The new Great Game: big-power politics behind the come-back of industrial strategy and managed trade

Abstract

The government of President Biden has rolled out a “modern American industrial strategy”, dramatically qualifying the 40-year western consensus on free markets, globalization and China. The spearhead of the new approach is not the Treasury or Commerce Department but the national security establishment, and the main objective is to “contain China” in sectors where its rise poses a threat to US primacy in the world-system. This gives US economic engagement with allies and the world-economy-at-large a more geopolitical and techno-nationalist cast than since the Second World War. The government is boosting investment in certain high-tech sectors in America, while it chokes China’s access to crucial technologies and limits the reach of Chinese tech and telecommunications companies abroad. It is pressuring allies to comply with its restrictions, lest their firms benefit from US firms’ absence. This essay describes the complicated responses within the US and within European allies. It concludes that high-level geopolitics will continue to shape international and national economic policy for long into the future, much more pervasively than in the decades since the Second World War. A possible upside is that the American embrace of a modern industrial strategy opens the door to a more dispassionate consideration of industrial policy possibilities for developing countries than in the past.