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How did the United States get rich?
The textbooks tell us it was the “free enterprise” genie. The Founding Fathers, they say, had the foresight to construct a political and economic vision of a commercial republic, committed to private property, open markets, and individual liberty. Slavery was the only major stain on this vision — until our “new birth of freedom” extinguished it in war.

Despite protectionist spasms when the country was young, America emerged as the champion of the “liberal economic order” after the Second World War — and now is the time to defend it against a rising China and an economically illiterate commander-in-chief, they say.

The Rise of the “Yankee Leviathan”
This story, unfortunately, is mostly false.

As the economic historian Paul Bairoch has written, America is the “mother country” of protectionism. The very first act passed by Congress was the Tariff of 1789, and the United States consistently maintained some of the world’s highest tariff levels throughout the 19^th century, when it became an economic powerhouse. What the economists call “infant industry protection” was essentially pioneered in the United States, reflecting Alexander Hamilton’s view that “capital,” without government support, “is wayward and timid in lending itself to new undertakings.”

And despite our present sanctimonious lecturing to China, we weren’t too keen on the sanctity of intellectual property, either. This was one of Charles Dickens’s many gripes about the United States, as he saw pirated editions of his novels proliferate across the Atlantic without any copyright constraints. Echoing modern American policymakers and business leaders, he complained that “I am the greatest loser alive by the present law.”

Of course, times have changed. American tariffs have, on the whole, decreased, and we are no longer proudly ripping off innocent British novelists.

Nonetheless, this history matters. For one thing, other countries know it well — and are trying to copy it. Chinese leaders may claim to offer a new and exciting “Beijing Consensus” stemming from the unique genius of the Communist Party, but they are doing little more than putting the American model on steroids.

Although the methods are different, the key ingredients are remarkably similar to those of the late 19^th Century “Yankee Leviathan“: the suppression of organized labor; the creation of a cheap, easily exploitable migrant underclass; national infrastructure programs; and, yes, protectionism. China has just done it all faster and more brutally.

Kicking Away the Ladder
Our current strategy, to paraphrase Friedrich List, is to “kick away the ladder.”

Britain perfected this art after the repeal of the Corn Laws in 1846, becoming the leading proponent of free trade only once it had conquered a third of the world with a mixture of raw naval power and the highly restrictive Navigation Acts, which entrenched the catchy principle of “English trade for English vessels” over nearly two centuries.

The Founding Fathers and many subsequent American leaders were smart enough to see through the British game. China probably did, too, but — with no central political authority in a degenerating “century of humiliation” — had no means of countering it.
Now, however, the picture has changed dramatically.

China has the power not just to protect “infant industries” through tariffs, currency manipulation, or subsidies, but also to withstand American attempts at “hitting back” in a tit-for-tat spiral: inflicting reciprocal pain in politically important U.S. states, and absorbing economic coercion through government spending and redistribution.

What has changed less is the American appetite for protectionism. The most globally significant U.S. industries receive government largesse in a wide variety of forms. Subsidies for agribusiness; generous tax breaks for tech giants; unmonitored and seemingly unlimited contracts for defense companies — these sectors of the economy have hardly pulled themselves up by their bootstraps.

Warnings from History
In this context, condemnation of China’s inadequate enthusiasm for free markets is obviously unprincipled.

But maybe it is smart. After all, international politics is inherently dishonest and hypocritical, especially when incumbent and emerging superpowers are involved. President Trump is not the only one who wants us to win at this game without moral compunction.

A similarly calculating approach worked for Britain. At least until the patience of Germany — its primary economic and strategic rival — ran out.

After unification in 1871, shrewd politicians like Otto von Bismarck led Germany through a rapid industrial revolution that would have undoubtedly impressed Xi Jinping, and carefully avoided antagonizing their superior but declining competitor.

Eventually, however, their less sober successors wanted a piece of the global imperial pie. They were also tired of lectures on “democracy” and “liberalism” from a British government that would offer none of these things to the Indians or the Irish — and didn’t hesitate to use military force against its own miners.

Germany and Britain fell into what Graham Allison calls “Thucydides’ Trap“: war between rising and falling nations.

As the American president becomes more bombastic, belligerent, and unpredictable in his approach to China, we ought to remember these eerie historical analogues, rather than inflate delusions about our role in the global economy.

If we look honestly at our own history, we can begin to understand China’s current and future goals. Then, we can think about our best methods of accommodation or — gasp! — “appeasement.” This, of course, carries domestic political costs. But compared to the long-term costs of escalation, it is cheap.
 

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Chris Devers / Flickr

Arms companies have had a good year.

The top 100 learned in July that their annual revenues amounted to a healthy $364.8 billion, with American companies — as usual — dominating. While the military itself has suffered several calamities — the apparent murder of a Green Beret by two Navy SEALs in Mali in June, the deadly crash of the U.S.S. John McCain near Malaysia in August, the killing of four Special Forces troops in Niger in October, — the contractors have thrived.

The author of The Art of the Deal has helped.

$110 billion from Saudi Arabia, $2.4 billion from austerity-ravaged Greece, $1.4 billion from Taiwan — all these deals have been set in motion by the Trump White House. Even if they’re not completely fulfilled, as can often be the case in such an opaque and unpredictable market, the financial outlook for America’s arms companies will keep making other (less lethal) industries look like mom-and-pop stores.

“Last time I checked they were on our side”
But the real victory is political. One voice at the top of the Pentagon is, in the long run, far more valuable than a big, new F-35 contract — and this is where President Trump has been so useful to the makers and sellers of weapons.

Well before the Thanksgiving break, the Senate had already confirmed that the new No.2 at the Pentagon will come from the executive council of Boeing; and the new Army undersecretary from the vice presidency of Lockheed Martin‘s F-35 sustainment program.

The new undersecretary of defense for acquisition, technology, and logistics — a central role in deciding what the Pentagon purchases and from whom — comes from the very top job at Textron Systems, the 16th largest arms company in the world. On November 15, Raytheon didn’t miss out on the action, with its vice president of governmental relations confirmed as Army Secretary.

In all of these cases, notwithstanding a smattering of tough questions, senators haven’t thought twice. By margins of 89-6, 92-7, and simple voice votes, these confirmations have been anything but grillings.

The one exception was John Rood’s November 16 confirmation hearing for undersecretary of defense for policy. Senators Elizabeth Warren and John McCain asked whether a senior vice president of Lockheed Martin International — whose role included “developing and executing strategies to grow Lockheed Martin’s International business” — could be trusted not to do more or less the same thing in a top Pentagon job.

Yet the prospect of the Senate doing its job was, it seems, short-lived. The Senate Armed Services Committee voted to advance Rood’s nomination two weeks later, despite concerns over potential conflicts of interest.

It doesn’t stop there. As The Intercept’s Lee Fang noted back in March, “Personnel from major defense companies now occupy the highest ranks of the administration including cabinet members and political appointees charged with implementing the Trump agenda.” This includes the defense secretary himself, who had to resign from the board of General Dynamics to take up the most senior job at the Pentagon, and now White House chief of staff John Kelly, who had to step down from his role as a paid advisor to Dyncorp to become the Homeland Security chief.

These two former generals and close friends of defense contractors are now two of the most senior figures in the Trump administration. They may well be running our foreign policy, with the president himself so inexperienced and his secretary of state only apparently there to destroy his own department and occasionally be subjected to public humiliation by the commander-in-chief.

But even these exceptionally powerful military men still find time to win applause from their former paymasters. Defense Secretary Mattis, in particular, has assured industry representatives that the Pentagon will “aggressively and swiftly take advantage of the opportunities that we see developing around us in the private sector.”

When he was rebuked for meeting with contractors so soon after starting his new job in public service, he responded: “I became aware that some people thought, ‘you can’t do that,’ and I said, ‘why not, they’re Americans aren’t they?’ Last time I checked, they were on our side.”

The “Proactive” President
Congress has not questioned any of this.
Instead, it has ensured that a $700 billion budget for the military has cruised through both houses with bipartisan support. This, too, will be good news for defense contractors, who sucked up nearly half the Pentagon’s similarly massive budget for fiscal year 2016.

They continue to be rewarded for their long list of failures, which range from overpriced and constantly delayed “big-ticket” deals, to at least $31 billion of waste in rebuilding Iraq and Afghanistan. Their dubious and exaggerated claims of being “job-creators” and “innovators” are uncritically embraced by the Trump administration.

No wonder, then, that “industry leaders” have spared a rare favorable word for the embattled 45^th president.

Jerry DeMuro, CEO of defense giant BAE Systems, Inc. (the U.S. subsidiary of the larger UK company), praised Trump’s “proactive” approach to promoting U.S. arms sales abroad, as well as the defense secretary’s willingness to “bridge the gap” between the public and private sector. Similarly, Raytheon’s CEO gushed that the Trump administration “has opened several doors for us” and is “accelerating our ability to grow internationally.”

The initial scare generated by Trump’s early Twitter attacks on the exorbitant cost of fighter jets has now dissipated: He’s become a reliable arms-dealer-in-chief.

So, with profits flowing, and political clout solidifying, the arms industry will begin 2018 happier than ever. President Obama was a good friend to them, approving more than double the value of arms sales reached by George W. Bush. Trump, it seems, will be even better.
 

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