Reheated Nachos in the Age of Crony Capitalism

In the latest edition of Foreign Affairs, former Biden National Security Advisor Jake Sullivan has written a piece optimistically called “The Tech High Ground.” In it, the United States is the defender of the free world, tech companies are good guys, Wall Street just needs a little nudge here and there, and the government should only intervene in the economy for national security purposes. It has a retro feel to it: neoliberalism, but tweaked to advance the security state.

Sullivan paints a picture that comes across as naive: our allies will line up for American "digital infrastructure" after U.S. taxpayers subsidize tech exports. America will lead the world in setting "democratic" AI standards even as we use trade policy to benefit Silicon Valley at the expense of sovereignty. And our clean energy plan will the products that concern the Pentagon the most, so the purpose of these expenditures is not a just transition, but rather the justification for an updated military-industrial complex that allows us to control defense supply chains.

What’s Not There

What isn’t in the article? Any mention of unions. Wage growth will happen, somehow, but the new industrial policy doesn’t even specify that government investments should require union labor or prevailing wages. The article states that “the best approach is the one I have described as ‘small yard, high fence,” - that is, he is reupping the same plan he had before the COVID supply shocks (reminder: those shocks were inflationary). In practice, “small yard, high fence” was less of a yard and more of a window box. And the article recognizes that the high fence - which includes export controls - didn’t really work when it came to semiconductors.

The first criterion for government intervention is a “clear national security nexus.” It seems our ambition is not to lift Americans from the economic precarity that has undermined confidence in democracy: that would require us to start not with “how do we advance our national security goals” but instead with “how do we create good jobs with good benefits for Americans who are falling behind?” Democrats have seen the Blue Wall crumble in two of the last three elections, but we’re sticking with “small yard, high fence”?

Because the starting point is national security, Sullivan’s proposal comes with a call to remove all the tariffs on China for goods that aren’t in the little national security window box — and so tariffs for electric vehicles and semiconductors. The idea is that we’re going to keep importing everything else from the PRC. If the last 10 years have taught us anything, it ought to be that national security starts right here at home – with the plight of working Americans. When we don’t deliver for them, our democracy becomes fragile, and with it any credible claim to be the defender of the free world. The national security establishment seems to be unable to deal with, this central challenge. There are phrases tossed in here and there about stuff for workers, but they read as pro forma recitations, not a real commitment to improving the lives of working class Americans.

“as if we were not smack in the middle of a dynamic in which allies find the fusion of our government and our tech titans to be a noxious stew”

By reupping a pre-COVID strategy, the article memory-holes the lessons from the pandemic. We had shortages of just about everything. Limiting the project to national security betrays that there is no plan for true resilience. Monopolization of supply chains is not good, even if those supply chains aren’t in the national security window box. One way to deal with that problem, of course, is to deny that the supply chain shock mattered. But that requires people to ignore their lived experience.

According to the article, the United States is somehow going to advance democratic standards for AI, whatever those may be, as if we were not in smack in the middle of a dynamic in which allies find the fusion of our government and our tech titans to be a noxious stew. European countries, for example, are decoupling from American tech platforms. And the problem isn’t limited to tech: it extends to the weaponization of the dollar against European residents, motivating them to try to figure out how to deliver a digital Euro.

This pitch is, of course, framed as competition with the PRC. The subtitle is “What It Will Take to Gain the Advantage over China.” These are nachos that have been reheated several times now: it’s the latest version of the “Pivot to Asia.” The same Pivot to Asia that led to the failed TPP and then the failed IPEF. It’s an attempt at neoliberalism ex-China that fails because the problem facing American democracy, and democracies around the world that have depended on American democracy, can’t be laid exclusively at the feet of the PRC. Our core problem is demonstrating that democracy can lead to outcomes that actually support the working class. The foreign policy elite is so consumed with the U.S.’s role in the world that they do not recognize the degree to which we cannot be a good partner to others when we are struggling this much at home.

Beyond that major flaw, the pitch does not include any reckoning with the fact that Europeans experienced the original “Pivot to Asia” as weakening NATO. And Team “Pivot to Asia” is the same crew that devised with AUKUS – which the French believe came at their expense. Mourning TPP, Team “Pivot to Asia” tried to pivot to Big-Tech friendly  “digital trade deals” during the Biden Administration‍. That was the first effort to microwave the nachos. It morphed into IPEF - the second one. No mas, por favor!

Put together the NATO concerns, the AUKUS concerns, and the tech concerns, and it’s easy to see that the “Pivot to Asia” folks are not the right sales team to pitch Europeans on the virtues of the U.S. tech stack.

Surveillance Capitalism Can’t Occupy the Tech High Ground

The tech discussion in the article may be the most unnerving part because it rests on assumptions that just don’t hold. The article operates in a world in which the tech oligarchs aren’t seen as Bond villains. This is a big miss, since even Larry Summers’ former speechwriter has invoked the comparison. And thus we end up with this baffling statement:

“If the global digital economy ran on a U.S. tech stack – cloud architecture, chip designs, safety protocols, and technical standards – the United States could secure a future in which democratic values were baked into the code of the twenty-first century.”

Democratic values? Say what? The tech bros, who have captured every branch of the U.S. government, have made it clear that they have no interest in democratic values; we as the United States are unable to regulate them. The most trusted American spokesman is Pope Leo, who has strong views on tech and inequality; one of the tech titans just suggested that he’s the Antichrist. The Pope’s flock numbers more than a billion people, all over the world. If I were looking to build allied relationships, I’d “lean in” to Pope Leo and not so much the other guy.

The article talks about allies and partners de-risking from China. Allies and partners are de-risking from us, especially in tech! Europeans are now actively building their own Eurostack. It’s getting a head of steam precisely because the American brand  - Pope Leo aside - is tarnished, especially on tech. The article mentions the problem of infiltration by “Chinese state-sponsored cyber-actors.” Are we sure we aren’t seen as posing a similar risk?

Americans must come to grips with the fact that we are no longer perceived as that different from the PRC. We have surveillance capitalism; the PRC has state surveillance capitalism. They coerce as part of their Taiwan agenda; the current crew coerces as part of their crony capitalist agenda. To allies, it’s potato, po-tah-to.

If we want to “lead",” we’ll need to distinguish ourselves especially on tech. And right now, the dream of having “a democratic digital order that makes American technology the prevailing model” is fantastical and will remain so unless we deal with the outsized economic and political power of the very tech companies that would be driving this “digital order.”

Tech Capture is a Bipartisan Thang

It would be nice to think that the problem of capture was unique to the current crew, but alas it is not so.

Tech is a good case in point. Under Biden, USTR paused negotiations on certain digital trade provisions in IPEF, including provisions requiring  countries to permit the free flow of data. That is, we had concerns that a free data flow provision gave Big Tech too much control of what happens to your data - your privacy, where that data gets sent, and even the antitrust concerns when only a few companies have all the data. So we hit pause, and it was no biggie. Having done that with IPEF, USTR then ensured that its position at the WTO matched its position on IPEF. Also no biggie, right? Wrong! The National Security Council had a meltdown, chatting up the press and giving the House Oversight Committee an opening to make hay with it.

This was at the same time the Administration was trying to get a rule out the door that would have limited the free flow of data to “countries of concern” (e.g., China and Russia). You might be thinking "ok, but those countries of concern weren’t parties to the WTO negotiations, because otherwise the NSC would be undermining the Administration’s own position, and that would be weird.” Wrong! Both China and Russia are indeed parties to the WTO digital trade negotiations.

The blurred lines between government and business are the hallmark of neoliberalism. The article is a good example of it, contending that

“winning … requires commercial diplomacy at scale. The U.S. government should partner with U.S. companies to lower barriers to access to American technology around the world.”

It proposes that the U.S. government help with financing – financing! These tech companies are firing people and lighting money on fire, while also avoiding taxes, but the American taxpayer is going to subsidize their access to foreign markets?

About those foreign markets – they’re the ones currently experiencing U.S. government bullying on behalf of those same companies. Try to regulate tech and they’ll all scream “discrimination!” It’s reached the absurd level where, as the Capitol Forum has reported, the Korean-born CEO of a nominally American company claims “discrimination” because the Korean government is enforcing Korean law against him in Korea, where he lives. Epstein class impunity.

Coping

Everyone who served in the Biden Administration copes with what’s happening now in their own way. Certainly, one coping mechanism is denial: let’s pretend it’s 2020, and if things break for Democrats, then America is Back! CHIPS! IRA! Plus a U.S. tech stack!

“Neoliberalism begets crony capitalism.”

But when we came back last time, America’s Back-ness proved to be of short duration, the IRA was gutted, and CHIPS survived because of a swing seat in the House that would have been in play if they’d gotten rid of it.

It isn’t credible to think partners and allies are going to embrace another round of the same old same old when the new piece of it involves exporting the dominance of deeply unpopular techno-feudal overlords.

For those of us who came of age in the 1990s, neoliberalism was presented as an objective truth, rather than as a policy choice. It’s tempting to view the challenges we face today through the narrow prism of “market failures.” This is particularly true among a cohort who believe the answer to Democrats’ problems is a return to Clinton-era policies. But Clinton-era neoliberalism + a window box is still neoliberalism. It’s still grounded in the Washington Consensus, with a little tweak here and there.

In truth, we should have learned our lesson during the financial crisis: neoliberalism begets crony capitalism. It’s not too late to learn that lesson now. That means separating what’s in the American national interest from what’s in the multinational corporate interest and not taking orders from the latter under the theory that it advances the former. It’s the only way to have a chance of occupying any kind of “high ground” on tech or anything else.

If we’re really looking to “gain an advantage over China,” we’ll need to start with shedding our crony capitalist approach to international economic relations. Otherwise, it’s just more of the same.