel talks with Islamabad and Student activists install a billboard of Indian Prime Minister Narendra border negotiations with Beijing. But Modi with a message in Punjabi reading, “Mr. Modi, why did you send even longer-lasting damage has been done to India’s soft power, which was our vaccines abroad?” in Amritsar, India, on May 18. already dented under Modi’s authori- tarian regime. This is a big problem for policy against accepting bilateral aid. It shattered. They must instead confront NARINDER NANU/AFP VIA GETTY IMAGES the government as it was soft power that is bad enough that India has gotten help the harsh reality of being citizens of a allowed New Delhi to assert itself for a from traditional partners like the United country that is dependent once again seat at the global high table to begin with. States and Russia, but it also accepted on the largesse of others. supplies from China, whose relationship Front-page images and video clips with India has been increasingly strained The pandemic has hurt India in other of constantly burning pyres and dying under Modi. And it must have been par- ways, too. Australia, another member of patients have receded from the fore- ticularly galling to the prime minister the Quad, has imposed a ban on its citi- ground, but rebuilding India’s diplo- that even Pakistan made an offer to send zens from returning home, threatening matic heft and geopolitical prominence medical supplies and equipment. five-year prison sentences, if they have will need more than the passage of spent time in India. In its first leaders’ months and years. It will take a con- Most Indians acknowledge their summit in March, the grouping decided certed effort, and S. Jaishankar, Modi’s country was in an economic reces- to provide a billion doses of the COVID- foreign minister, has so far appeared sion last year and that accepting bilat- 19 vaccine to the Indo-Pacific region unequal to the task. eral aid is more of a compulsion than a by 2022. The vaccines were to be pro- choice. But how will they reconcile that duced in India, funded by the United In March, when the second wave with the fact that work on a $2 billion States and Japan, and distributed by started unfolding in India, Jaishan- project to reconstruct a government Australia, in what was seen as the show- kar’s ministry was busy issuing official office complex in the national capital, piece initiative to move the Quad away statements and organizing social media including building a new residence for from its security-centric approach and storms against the singer Rihanna and Modi, was counted as an essential ser- soften its reputation as an anti-China the climate change activist Greta Thun- vice during the pandemic? grouping. With India struggling to pro- berg. In late April, at the peak of the duce vaccines for its own citizens, it is health crisis, Jaishankar’s focus in a Modi boasted of having made India a unlikely the Quad will be able to keep meeting with all the Indian ambassa- vishwaguru and personally enhancing its scheme on schedule. dors to various global capitals was on national prestige through his numer- countering the so-called “one-sided” ous global trips. His ultranationalist Meanwhile, Beijing has already narrative in international media. supporters had started assuming India moved in to take advantage of India’s was already a global power in the same misfortune to strengthen its ties with Until recently, Jaishankar was also league as the United States and China. other South Asian countries. At the the most enthusiastic promoter of This feeling tied in with his domes- end of April, Chinese Foreign Min- the government’s Vaccine Friendship tic political positioning. Hindutva, or ister Wang Yi held a meeting with program, under which New Delhi sup- homogenized Hindu nationalism, was his counterparts from Afghanistan, plied around 66 million doses of the offered as the ideology that had made Bangladesh, Nepal, Pakistan, and Sri India-made AstraZeneca vaccine to this supremacy possible. Lanka to discuss cooperation against 95 countries in packing boxes marked COVID-19. India was absent from the prominently with large pictures of But now Modi’s supporters find meeting. And although Afghanistan, Modi. Meanwhile, India’s own vacci- their dreams of being a global power nation rollout has been dismal. As of early June, under 5 percent of Indians had been fully vaccinated, despite the country being the world’s biggest vac- cine manufacturer—a misstep that has emerged as one of the key culprits for India’s uncontrolled second wave. Having exported doses in a quest for personal glory, Modi was left waiting for vaccines and raw material for vac- cine manufacturing from the United States after abruptly reversing 16 years of 6 SUMMER 2021

ARGUMENTS Bangladesh, Nepal, and Sri Lanka have none.” Now that all the balls are lying on The Foreign Correspondents’ Club received some vaccine supplies from the floor, the country will need humil- of China reported that the government India and expect more, these countries ity, honesty, and extraordinary effort expelled at least 18 foreign journalists are now looking to Beijing for doses. to pick them up and start again. n in the first half of 2020. John Sudworth, a BBC reporter, is the latest departure China has also pressed its advantage SUSHANT SINGH is a senior fellow at the from a prominent news organization, along its restive border with India. After Centre for Policy Research in New along with his wife, Yvonne Murray, a an initial disengagement in the border Delhi. reporter for the Irish station RTE. As region of Ladakh, China refused to pull someone who was given rare access to back any farther from other Indian-held CHINA the so-called “thought transformation territories it had moved into last sum- camps” in Xinjiang, his reporting helped mer. It stonewalled Indian attempts to Understanding bring the story to a global audience. discuss these areas in the last round of China Is talks between the two sides, and it has Getting Harder The sense that foreign journalists are constructed permanent military infra- less at risk of retribution has waned, structure and deployed troops close to By James Thorpe and there is less room for investigative the disputed border. journalism in China. Sudworth is one It has never been easy to write of a number of China correspondents If there were ever a time for India to about China, but today access from major news outlets now based in demonstrate its strength, it would be is harder, and sources are more Taiwan, while others have gone to Hong now. But the second wave of COVID- limited than they have been in Kong or left the region altogether. With- 19 has forced the opposite. A similar decades. The pandemic hasn’t out access to China, developing sources impact will be felt throughout New helped; since March 2020, China’s bor- becomes considerably more difficult. Delhi’s ongoing back-channel talks with ders have been closed to most non- Islamabad, where Pakistan seeks to take Chinese citizens. The result of this is that Megha Rajagopalan, a journalist at full advantage of any chinks in India’s it is even more difficult for outsiders— Buzzfeed News, knows about these chal- armor. India cannot afford to walk away and even most Chinese—to understand lenges. After seven years in Beijing, her from those talks as it grapples with a two- what is happening inside the country. visa application was denied in 2018. front challenge from China and Pakistan. Her reporting on Xinjiang from over- An economy and a country ravaged by As a journalist, you risk being targeted seas recently won her a Pulitzer Prize, COVID-19 make the dual threat an even by an ever changing set of measures by but she acknowledges the limitations more difficult proposition for India. the Chinese government. A weapon- of working abroad. “You’re talking to a ized visa process means your creden- limited number of people who have been Although Indian diplomats may still tials may be renewed for six months able to leave China and resettle with a be able to contain the situation with Bei- or denied without explanation. You, stable immigration status,” she said. “A jing and Islamabad, they can do little to or more likely your Chinese colleague, lot of the time, the information we get undo the damage to the country’s soft might be detained as the Bloomberg on what’s happening can be a little out power. India’s reputation as a liberal reporter Haze Fan was in 2020. of date.” When reporting on Xinjiang democracy had already been dented, relies on the few who have managed to but the country’s ability to manage all its leave China, it becomes harder to look internal contradictions was still seen as at the experiences of the average person. worthy of emulation by the developing world. Now, with its bungled response to Local perspectives are important in the second wave and canceling of vac- China, where government programs are cines committed to other countries in often trialed before a decision to roll them Asia and Africa—an allocation they were out at scale is made. Fewer sources and banking on—it will be hard to recover. less access mean this process is more difficult to track. In 2014, for example, Indians are currently dealing with Islamic headscarves and beards were a humanitarian catastrophe of Modi’s banned in public spaces in Karamay, a making. New Delhi’s ambitions to be city in northern Xinjiang. Three years a global power have been dealt a blow. later, this became law across the region. Under Modi, Jaishankar once boasted, With less reporting being done on the diplomacy “is having many balls up in ground, it’s harder to look at the impact the air at the same time and displaying of these changes in their early days and the confidence and dexterity to drop 7F O R E I G N P O L I C Y. C O M

provide a detailed and up-to-date picture. a group, rather than individuals. Any- cul-de-sac. Göbel said the permissible Researchers have also been squeezed one who worked for the party began to gray zone for Chinese academics has use pre-prepared notes, he said. been eroded and he sees considerably out of China. Michael Kovrig, a Cana- more work from his Chinese counterparts dian researcher with the International Like other academics, Göbel has tried on topics such as Xi Jinping Thought Crisis Group, remains in solitary con- to overcome these obstacles through or the value of Marxism. This makes it finement on espionage charges, held, more creative means. He now compiles harder to rely on domestic analysis. along with another Canadian, for over large data sets from Chinese social media two years as a hostage after Canada platforms to better understand how peo- A proposal submitted to the CCP this arrested Huawei Chief Financial Officer ple feel about what the government deliv- year appears to acknowledge how much Meng Wanzhou. In April, the Chinese ers and how they register these opinions. the culture of repression has affected aca- Communist Party (CCP) banned more This type of research helps counter the demic output, but it’s unclear if there’s European academics and researchers well-worn cliché that the CCP presides much possibility of reform. Jia Qing- from entering the country. Chinese cit- over an unresponsive population that is guo, an academic at Peking University, izens and organizations are also forbid- forever acquiescent to its rule. criticized rules at some institutions that den from dealing with those blacklisted. require two university staff to approve a In what may become a new tactic, the But Göbel added that this approach meeting between a Chinese academic German anthropologist Adrian Zenz is comes with its own set of problems. and a non-Chinese one. He also took aim the target of a defamation lawsuit from “Social media tends to dramatize prob- at regulations that prevent meeting the Chinese companies that have asked a lems, so you often end up with a more same foreigner more than twice in a year domestic court to order him to stop his negative and problematic sense of the and the need for a report after each meet- work on Xinjiang and pay damages to issue you are working on,” he said. ing. Jia’s complaint is unusually outspo- them. It might be a stunt, but it’s a fierce Qualitative, in-country research is now ken—but for now it doesn’t seem to have deterrent for anyone who wants to keep much harder to do for academics such made any difference. visiting China for research. as Göbel. For his work, the result is that softer, more complex views that may While it’s worth acknowledging Chi- Christian Göbel, a professor at the not make it onto social media are less na’s progress on data transparency, this University of Vienna who looks at likely to be picked up. comes with a big caveat. It publishes protest movements in China, said his more figures than ever before, on court fieldwork trips to the country have Research coming out of Chinese insti- decisions, consumption habits, and gradually become less productive since tutions has also been undermined. China more, which has sparked insights that Xi Jinping came to power in 2012. After has had an ongoing problem with cred- would previously have been impossible. that, he was forced to conduct inter- ibility due to plagiarism and falsifica- Despite this, the open-data project is views with local officials and citizens as tion, but pressure by the CCP is forcing not managed by an open government. social science studies into a thematic Researchers often probe obscure cor- ners to get the information they need. Police attempt to stop journalists from Predictably, Beijing refused to hand recording outside a over raw patient data to the World court in Shanghai Health Organization during the early ahead of the trial of days of the COVID-19 outbreak—a prac- the citizen journalist tice considered standard among the Zhang Zhan, who international community. Leaks are was detained after inevitably rare because the CCP openly reporting on Wuhan’s jails journalists such as Gao Yu, who was COVID-19 outbreak, highly respected in China before she on Dec. 28, 2020. was accused of supplying a news out- let with a document that showed the change of ideological direction under LEO RAMIREZ/AFP VIA GETTY IMAGES Xi. It’s hard to see how these sources won’t continue to dry up, and the lim- itations of the data revolution are clear. The data, too, must serve the party. Through the reform era and beyond the 2008 Beijing Olympics, writing 8 SUMMER 2021

ARGUMENTS about China helped soften perceptions only civilian but also a child (66 out of a total 256 deaths). Yet the Israeli military of the country. The absence of these did not change its tactics or recalibrate its use of force, continuing to deploy the everyday stories has helped reduce our MIDDLE EAST aerial prowess of a military superpower AND AFRICA against the tower blocks of an impover- image of China to its authoritarian gov- ished, captive population. How Israel ernment. For Yangyang Cheng, a physi- Lost the The difference this time was the racial Culture War expression of the violence that, inter- cist and postdoctoral fellow at Yale Law secting as it did with a larger global By Alia Brahimi conversation about systemic racism, School, the contemporary approach to promised a transformational shift in A After accepting an Egyp- the conflict’s framing. China overly focuses on the geopolitical tian-brokered cease-fire, which took effect on A discussion about race in Israel- and has pushed out a more humanized, May 21, former Israeli Palestine has the potential to gain trac- Prime Minister Benja- tion among a younger generation that nuanced view of the country. min Netanyahu hailed an “achieve- tirelessly challenges received wisdom ment no military has ever achieved” in on global issues from climate change “Current perspectives often greatly Israel’s 11-day bombing campaign in to economic inequality. Young Amer- Gaza. At the same time, Hamas, the ican Jews are a critical force in these exaggerate and mythologize the capa- Palestinian militant group that had shifting cultural sands as they struggle indiscriminately fired more than to reconcile their progressive views on bility of the Chinese government, which 4,300 missiles into Israel, reflexively politics and race with Israel’s actions, expressed the “euphoria of victory.” asking: “Why does a safe homeland for inadvertently supports the Communist us mean the subjugation of another?” Whatever the military outcome, it Party’s own narrative,” she said. “This seems increasingly likely that the final As global networks such as Black reckoning of this latest round of conflict Lives Matter stand in solidarity with helps to strengthen its domestic control will be decided far away from the bat- Palestinians, they draw attention to an tlefield. Netanyahu may have picked underlying and universalizable struggle and international status.” the wrong time to doggedly pursue air- for racial liberation. This new license to strikes against one of the most densely interrogate official Israeli talking points The stories of acceptance, resistance, populated areas on Earth, where 50 per- has already reformed the vocabulary in cent of the inhabitants are under the the United States’ conversation about and everything in between that ripple age of 15; more specifically, he may have the conflict in striking ways. chosen the wrong cultural moment. throughout China play an important The outbreak of war was surrounded Of course, there are grim continuities by a series of racially charged incidents part in political responses. Policymak- between the latest war and previous in Jerusalem and elsewhere: Israeli onslaughts on Gaza. For example, as police raids against Al-Aqsa Mosque ers who see China as a country with real with Operation Protective Edge in 2014, on the first and last days of Ramadan roughly 1 in 4 fatalities in Gaza was not and on the holy night of Laylat al-Qadr, people and culture are likely to make firing stun grenades and rubber-tipped bullets at one of the holiest sites of better, less reactionary decisions. If Islam; the impending forced displace- ment of Arab families in the Sheikh Jar- what we’re left with is former U.S. Secre- rah neighborhood of Jerusalem, whose homes are one court ruling away from tary of State Mike Pompeo proclaiming being taken by Jewish settlers; and vio- lent clashes between Jewish and Arab that Taiwanese pineapple is a symbol citizens in several Israeli cities raising the specter of mob “lynchings.” of freedom, the binary encourages us to To coordinate their attacks against see everything Chinese as suspicious. Arabs, ultranationalist Israelis created The more simplified narrative has contributed to anti-Chinese senti- ment in the West, where anti-Asian hate crimes are on the rise. Perversely, this plays into the CCP’s appeal to the diaspora that Western countries are unable to abandon their historic prej- udices against the country. It’s almost impossible to suggest how to improve the way we report, write about, and discuss China as the infor- mation available has always been a house built on sand. At any time, the web of censorship, paranoia, and disregard for the truth threatened to overwhelm. The familiar call for more diplomacy over- looks that the Chinese government has done the most to damage our under- standing of China—the issue is that the CCP probably doesn’t care. n JAMES THORPE is a writer on law and politics in China. 9F O R E I G N P O L I C Y. C O M

social media channels with names women have been subjected to domi- like “Death to Arabs.” The brutal May 12 assault of an Arab man pulled from nation of their bodies by others. This his car and attacked by a crowd of Jew- ish extremists in a suburb of Tel Aviv increasing global focus on the ways the was reportedly organized on Telegram. human experience is shaped by power These events brought into sharper focus the source of the so-called Israel- relations flips the script on the Israeli Palestine dispute: a colonial-style occu- pation that the official Israeli narra- government and draws attention to tive has long sought to suppress. Israel remains the occupying power of Pales- Israel’s 54-year occupation of the Pal- tinian territory in the West Bank, East Jerusalem, and Gaza—where it still estinian people. enforces a military blockade despite removing settlers in 2005. Whereas in the wake of 9/11 the Israeli Within the bounds of Israel itself, Arab narrative found a captive audience, citizens are discriminated against on racial grounds in a systematic manner Palestinians now have access to the that is increasingly being described as apartheid; the disproportionate number language of the moment as hypermil- of arrests and indictments of Arabs after recent Arab-Jewish violence is just the itarized Israeli security forces literally latest indicator. As the psychiatrist and philosopher Frantz Fanon observed 60 kneel on the necks of peaceful protest- years ago, what parcels out the colonial world is “the fact of belonging to or not Palestinian children, who returned to ers and demonstrators wave banners belonging to a given race, a given species.” their Gaza City neighborhood after the Israel-Hamas cease-fire, stand in that integrate their cause with a global These colonial conditions also what remains of their home on May 21. helped explain the dramatic imbal- fight for racial justice catalyzed by the ance in the death toll (13 deaths on the international humanitarian law. Israeli side compared with 256 deaths Confronting the reality of Israel’s murder of George Floyd by a U.S. police in Gaza). Hamas’s targeting of Israeli civilians is as cowardly and abomina- occupation of the Palestinian territories officer: “We can’t breathe since 1948.” ble as the Israeli military’s indiscrim- raises further uncomfortable questions inate bombardment of Gaza, yet it is for Israel, not least a closer inspection of In this emerging global discourse, no coincidence that Israel is shielded its enemies. Groups like Hamas are mil- by the Iron Dome air defense system itant, repressive nonstate actors with no Palestinian lives matter as much as (which blocked 90 percent of incoming international legitimacy that often make rocket fire) and its citizens have access double victims of the Palestinian peo- Israeli lives do. And no military victory to bomb shelters. This asymmetry is not ple. But they are able to claim a mandate an accident of history; it is integral to anchored in the promise of military resis- for Israel will spare it from that racial the colonial origins of the conflict and tance to the oppressor. At the same time, guarantees an inequality in suffering. the occupation’s brutalizing conditions reckoning. n make it difficult for nonviolent forms More concretely, the United States of resistance to compete with armed ALIA BRAHIMI is a nonresident senior has provided $1.6 billion specifically movements. In a way, Israel is fighting fellow at the Atlantic Council. for Iron Dome batteries, interceptors, the shadow of its own colonial enterprise. and maintenance as part of the $3.8 bil- Why Eritrea lion aid package it delivers annually All this is bad news for the Israeli gov- Won’t Leave to Israel—which goes almost entirely ernment, which is prosecuting an old Ethiopia toward military assistance and is not colonial campaign in a rapidly chang- conditioned on Israel’s compliance with ing global culture. For two decades, its By Seeye Abraha Hagos official narrative has been empowered by the sweeping and suffocating dis- W hen U.S. Sen. course of the global war on terrorism, in Chris Coons which Israel was breathlessly depicted visited Addis as a small and committed democracy Ababa, Ethi- defending itself against the inexplicable opia, and met wrath of an Islamist terrorist movement Prime Minister Abiy Ahmed in March, the powered by antisemitic motivations. United States’ top demand was that Abiy should order the withdrawal of Eritrean In 2020, one prominent Israeli news- troops from the Tigray region. After four paper noted that what the Black Lives months of denials that the Eritreans were Matter and #MeToo movements have inside Ethiopia, Abiy belatedly acknowl- in common is the way Black people and edged their presence and promised to request their withdrawal. 10 S U M M E R 2 0 2 1

ARGUMENTS It’s not going to happen. Numer- of a bilateral relationship between two This massive involvement threat- ous reports indicate that the Eritrean sovereign states. I remained engaged in ens to further destabilize the Horn of troops have committed atrocities in bilateral defense and security matters Africa. The Ethiopian-Eritrean alli- Tigray and that this violence continued during my tenure as Ethiopia’s defense ance has poisoned Ethiopian-Sudanese after Coons met Abiy. As late as mid- minister until 1995. Ties between the relations by bringing Addis Ababa April, heavy fighting was happening on two governments deteriorated in the and Asmara into alignment over the three fronts in central Tigray involv- late 1990s, eventually leading to con- Sudanese border dispute and the con- ing dozens of Eritrean divisions, and flict, and I served on Ethiopia’s Cen- troversy surrounding the Grand Ethi- Eritrean troops have reportedly been tral Command for the duration of the opian Renaissance Dam. This fallout rebadged with Ethiopian military uni- war against Eritrea from 1998 to 2000. is jeopardizing peacekeeping missions forms to disguise their identities. in Sudan and South Sudan, and Abiy Today, Isaias rules a country stricken will continue to destabilize the region Despite the Ethiopian government’s by poverty despite Eritrea’s ample unless the newfound alliance is limited attempt to block any information from access to ports and an untapped poten- through diplomacy or the use of force. the region, international human rights tial for trade. Instead, he leverages his organizations have scrupulously doc- military power to dictate regional pol- Isaias’s quest to extract undue eco- umented mass killings, rape, and icies and extort economic conces- nomic benefits from Ethiopia has been wanton destruction and pillaging of sions from his neighbors, in addition present since the early 1990s. Leverag- villages, industries, clinics, schools, to deploying his network of illicit trade ing the strong alliance built between the government offices, and banks. in the Horn of Africa region and beyond. Eritrean People’s Liberation Front and the TPLF during our joint war against Abiy has, it appears, invited Eritrean The extensive deployment of Eritrea’s the Derg, which was in power from 1974 dictator Isaias Afwerki to wreak may- army and security forces in Ethio- to 1991, Isaias made demands for mon- hem on Tigray. The terms of this deal pia indicates the deep involvement of etary policy concessions. aren’t public—but its implications are Eritrea in the Ethiopian polity. Exam- becoming ever more alarming. ples include the deployment of Eritrean This became evident after Eritrea troops alongside Amhara forces and the printed its own currency, the nakfa, in I know Isaias both as an ally and as federal army on the Ethiopia-Sudan bor- 1997 and the two countries embarked an adversary. During the pre-1991 war der (where there is a territorial dispute) on redefining their monetary, trade, against the Ethiopian military junta, and the reported use of Eritrean troops and investment policies. The Ethiopian known as the Derg, Tigrayan and in the fight against the Oromo Liberation government—led by the Ethiopian Peo- Eritrean forces joined hands in repuls- Army in Ethiopia’s Oromia regional state. ple’s Revolutionary Democratic Front ing the Derg’s Red Star Campaign in 1982, LEON NEAL/GETTY IMAGES which aimed at dislodging the Eritrean Beyenesh Tekleyohannes and family members gather in forces from their last stronghold in the her home in the village of Dengolat in Ethiopia’s Tigray Sahel mountains of northern Eritrea. region on Feb. 26 to mourn the victims of a massacre the The relationship between the Tigray Peo- United Nations said was perpetrated by Eritrean troops. ple’s Liberation Front (TPLF) and Isaias’s Eritrean forces went sour in 1985—due to reports of Isaias’s secret negotiations with the Soviets and the blocking of a humanitarian corridor from Sudan—but we rekindled ties in 1987 due to the need to fight against a common foe, and our cooperation continued until the demise of the Derg in May 1991. As chair for military affairs and member of the executive committee of the TPLF, I met with Isaias and his colleagues on several occasions. Our relations after 1991 were not smooth but continued relatively amicably until after the 1993 Eritrean independence referen- dum, when Ethiopia and Eritrea started to realign their relations in the spirit 11F O R E I G N P O L I C Y.C O M

coalition with the TPLF as its strongest eled to Asmara, and statements were it as well, if push comes to shove. member—wanted bilateral trade to fol- released from both capitals on March 26. There are signs on the ground that Isa- low internationally accepted norms The release from Asmara said nothing whereby our currencies would be about the central issue—the withdrawal ias, Abiy, and Amhara elites are already pegged to the U.S. dollar. of Eritrean forces from Tigray—while the working toward a de facto partition of statement from Addis Ababa said both Tigray into three pieces. First, the irre- The Eritreans did not agree to this and sides agreed on the withdrawal. In those dentist Amhara forces will seek to incor- demanded that the two currencies have statements, neither side mentioned the porate most of southern and western a parity exchange rate (one Ethiopian atrocities committed in Tigray nor any Tigray into the Amhara regional state; birr would be exchanged for one Eritrean investigation into them, but they did the world is already witnessing this as nakfa) as well as rejected the pegging stress their so-called shared vision of hundreds of thousands of people are and the market rate of exchange. They economic cooperation and partnership. displaced from western Tigray in what also demanded that businesses owned the U.S. government has called “ethnic by Eritreans in Ethiopia be treated like The message was clear: Isaias intends cleansing.” Second, the northern part Ethiopian firms, which would mean they to keep his troops on Ethiopian soil, and of Tigray stretching from the Eritrean would repatriate their profits in foreign Abiy seems prepared to provide the border to the highway linking Adigrat currency even if their capital source was requisite political and economic cover and Shire is likely to remain under the Ethiopian. It was this disagreement that because he wants him to stay. Indeed, the control of the Eritrean occupiers, now laid the groundwork for the 1998-2000 two need each other. The double talk is more likely to be wearing Ethiopian Ethiopian-Eritrean War. intended to make the international com- army uniforms. Eritrea’s current deploy- munity refrain from imposing punitive ment of forces and actions it is taking in Relations deteriorated as our side sanctions on Ethiopia so Isaias can thrive areas north of Adigrat are indicators of refused to give in to Eritrean demands on the economic umbilical cord that the its intentions. The remaining piece of and Isaias invaded Badme in 1998 to two intend to develop under the guise of Tigray will be left for the interim admin- coerce the Ethiopian government to economic cooperation and partnership. istration of Tigray installed by Abiy. Of yield to his wishes. Contrary to popular course, this administration will be chal- perceptions, as Isaias acknowledged in Isaias’s campaign in Tigray is the first lenged by Tigrayan forces, and its via- an interview conducted in November step toward achieving his long-term bility depends on the military, political, 2018, the Ethiopian-Eritrean War was dream of leveraging the strong Ethi- and diplomatic dynamics that unfold in not primarily about a border dispute. opian economy to serve his interests. the coming months. It was Isaias who ignited the war by These include his grandiose regional sending invading troops into Ethio- ambitions to lead a regional alliance of The three forces can plan and fight pian territory in 1998. autocrats that he sees taking shape in the jointly; they will likely have the same Horn of Africa, based on his autocratic source of food, ammunition, uniforms, Similarly, Eritrea’s involvement in the model of governance, which is imposed and paychecks—with the funding com- current war in Tigray is not a border or by his security apparatus and army. ing from Ethiopia’s government. Under a national security concern. Instead, it this scenario, Abiy could claim that he is an opportunity for Isaias to unleash Links with Ethiopia’s economy will cannot compel the Eritreans to remove his wrath on his old enemy, the TPLF, allow Isaias to escape the effects of any their troops as demanded by Washing- and the people of Tigray with the help of possible economic sanctions imposed ton or force the Amhara militias to leave. Abiy’s government and Amhara militias by the international community while He could then plead that Ethiopia is both seeking to realize their irredentist terri- maintaining the Eritrean economy as too big and too fragile to afford further torial claims to parts of Tigray. his personal fiefdom. In particular, he is sanctions—implicitly threatening total encouraging Amhara leaders in Ethiopia breakdown if his plan is not backed. In his statement to the Ethiopian to resist international pressure, assuring House of Peoples’ Representatives on them that recently imposed sanctions This strategy would allow Isaias to March 23, shortly after seeing Coons, against Ethiopia and Ethiopian officials make an end run around the prospect Abiy was at pains to explain why it may not significantly affect the country. of sanctions. Isaias is convinced that would be difficult for Isaias to withdraw After all, the Eritrean regime was under sanctions against Eritrea are unescap- his troops in the absence of Ethiopian United Nations sanctions for supporting able, while it is less likely that the inter- federal forces to close the gap that could the Somali militant group al-Shabab for national community will treat Ethiopia be created by the withdrawal. As to the about a decade, and Isaias claims to have as harshly in the long term. Either way, withdrawal of the Amhara forces from survived mostly unscathed; he is now he is confident that economic coopera- southern and western Tigray, he sim- trying to sell this approach to Amhara tion with Ethiopia will help him survive ply averred that it would not happen. elites as proof that Ethiopia can survive because it buys him time. Soon after the speech, Abiy trav- 12 S U M M E R 2 0 2 1

ARGUMENTS If his plan is allowed to play out, Ethiopians will discover—as have the long-suffering Eritrean people—that Isaias is a false friend. The Eritrean dic- tator is determined to ruin and to rule the Ethiopian state at the same time. n SEEYE ABRAHA HAGOS is a former Ethiopian defense minister and former senior member of the Tigray People’s Liberation Front. AFRICA BRIEF: From Algeria to Los Angeles Mayor Eric Garcetti (center) and other officials attend Zimbabwe and countries in between, the ribbon-cutting for the expansion of the Los Angeles FP’s Africa Brief newsletter, written International Airport on June 4. by Lynsey Chutel in Johannesburg, delivers essential updates and analysis to your inbox every Wednesday. PATRICK T. FALLON/AFP VIA GETTY IMAGES AMERICAS made the point repeatedly during the governments invest in their residents— run-up to the November 2020 elections via education, health care, housing, Foreign Policy and has kept making it since. National and other basic needs—they are laying Is Local Security Advisor Jake Sullivan was one the domestic foundation of foreign- of the architects of a “foreign policy for policy success. Local governments and By Nina Hachigian the middle class.” If there is a Biden doc- communities raise and empower the trine, breaking down the silos of foreign workers, inventors, caregivers, entre- In a 2009 essay, I coined the term and domestic policy would be a funda- preneurs, entertainers, and soldiers of “formestic” to describe the inevi- mental element. tomorrow. When their programs and table intertwining of foreign and institutions are equitable, they help domestic policy and the fact that The reason why these realms are eliminate systemic racism and gender solutions to global challenges deeply connected is simple: The United inequality, LGBTQ and religious bias, often lie at home—and vice versa. States is only as influential abroad as and other injustices. This aids foreign Although I’m not holding my breath the strength of its economy, institu- policy in two ways: Not only will the for the word to catch on, the idea that tions, people, and ideas at home. But United States’ international reputa- foreign and domestic policy are insep- if that fact has sunk in, the discussion tion improve as it addresses its wrongs, arably connected is a core conviction has mostly revolved around what the but it will have the benefits of the full of U.S. President Joe Biden’s team. He federal government can do, such as team it needs, instead of leaving people repairing and building infrastructure, behind and talents untapped. investing in research and development, and shoring up the day care system. Today, state and local governments Encouragingly, the Biden administra- interact with the world outside U.S. tion has vowed to measure foreign- borders in many more ways than in policy success by what that policy deliv- the past. Local leaders are the actual ers for everyday Americans. boots on the ground when transna- tional threats hit U.S. shores. They set So far, so good. But what has been pandemic rules, distribute vaccines, missing in the debate is the crucial cope with extreme weather, and care role that U.S. states, cities, and com- for migrants. Local governments have munities can play. Cities’ and states’ become key national security actors. economic policy choices concerning infrastructure, innovation, and other Their direct role in foreign policy has areas create the economic strength on also been growing. For example, local which U.S. power rests. When local leaders in the United States regularly 13F O R E I G N P O L I C Y.C O M

nurture relationships with foreign gov- mayors from around the world through disadvantaged community college stu- ernments. In any given week in Los the auspices of C40, where he chairs a dents, about a third of whom had never Angeles, where I am the deputy mayor of group of nearly 100 climate-ambitious boarded an airplane before, on their first international affairs, Mayor Eric Garcetti cities. The mayors discuss not only what trips overseas and also brought inter- could be speaking with his counter- more their cities can do to address the national leaders to talk to hundreds of parts in Tokyo, Jakarta, or Mexico City; climate crisis but also pragmatic details Black and other students of color about ambassadors of India or France; or the of how best to respond to COVID-19 and career paths. This program could be secretary-general of the United Nations. how the post-pandemic recovery must replicated across the country. Before the pandemic, Los Angeles hosted be just and green. Los Angeles belongs heads of state and government minis- to many other city networks, some ded- To give these and many other ideas ters on a regular basis. Of course, these icated to specific topics such as gender more traction, the U.S. State Depart- relationships do not define the contours equity, some broader, like the Urban 20, ment should establish a permanent of national ones, but the sum total of a network of cities advocating for a pro- office for city and state diplomacy as local ties—involving government, civil gressive agenda. Los Angeles is also one proposed in congressional legislation society, business, and countless individ- in a network of global cities measuring last year. A key provision of that plan ual people—is a critical stabilizer. In a their progress toward the U.N. Sustain- is to detail federal foreign service offi- democracy, especially one with a federal, able Development Goals. cers to state capitols and city halls to decentralized system, these ties create support their growing foreign-policy the political space for closer relations or, This may sound like many interna- agendas. This team could keep Wash- in some cases, frostier ones. tional initiatives for a city hall in Cali- ington aware of local concerns and pri- fornia. But the truth is most other major orities, build on local connections with Some relationships deserve the spe- global cities have more active inter- foreign partners, guide local leaders cial attention of a city like Los Ange- national engagements supported by when they interact with countries that les—perhaps because of their outsized greater resources than U.S. cities do. may have malign intentions, and other- economic impact or their importance to wise bolster what cities and states have a large diaspora community. With the Cities and states could do even more been doing in recent years. Many other Mexican Foreign Ministry, we created with support from the Biden admin- countries have such offices. the Mexico-Los Angeles Commission, istration. If foreign policy is to serve a first-of-its-kind, city-to-nation citi- everyday Americans, these channels Along with this new team for sub- zens’ commission that paired leaders should be expanded and deepened. national diplomacy, which should be in key sectors. We were honored when located outside Washington, the State Japan chose to launch its third global Here are a few suggestions to start. Department could also add staff to public diplomacy hub, Japan House, in On climate policy, the Biden team could the Office of Foreign Missions in U.S. our city; currently, we are testing Japa- push to involve U.S. and global cities cities like Los Angeles, Houston, and nese zero-emission equipment at the at the upcoming U.N. Climate Change Chicago. Foggy Bottom could take a busy Port of Los Angeles. Vietnam and Conference in Glasgow, Scotland. The page from the Defense Department the United States need a nonstop flight world’s cities have shown a much higher and place more staff in places outside to connect them, and Los Angeles has level of ambition than most nations. the Washington bubble. To assist U.S. the best airport for that critical route. Their progress could inspire others. public diplomacy, for example, the Paris and Los Angeles are cooperating State Department should have a liai- to make their Summer Olympic and Second, the administration could use son office in Los Angeles focusing on Paralympic Games in 2024 and 2028, experts from U.S. cities as international the U.S. entertainment industry’s soft respectively, equitable, sustainable, and development advisors just as Japan and diplomacy and the censorship it faces innovative. With Britain, we are work- other countries do. Cities and states abroad. Similarly, a State Department ing on mobility innovation and gen- have concrete, on-the-ground exper- liaison for public health based in Hous- der equity progress. Finally, the city’s tise: how to use technology while pro- ton, which is home to one of the largest large Armenian American diaspora tecting privacy, how to transition away agglomerations of medical institutions demanded that elected officials be active from coal, how to write green building in the world, could work on interna- in addressing the recent war between codes, how to budget transparently. tional collaboration involving hospi- Armenia and Azerbaijan. Los Angeles’s tals, biotech companies, and state and role has been formestic indeed. Finally, the administration could local governments. work with cities and community col- Mayors also cooperate across bor- leges to inspire a diverse new generation There are still other ways the Biden ders every day. Garcetti has convened of young people to devote their careers administration could operationalize the to international relations, administra- formestic agenda. The State Department tion, and business. We started the May- or’s Young Ambassador program to send 14 S U M M E R 2 0 2 1

ARGUMENTS could make better use of U.S. embassies after major U.S. combat operations con- operations and goals—is spelled “A-R- cluded, the United States spent around M-Y.” The defense world has effectively abroad to address domestic concerns. $45 billion annually to maintain its revolved around the two land wars in training, advising, and special opera- Asia (one of the classic blunders) for 20 Many domestic agencies, such as the tions footprint in the country. But now years. The Navy’s role in guarding the the name of the game is great-power world’s sea lines of communication— U.S. Food and Drug Administration, sta- competition—and Americans need and, in times of conflict, driving ene- to have a serious discussion about the mies’ fleets from the seas—is wholly tion staff at embassies to work on narrow defense budget. unfamiliar to a generation that has seen U.S. forces myopically engaged in grind- bilateral issues. They should be encour- The United States relies primarily on ing counterinsurgencies and wars of sea-based commerce, as well as mari- choice far from the public eye. aged to think more broadly about how time resources like oil, rare-earth met- als, and seafood, which means it needs In his recent book To Provide and their work abroad could benefit Ameri- a navy. Unfortunately, the U.S. Navy Maintain a Navy, Jerry Hendrix notes has been ground into a shadow of its that drops in annual defense budgets cans. And although the U.S. Agency for former self through two decades of have disproportionately affected the unsustainable deployments. For years, U.S. Navy’s ability to execute its con- International Development is in the busi- the defense budget has roughly been gressionally mandated tasks without partitioned into thirds, but those days any commensurate reduction in oper- ness of helping developing countries, its must end if there is any intention of ational tasking. The Navy decommis- conventional deterrence facing down sioned 200 ships in the seven years staff abroad should also be scoping the America’s main challenger, China. following the end of the Cold War, end- ing 1996 with 375 ships at the pier. That territory for innovative local solutions This is going to require a serious par- number had shrunk to under 300 by adigm shift for the U.S. Army. A com- 2003 and came to rest at a low of 271 in to bring back home. mon joke in the military services is 2015. In contrast, China commissions that “joint”—meaning multiservice But this blending is easier said than done. The divide between the United States’ foreign and domestic policy communities is deeply ingrained— not just within government but in uni- versities, think tanks, the media, and political campaigns. Only at the very top of the food chain—in the White House—is there a clear view of how the two realms are inescapably connected. Marrying the national and local would give the Biden administration more partners willing and able to pursue a holistic approach. n NINA HACHIGIAN is the deputy mayor of international affairs of Los Angeles and a former U.S. ambassador to the Association of Southeast Asian Nations. Give the Navy the Army’s Money NOEL CELIS/AFP VIA GETTY IMAGES By Blake Herzinger U.S. Navy personnel raise the flag during a maritime exercise with the Philippine Navy aboard the USS Since 2001, the United States has spent nearly $2 trillion John S. McCain in the South China Sea on June 28, 2014, trying to reform the grave- near waters claimed by Beijing. yard of empires, Afghani- stan, into a rose garden of 15F O R E I G N P O L I C Y.C O M democracy, and now it’s leaving. Even

new ships so rapidly that the process is Afghanistan concludes, billions of required to invade the Pacific Islands à H. ABERNATHY/CLASSICSTOCK/GETTY IMAGES referred to by Chinese sources as “drop- dollars in funding need to be turned la imperial Japan in the 1940s. And it ping dumplings into the broth.” toward clearing the maintenance back- might also be revelatory for those who log of the U.S. fleet and invested in new tout the Army’s role in amphibious war- It is time for the bloodletting foretold ships and submarines. fare to note that the U.S. Marine Corps, in 2020 by Joint Chiefs of Staff Chair- which is actually the service responsible man Mark Milley. A career Army offi- Any description of the naval threat for amphibious warfare, has elected to cer, Milley articulated what many on posed by China sounds like hyperbole: divest itself of its tank force in favor of the Navy’s bench have been shout- thousands of modern cruise and ballis- capabilities suited to the character of ing into the void for 20 years: “The tic missiles, including a specific pro- contemporary maritime warfare. Much defense of the United States depends gram designed to blow big flaming holes as funding was unevenly prioritized for on air power and sea power primar- in aircraft carriers; an inventory of tens the Army’s needs in the 2000s, so must ily. People can say what they want and of thousands of sea mines; a navy bat- it be now for the Navy. argue what they want, but that’s a real- tle fleet that exceeds the U.S. fleet by ity.” The free sea is the lifeblood of the 60 ships but a total maritime force of A considerable amount of the Army’s United States and has been for more more than 700 when accounting for its 2000s-era funding surge came from than two centuries. coast guard and maritime militia. On the Overseas Contingency Operations balance, most U.S. ships are assessed fund—a supplemental appropria- Milley’s remarks made clear that he to be of higher quality than their oppo- tion designed to augment the defense expected a reprioritization of fund- site numbers, but numbers will matter budget for war-related activities that ing among the services and that the when missiles start to fly. essentially ended up as a slush fund Navy and Air Force should be at the top for circumventing the 2011 Budget Con- of the pile. To be successful, this pro- Those mines, which would hobble trol Act—not the base budget that goes cess must be bold and involve actual any large-scale Army assault, are met through the normal authorization and choices, not simply rearranging deck by only 11 1980s-era U.S. minesweep- appropriation process and the services’ chairs on the Titanic by reallocating ers, which have already been identified enduring requirements. It also seems single-digit percentages. A navy takes for removal from service. The creaky unlikely that U.S. defense budgets, as years to develop, and the United States U.S. sealift fleet and its vulnerable a percentage of GDP, will rise appre- is already frighteningly behind in mak- oilers, first targets at the outbreak of ciably in the near future. That means ing these hard choices. hostilities for their irreplaceable role that the real prioritization knife fight in keeping the battle fleet at sea, are will likely take place within the base The Army receives approximately 40 already too few in number. Without budget top line. percent more funding than the Navy a larger fleet, American soldiers will for its personnel costs and only slightly die along with sailors, caught in vast Put plainly, to achieve the required less for operations and maintenance minefields and targeted by waves of investment in the Navy, the Army will ($57 billion to the Navy’s $60 billion). In missiles more numerous than existing either need to forgo many of its mod- terms of acquisitions, the Navy receives ships can counter, long before reaching ernization aims or become considerably far more, but the ships being built must any intended field of battle. To place it smaller. The Army’s Future Combat Sys- also serve Army requirements. in perspective, with only one success- tem program cost American taxpayers ful ballistic missile attack that sinks $18 billion and produced nothing; at The Navy maintains enormous ships an aircraft carrier, China would kill those rates, the Navy could purchase that would transport approximately 90 twice as many Americans than were at least 15 hulls of its newest frigate percent of the Army’s required equip- killed during the duration of the war design. In terms of manpower sav- ment to the theater of battle in a major in Afghanistan. ings, with careful planning the Army contingency. But even this fleet of sea- could tighten its belt by sending identi- lift vessels is rapidly becoming obsolete. Much as the wars in Iraq and Afghan- fied capabilities to the reserve. But any By the end of this decade, many of the istan were largely ground-centric efforts savings at the Army’s expense would ships the Navy would rely on for this led (rightly) by the Army, the challenges place increased onus on the Navy to crucial role will be nearly 50 years old. faced by the United States now and for actually deliver. The service’s track The ships’ engines are so old that only the foreseeable future are maritime. If record over the past two decades has a quickly shrinking cadre of mechanics the United States and China go to war, done little to inspire confidence in its even know how to operate them. it will play out in the vast oceans of the abilities to acquire ships that actually region, not on Chinese shores. work, arrive on time, and don’t blow Beyond that, it is just the nature of past their planned budgets. the services that the Navy requires There is little likelihood that Bei- ships, ships cost money, and the Navy jing could muster or sustain the forces needs a lot more ships. As the war in 16 S U M M E R 2 0 2 1

ARGUMENTS There are certainly legitimate requirements for modernizing the Army. But today’s Army is adequate to address the immediate security needs of the nation. The Navy is not. Many naval advocates would point to the U.S. Constitution, which out- lines Congress’s responsibility to raise an army when required but to provide and maintain a navy at all times. It is no less true in 2021 than it was in 1787 that a navy takes time and long-term, sustained investment. Infantry sol- diers can be trained to a reasonable A fleet of combines harvests a Nebraska standard in the space of months, but wheat field in the 1970s. the timeline for ships is far longer. A Big nation cannot start building a navy at Agriculture Is Best the outbreak of hostilities and expect By Ted Nordhaus and to prevail. For a maritime nation like Dan Blaustein-Rejto the United States, which relied on the In some ways, it is not surprising agriculture. It is this central role of large, that many of the best-fed, most corporate, and industrial-style farms oceans to reach its perch at the top of food-secure people in the his- that critics point to as evidence that the tory of the human species are food system needs to be transformed. the global order, a navy is nonnegotia- convinced that the food system is broken. Most have never set foot on a But U.S. dependence on large farms ble. U.S. shipyards built thousands of farm or, at least, not on the sort of farm is not a conspiracy by big corporations. that provides the vast majority of food Without question, the U.S. food system ships during World War II but avoided that people in wealthy nations like the has many problems. But persistent United States consume. misperceptions about it are a function complete catastrophe in 1941 because a of its spectacular success, not its failure. In the popular imagination, the ide- Any effort to address social and environ- concerted shipbuilding campaign had alized farm looks something like the mental problems associated with food ones that sell produce at local farmers production in the United States will begun five years before. Those ship- markets. But while small farms like need to first accommodate itself to the these account for close to half of all U.S. reality that, in a modern and affluent yards are long gone, the U.S. commer- farms, they produce less than 10 per- economy, the food system could not be cent of total output. The largest farms, anything other than large-scale, inten- cial shipbuilding industry as dead as its by contrast, account for about 50 per- sive, technological, and industrialized. cent of output, relying on economies military shipbuilding program. of scale to feed a nation of 330 million Not so long ago, farming was the people, vanishingly few of whom live principal occupation of most Ameri- The Navy’s need for a greater share anywhere near a farm or want to work in cans. More than 70 percent labored in agriculture in 1800. Today, that figure of the defense budget will certainly be is less than 2 percent. criticized as interservice rivalry or paro- The consolidation of U.S. agriculture has been underway for more than 150 chialism. But in terms of any contin- years. First came irrigation and ploughs, then better seeds and fertilizers, and gency related to a rising China seeking then tractors and pesticides. With each innovation, farmers were able to produce to displace the order of the free world, larger harvests with fewer people and work larger plots of land. Better oppor- there are no realistic options without a tunities drew people to cities, where they could get jobs that provided higher wages strong, revitalized Navy. Active and retired naval strategists are increasingly fervent in their calls for recapitalization of the fleet—not to score points in some imagined interser- vice rivalry but because they know that if called on, the force may not merely be bloodied but may fail. Not for want of sailors or fighting spirit but for a simple lack of large gray ships ready to go into harm’s way. n BLAKE HERZINGER is a civilian Indo- Pacific defense policy specialist and U.S. Navy Reserve officer. 17F O R E I G N P O L I C Y.C O M

and, ultimately, greater societal wealth. to drive cattle to these new rail centers, lution because manure is a highly inef- The large-scale migration of labor from where they were finished, slaughtered, ficient way to deliver nutrients to crops. farms to cities pushed farmers to invest and then the meat shipped throughout even more in productivity-enhancing the country by rail. After World War II, Another benefit of large-scale U.S. practices and technologies in a virtu- beef production and feedlots expanded farms is that because they are so effi- ous cycle of urbanization, agricultural massively, driven not so much by corpo- cient, economically and environmen- intensification, and economic growth. rate greed as by rising demand for beef tally, they are also able to produce vastly from the United States’ newly prosper- more food than Americans can con- It is not a stretch to say that the ous middle class and by a scarcity of sume, making the country the world’s United States is wealthy today because labor as ranch hands returning from the largest agricultural exporter as well. most of its people work in manufactur- battlefields of Europe and the Pacific ing, services, technology, and other sec- chose to pursue better economic oppor- That benefits the U.S. economy, of tors. In this, the country is not alone. No tunities in the postwar economy. course, but it also comes with an envi- nation has ever succeeded in moving ronmental benefit for the world. In the most of its population out of poverty Debates about the social and envi- contemporary environmental imagina- without most of that population leav- ronmental impacts of America’s food tion, highly productive, globally traded ing agriculture work. system cannot be disentangled from agriculture is a bad thing—poisoning the basic reality that in a modern indus- the land at home and undermining That transition often isn’t easy. Mil- trialized society, most people will live food sovereignty abroad. But in real- lions of Black Americans made the dif- in cities and suburbs and will not work ity, a pound of grain or beef exported ficult journey from tenant farming in in agriculture. As a result, most food from the United States almost always the South to factory work in the North, will need to be produced by large farms, displaces a pound that would have been where they faced new forms of racism with little labor, far away from the peo- produced with more land and green- even as they escaped the tyranny of ple who will consume it. house gas emissions somewhere else. sharecropping. More recently, small farmers have struggled as increasingly Many sustainable agriculture advo- An accurate understanding of the high agricultural productivity and fall- cates tout the recent growth of organic benefits of the U.S. food system points ing commodity prices tilted the playing agriculture as proof that an alternative toward a number of important oppor- field toward large farms. food system is possible. But growing tunities to improve it. market share vastly overstates how much But over the long term, the living food is actually produced organically. First, the United States should dou- standards and life opportunities offered In reality, organic production accounts ble down on technology and productiv- in the modern knowledge, service, and for little more than 1 percent of total U.S. ity. Better seeds, irrigation, fertilizers, manufacturing economies have proved agricultural land use. Meanwhile, only feeds, and animal breeding—together vastly greater than anything possible a bit more than 5 percent of food sales with precision farming—could signifi- under agrarian social and economic come from organic producers, mostly cantly improve both the competitive- arrangements. because organic sales are overwhelm- ness and environmental performance ingly concentrated in high-value sectors of U.S. farms. Modern life required not only liberat- of the market, namely produce and dairy. ing most Americans from agrarian labor Second, liberalizing trade agreements but also the development of a food sys- Moreover, organic farms, large and can improve global food security, ben- tem capable of getting food from farms small, don’t actually outperform large efit U.S. agriculture, and bring substan- to the cities. For this reason, the rise of conventional farms by many important tial environmental benefits. Free trade modern agriculture is as much a story environmental measures. Scale, tech- agreements like NAFTA have histori- of railways and highways as combines nology, and productivity make good cally been a target for environmentalists, and tractors, refrigeration and grain environmental sense. Because organic who argue that they hurt poor farmers elevators as pesticides and fertilizer. farming requires more land for every in developing countries while opening calorie or pound produced, a large-scale up U.S. markets to producers with lower The development and growth of feed- shift to organic farming would entail labor and environmental standards. lots followed a similar path. As the his- converting more forest and other land to But overall, agricultural trade benefits torian Maureen Ogle recounts in her farming, resulting in greater habitat loss the global poor, and further liberaliza- magnificent history of the beef industry, and more greenhouse gas emissions. tion could lift millions of people out of In Meat We Trust, the first feedlots grew And while organic farming doesn’t poverty while improving food security. out of the stockyards of Chicago and use synthetic pesticides or fertilizers, Further reducing trade barriers, par- Kansas City in the late 19th century. The it often results in greater nitrogen pol- ticularly for goods with relatively low most efficient way to get beef to bur- environmental footprints, would also geoning markets in America’s cities was concentrate production in places with an 18 S U M M E R 2 0 2 1

ARGUMENTS environmental comparative advantage. have the means to invest in cutting-edge also sparing forests in many other parts Third, the United States should capital equipment and technology. of the world. It does all this while being extraordinarily efficient environmen- stop growing crops for biofuels and The prospect that a few large corpora- tally. A better food system will build on incentivize farmers to produce food tions could ultimately not only process these blessings, not abandon them. n for export markets. About 40 percent but own much of America’s farmland of U.S. corn is diverted for production and grow much of its food will strike TED NORDHAUS is the executive director of biofuels, largely because the federal many as fundamentally wrong. But it of the Breakthrough Institute, where government mandates such fuels for is likely where we are heading one way DAN BLAUSTEIN-REJTO is the director of ethanol use in gasoline. These policies or another, as farming has always been food and agriculture. might have made some sense in the a tough business to stay in, much less 1970s, when oil was scarce and Amer- get into, and fewer and fewer Americans LATIN AMERICA BRIEF: Written by ica’s petroleum reserves seemed to be have any interest in doing so. Catherine Osborne in Rio de Janeiro on the wane. But today, the country and delivered to your inbox on Fridays, is awash in oil, and the transition to Vertical integration might bring sig- FP’s Latin America Brief newsletter electric vehicles is just getting started. nificant benefits. Big agricultural cor- traces the contours of debates that porations would have significantly will shape the region’s future, from Continuing to use some of the most greater incentive to invest resources geopolitics to business to human rights. highly productive farmland in the world into the long-term improvement of the to grow corn for biofuels also has terrible land they own and farm, implement EUROPE environmental costs. Under the best of evidence-based farming practices, and circumstances, biofuels have a margin- spend on capital-intensive technology. Industrial ally lower carbon footprint than conven- Policy Saved tional petroleum-based fuels. But every Large companies are also, counterin- Europe’s bushel of corn that is used for fuel is also tuitively, more responsive to demands Vaccine Drive a bushel that isn’t used for food, which for social responsibility, not less so. It is increases pressure to convert forests for large, multinational corporations, not By Caroline de Gruyter farming somewhere else in the world. If smaller regional operators, for instance, President Joe Biden were to change just that have been willing to make zero- In March, Europe’s vaccine one thing about the U.S. food system to deforestation commitments in places procurement was the world’s protect the environment, it would be to like Brazil. That’s because, even though laughingstock. The Europeans get rid of ethanol, not Twinkies. they can leverage their size and eco- were far behind the Americans, nomic power to thwart reform, they are the British, and the Israelis in Much of the criticism of big agricul- also easier to target, pressure, and regu- obtaining vaccines and administering ture focuses on the monopolistic power late than more decentralized industries. them to citizens. But now, the critics of food processors such as Archer- Daniels-Midland and Tyson Foods. For these reasons, a food system that But the bigger problem is arguably that is bigger, more consolidated, and more there is too little vertical integration vertically integrated might actually of food processors with food produc- deliver better social and environmental ers and landowners. Today, big food outcomes than the one we have today. processors are able to take an outsized Either way, big farms and big agriculture share of the profits from the food system are here to stay. They are a fundamental while pushing the economic risk onto feature of global modernity, not a con- those further down the supply chain. spiracy by capitalists and corporations Many large farmers, meanwhile, lease to poison people or the land. rather than own much of the land they farm, with much of America’s farmland Ultimately, improving the U.S. food owned by absentee landowners. system will require, first, appreciating it for the social, economic, and technolog- The resulting economic arrangements ical marvel that it is. It feeds 330 million are rife with what economists call princi- Americans and many millions of people pal-agent problems. Many farmers don’t more around the world. It has liberated have incentives to invest in the long- almost all Americans from lives of hard term productivity of the land they farm agricultural labor and deep agrarian because they don’t own it nor do they poverty. It has allowed forests to return across much of the United States while 19F O R E I G N P O L I C Y.C O M

are silent. European countries are vac- February, these complex chains were He soon found out that several sup- TRIBOUILLARD/AFP VIA GETTY IMAGES cinating in record numbers, all more hardly monitored at all in Europe. It ply chains were disrupted, with no one or less at the same pace. took a pandemic—when governments doing anything to fix the problems. He want to get vaccines at all costs—to had to act fast. The commission had Europe caught up fast because it com- show how vulnerable this system was. been assigned to do all vaccine pro- pletely turned around the way it does curement on behalf of member states. business in the health sector. It used In February, in response to the pub- Last summer, when no one knew when to be an open system, where goods lic outcry over AstraZeneca’s failure to which vaccines would be available, it and services flowed in and out freely; deliver what it had promised, Thierry had placed orders with six produc- it is now more controlled and more Breton, the European commissioner ers to spread risks—if one pharma- European. By setting up a real industrial for the internal market, set up a vaccine ceutical company could not deliver policy, and investing in it, Europeans procurement taskforce. The first thing in time, there were always five others managed to guarantee a steady supply of he realized, he told a French podcast, in the field. Member states had asked vaccines. The idea that an industrial pol- was that the EU had had “extraordi- the commission to do this for them. icy helps, long taboo in Europe, is now narily liberal and Anglo-Saxon poli- If all would buy their own vaccines, here to stay—and not just for vaccines. cies” for decades. big countries with larger budgets (or factories on their territory) would get When AstraZeneca announced in The European single market, designed there first. Smaller and poorer coun- January that it could deliver only a in the 1980s, centered on customers. The tries would end up at the back of the third of its promised doses in the first idea was that customers mechanically line. This would disrupt the internal quarter of 2021, the European Com- profit from free market forces and fierce market and put internal relations under mission got all the flak. The com- competition, resulting in lower prices unbearable political strain. If all would mission, which was asked by the 27 and better quality. The role of govern- get vaccines at the same time, for the member states to buy vaccines for all, ment was limited to ensuring and mon- same prices, disaster could be averted. had been too slow, critics said. It sup- itoring the level playing field. There had posedly focused too much on the price always been strong support in the com- AstraZeneca produced one of the of vaccines and too little on exclusive mission for industrial policies that would first vaccines in Europe. But the supply delivery. In the meantime, the United protect Europe’s industry and make it chain system could not cope with mass States, the United Kingdom, and Israel more competitive. The problem was not production under stress. Immediately, elbowed their way to those vaccines, so much the substance of such policies there were hitches. Supply was lower leaving the European Union in the but the fear by member states of a multi- than the company had planned. Some cold. High time, many said, for Europe national power grab by the commission. governments started pushing AstraZen- to flex its geopolitical muscle. When it was really unavoidable, as it was eca around, forcing it to move produc- for the steel industry, they accepted it— tion to their territory or forbidding it to But Brussels soon discovered that the resulting in the Davignon Plan, which export to others. All companies were problem was not so much bad contracts protected and restructured European under similar strain. Israel, for instance, or slow negotiating but the fact that steel manufacturers heavily hit by an secured its vaccines by handing over the no one in Europe had oversight over economic crisis in the 1970s. personal data of its citizens in exchange complex supply chains. It wasn’t that for guaranteed delivery of doses, at the Europe lacked the production capacity It took a pandemic to accept that the expense of other countries. to fulfill its own orders or that its share scope of such policies must be wider. of production was being shipped else- No one, it turned out, had previously Meanwhile, vaccines freely flowed where. The problem was the production had oversight over the production of in and out of Europe. This was not a process was breaking down within the the hundreds of millions of vaccines problem as such. Today, like several continent. It was a problem that indus- that the commission had ordered. U.S. months ago, Europe exports more than trial policy was designed to solve—so policymakers were doing business with 40 percent of vaccines produced on its long as industrial policy was something vaccine producers, researchers, and pro- soil. The difference now is that supply the EU was capable of doing. ducers, working toward a good output. has become so ample that even with In Europe, there was very little coordi- exports totaling almost 50 percent of Many vaccines produced in Europe nation. All the parts of the chain were production, Europeans have more than and destined for Europe must cross acting independently. Vaccine doses enough for themselves. many borders before they are ready were flowing in and out of the internal to use. Components are sourced all market without anyone keeping track. Breton is a hands-on former indus- over the world. Assemblage is done in trialist, whose credo is that “if I run several countries. Often, vaccines are Breton, the EU commissioner, started faster than others and they want to shipped abroad again for bottling. Until to visit factories, mapping bottlenecks. 20 S U M M E R 2 0 2 1

ARGUMENTS keep up with me, they all run in my Thierry Breton, There are now 53 manufacturing sites direction.” He sleeps five hours a night the European in Europe, up from barely a dozen in Jan- and says he phones vaccine producers commissioner for the uary. According to Breton, “We should be every day—starting with AstraZeneca’s internal market, puts proud of Europe’s industrial capacity.” CEO, a Frenchman living in Austra- a sticker with the His boss, von der Leyen, said Europe lia. The first thing Breton did after European Union flag has used this crisis to reinvent itself and the AstraZeneca debacle was to cre- on a box containing become stronger, as happened repeat- ate oversight over the entire vaccine Pfizer-BioNTech edly in the past. She called Europe, still production process. All exports, both vaccines against exporting almost half of its vaccine out- of finished vaccines and components, COVID-19 in Puurs, put, “the pharmacy of the world.” had to be vetted by him—not to block Belgium, on Feb. 22. them (he never did) but to get an over- The European Commission sees view: What went where? This is how he by then came straight from factories in the vaccine procurement saga as a managed to avert a second disaster. Europe—mostly BioNTech’s. Vaccines test case. In May, it proposed more EU produced in U.K. factories for use in the protection for other sectors vulnerable This time, it involved Johnson & EU, though, were blocked because of to geopolitical weaponization and to Johnson vaccines. By insisting that the country’s export ban. make the single market more resilient all export requests pass through his to supply restrictions, border closures, desk, Breton discovered that J&J vac- Although national governments or fragmentation in the future. Fierce cines, although produced in Europe (by bear responsibility for the lack of a discussions are expected with some of Janssen, in the Dutch city of Leiden), European industrial policy in the past, Europe’s strongest free market defend- had to be bottled in the United States some put all the blame on Brussels and ers, such as the Netherlands. But even before returning to Europe. But the went out to buy vaccines themselves. The Hague has by now accepted that U.S. Defence Production Act severely Hungary, for example, bought Russian European “strategic autonomy” and restricted exports. The chance J&J vac- vaccines, although they have not been industrialization policy have become cines would make it back to Europe to approved by the European Medicines key concepts to be developed in an be administered was small. Agency yet—and probably will not be increasingly mercantile world. n for some time. Breton spoke with Hun- So the European Commission inter- garian Prime Minister Viktor Orban at CAROLINE DE GRUYTER is a Europe vened. A German bottling plant for length and visited Austrian Chancellor correspondent for the Dutch dengue vaccines was temporarily repur- Sebastian Kurz, too. He asked Kurz what newspaper NRC Handelsblad and posed for J&J. Now the vaccines do not he and Danish Prime Minister Mette a columnist at FOREIGN POLICY. need a detour to the United States any- Frederiksen had done on a highly publi- more. Better even, they are delivered cized “vaccine trip” to Israel. Kurz sup- faster. The commission is also ramp- posedly answered: “Not much.” ing up investments in vaccine develop- ment and production. With German and By now, criticism of EU vaccine pro- European money, the vaccine-maker curement has almost stopped. Vaccina- BioNTech bought another factory in tion rates have accelerated everywhere. Germany, moving parts of the produc- Apart from Hungary and Malta, which tion process back to Europe. are ahead, and Romania, Latvia, and Bulgaria, which lag behind, most mem- In March and April, scorn from all ber states are moving ahead at the same corners of Europe, and beyond, rained speed. This common pace was the idea down on Brussels. Some called it a behind common procurement. “mess,” and others wrote that the “vac- cine disaster is the death rattle of the EU” or thought Commission President Ursula von der Leyen should resign over this “shambles.” The harshest commen- tary came from the U.K., which was, by mid-April, injecting its citizens twice as fast as Europe, proudly opening pubs again. But actually, at least half of the 40 million doses the U.K. had administered 21F O R E I G N P O L I C Y.C O M

A NEWGovernment Unbound UNDISCOVERED SOCIAL THE COUNTRY CONTRACT DYNAMIC DIVERGENCE Boring ’20s EXPERIMENTAL FuzzynomiECONOMY The AGE OF (RE)DISCOVERY Era of Secular Stimulus MANAGED AGE OF DEADLY STRATEGIC DISPARITIES COMPETITION

POST- WW HH AATT ’’ SS FINANCIAL II NN AA NN AA MM EE ?? micsCAPITALISM We asked 13 economists and thinkers to define the post-pandemic era. INFANTILIZED LIBERALISM IN HINDSIGHT, OUR NEW ECONOMIC ERA probably began in 2008, when a handful of bankers—and the policymakers who write the rules—broke the system. Not only did they set off a terrifying financial meltdown, but the resulting deep recession also exposed a crisis in economic policymaking. The emer- gency measures that kept the developed economies going, such as near-zero interest rates and massive asset buying by the central banks, are still with us today and have produced, at best, mediocre results. Governments, it seems, are fumbling in the dark. Since the outbreak of COVID-19, these policies have only ballooned. Rich countries have spent previously unimaginable sums to order vaccines, sup- port workers, and shower corporations with cash as the lockdowns froze the economy. Even as the pandemic (hopefully) winds down, there are few signs that the urge to spend and stimulate is going away. Many cheer this as the return of the robust state. Others fret about fiscal irresponsibility. Decades of economic orthodoxy are being thrown out as the world sorts itself out anew. Governments used to care about debt and central banks about their balance sheets—no longer. The consensus was that endless money printing would unleash galloping inflation—whether that happens remains to be seen. During the depths of last year’s economic deepfreeze, stocks were soaring to new all-time highs. By some measures, U.S. asset valuations are now more extreme than they were before the crash in 1929. So are we in the Roaring ’20s—or on the cusp of another meltdown? Out goes the rulebook for an international liberal order based on free markets and trade, replaced by a new dogma of intervention as the admin- istration of U.S. President Joe Biden and other governments seek to secure jobs, green their economies, and reorganize supply chains whose 23

fragility the pandemic exposed. Nations are put- The ting the brakes on globalization as they realign Experimental their economies in the emerging strategic com- Economy petition between Washington and Beijing. Poor countries—the ones that can’t afford all this BY STEPHANIE KELTON spending—risk falling further behind. PROFESSOR OF ECONOMICS AND PUBLIC The new age is rife with ironies and unintended POLICY AT STONY BROOK UNIVERSITY consequences. Trillions of dollars spent by central banks were supposed to trickle down to compa- WE HAVE ALL BECOME POLICY EXPERIMENTALISTS in the new era ushered nies and their workers. Instead, they fed perhaps in by the 2008-09 global financial crisis and the COVID-19 pandemic. the biggest asset boom in history, making the rich Whereas central banks were once considered uniquely well-equipped even richer and helping to raise inequality in the to restart the economic engine after a recession or tame inflationary United States to levels not seen since the Great pressures in a boom, fiscal policy is increasingly seen as a powerful Depression. The old global order lifted billions and fast-acting way to reverse a downward spiral. When fiscal policy of people out of poverty in the developing world; did too little—after the global financial crisis, for example—central now the walls may be going back up as seamless bankers tried to compensate, experimenting with forward guidance globalization turns into an economic cold war. and large-scale bond-buying programs known as quantitative easing. Green policies designed to save the planet are one While the U.S. Federal Reserve cut interest rates to zero, a handful of of the reasons why demand for steel, coal, and other central banks experimented with negative rates. All of them many other environmentally dubious commodi- hoped that the combination of asset purchases and near-zero inter- ties is soaring as investors anticipate a golden age est rates would induce enough borrowing and spending to restore for industrial manufacturing to produce all those output and employment. The results were underwhelming. wind turbines, new transmission infrastructure, and electric car batteries. Instead of celebrating The policy response improved in the wake of the pandemic. the transition to a digital service economy, we’re Technocrats at the world’s major central banks urged governments talking about supply chains again. to deploy a robust fiscal response. To prevent a repeat of the 2010 government debt crisis that nearly unraveled the euro, the Euro- To help us think about what comes next, pean Central Bank experimented with targeted bond buying. In the FOREIGN POLICY asked 13 prominent economists United States, Congress experimented with pandemic unemploy- and thinkers to both describe the new, post-pan- ment assistance to channel income support to those not eligible for demic economic era and propose the name by regular unemployment compensation. It also experimented with which it should be known. You can read their payroll protection programs and intermittent cash payments that entries on the following pages—from Mohamed A. put money directly into the hands of most Americans. Some law- El-Erian’s Government Unbound to Jayati Ghosh’s makers wanted to experiment with large recurring payments that Age of Deadly Disparities. would go to every person in the United States until the crisis was over. Some wanted to experiment with triggers that would auto- To us, the epithet for this moment that stuck matically extend unemployment benefits instead of waiting for was Fuzzynomics. Coined for this issue of our an act of Congress each time those benefits ran out. For its part, magazine by the investor, author, and FP advi- the Fed is experimenting with a new policy framework known as sor Antoine van Agtmael (who in the 1980s average inflation targeting, a shift that has some economists wor- invented the term “emerging markets”), Fuzzy- ried that the central bank could fall behind the curve if inflation nomics encapsulates a world where the old rules runs hot for an extended period of time. no longer apply and the new ones aren’t yet clear. Where governments and central banks—at least in That’s not my baseline prediction, but one thing seems clear: rich countries—can throw around money by the Should inflation break out, policymakers won’t put all their eggs trillions and make up the rules as they go along. in the rate-hike basket. They will experiment with new ways to Where things feel artificial, inflated, uncertain— contain the pressures driving up prices. And should the recovery and where the experiment could go either won- stall or fail to produce enough jobs for all, we might even see some derfully right or terribly wrong. governments around the world try yet other experiments—such as a public job guarantee. Perhaps Fuzzynomics will stick. Even if it doesn’t, we’re convinced that these 13 thought leaders have, in aggregate, sketched the contours of our age. But read on, and decide for yourself. —Stefan Theil, deputy editor 24 S U M M E R 2 0 2 1 Previous spread illustration by SEAN FREEMAN and EVE STEBEN | Portraits by ORIANA FENWICK

Government Unbound BY MOHAMED A. EL-ERIAN CHIEF ECONOMIC ADVISOR AT ALLIANZ AND PRESIDENT OF QUEENS’ COLLEGE AT THE UNIVERSITY OF CAMBRIDGE COVID-19 HAS TURBOCHARGED an economic, social, and political phenom- While all this was notable pre-pandemic, it enon that was partly visible going into the pandemic but, until now, pales in comparison with today’s realities on the lacked sufficient roots and momentum. Current events and history ground—as well as what lies ahead. suggest that this phenomenon will be with us for a while, can deliver important gains for society, but also risks overshooting. COVID-19 also accelerated the process of corpo- rate concentration and power, particularly in Big After almost four decades of deregulation and liberalization, gov- Tech. With pressure fueled by many increasingly ernments in many advanced countries have reversed course and are visible mishaps in the private sector—involving reinserting themselves into their citizens’ daily lives. The catalyst is a national security, data leaks, fake news, platform pandemic that has inflicted tremendous human suffering, dislocated surveillance, behavioral manipulation, and other lives, worsened the inequality trifecta (of wealth, income, and, espe- issues—governments are also taking a wider and cially, opportunity), exploited economic and social vulnerabilities, more serious look at enlarging and modernizing exposed glaring fragilities in our systems and institutions, and simul- their regulatory and tax purview over the economy. taneously eroded social cohesion and individual resilience. Judging from history, this swing of the pendu- Most people can agree that governments had no choice but to step lum will likely be long in duration and big in scope. in and stop a calamity from becoming a multigenerational disaster. If the return of government is well designed, it Setting aside all known limits on government budgets, states provided offers us the opportunity to address long-stand- unprecedented direct income support to citizens while also protecting ing challenges, implement midcourse corrections many businesses from bankruptcies. They funded vaccine innovation to avoid future ones, adjust to new realities, and and deployment on a previously unknown scale. Some are pressing emerge stronger and wiser from a terrible pan- forward with massive infrastructure programs. And the list goes on. demic. But this will need a degree of self-discipline that governments—and even central banks—have While the scale and scope of these interventions have been unexpected, often struggled to impose in the past: that of avoid- historic, and truly stunning, the direction of travel is not new. Going into ing market failures being compounded by fail- the pandemic, the public sector had already been expanding and inter- ures of public sector institutions and governance. vening after too many years of low and insufficiently inclusive growth. Already there are concerns about civil liberties, resource misallocations, and inflation. Responding to intense feelings of alienation and marginalization in parts of society, both sides of the political spectrum were busy crafting Coming out of the 2008 global financial crisis, new approaches. This was seen not just as an economic and social neces- many policymakers declared “mission accom- sity but as politically attractive as well. Reacting to widespread grass- plished” in winning the war against what could roots pressure to address massive failures in the provision of critical have been a global, multiyear depression. In their public goods—such as protecting the planet, anchoring corporate social haste, they inadvertently lost sight of the impor- responsibility, and enhancing governance—governments got interested tance of also securing a lasting, durable, and com- in launching multiyear responses that engaged many segments of society. prehensive economic peace. Meanwhile, led by the U.S. Federal Reserve and the European Cen- Today, vaccines and continued vigilance against tral Bank—the world’s two most systemically important monetary infections and new virus variants offer us encour- institutions with powerful printing presses in their basements and aging prospects to win this new war—this time, an appetite to run those presses at turbo speed—central banks had against a pandemic. Whether we can also win the been maintaining and intensifying their post-2008 market interven- peace will depend, to a large extent, on how gov- tions in ways that were previously unthinkable. They, too, have started ernments navigate their much greater involve- being pulled into supporting a broader set of public goods, including ment in our lives. climate policy and combating inequality. 25F O R E I G N P O L I C Y.C O M

Post- A New Financial Social Capitalism Contract BY DAMBISA MOYO BY MARIANA MAZZUCATO ECONOMIST AND AUTHOR OF PROFESSOR IN THE ECONOMICS HOW BOARDS WORK AND EDGE OF CHAOS OF INNOVATION AND PUBLIC VALUE AT UNIVERSITY COLLEGE LONDON AN EMERGING ECONOMIC CULTURE will reframe how global corporations trade, invest, and behave. BUSINESS IS TALKING ABOUT stakeholder capitalism. Governments are talking about the need to con- As we move from the preeminence of financial front challenges such as climate change. The new shareholders to a broader stakeholder capitalism, cor- era requires walking the talk—and putting com- porations are switching to new metrics to assess suc- mon purpose at the center of how the public and cess beyond profits. The new environmental, social, private sectors interact. For too long, the relation- and governance (ESG) agenda is complex, involving a ship between government and corporations has long list of issues for companies to consider—includ- been parasitic, not symbiotic. In areas like health, ing climate change, worker empowerment, gender we have governments putting billions of dollars and racial diversity, pay equity, human rights, the into drug innovation, yet taxpayers often cannot provenance of goods and services, and, in the United afford them. Government invented the internet but States, even voter rights. Policymakers, companies, didn’t bother making sure that technology corpo- and financial institutions are under intense pressure rations wouldn’t abuse our privacy. A new social on these matters from vocal ESG activists. contract is required to make sure that stakeholder value and policies defined by the challenges they However, this new cultural frontier entails consid- must solve go to the center of how business and erable trade-offs for leaders to navigate. For example, the state interact—that is, in how they co-create calls to defund energy companies to combat climate value. This should affect how intellectual property change ignore the fact that such an approach would rights are governed: to foster collective intelligence risk fuel shortages and price spikes, adding to grind- rather than rent-seeking. It should influence how ing poverty among the 1.5 billion people who still lack internet algorithms are designed, which conditions access to affordable and reliable energy. The shift to on workers’ rights or emissions are attached to social goals has Western workers advocating for a bet- government subsidies and bailouts, and especially ter work-life balance, notably in the technology sec- how profits are shared among different actors in tor. But their Chinese competitors are still working the economy. Building back better, as U.S. Presi- 9-9-6: from 9 a.m. to 9 p.m., six days a week. Politi- dent Joe Biden says he wants to do, cannot hap- cal and business leaders must weigh up the risks of pen without this. Chinese practices being rejected by employees and customers in the West and vice versa. Left unchecked, an aggressive ESG agenda could do more harm than good. In the new ESG era, lead- ers must approach the changing global landscape in a way that is transparent, consistent, flexible, inno- vative, sustainable, and sensitive to cultural differ- ences. They must focus not only on risk mitigation but also on opportunities to create the upside lever- age needed to support human progress in the future. Dambisa Moyo sits on the boards of 3M and Chevron. 26 S U M M E R 2 0 2 1

Undiscovered Age of Deadly Country Disparities BY IAN BREMMER BY JAYATI GHOSH PRESIDENT OF THE EURASIA GROUP PROFESSOR OF ECONOMICS AT THE UNIVERSITY OF MASSACHUSETTS AMHERST THE ECONOMIC SHOCKWAVES created by the pandemic were extraordinary in many respects. As impres- GLOBAL INEQUALITIES were already extreme before the COVID-19 sive as the recovery has been in much of the (vacci- pandemic; now, even greater disparities are actually killing peo- nated) world, it is staggeringly uneven both within ple. Opportunistic vaccine grabs by rich countries and knowledge and across countries. Developing countries, in par- colonialism through the control of intellectual property rights ticular, risk being left behind—with unsustainable mean the disease will continue to destroy lives and economies. debt levels, fragmented labor markets, polarized People in rich countries get big government with expanded ser- politics, and weakened governments at a time vices, income support, and more public spending, as they should. when the world has virtually no global leadership. But in poor countries, people face cuts in government expendi- ture, fiscal austerity, and the brutal so-called discipline imposed How best to grapple with the uncertainty of by global finance. The resulting job losses, worsening livelihoods, this new era? Firms will be more cautious in how hunger, and reduced access to crucial public services could lead they construct their international supply chains, to a lost generation across much of the developing world. and governments will be more involved in setting parameters for the economy. U.S. Federal Reserve Infantilized Chair Jerome Powell once described the task of Liberalism central banks as wandering in a dark room and feeling their way—just as Chinese leader Deng BY DEIRDRE NANSEN MCCLOSKEY Xiaoping once described his country’s never- before-attempted path to economic reform as DISTINGUISHED PROFESSOR “crossing the river by feeling the stones.” But this EMERITA AT THE UNIVERSITY OF requires steady leadership, consistent execution, ILLINOIS AT CHICAGO AND AUTHOR and the absence of politicization. That’s not some- OF WHY LIBERALISM WORKS thing the world can count on when the United States is both the West’s most powerful country—and the AFTER COVID-19, cries resound for the parent state to come to the most politically divided and dysfunctional. aid of its adult children with spending and regulation galore. In the United States, liberalism has long meant such a tentative We are entering an undiscovered economic land- socialism. Yet the true liberalism of Adam Smith, Mary Woll- scape. Let us heed William Shakespeare’s warning in stonecraft, and John Stuart Mill was better. It might be called Hamlet and not be cowards as we face the unknown: “adultism,” floating above the statist spectrum of left and right, which both treat adults as sad or bad children. Liberalism accords The undiscovered country from whose bourn them dignity, the permission to be without a master, whether No traveler returns, puzzles the will aristocrat or bureaucrat. And makes us rather bear those ills we have Than fly to others that we know not of? True liberalism in the past two centuries has made much of the world rich and dignified. It liberated poor men, then slaves, women, colonized peoples, and LGBT people and allowed them to have a go. And go they did, innovating at a pace that has yielded a 1,000 percent increase in the world’s real income per person over the misery of 1800 and much more in some coun- tries. Statism—reverting to the pre-liberal idea that people need parental masters—kills the innovation. Let’s not. 27F O R E I G N P O L I C Y.C O M

Era of Secular Between 2008 and 2019, the central banks of Stimulus the so-called G-4 (the United States, the European Union, Britain, and Japan) purchased more than BY RUCHIR SHARMA $8 trillion in financial assets, expanding their total holdings to nearly $13 trillion. They bought more HEAD OF EMERGING MARKETS during that period than they had in all their pre- AND CHIEF GLOBAL STRATEGIST vious history. What’s more, most of the purchases AT MORGAN STANLEY INVESTMENT didn’t come until several years after the start of MANAGEMENT AND AUTHOR OF THE the recovery in 2009. 10 RULES OF SUCCESSFUL NATIONS All this money flowing out of the central banks THE TRILLIONS OF DOLLARS SPENT to ease the economic pain of the pan- was not doing much to stimulate the economy. demic has commentators marveling that “we are all Keynesians now.” Former U.S. Treasury Secretary Lawrence Sum- But the current spending is a gross distortion of what that famous pro- mers revived the phrase “secular stagnation” to ponent of government stimulus, the economist John Maynard Keynes, describe persistently disappointing growth during recommended during the Great Depression nearly a century ago. this period. But with rates so low and borrowing so easy, it became increasingly popular to argue The prevailing view before Keynes was that the government should that deficits don’t matter. let nature run its course. That approach had worked over the preceding century, and then-U.S. Treasury Secretary Andrew Mellon advised Pres- The new view, widely held in both U.S. politi- ident Herbert Hoover that if he let the Depression “liquidate” the weak cal parties, was that the government could keep links in the economy, it would emerge from the crisis stronger. The depth borrowing to stimulate the economy—so long as of the resulting pain discredited the old Darwinian approach forever. inflation was contained and growth subpar. Under former President Donald Trump, Republicans It also opened the door to Keynes, who proposed instead that the gov- pushed out a massive stimulus in the form of tax ernment should borrow and spend to ease the pain of crises and stimu- cuts eight years after the 2009 recession was over, late recovery. His approach would guide the U.S. response to recessions creating the largest deficit ever seen in the later through the 1960s. We were all true Keynesians then. stages of an economic expansion. The old resistance to activist government eroded further in the early Now, there is a widespread belief that President 1970s with the collapse of the Bretton Woods monetary system. Govern- Joe Biden is ending an era of small government. ments stopped backing their currencies with gold, making it easier to But government was growing bigger and more borrow and spend. Before 1970, the governments of developed countries active well before the pandemic, which greatly rarely ran large deficits outside of major wars; since then, they have run accelerated the trend. The G-4 governments have substantial deficits virtually every year, whether times were hard or not. broken post-World War II records on fiscal stimu- lus in every big recession since 1980, reaching 2.6 A new era had begun, marked by an increasingly interventionist percent of GDP in 2001, 5.3 percent in 2008, and government. Leaving the spending spigots open was expected to trig- 12.7 percent last year. ger inflation, which came on cue in the late 1970s. Politicians left the problem to central bankers, who raised interest rates into the double The G-4 central banks keep breaking records as digits, triggering severe recessions but whipping inflation. Inflation fell well: Monetary stimulus reached around 5 percent to around 2 percent in the developed economies and stayed there, con- of their combined GDP in 2001, 7 percent in 2008, tained by intensified global competition and technological advances. and 19 percent in 2020. Last year, they bought another $8 trillion-plus in assets, matching in As long as consumer price inflation was low, central banks and govern- 12 months the record-smashing purchases of the ments figured they could do whatever it took to cushion and even pre- prior 11 years. This year, central banks are con- empt downturns. The rate cut by the U.S. Federal Reserve following the tinuing to buy billions of dollars’ worth of assets stock market crash of late 1987 and the bailout of a private hedge fund in each month, including mortgage-backed securi- 1998 were prime examples of preemptive intervention. Corporate bailouts ties, apparently unable to stop themselves even would grow increasingly sweeping and generous in subsequent crises. amid a global boom in housing and other assets. The next big shift came in 2008. In addition to buying government What we have now is not Keynesian stimulus to bonds, central banks began using a rescue maneuver pioneered by ease recessions. It is the era of secular stimulus, Japan, directly buying commercial paper and other financial assets with economies hooked on the increasingly unsat- as another way to pump money into the economy. isfying drip feed of constant government support. 28 S U M M E R 2 0 2 1

Dynamic Divergence BY VERA SONGWE sures in advanced economies will fur- ther delay the growth of emerging and EXECUTIVE SECRETARY OF THE UNITED frontier economies—not least by raising NATIONS ECONOMIC COMMISSION FOR AFRICA the prices of crucial imports, especially food and fuel. The United States and China are drift- SLOW AND STEADY EVOLUTION characterized the period before ing apart as they extract their supply chains from COVID-19. The pandemic, however, hit with a force that each other’s control. Europe is still strained by Brexit, while accelerated change all across our economic, social, and polit- Latin America is seeing another resurgence of anti-market ical structures, leading to a dynamic divergence within and forces, with Peru electing a new populist and self-styled among the world’s economies. This divergence is spilling over anti-market leader. Vaccine nationalism has left Africa vul- into all segments of society, resulting in greater and deeper nerable and late in the race for economic recovery, adding inequality, widespread injustice, and a growing susceptibility injustice to inequality and exacerbating the divergence in to disinformation. Alliances are changing, growth poles are economic fortunes—even if the African Union has taken its diverging, and innovation is accelerating—for better or worse. destiny into its own hands by creating the COVID-19 African Vaccine Acquisition Task Team. Finally, the resistance to sci- The pandemic created the world’s first $200 billionaire, ence and evidence-based policies, especially on the climate while more people in the advanced economies fell deeper front, is accelerating the speed and raising the cost of this into poverty. Inequality was also manifest at the global level, divergence. For this dynamic divergence to converge on a where developing nations lacked the financial liquidity to more harmonious steady state, it would require a renewed stave off the crisis while advanced countries injected tril- global multilateral system with more representative and lions of dollars into their economies, discarding all caution inclusive institutions better suited for their purpose. about deficits and debt. The resulting inflationary pres- Managed state’s dominance as the enforcer of national competitive Strategic advantage, not just in China but also in the United States and Competition elsewhere. While the efficiency costs will be high, this new period of “state-onomics” will continue until the outcome BY KEVIN RUDD of the race for global supremacy is resolved. PRESIDENT AND CEO OF THE The 2020s will therefore be a decade of living dangerously. ASIA SOCIETY AND FORMER To mitigate the risks—of crisis, conflict, and war—Washing- AUSTRALIAN PRIME MINISTER ton and Beijing will likely find it in their interest to agree on some basic guardrails to contain their growing strategic com- THE MAIN DRIVER OF THIS NEW ERA is no longer economic glo- petition. The coming era will, therefore, be one of managed balization but, increasingly, great-power competition. This strategic competition: Great-power rivalry will intensify, competition—primarily between China and the United while red lines in national security are likely to be observed. States—will dominate nearly every policy domain: trade Competition will be intense across the board, while defined and investment, financial markets, information technol- areas of collaboration, such as on climate policy, will still be ogy, biotechnology, foreign policy, military power, and ide- possible. And within this race: May the best system win. The ology. It will also dominate nearly every region of the globe alternative to managed strategic competition is an unman- as it draws countries, corporations, and institutions into an aged one, which both great powers are likely to find too dan- increasingly binary race. gerous and destabilizing to sustain over the long term. The state will truly be back as a regulator, driver, and active par- For these reasons, we are also seeing the return of the ticipant in the economy, driven ultimately by the overriding dynamics of this new era of managed strategic competition. 29F O R E I G N P O L I C Y.C O M

The Boring ’20s BY NIALL FERGUSON SENIOR FELLOW AT STANFORD UNIVERSITY’S HOOVER INSTITUTION AND AUTHOR OF DOOM: THE POLITICS OF CATASTROPHE IN HIS BOOK APOLLO’S ARROW, Nicholas Christakis asks if, in the too high, taxes too high, immigration too high, wake of the COVID-19 pandemic, we might find ourselves, crime too high. like our grandparents and great-grandparents after the 1918- 19 influenza pandemic, in the Roaring ’20s: Economists such as former U.S. Treasury Secre- tary Lawrence Summers worry about rising, if not … the increased religiosity and reflection of the immediate roaring, inflation because of the outsized U.S. fis- and intermediate pandemic periods could give way to cal response relative to only a modest output gap increased expressions of risk-taking, intemperance, or joie and a rapid vaccine-driven recovery. The reality, de vivre in the post-pandemic period. The great appeal of I’m afraid, could be much less interesting. Absent cities will be apparent once again. People will relentlessly a major geopolitical shock like a war, there is no seek opportunities for social mixing on a larger scale in guarantee that higher inflation will persist. Per- sporting events, concerts, and political rallies. And after haps, as happened in the wake of the 2008 finan- a serious epidemic, people often feel not only a renewed cial crisis, easy money will merely cause asset sense of purpose but a renewed sense of possibility. The bubbles, not consumer price inflation. 1920s brought the widespread use of the radio, jazz, the Harlem Renaissance, and women’s suffrage. The 1920s are also remembered by historians as a time when a first attempt to build a liberal inter- To say the least, this is a rather flattering sketch of the national order—the League of Nations—failed to 1920s—a decade as notable in the United States for its vio- take root, mainly because the European powers lent criminals as for its flappers and elsewhere for hyperin- could not sustain the various peace treaties signed flation, hunger, Bolshevism, and fascism. In any case, there after World War I without U.S. commitment. The are good reasons to doubt that the 2020s will be roaring in 2020s may be a little like that, though it is a pan- any sense at all, good or bad. Rather, the remainder of the demic and not a war that the world is recovering decade may prove distinctly boring. from. Unlike its predecessor, and unlike the U.S. Congress in the 1920s, the Biden administration For one thing, the tedious habits most of us were forced to believes in the liberal international order and the adopt during the pandemic may stay with us longer than we institutions and alliances that undergird it. At the think. Recurrent outbreaks and new variants may necessi- same time, the new administration is in some ways tate our getting regular booster shots of vaccine, may force being tougher on China than its predecessor— us to keep those irksome masks in our pockets and brief- though with an approach that is fundamentally cases, and may oblige us to keep filling in online forms to different from former President Donald Trump’s enable us to get into offices and onto planes. Equally bor- indiscriminate protectionism. ing will be the way the world will revert to fighting its old battles the minute it has brought COVID-19 under control. Maybe this could all escalate nastily over Tai- Israelis and Palestinians have already resumed their old wan. But it seems just as likely that an initial period fight. Europeans will get back to arguing about immigra- of diplomatic hardball will be followed swiftly by tion. And it will not take long for Republican criticisms of a U.S.-Chinese détente—in which case our decade a Democratic administration to revert to the mean: deficits might start to feel more like the boring ’70s than the Roaring ’20s. 30 S U M M E R 2 0 2 1

Fuzzynomics the rules of the bygone American Century. Its military, economic, and soft power are BY ANTOINE VAN AGTMAEL shrinking below the threshold required for dominance. U.S. technological superiority has AUTHOR OF THE EMERGING not yet gone away but is under clear threat from MARKETS CENTURY, CO-AUTHOR OF China in crucial areas, such as artificial intelli- THE SMARTEST PLACES ON EARTH, gence and electric cars, while Russia has become AND SENIO R ADVI S OR AT F P AN ALY TI CS an alternative vaccine-maker. The U.S. dollar’s role as the preeminent reserve currency—always a symbol of super- LONG-HELD BELIEFS IN DEMOCRACY and market-based solutions power status—is running out of shelf life. Many Americans are under attack from both the right and the left; we are enter- may still believe in their country’s exceptionalism, but the ing an age of transition. At the same time, the torch of global rest of the world no longer does. preeminence is being passed to China, which is growing Fuzzynomics is today’s post-pandemic recipe for new and impatient in reclaiming its pre-Industrial Revolution role as old problems. Above all, it means spending your way out of the dominant economic power. Classic military doctrine and trouble. It means throwing out the rulebook in the uncer- technology may soon prove flawed—if not futile—in a crisis tain hope that it will work—in the same way that pumping over Taiwan that could challenge the United States’ super- up the global economy using monetary policy worked after power status. Political brinkmanship will be put to the test. the global financial crisis or Keynesian fiscal spending saved capitalism after the Great Depression. Western democracies Three huge challenges are simultaneously overwhelm- seem to have little choice other than to keep printing and ing traditional market-based solutions: resistance to social spending money as they fight a polarizing battle to keep in change from the right, the backlash against economic and check a growing part of the electorate on the right and a left racial inequality from the left, and climate change. that has lost faith or simply refuses to face reality. Internationally, the center of gravity’s shift from West to East doesn’t give the United States much room to impose Age of where the pandemic hit particularly hard. (Re)Discovery These millions must discover new career paths as job openings surge but with no BY BETSEY STEVENSON direct fit to what they were doing before the pandemic. Similarly, others are looking PROFESSOR OF PUBLIC to discover a new career path or approach POLICY AND ECONOMICS to work that is a better match for their new- AT THE UNIVERSITY OF MICHIGAN found priorities. Americans accumulated tril- lions of dollars in savings during the lockdowns PEOPLE ARE EMERGING from a year of loss, isolation, and change. and will rediscover the joy of spending, particularly on They will need to rekindle friendships and acquaintances experiences. But perhaps they will also discover that their and learn to be and feel safe in a crowd. Many will rediscover tastes have changed. The pandemic changed technology the thrill of a crowded concert or sporting event, while oth- and our relationship with it, and we will all be discover- ers will discover that new passions have replaced the old. ing how to use the advantages of technology in a world in People are rediscovering their work commute, and many which face-to-face contact is safe again. Enough time has workers and employers are busy discovering a new way of passed that COVID-19 was not just a pause; we will not sim- working—one that seeks to find a balance between the ben- ply return to pre-pandemic life. We have a period of great efits of working from home and its costs. Millions of peo- adjustment ahead as we discover what comes back into our ple have lost their jobs in industries that are contracting or lives and what doesn’t, as well as what grows anew. n 31F O R E I G N P O L I C Y.C O M

HOW BIDENOMICS CAME TO BE A supposedly transitional president wants to turn 40 years of trickle-down thinking on its head. BY MICHAEL HIRSH ONLY A YEAR AGO, JOE BIDEN was seen as an aging if likable estab- lishment figure whose main claim to the U.S. presidency was that he wasn’t Donald Trump. Biden himself suggested he might be a “transitional president” rather than a transfor- mational one: Elect me, get rid of the widely hated Trump, and then we’ll figure out how to fix our country. Or perhaps my successor will. But that isn’t the Biden who has shown up this year—at all. In a May 27 speech at Cuyahoga Community College in Cleve- land outlining his $6 trillion budget proposal, Biden talked about “creating a new paradigm”: resurrecting America’s belea- guered underclass with a combination of major education, health care, and tax proposals and a new brand of industrial policy and economic nationalism that will, eventually, pro- pel the United States past China and other rising competitors. If he is able to follow through on this plan—by no means a given—the president will cast onto history’s ash heap the ruling doctrine of the past 40 years: Reaganomics, or “trickle- down economics,” as Biden calls it. Far from acting as a place- holder in U.S. presidential history, Biden is setting his sights 32

Illustration by MIKE MCQUADE

high, as revealed by the name he has given his program: the 50 percent in 1950 to more than 80 percent today, and at the “new bargain,” consciously echoing Franklin D. Roosevelt’s same time taxes on corporations fell from 30 percent of GDP New Deal. Or perhaps we should call it Bidenomics. to less than 10 percent now—making America’s rich much richer and the working class poor and desperate. Beyond THE TRUTH IS, BIDEN ALWAYS had big plans of his own. By the that, with government starved of funds, public research accounts of some of his closest advisors, the new president and development fell from 2 percent in the 1960s to a mea- has long been a pent-up populist who spent his eight years ger 0.7 percent today—making the United States one of the as vice president—on top of 30 years of vying for the White few advanced nations where public investment actually House—pushing hard for a major government expansion of dropped in the past quarter century. Under Biden’s proposal, support for America’s long-suffering working class. anyone earning more than $400,000 a year will see their taxes increase to pay for his grand plans, while those below One longtime Biden aide, the economist Jared Bernstein, that threshold will not. “This is about rebalancing the bur- confirms that none of this thinking is new for the 78-year- den between labor and [corporate] profits,” said the senior old president: Biden has long believed U.S. global leadership administration official involved with formulating the plans. is entirely dependent on U.S. economic leadership. He also believes its edge has been lost through decades of obsessive In response, Biden has proposed a revolutionary new global deficit reduction and government paralysis, leading to rapidly corporate income tax, and in his first speech to Congress declining public investment and an undereducated middle on April 28, Biden trotted out his third $2 trillion plan in a class that is desperate for affordable housing, decent public hundred days and boasted that his infrastructure spending transit, and adequate child and elder care. scheme would be “the largest jobs plan since World War II.” In all, Biden is proposing about $7.5 trillion in new spend- “He’s enacting a set of core principles that he’s carried with ing, nearly double what the United States spent in inflation- him forever, at a moment that invites precisely that kind adjusted dollars to win World War II. His budget plan is of action,” said Bernstein, who currently serves on Biden’s heavily focused on a flood of new government-led R&D and Council of Economic Advisers. “What he’s talking about is infrastructure spending and assistance to lower-income making necessary investments so we don’t just show up as Americans. That includes massive subsidies for free commu- good GDP growth and a stock market but that we are globally nity college and health and child care, as well as additional competitive to the point where the prosperity we’re gener- federal funding programs for schools with large concentra- ating is realized not only by the top 1 or 2 percent but all the tions of less advantaged students. way down to the lowest-income communities.” Biden’s ambitious plans for reorienting the U.S. economy That means correcting inequities that have festered since away from the billionaires and back toward the middle class the Reagan era—and frankly embracing a national industrial could also shift the ideological axis globally. For decades, the policy for the first time in decades. “He is saying we need a rest of the planet has had to endure stern lectures from the different social contract,” said a senior administration offi- leader of the free world about the virtues of letting markets cial who is directly involved with developing the policy. “The rip and shoving government out of the way. Washington’s private sector, by itself, isn’t going to solve the biggest chal- tireless advice was simple. Privatization, free trade, and lenges we face—extreme inequality and social disparities, market discipline would lead to a more prosperous, global- the climate crisis, people dropping out of the labor force, the ized world. American counsel was so cut and dried it even narrowing of our technological edge.” assumed a stuffy name: the Washington Consensus. Much of this government-directed, spread-the-wealth As senator and then vice president, Biden mostly went thinking comes out of Biden’s more than three decades on along—often reluctantly, his aides say—with the Washington Capitol Hill. Jim Greene, a longtime Senate advisor to Biden, Consensus crowd, centrist Democrats who acted almost like said the president’s thinking goes back to the opening of neo-Reaganites in their distaste for too much government China in the 1980s and the fall of the Berlin Wall, which thrust in the wake of America’s Cold War victory and who tended millions of new low-wage workers into the global market. to discredit centralized economies. Both his Democratic “He knew that would put U.S. labor on the back foot,” Greene said. Biden watched as his conservative Senate colleagues The president’s thinking did little to invest in retraining and upgrading America’s goes back to the opening of workforce, and while productivity and GDP surged, middle- China in the 1980s and the class incomes did not. fall of the Berlin Wall. Not only that, but the declining middle class took on a greater burden of taxes during the decades after Ronald Rea- gan. According to government data, changes in U.S. tax laws saw labor’s proportion of taxed federal revenue leap from 34 S U M M E R 2 0 2 1

“You know what the basis of foreign policy is in our stature in the world? One thing: our economic prowess,” Biden said. “We must be No. 1 in the world to lead the world in the 21st century. It’s a simple proposition.” So far, despite facing fierce resistance on Capitol Hill to some of his spending and tax plans, Bidenomics may be working: In early June, the World Bank nearly doubled its January projections of U.S. GDP growth from 3.5 percent to 6.8 percent, the fastest pace since 1984. BETTMANN ARCHIVES/GETTY IMAGES In his first major televised address to the STILL, BIDEN’S BIG CORRECTION—especially his inward, intensely nation on Feb. 5, 1981, then-U.S. President Ronald America-first focus—has some globalists concerned. For one, the protectionist themes that Biden sometimes sounds Reagan uses a chart to show how government tend to undercut good economics. “There is simply no rea- spending is rising faster than revenue and how son why the blades for wind turbines can’t be built in Pitts- burgh instead of Beijing. No reason. None,” Biden declared he proposes to change that. on April 28. Forget the suddenly antiquated idea that other nations might build such things more cheaply or better, as predecessors, Bill Clinton and Barack Obama, also bowed to U.S. economists once argued in favor of promoting globaliza- the popular demand for smaller government, lower corpo- tion, open markets, and national comparative advantage. In rate taxes, and tighter budgets, with Obama once lament- May, Biden again declared that “100 percent of [government] ing that it was hard “to change the narrative after 30 years.” investment is going to be guided by one principle: Make it in America. Make it in America.” Now other nations are watching in amazement as blue-collar Joe Biden from hardscrabble Scranton, Pennsylvania—as he Perhaps the most worrisome issue is if the United States likes to portray himself—throws it all out the window in favor doesn’t stand up for globalization and open markets, who of a new kind of quasi-protectionism and spending plans so will? Many other countries never much liked all that free ambitious they have quieted even the petulant progressives trade anyway. China is already warning of a “vicious life- in his own party. In only a few short months, the Democratic or-death struggle that could turn the world into a battle- Party has learned to stop worrying and love big government ground,” as the Global Times, an official Beijing mouthpiece, again, enthusiastically endorsing Biden’s new budget. put it in February. And there are indications that the Euro- pean Union is preparing to respond to Biden’s “Buy Amer- And that’s just for starters: The new president is also embrac- ican” plan with a “Buy European” riposte. EU leaders are ing a new economic nationalism unheard of since the grimmest also increasingly irritated by Biden’s apparent willingness days of the Cold War—only this time, the bogeyman is China to keep in place Trump’s steel and aluminum tariffs (which rather than the Soviet Union. Whether the issue is COVID-19 are popular among steelworkers’ unions, whose support or climate change, the United States will lead the way and “win Biden cherishes). the 21st century” in the global competition with China, Biden said in his first address to Congress. In his May budget speech, “In Europe, there could be a doubling down on strategic Biden elaborated on this point, saying America’s global lead- autonomy,” said Erik Brattberg of the Carnegie Endowment ership role depends entirely on the country’s economic resur- for International Peace. “The big question mark to me is not gence. That, in turn, depends on major government investment whether we’re going to see more industrial policy—that is a in every kind of infrastructure, from interstate highways to certainty. It’s whether the allied states can work together at all.” internet connectivity to new climate-saving (and job-creat- ing) technology—“like when we brought electricity to every Ultimately, Bidenomics could set the stage—in a Smoot- household in the country in the 1930s or we connected the Hawley sort of way—for protectionist fervor to spread around country through the Interstate Highway System in the ’50s.” the globe. Critics have belittled Biden’s approach as Trump’s America First agenda but with a smile—Trumpism without Trump. Certainly the nationalism and anti-China rhetoric sound familiar—and are just as dangerous to global prosper- ity, some critics say. “A strong U.S. economy should not be a threat to China, just as Chinese economic growth need not have been damaging to America,” said Dani Rodrik, a Harvard economist who is president-elect of the International Economic Association and has been a longtime skeptic of globalization. “Biden’s 35F O R E I G N P O L I C Y.C O M

framing is damaging insofar as it turns good economics at at Delaware Tech and other community colleges. As Biden home into an instrument of aggressive, zero-sum foreign himself declared in his Cuyahoga Community College policy directed at China. Can we blame China if it tightens speech: “Jill has a constant refrain: ‘Joey, any nation that restrictions on U.S. corporations as a defensive measure out-educates us is going to outcompete us.’ It’s a simple against the Biden plan?” proposition.” The senior administration official disputed that Biden is a “The Biden administration has launched a bold and protectionist at all, though conceded that “there is a differ- long-overdue economic transformation,” Rodrik said. “But ence between the way we’re thinking about trade compared those who are looking for a new economic paradigm should to recent administrations.” be careful what they are wishing for.” “The reality is that not all trade is good trade,” the official INDEED, IT’S FAIR TO ASK: How much of Biden’s response is really said, alluding to the state subsidies that create unfair trade new? In many ways, it has something of a musty odor about from nations such as China. “We want to create a global trad- it—as if America’s oldest inaugurated president has been ing environment in which we’re competing on our ability to rummaging through an ideological mothball closet from attract and develop the best talent, commercialize the best the 1970s. For the most part, the ideas he has pulled out are ideas, and ultimately create and innovate for the benefit of Democrats’ old answers to the excesses of free market fervor. the U.S. and the world. … That is not protectionist.” Biden and other populists have mainly been leading global opinion back to a place where globalization was about 40 Other economists agree that Biden is not exactly embrac- or 50 years ago—an infant and mistrusted phenomenon ing Trumpian protectionism, even as he puts government in best kept in check. We may, in other words, be headed back the lead. “I don’t see him arguing that we shouldn’t import to some version of the dreaded 1970s, minus the runaway generally from other countries (as Trump did),” said Wendy inflation (though it seems to be edging up) and the bad hair. Edelberg, a former chief economist at the Congressional Back then, the problem was “stagflation.” Now, it’s “secular Budget Office. “I see him saying that there is technology and stagnation.” In both cases, growth is lagging. capabilities that we want to make sure we develop here. That is more industrial policy than protectionism.” The biggest difference: China has replaced the Soviet Union as the mechanical rabbit to America’s resurgent David Autor, a leading trade economist at the Massachu- greyhound economy. setts Institute of Technology, said Biden may be avoiding the worst protectionist mistakes of his predecessor: “The Trump If the present has thus become the past, then conventional administration wanted to compete with China not by investing wisdom is settling into a kind of post-Trump intellectual in the U.S. but by taxing the Chinese. This is false economics.” equilibrium, a “new-old world order.” This was the real sub- text to Biden’s speech to Congress, in which he reembraced Rather than new tariffs, Biden likes to speak of the gov- an idea that many economists had once declared to be eco- ernment’s greatest investments—without the usual caveats nomically and geopolitically dubious: that nations actually about the superiority of private investment: the transconti- compete with each other for markets the way corporations nental railroad and interstate highways and victory in the do. By restoring the idea of national competition, Biden is 1960s space race. “Throughout our history, if you think about seeking to restore the necessity of government. it, public investment and infrastructure has literally trans- formed America,” the president said in his April 28 speech. Whether or not the president’s grand plans are really new— Biden also touted the Defense Advanced Research Projects or economically and geopolitically sound—the Biden reck- Agency, which “led to everything from the discovery of the oning has been a long time coming. His aides say Biden internet to GPS and so much more.” He now wants to apply was only waiting for his moment to completely redirect the the same government-in-the-lead idea to beating back dis- U.S. economy—and the disastrous Trump presidency and eases like COVID-19. COVID-19 pandemic provided it. Biden’s American Families Plan for education, meanwhile, “We’re at an inflection point in American history. It hap- goes beyond government-funded free high school and adds pens every several generations,” Biden said in his speech two additional years of preschool along with two free years of community college. When Sen. Bernie Sanders pitched Biden has embraced the the idea of free college during the 2020 campaign, it was dis- idea that nations actually missed as radical and undoable. No more, apparently—not compete with each other with China breathing down America’s neck. “Twelve years the way corporations do. is no longer enough today to compete with the rest of the world in the 21st century,” Biden said in April. On this score, aides say, the president has been deeply influenced by his wife, Jill Biden, who has taught for years 36 S U M M E R 2 0 2 1

NICHOLAS KAMM/AFP VIA GETTY IMAGES U.S. President Joe Biden after his speech on the false dawn of the mid-2000s mortgage mania, when the poor economy at Cuyahoga Community College’s felt rich but in truth were only more indebted. When that all Manufacturing Technology Center came to an end abruptly, Biden saw that the United States in Cleveland on May 27. had come out the other side of the Great Recession a very different economy altogether, with most of the recovered at Cuyahoga Community College, repeating themes he has wealth flowing to richer Americans while ordinary people sought to sell for months. were drowning in mortgage debt. Biden himself has acknowledged that the pandemic— Thus it was Biden, Goolsbee said, who in 2009 pushed for and Trump’s disastrously inept response—afforded him a grand social mobilization behind new infrastructure pro- the opportunity to reinvent the whole idea of government grams like a smart energy grid and who advocated an all-out because it “exposed just how badly we need to invest in the rescue of the Big Three automakers—General Motors, Ford, foundation of this country.” and Chrysler—because he was concerned about the work- ers and small businesses down the line that would go under. “He always had a muscular view of government interven- Biden also regularly harangued Obama about strengthening tion,” said Austan Goolsbee, who served as chair of the Coun- the Dodd-Frank financial reform law in favor of the under- cil of Economic Advisers under Obama and was an advisor privileged over the big banks, Goolsbee said. “He said, ‘You’ve to Biden. “And what’s happened is that we’ve gone through a got to put the Consumer Financial Protection Bureau front wild pandemic and economic collapse that put all the pathol- and center. And we have to make mortgages cheaper.’ It was ogies of our system in front of everyone’s face—problems that in the same populist mode.” were always there but have now become glaring problems.” Inequality, to begin with: the difference between wealthier, At one point, Goolsbee added, Biden became so impas- educated people who are able to do their jobs from home and sioned at a cabinet meeting about a proposal to restrain low-income people who generally can’t; a health care system reckless bank trading that Obama put his hand on the vice that is still largely tied to employers, which means some 5 president’s arm, saying, “Easy, Joe. We’ll get to that.” million people have lost their insurance; and the devastating loss of manufacturing and service jobs, first in the 2008 Wall Biden and other Democrats also came to realize that they Street-generated Great Recession and then in the pandemic. had effectively sacrificed the U.S. middle class to unfair com- petition from China’s state-subsidized low-wage workers “All of that changed the American people’s idea of what over the past quarter century. At the same time, Republi- the role of government should be,” Goolsbee said. cans found their identity as the party of small government stripped away by the populist Trump, who still rules the GOP Biden’s embrace of government intervention entered high roost from his retreat in Mar-a-Lago. The coup de grâce to gear as the Great Recession exposed the harsh inequalities small-government ideology finally came a year ago in the in U.S. society, Goolsbee said. Until the crash, the reality of form of the COVID-19 pandemic, which shut down the pri- stagnating middle-class income had been obscured by the vate economy. So the path was wide open to a new need for government intervention—and a new way of thinking. Added Goolsbee: “Biden comes along and says, ‘I can do this. You want muscle? I’ve got the muscle.’ … And he’s going to sell it. He’s really good at that.” BIDEN HAS A LOT TO SELL, a razor-thin vote margin in the Senate to make it happen, and not a lot of time to do it as recalci- trant Republicans—who deride his spending plans as ram- pant socialism—gear up to take back at least one house of Congress in the 2022 midterm elections. For many Republicans, of course, harking back to that pre-Reagan era of the ’70s triggers their worst fears. Biden’s big-government approach is precisely the sort of “socialism,” they say, that they warned about during the 2020 campaign. Responding to the White House’s proposed $1.8 trillion Amer- ican Families Plan, Senate Minority Leader Mitch McConnell said Biden’s “daydreams” of a “sweeping socialist legacy” will “never happen.” The Republican wall of opposition is another factor in 37F O R E I G N P O L I C Y.C O M

Biden’s ambitious rush to spend. What he also learned from Most economists still agree that trade is not a zero-sum his years as Obama’s veep was that his moment for change game—everyone generally benefits from free trade—but this may be brief if Republicans win the midterms in 2022; after established wisdom may be swept away by the new wind of the same happened to Obama in 2010, he found his programs economic nationalism. “There’s been a serious realignment blocked at every turn. Right now, Biden has the votes to pass of thinking about China as a competitive threat and the his big budget bills—just barely in a 50-50 Senate (where Vice importance of restoring middle-class jobs for non-college President Kamala Harris delivers the tiebreaking vote). But the workers,” MIT’s Autor said. Republicans have structural advantages in both the House of Representatives and Senate; the party controls and is using its More bluntly than any president since Lyndon B. Johnson, majorities in statehouses and governorships across the coun- Biden is intent on raising up the underclass at the expense try to pass voting laws that solidify its edge going into 2022. of the richest 1 percent, calling his American Jobs Plan a “blue-collar blueprint to build America” and noting that Most Republicans no longer seem to care much about free nearly 90 percent of the infrastructure jobs he’s proposing market ideology, only loyalty to Trump. That was the mes- do not require a college degree. sage that came out of the May 12 ouster of Trump’s most vocal critic, Rep. Liz Cheney, from the House leadership and her Despite concerns from Republicans that Biden’s generous replacement by the more moderate (but zealously Trump- subsidy plans for child care only incentivize family caregiv- loyal) Rep. Elise Stefanik. ers to stay home rather than work—harking back to Reagan’s infamous critique of “welfare queens”—some experts say And if Trump still dominates the party, then so does his he is in fact correcting long-festering economic inequities. neo-nationalist worldview. If there’s any new consensus in “Cash-based child benefits are among the most effective a polarized Washington, it’s that nearly everyone on both anti-poverty policies in any modern government’s tool kit, sides of the aisle seems to love to hate China. As recently as producing social benefits many times their costs,” said Sam- the early Trump years, centrist pundits in both parties were uel Hammond of the libertarian Niskanen Center. appalled at the China-bashing of hard-liners such as Peter Navarro, Trump’s chief China advisor, and U.S. Trade Rep- Autor, one of the economists credited with documenting resentative Robert Lighthizer, who in May 2020 called for a the “China shock” to U.S. middle-class jobs in the last cou- reversal of U.S. economic offshoring in response to China’s ple of decades, said the new Bidenomics is a radical mix of “predatory trade and economic policies.” good and bad ideas. Biden’s embrace of domestic content restrictions—like those wind turbine blades—is only “bound Now Biden indulges in the same rhetoric with scarcely a to raise costs and not really benefit anyone other than a few pushback or a mention of its pitfalls. On the contrary, even in well-positioned companies,” he said. So, too, the demoniz- the face of gridlock over infrastructure spending, the Senate ing of China as a purely competitive threat to American jobs on June 8 voted overwhelmingly to pass the U.S. Innovation may come back to haunt the president. and Competition Act, which will allocate nearly a quarter tril- lion dollars to counter China’s rise, funding what Biden called “Generally, the wishful thinking that says that we can “tomorrow’s most vital technologies—from artificial intelli- maintain leadership by holding others back is just foolish gence to computer chips to the lithium batteries used in smart or worse,” Autor said. devices and electric vehicles—right here in the United States.” Here, too, Biden’s approach is a stark departure from his Dem- It may also be somewhat risky as China turns ever more ocratic predecessors, especially when it comes to recasting aggressive and autocratic, with President Xi Jinping recently the role of China as America’s No. 1 bogeyman. Obama, for anointing himself as “helmsman,” an honorific no Chinese example, repeatedly said that “the United States welcomes leader since Mao Zedong has enjoyed. the rise of China,” and he declared at a town hall in Shanghai in 2009 that the whole idea of national competition was “no Rodrik agrees. “The fear that the U.S. may be losing its edge longer a zero-sum game.” Clinton, who fancied himself the in ballistic missiles and in the space race to the Soviet Union globalization president, consistently spoke of the mutual, sta- helped catalyze a national technological mobilization in an ear- bilizing benefits of the so-called G-2 relationship with China. lier era. But there is much less reason for such fearmongering today,” he said. “Doing so is unlikely to buy much Republican “The Biden plan has the potential to be transformative for support, given the intense polarization at present.” the U.S. and set an important example for other nations to follow,” Harvard’s Rodrik said. “But to achieve its potential, it “To achieve its potential, [the must avoid outdated Cold War tropes and misleading state ver- Biden plan] must avoid outdated sus market dichotomies. Today’s problems—climate change, Cold War tropes and misleading the disruption of labor markets due to new technologies, state versus market dichotomies.” and hyperglobalization—require new solutions.” 38 S U M M E R 2 0 2 1

On the other hand, Autor, Rodrik, and other economists economist at New York University. “I would prefer that Biden applaud Biden’s ambitious (and expensive) plans to rein- focus more narrowly on getting an infrastructure bill passed.” vest in U.S. human capital by providing lower-income child care; to fund education from prekindergarten through 12th That plainly is not going to happen, although Biden is grade schooling and beyond, in addition to better supplying also trying to get the rest of the developed world, especially vocational training via community colleges; to modernize Europe, to go along by proposing a global minimum tax on U.S. infrastructure; and to restore U.S. leadership in R&D corporate profit. Curbing corporate tax havens abroad, Biden and innovation. hopes, will help him raise the corporate rate at home. As Bernstein put it: “What Biden recognized is that in fact we “There are good ways to use the China challenge to mod- already have a shadow industrial policy in our tax code and ernize U.S. economic policy and institutions. There are foolish it very heavily favors wealth over work because those with ways as well,” Autor said. “The right steps will require sub- the most connected lobbyists were able to write the tax laws.” stantial public investment and some actual industrial pol- Indeed, an explosive report published by ProPublica in June icy, a term that’s been almost unsayable since the 1980s. … revealed that some of America’s wealthiest billionaires paid It’s going to take a big push, or it won’t gain enough momen- a scant 3.4 percent in taxes in recent years. tum to be self-sustaining. The Biden administration seems to know this.” The question is, though, is the country ready Yet while Biden may be able to put through his spending for Bidenomics? plans, without dismantling the Senate filibuster rule that requires a supermajority of 60 votes he may well fail to change SOME ECONOMISTS FEAR what Rodrik calls “overreach” by Biden— the underlying problem: a tax code that raises up the rich. provoking yet another pendulum swing “between excessive optimism and pessimism about the role of the government in If the unequal tax code is not redressed, the question ulti- the economy.” “Pendulum swings in the balance between mar- mately is how deep and enduring Biden’s “inflection” will be. kets and government have not been helpful in the past,” Rodrik Has he really rid his party of Reagan envy? So far the polls said. “Each excessive swing in one direction has prompted show support across party lines for Biden’s agenda, but how another extreme correction down the line.” The only way Biden long will that outlast the pandemic and economic downturn? can break this cycle, he said, is to demonstrate that “markets and governments are complements, not substitutes—that Back in January 2008, when Obama was battling Hillary each works better when the other pulls its weight.” Clinton for the Democratic nomination, then-candidate Obama stunned many of his supporters by praising Reagan That means that “the government will have to work as a transformational president—while Bill Clinton wasn’t, together with markets and private businesses, as well as Obama added cuttingly. “Ronald Reagan changed the tra- other stakeholders such as unions and community groups,” jectory of America in a way that, you know, Richard Nixon Rodrik said. did not and in a way that Bill Clinton did not,” Obama said then. “He put us on a fundamentally different path because Other economists, though, welcome his ambitious think- the country was ready for it.” ing. It has been at least a decade or so since globalization crashed into a ditch with the Great Recession. Suddenly, all The greatest political danger, some economists say, is that those neat global interconnections that were going to make Biden will do little but provoke right-wing opposition in the everyone more prosperous brought down the global econ- end—especially if government debt and inflation get out of omy, making the rich richer and the poor poorer. And as the control (as happened in the 1970s, setting the stage for Rea- smoke cleared from the disaster, out popped Trump, Boris ganomics), creating a 2022 midterm backlash. Johnson, Narendra Modi, Jair Bolsonaro, Viktor Orban, and other nationalists who preached, each in his own way, a new Some Biden aides agree that selling this idea will be the kind of illiberalism. At the same time, economists began edg- test of success—just as they acknowledge that “winning ing their way backward as well, finding new ways to ques- the 21st century” isn’t mainly about narrowing the com- tion rather than promote globalization while there was no petitive gap with China but rather narrowing the inequi- new consensus on how to regain broad-based prosperity—to ties in America’s own economic system. Bidenomics in the restore the fabled “American dream” of opportunity for all. end is about making America’s billionaires, far more than Beijing, pay their fair share. Consensus now seems further away than ever. One of the hazards of Bidenomics is that Biden may have the votes to get Biden himself insists that he doesn’t intend to displace a lot of his spending plans passed but not to revamp the tax the global market system—only to moderate it. “I’m a capi- code to pay for them by making the wealthy and corporations talist,” the president said in May. “I’m not looking to punish dole out more. “I do think we are reaching a point where we anyone or to say business shouldn’t be able to make a signif- need to start thinking about the debt,” said Mark Gertler, an icant profit. … I just think, after decades of workers getting a raw deal, it’s time they be given a fair shake.” MICHAEL HIRSH is a senior correspondent at FOREIGN POLICy. 39F O R E I G N P O L I C Y.C O M

LOOKING OUT FOR NUMBER EINS WHAT THE WORLD MISUNDERSTOOD ABOUT ANGELA MERKEL. BY MATTHIAS MATTHIJS AND R. DANIEL KELEMEN 40 Photograph Illustration by NAMETK NAME

T his summer, as the pandemic eases and Europe opens again for business and pleasure, the Merkel era will end. After her 16-year reign as Germany’s chan- cellor, Angela Merkel deserves admiration and praise on many counts. When she made history in the fall of 2005 as the first woman to be elected chancellor, unemployment stood at just over 11 percent, and Germany was widely disparaged as the “sick man of Europe.” Doctoral students on both sides of the Atlantic were writing disserta- tions trying to uncover the roots of Germany’s malaise and were asking what it was about the country that made it so hard to reform. Four Merkel cabinets later, German unemployment stands at 6 percent (and would be even lower if not for the pandemic), and no one doubts Ger- many’s political, financial, and economic lead- ership of the European Union. In an era plagued by erratic and swaggering strongmen like Donald Trump, Boris Johnson, Narendra Modi, and Jair Bolsonaro, Merkel pro- vided a model of rational, steadfast leadership. Indeed, in the early years of the Trump presidency, political observers on both sides of the Atlantic were fond of dubbing her the new “leader of the free world.” Merkel always rejected that honorific, even though she has undeniably been the de facto leader of the EU. But what kind of leadership has she provided for the European project? Many glowing retrospectives on Merkel’s ten- ure depict her as Europe’s savior—the steady and reliable pair of hands that steered the EU through a series of unprecedented crises. They recount her role over the past decade along the following lines. When the eurozone debt crisis threatened to overwhelm EU institutions, Merkel overcame domestic resistance to negotiate bailouts for the hardest-hit eurozone members, provided politi- cal backing for massive European Central Bank liquidity injections, and paved the way for a Photograph by MARKUS JANS

myriad of new EU institutions, including a sweeping banking crisis, she ultimately failed to convince her fellow EU leaders union. When Vladimir Putin’s Russia annexed Crimea and to craft a humane common policy, resorting instead to an intervened militarily in Ukraine’s eastern Donbass region, unsavory “money for refugees” deal with Turkey. she kept her cool and took the lead in negotiating the Minsk agreements. During the refugee crisis in the summer of 2015, Finally, in her 2020 volte-face over Eurobonds in response she showed her humanity—at considerable political cost—by to the coronavirus pandemic, she made it abundantly clear letting more than 1 million mostly Syrian refugees into Ger- that she saw it as a one-off gesture of solidarity in response many. Merkel also helped the EU member states maintain a to extraordinary circumstances rather than a fundamen- united front during the Brexit negotiations. She insisted on tal shift toward closer EU fiscal integration. This approach the sanctity and indivisibility of the four freedoms of move- seeks to perpetuate what one could call Germany’s exorbi- ment—in goods, services, capital, and people—that define tant privilege in the eurozone, where it continues to benefit the EU single market. And during the spring of 2020, she from extremely low interest rates due to its safe-haven sta- threw her political weight behind the launch of a 750 billion tus in financial markets and from an undervalued euro that euro ($913 billion) pandemic recovery fund to be financed boosts its powerful export sector. At the same time, it keeps by joint bonds issued by the European Commission, taking Europe’s peripheral economies at a consistent disadvantage. a landmark step toward an EU fiscal union and economic government. In the late 1990s and early 2000s, before Merkel entered the chancellery, the EU had taken to portraying itself as a “nor- There is some truth to this flattering narrative about mative” power. EU leaders eagerly promoted the idea that Merkel, but it tells only one part of the story. There has also while the union lacked the attributes of a traditional military been a darker side to Merkel’s leadership in Europe—both superpower, it could project global leadership by promoting to the specific decision-making tactics she has relied on norms such as democracy, rule of law, human rights, and social and to the general principles that have guided her policies. solidarity. Sixteen years of Merkel’s leadership have made a mockery of such lofty aspirations. She has pushed the EU to IN APPROACHING EUROPE’S POLITICAL CRISES, Merkel’s main polit- appease autocrats rather than championing democracy and ical stratagem has been to procrastinate and dither. Merkel human rights and to impose austerity and painful reforms became so famous for this approach that German teens turned over embracing solidarity and promoting public investment. her name into a verb—merkeln—which became slang for chronic indecision and for saying or doing nothing on an IN THE SPRING OF 2010, when it was clear to bond markets issue. (“Merkeln” was an early leader in the publisher Lan- that Greece’s budgetary position was unsustainable, Merkel genscheidt’s youth word of the year competition in 2015 but famously insisted that the eurozone rules had to be geared ended up losing out to “Smombie,” a portmanteau for smart- toward the strong rather than the weak and solemnly pledged phone zombie.) In almost every crisis, Merkel kicked the can two years later that she would not agree to systemic solutions down the road—hesitating to take big decisions until the last like Eurobonds—jointly issued common debt instruments—as possible moment and, even then, often agreeing to doing just “long as she lived.” The choice facing Merkel and other leaders the minimum necessary to keep things from falling apart. In of the “core” member states was either to bail out “peripheral” many cases—from the euro crisis to the rule of law crisis in members like Greece and Ireland or to allow them to default Hungary and Poland—her strategic inaction led to serious while staying in the eurozone. The latter option would have problems festering and becoming even more deeply ingrained. hurt Northern European creditors and once again forced Ber- lin to bail out German banks—a politically unpalatable option. It wasn’t just her “Merkeling” tactics that proved problem- The bailouts in effect functioned as a kind of money laundering atic. Far more troubling was the substance of many of her and political blame-shifting operation. Core countries like Ger- policies, which we can simply label “Merkantilism,” defined many provided financial bailouts—subject to extremely harsh as the systematic prioritizing of German commercial and conditions in the form of budgetary austerity and structural geoeconomic interests over democratic and human rights values or intra-EU solidarity. From her coddling of Hungar- “Merkantilism” can be defined ian strongman Viktor Orban as he built the EU’s first autoc- as the systematic prioritizing racy to her active courting of Europe’s geostrategic rivals in of German commercial and Russia and China, Merkel has tended to place German profit geoeconomic interests over and expediency above European principles and values. This democratic and human rights was also the case in the eurozone crisis, when EU bailouts values or intra-EU solidarity. were cynically structured to benefit German bankers at the cost of Greek and Portuguese workers. Even at the moment of her boldest moral leadership, the 2015-16 migration 42 S U M M E R 2 0 2 1

Counterclockwise, from top left: German Chancellor Angela Merkel takes a selfie with a Syrian refugee in Berlin in 2015; meets with Russian President Vladimir Putin in Istanbul in 2018; greets European Council President Charles Michel in Brussels in 2020; reacts to a robot in Berlin in 2020; and attends a ceremony marking the 75th anniversary of the end of World War II in Berlin in 2020. SEAN GALLUP/GETTY IMAGES; BERTRAND GUAY/AFP VIA GETTY IMAGES; HANNIBAL HANSCHKE/AFP VIA GETTY IMAGES; reforms—to peripheral governments, which then used that to haunt the EU in the spring of 2020, when the COVID-19 CARSTEN KOALL/GETTY IMAGES; THIERRY MONASSE/GETTY IMAGES money to pay back German, French, and Dutch banks. pandemic, in a cruel twist of fate, first struck Europe in Italy and Spain, two big EU member states that had been forced By framing the eurozone debt crisis as the result of fiscal to cut back the most on public health expenditures during profligacy and lagging competitiveness in Ireland and Med- the previous decade. iterranean countries, Merkel encouraged the German pop- ulation and much of the rest of Northern Europe to think of AS MUCH AS MERKEL WAS RELUCTANT to show solidarity with strug- the euro crisis in terms of a morality tale of Northern saints gling democracies in the south of Europe, she was content and Southern sinners. Real leadership would have required to see billions of euros in EU subsidies showered on nascent acknowledging and addressing the structural roots of the autocracies in the east. Indeed, the so-called leader of the eurozone woes—pointing out that fiscal and banking crises free world has kept a dirty little secret over the past decade: were inevitable in a monetary union where capital flowed She has been the most important political patron of Europe’s freely in the absence of adequate joint mechanisms to coor- leading far-right authoritarian: Hungary’s Viktor Orban. The dinate fiscal policy, regulate financial services, or facilitate primary reason Orban could gradually dismantle Hungarian macroeconomic adjustment. Instead, Merkel’s account and democracy and replace it with what Freedom House and the her proposed solutions denied that German banks or regula- V-Dem Institute rate as the EU’s first hybrid regime is that tors held any responsibility for the crisis due to their excessive he enjoyed the political protection of Merkel and her Chris- lending to the periphery during the boom years and simply tian Democratic Union (CDU). Merkel protected Orban for reinforced popular Northern stereotypes of profligate and both political and commercial reasons. lazy “Club Med” governments and populations. Though Merkel would never contemplate cooperating with The outcome of her approach was an abrupt reversal of the the far-right Alternative for Germany at home, she was happy economic convergence process between North and South that for the past decade to ally at the EU level with Orban’s right- had started in the mid-1990s, as standards of living between wing, autocratic Fidesz party. Until this March, Merkel’s CDU core and peripheral countries started to diverge again after and Orban’s Fidesz were allied as members of the European 2010. As Northern economies thrived, their exports boosted People’s Party (EPP)—the most powerful of the pan-European by a weak euro and their fiscal accounts much relaxed by neg- “Europarties.” Orban’s minions provided votes for the EPP ative bond yields, Southern economies entered deep reces- in the European Parliament, helped elect Merkel protégée sions that saw a whole young generation mired in record Ursula von der Leyen as European Commission president, high unemployment. Southern Europe’s electorates could and assisted in the EPP remaining the dominant force in be forgiven for wondering whether the European integration EU politics. In return, she shielded him against EU censure. game was still worth the candle as they flocked to populist Though some more principled member parties long wanted and Euroskeptic parties that condemned the bailouts. This Orban out of their group, the CDU and its Bavarian sister party, lack of solidarity and emphasis on austerity would come 43F O R E I G N P O L I C Y.C O M

the Christian Social Union, repeatedly blocked his expulsion. EU’s overall efforts to reduce energy dependence on Rus- Even when he was finally shown the door in March after esca- sia. So why has Merkel continued to support the completion lating conflicts with other EPP leaders, Merkel never uttered of Nord Stream 2 in the face of opposition from the United a negative word about Orban’s assaults on democracy. States, allies in East Central Europe, the European Parlia- ment, and even domestic critics such as the Green party? But Merkel’s alliance with Orban wasn’t just about party The answer is that Nord Stream 2 promises to deliver abun- politics; it was characteristically Merkantilistic. Hungary dant low-cost energy supplies to German industry and con- is a major, low-wage, near-shore manufacturing center for sumers. Given Merkel’s abrupt decision to phase out nuclear German multinationals. Indeed, German automakers are power in response to the 2011 Fukushima disaster in Japan, the leading engine of economic growth in Hungary. While Germany has become more dependent on oil and natural Orban attacks the rule of law and his crony capitalists extort gas—and Gazprom offers the lowest-cost source of supply. small and medium-sized enterprises, his “Audiocracy” gives None of this suggests that Merkel sympathizes with the Rus- German car companies like Audi, Mercedes, and BMW the sian dictator’s worldview—that she is a Putin Versteher, a red-carpet treatment. Merkel recognized how good relations Putin understander, as some critics have suggested—but with the Orban regime served German commercial interests she is clearly willing to look past his repeated and brazen and hence used her enormous influence to shield him from violations of international law and human rights norms if EU criticism. Orban in turn implemented the autocratic play- it means cheaper energy for German factories and homes. book and then held open the door for other aspiring autocrats in the EU, such as Jaroslaw Kaczynski in Poland, another Merkel has pursued a similar “profits over principles” country that plays a key role as a manufacturing center for approach when it comes to dealing with Xi Jinping’s China. Germany’s industrial machine. Though additional factors Certainly, she has done the bare minimum to signal interest in certainly help explain the EU’s failure to stand up to dem- the country’s human rights situation. She has expressed con- ocratic backsliders in its midst, much of the blame can be cerns over Beijing’s assault on democracy protesters in Hong traced back to the original sin of Merkel’s alliance with Orban. Kong and made oblique references to the Uyghur detention camps in Xinjiang, calling for the resumption of a dialogue MERKEL NOT ONLY PUT PROFIT ABOVE PRINCIPLE when it came to on human rights and imploring the Chinese government to pet autocrats inside the EU, but she also did so on a larger respect international norms on forced labor. This spring, her scale in her approach to Europe’s geostrategic rivals—the bla- government also backed EU travel bans and asset freezes on a tantly authoritarian regimes of Russia and China. In principle, handful of Chinese officials in reaction to new developments successive Merkel governments were guided by the man- in Xinjiang. However, at the same time that Merkel engaged tra of Wandel durch Handel (“change through trade”)—the in virtue signaling on human rights, her government used its theory that deepening economic relations would encourage rotating presidency of the Council of the EU late last year to progressive reforms in Moscow and Beijing. But in practice, rush through an EU-China investment deal that critics saw as they long ago gave up on the change part. This is nowhere a major gift to Beijing. The European Parliament has since fro- more obvious than in Merkel’s determination to pursue zen ratification of the deal in the wake of escalating tensions the Nord Stream 2 gas pipeline despite strong opposition between the EU and China over Hong Kong and the repres- from the EU and the United States. Defenders of Merkel’s sion of the Uyghurs, but Merkel—with an eye to the interests approach to the Putin regime would point to the leadership of German multinationals keen to pursue opportunities in the role she played after Russia invaded and annexed Crimea in growing Chinese market—has continued to support the deal. putting together a sanctions package that thus far has held up remarkably well. However, Merkel has contradicted and ON TWO FRONTS—in her response to the migration crisis of 2015 undermined any impact of these sanctions on Putin and his and to the recent coronavirus pandemic—Merkel’s leader- associates by continuing to support Nord Stream 2, a project ship was more courageous and less driven by Merkantilis- that hands his regime a far greater prize. tic logic. Yet even on these two issues, she leaves behind a rather mixed and uncertain legacy. Nord Stream 2 will supply gas directly from Russia to Ger- many through the Baltic Sea, thus circumventing the exist- During the summer of 2015, with hundreds of thousands ing pipeline route that passes through Ukraine and other of asylum-seekers fleeing conflict in the Middle East, cross- countries in East Central Europe. The pipeline would enable ing the Mediterranean Sea into Greece, and then moving Russia to cut off gas supplies to Ukraine and other countries westward, Merkel declared an open-door policy. She waived in the region while still selling gas to Germany and Western the rules of the EU’s Dublin Regulation that would have Europe. The project would heighten the risk of a Russian allowed Germany to return any asylum-seekers to the first invasion of Ukraine, threaten the security of energy sup- EU country they had passed through and instead said Syr- plies to EU member states like Poland, and undermine the ian refugees who made it to Germany would be allowed to 44 S U M M E R 2 0 2 1

stay. Though many Germans worried the country would be the German economy from falling off a cliff. overwhelmed by the influx of refugees, Merkel famously declared, “We can do it!” (Wir schaffen das!) Merkel clearly While some analysts hailed Merkel’s U-turn on Eurobonds wanted to avoid a humanitarian crisis. She saw that Greece could not cope with the mass inflow of refugees, especially as the “Hamiltonian moment” the EU had been waiting for, after its highly contentious third bailout had just been approved that summer, and that tensions were escalating it is far from clear whether the scale of the fund, called Next among the countries refugees were passing through on their journey west. Though she insisted from the outset on the Generation EU, will be adequate to meet the post-pandemic need for a coordinated EU response, when faced with this crisis she acted alone in deciding that more than 1 million challenges at hand, much less whether it will become per- mostly Syrian refugees could travel on to Germany, where they would be welcomed with open arms. manent. Merkel herself was careful to present Next Genera- Her unilateral move was compassionate, but it became tion EU to German voters as a one-off injection of EU money, clear rather quickly that Merkel could not convince her fel- low leaders to take a joint approach to the migration crisis. justified only given the once-in-a-century pandemic that hit By the spring of 2016, Merkel flew to Ankara to negotiate a deal that would pay Turkey an additional 3 billion euros certain EU member states much harder than others. On top ($3.69 billion) and offer other incentives in exchange for the country preventing refugees from crossing into the of that, as with previous EU bailouts, the new recovery funds EU. Similar deals were later cut with Libya and Morocco, hardly exemplars of “safe third countries.” While many are tied to economic reforms in the countries receiving them praise Merkel’s initial burst of magnanimity on refugees, far fewer recognize that she quickly gave up on pressing for as well as subject to oversight by the European Commission, a humane common EU migration policy and instead green- lighted an approach in which the EU essentially pays transit with a so-called “handbrake” that can freeze the funding if countries to hold refugees—often in profoundly inhumane conditions—to prevent them from entering Europe. The a country is not making enough progress with its reforms. EU is no closer today to agreeing on reforms of the asylum rules, including a more equitable distribution of refugees This logic maintains the toxic “sinners and saints” dynamic across EU member states, than it was when Merkel called for this back in the summer of 2015. Meanwhile, the tragic that proved so damaging for the European project during reality is that since then, more than 14,000 migrant deaths have been recorded in the Mediterranean Sea. the eurozone crisis of 2010 and could once again trigger a Merkel once again acted boldly in the spring of 2020, when serious backlash if pushed too far. Hence, the future of fis- she saw the rapidly mounting death toll from the coronavi- rus in Italy and Spain. She decided to join efforts with French cal solidarity in the EU will depend to a large extent on who President Emmanuel Macron to set up a European recovery fund that would distribute EU grants directly to the member takes over from Merkel in the fall of 2021. states and would be financed by Eurobonds, or “coronabonds,” issued by the European Commission and jointly guaranteed Most analysts agree that Merkel would probably have been by all member states. She also agreed to suspend EU fiscal rules, and her government provided a record amount of public reelected if she had chosen to run for an unprecedented support to German companies. As the COVID-19 pandemic laid bare the structural shortcomings in Germany’s economy, fifth term in office. She remains Germany’s most popular from a chronic lack of public investment in infrastructure to severe deficiencies in digitization in its education and health politician by quite some distance, above all because of her care systems, her government put aside its obsession with maintaining the “black zero” (schwarze Null) for the coun- steady economic leadership at home, whatever the conse- try’s fiscal accounts by avoiding any deficit spending. Merkel’s Social Democratic finance minister, Olaf Scholz, was given quences abroad. Her CDU successor, Armin Laschet, lacks permission to provide Europe’s largest fiscal stimulus to keep both charisma and fresh ideas but remains closely aligned with her Merkantilist approach. If one is looking for a real change in leadership, both in Germany and in Europe, one has to hope that the Greens— now led by the 40-year-old Annalena Baerbock—come to power this fall. If the Greens play a major role in the next coa- lition, and particularly if Baerbock becomes Germany’s new chancellor, a substantial policy shift on Eurobonds—and a shift away from Merkantilism more generally—is definitely in the cards. Germany’s Greens want to push the country away from its fiscal orthodoxy, stand up to Europe’s nascent autocrats, scrap Nord Stream 2, and take a tougher stance on human rights in China. Ironically, we may one day look back and judge that one of Merkel’s greatest legacies for the EU was to open the door to women’s political leadership in Germany—so that a new leader could emerge who would reverse many of her policies. Though Merkel may not be the savior of Europe some have made her out to be, she may have paved the path for a new leader who could be. n MATTHIAS MATTHIJS is an associate professor of international political economy at Johns Hopkins University and a senior fellow at the Council on Foreign Relations. R. DANIEL KELEMEN is a professor of political science and law and the Jean Monnet chair in EU politics at Rutgers University. 45F O R E I G N P O L I C Y.C O M

46 S U M M E R 2 0 2 1 Photo Illustration by FOREIGN POLICY

NIBBLE LIKE A SILKWORM, HOW CHINA QUIETLY SWALLOW OCCUPIED TERRITORY IN NORTHERN BHUTAN. LIKE A WHALE BY ROBERT BARNETT In October 2015, China announced that a outmaneuver India and its neighbors along their Himalayan new village, called Gyalaphug in Tibetan or frontiers. In this case, China doesn’t need the land it is settling Jieluobu in Chinese, had been established in in Bhutan: Its aim is to force the Bhutanese government to cede the south of the Tibet Autonomous Region territory that China wants elsewhere in Bhutan to give Beijing (TAR). In April 2020, the Communist Party a military advantage in its struggle with New Delhi. Gyalaphug secretary of the TAR, Wu Yingjie, traveled is now one of three new villages (two already occupied, one across two passes, both more than 14,000 under construction), 66 miles of new roads, a small hydro- feet high, on his way to visit the new vil- power station, two Communist Party administrative centers, lage. There he told the residents—all of them a communications base, a disaster relief warehouse, at least Tibetans—to “put down roots like Kalsang five military or police outposts, and what are believed to be flowers in the borderland of snows” and to a major signals tower, a satellite receiving station, a military “raise the bright five-star red flag high.” Film base, and up to six security sites and outposts that China has of the visit was broadcast on local TV channels and plas- constructed in what it says are parts of Lhodrak in the TAR tered on the front pages of Tibetan newspapers. It was not but which in fact are in the far north of Bhutan. reported outside China: Hundreds of new villages are being built in Tibet, and this one seemed no different. This involves a strategy that is more provocative than any- Gyalaphug, however, is different: It is in Bhutan. Wu and thing China has done on its land borders in the past. The a retinue of officials, police, and journalists had crossed an settlement of an entire area within another country goes far international border. They were in a 232-square-mile area beyond the forward patrolling and occasional road-building claimed by China since the early 1980s but internationally that led to war with India in 1962, military clashes in 1967 understood as part of Lhuntse district in northern Bhutan. and 1987, and the deaths of 24 Chinese and Indian soldiers The Chinese officials were visiting to celebrate their success, in 2020. In addition, it openly violates the terms of China’s unnoticed by the world, in planting settlers, security person- founding treaty with Bhutan. It also ignores decades of pro- nel, and military infrastructure within territory internation- tests to Beijing by the Bhutanese about far smaller infractions ally and historically understood to be Bhutanese. elsewhere on the borders. By mirroring in the Himalayas the This new construction is part of a major drive by Chinese provocative tactics it has used in the South China Sea, Beijing President Xi Jinping since 2017 to fortify the Tibetan border- is risking its relations with its neighbors, whose needs and lands, a dramatic escalation in China’s long-running efforts to interests it has always claimed to respect, and jeopardizing its reputation worldwide. 47F O R E I G N P O L I C Y.C O M

Left: The main administration building in Gyalaphug (Jieluobu), as seen in 2020. The sign above the building reads: “The Party and Serve-the-Masses Center.” Right: Wu Yingjie, Tibet’s party secretary, meets villagers in front =of the village administration office at Gyalaphug in April 2020. CHINA’S MULTILEVEL CONSTRUCTION DRIVE within Bhutan has gone word beyul means “hidden valley,” a term used in traditional TIBET DAILY TV SCREENSHOTS; MAPS BY DIANA D’ABRUZZO FOR FOREIGN POLICY almost completely unnoticed by the outside world. Bhutan Tibetan literature for at least seven areas high in the Himalayas must know, and other governments in the region are likely to ringed by mountain ridges and, according to legend, concealed be aware that China is active on Bhutan’s northern borders but by the legendary tantric master Padmasambhava in the eighth may not have realized the full extent of that activity or have century and only discoverable by those with heightened spir- chosen to remain silent. Yet information on the drive has been itual powers. The Beyul Khenpajong is the most famous such hiding in plain sight in official Tibetan- and Chinese-language valley in Bhutan, described in Bhutanese literature and myth newspaper reports published in China, on Chinese social since at least the 15th century. Jigme Namgyal, the father of media, and in Chinese government documents. There is one the first king of Bhutan’s current ruling dynasty, was born on catch to these Chinese reports: They never mention that this the eastern perimeter of the Beyul, only 75 miles as the crow construction work, confirmed by satellite imagery, is taking flies northeast of Bhutan’s now-capital, Thimphu. Given its place in disputed territory, let alone in Bhutan. incomparable importance for the Bhutanese and for Tibetan Buddhists in general, no Bhutanese official would ever for- China has tried building roads into Bhutan before—but mally relinquish this area to China, any more than Britain mainly in its western areas and with limited success. In 2017, would yield Stonehenge or Italy Venice. China’s attempt to build a road across the Doklam Plateau in southwestern Bhutan, next to the trijunction with India, FOREIGN POLICY contacted the spokesperson for the Indian triggered a 73-day faceoff between hundreds of Chinese and Ministry of External Affairs, the Bhutanese mission to the Indian troops and had to be abandoned. Last November, an United Nations and the prime minister’s office, and both the Indian media outlet reported that a village called Pangda had Chinese Embassy in Washington and the Ministry of Foreign been built by the Chinese government in subtropical forest Affairs in Beijing for a response to this story. We received just inside the southwestern border of Bhutan. (China denied the claim.) It’s possible, however, as some analysts have spec- ABOUT THIS PROJECT: Research for this story and its ulated, that Bhutan had quietly ceded that territory to China maps was conducted by Robert Barnett, Matthew Akester, but not announced it to the outside world. Ronald Schwartz, and two Tibetan researchers who asked to remain anonymous and was produced as part of an ongoing Work on Gyalaphug, however, began five years earlier collaborative research project into policy developments on Tibet. than Pangda, is far more advanced in its development, and The researchers used material drawn from official Chinese involves the settlement of entire districts, not just a single media reports, Chinese blogs, Bhutanese government reports, village. The Gyalaphug case includes yet another dimen- Indian media reports, and open-source mapping services. sion, one that is of far greater sensitivity: It is in an area of Additional fact-checking was provided by Nathan Ruser. Note: exceptional religious importance to Bhutan and its people. Place names are given according to usage in Bhutan, where known, or are taken from Tibetan translations of Chinese That area, known traditionally as the Beyul Khenpajong, is reports, which may be unreliable. Chinese names for claimed one of the most sacred locations in Bhutan, where the major- areas are given in parentheses in the maps and photo captions. ity of the population follows Tibetan Buddhist traditions. The 48 S U M M E R 2 0 2 1