Thoughts for December 25, 2022
Merry Christmas. Today’s topics are some geopolitical musings, free trade and peace, and a request for the new year.
Geopolitical Musings
One of the defining geopolitical thinkers since the end of the Cold War has been Francis Fukuyama, who is best known for his 1992 book, The End of History and the Last Man. Fukuyama’s End of History thesis argues that three major ideologies fought for supremacy in the 20th century: liberal capitalism, fascism, and communism. After World War II, fascism was defeated and relegated to the fringe, while the centerpiece of the communist world, the Soviet Union, was falling apart at the time Fukuyama developed his argument. This left liberal capitalism as the only major viable ideology. Since he considers the major historical force to be competition between distinct ideologies, the end of this competition signals the end of history.
The thesis did not appear to age well, and criticism mounted quickly. Samuel Huntington’s Clash of Civilizations, which he presented as an essay in 1993 and a book in 1996, argued that the next phase of conflict would not be ideological, as Fukuyama imagined, but civilizational. Huntington identified eight major civilizations and foresaw that a major defining feature of coming geopolitics would be conflict between Western and Islamic civilizations. His argument gained renewed appreciation after the September 11 attacks, but it hasn’t gained much respect among scholars. First, the argument seems to be factually wrong; most conflicts since 1991 has occurred within, not between, (what Huntington defines as) civilizations. Beyond that, I find Huntington’s conception of civilization to be amorphous and suspect that he greatly exaggerates the importance of civilizational differences and grievances.
The 2000s also saw strong economic performance of China and Russia, two countries that were decidedly outside of the framework of liberal democracy; the former developed with authoritarian state capitalism, and the latter with a sort of neo-czarism or neo-fascism. The reader does not need to be reminded of the ways in which these systems, at the end of 2022, do not look like viable models for the future.
Alex Stubb discussed these issues in a recent video. His channel, the STG (School of Transnational Governance) has a great deal of useful geopolitical insight, such as this analysis of the recent American National Security Strategy.
Also on China and Russia, I found this talk by George Friedman at the U.S. Naval Institute to be quite interesting, even if not convincing in all respects. Major points of Friedman’s presentation are:
An alliance between Russia and China is very unlikely. The two countries have long-standing mutual distrust, they don’t have common geopolitical interests, and they do not have the ability to significantly help each other.
China’s is an export-oriented economy, and the main reason for their economic trouble is that their ability to grow exports has come to an end. China will not resume rapid economic growth.
Putin made three major strategic miscalculations in the invasion of Ukraine. First, he greatly underestimated the strength of the UA military. Second, he underestimated the willingness of Western countries to back UA. Third, he wrongly believed that he would have Germany’s support due to German energy dependence.
In the 1970s, Americans were pessimistic, and talk of being a nation in decline was in vogue. This was followed by the microchip revolution and good decades in the 1980s and 1990s. He sees a similar renaissance as potentially in the offing.
I would contend that the major risk for liberal capitalism is not some alternative alluring system, because there is none, but that failures within the system could lead to decay. Fukuyama argued this in 2014.
I’ll leave the last word here with Richard Hanania. I’ve been critical of Hanania, and others who comprise what could be called the “post-liberal” set—a label that I don’t think he would accept anymore, since Richard’s post reflects an unusual candor about the ways in which he has been wrong. There is much in this post that I disagree with, but it is engaging and well-thought, and because of that and because it’s Christmas, I’ll pay him some more attention.
Free Trade and Peace
Free trade is a topic that I would like to explore and write about much more. Here I will consider one aspect: does free trade promote peace, and how? Here, by “free trade” I refer to a political regime that puts foreign and domestic products on an equal footing. This is broad and refers to manufacturing, where the footing refers mostly to tariffs that are easy to quantify, and also to services, where matters get much more complicated.
Free trade was Point III among Woodrow Wilson’s Fourteen Points, the principles he proposed that post-World War I peace would be built upon.
III. The removal, so far as possible, of all economic barriers and the establishment of an equality of trade conditions among all the nations consenting to the peace and associating themselves for its maintenance.
But an especially important figure in American history, with far-reaching views of the diplomatic importance of trade, was Cordell Hull. Hull represented Tennessee in the U.S. House for 22 years and the Senate for two years, before serving as Secretary of State for most of the Franklin Roosevelt administration. He is one of the most important figures in U.S. political history who was never President, having spearheaded the income tax in 1913 and played an instrumental role in establishing the United Nations. But according to Kenneth Dam, it was his work on trade, and having fought for the Reciprocal Tariffs Act, that was his most important legacy. Dam’s paper is very much worth reading, as it provides a useful history of the RTAA and subsequent trade agreements, as well as an layperson-friendly introduction to trade concepts, though with a publication date of 2004, it is now dated.
Throughout American history up to the onset of the Great Depression, tariffs had generally been seen through a domestic lens. High tariffs would benefit manufacturers who have foreign competition lessened, but they would harm consumers who faced higher prices. Since the tariff was the federal government’s primary source of revenue before the permanent income tax (which, as noted above, Cordell Hull also spearheaded), high tariffs went along with heavy government spending. Generally, Republicans (and before them, Whigs and Federalists) favored high tariffs, while Democrats favored low tariffs.
Hull saw the potential for tariffs as a form of diplomacy, and he also saw that, through reciprocity, the interests of producers and consumers could be tied together to break the political barriers against tariff reduction. Reciprocity meant that a reduction of U.S. tariff rates with another country was tied to that country’s reduction of rates against the U.S., so both producers and consumers could simultaneously benefit from lower rates. After World War II, the RTAA became the basis of the General Agreement on Tariffs and Trade, followed by the World Trade Organization.
The peace-through-trade concept is fairly intuitive. It holds that if two countries have more trade, they are less likely to go to war for several reasons. First, the economic interdependencies raise the costs of going to war, and create a financial disincentive to do so. Second, trade creates a merchant class with interests against war, and thus they will lobby against fighting. Third, trade increases personal connection between countries, and it is harder to convince a populace to go to war against a country when they know people there personally. But does this idea survive scrutiny?
A 2004 paper by Patrick McDonald (friendlier summary here) argues that it does, and he focuses on the tendency for trade to create a merchant class that will lobby against war. A 2016 paper by Lee and Pyun argues the same thing. This paper takes a dataset of country-country-year sets from 1950-2000 and finds that when two countries have more trade in a given year, the probability of war goes down. They control for several factors to address the “correlation does not imply causation” issue. They also find that global openness to trade is a factor in reducing the probability of war, on top of bilateral trade volumes.
I should also note this paper by van de Haar which argues against the peace-through-trade hypothesis. The paper does not muster the kind of quantitative evidence as the others, but it makes a few interesting points. He points out that trade can enrich a nation, granting them the ability to finance aggressive wars. The logic (among other considerations) of trade sanctioning, a preferred way in the modern world to conduct hostilities in a manner short of outright war, is to reduce a country’s capacity to field modern weapons, which sit at the apex of complex supply chains. He also points out that wars do indeed occur between countries with significant bilateral trade—Russia and Georgia, Russia and Ukraine, and Saudi Arabia and Yemen are three recent examples.
The peace-through-trade hypothesis holds that trade makes countries less likely to go to war, but it does not eliminate the possibility. That point was made in a rebuttal to van de Haar by John Murphy (which, I have to say, is the most gracious academic rebuttal I have ever read).
I would say that the balance of evidence, at least that I have reviewed so far, strongly supports the peace-through-trade idea. Thus I am worried to see trends like this.
The drops in 2008 and 2020 are not surprising, but a downward trend since 2008 can also be discerned. It is not too severe yet, but given the momentum behind protectionist politics worldwide, it may be durable. Furthermore, a bilateral or regional free trade agreement can be seen as merely widening the zone of trade barriers, and given the trend toward bilateral and regional trade agreements, I fear that trend shown above may underestimate the full extent of the problem.
The second half of the 20th century has been a time of unprecedented trade, wealth, and peace in world history, and I would contend that those three trends are highly related. It is unfortunate, then, that many people have forgotten where this prosperity came from and are pursuing ill-thought protectionist policies again. If you want peace, working toward trade openness might be the most important thing to achieve that goal.
A New Year’s Request
For my final comment of the year, I want to make a request of my readers who are actively involved with policymaking, lobbying, or influencing opinion.
Work on ideas that are relevant to me. Work on policies that help me in some tangible way. Or if not me specifically, work on policies that help some well-defined individuals in some tangible way.
Yes, I know this sounds banal, since almost all political actors think that their ideas are helpful. But many—dare I say most—are not. They are irrelevant at best and quite often actively harmful.
Sometimes it is obvious. The reason I am not getting up in arms with you about gender pronouns and public statues is not that I disagree; it’s because I don’t care. These don’t affect me or anyone else in a tangible way.
Grand visions are tougher but very often offenders. I’ve harped on the 15 Minute City a few times, but it illustrates my point quite well. Some people have an aesthetic interest in walkable neighborhoods. That’s OK. But what problem does this solve? How does this relate to actual needs that citizens have? I don’t know the answers to these questions. The whole idea looks like it was inspired by a game of SimCity, not by consideration of actual needs.
So many political ideologies succumb to this problem. Social justice, nationalism, religious politics, urbanism, and environmentalism, more often than not, present grand ideas that neglect any consideration of what’s in it for me. And they wonder why I don’t support those ideas. I’m not a sociopath; I’ll sometimes support ideas that go against my interest if they are good for society as a whole. But that is very seldom the case. Even space migration, which is something I very much believe in, I hate to admit often falls into this trap as well.
I don’t think that what I am asking for is complicated. It is a first-principles approach to policy that goes something like this:
What problem am I trying to solve?
Is it really a problem?
What is going to solve it?
And not like this:
What is my grand vision for society?
How can I sell it?
Call it irrational optimism if you will, but I think that after years of identity politics and culture war stuff, Americans are ready for substantive solutions and will listen to someone who provides them. Anyway, have a Merry Christmas, a happy New Year, and I look forward to more writing in 2023.