When the Hegemon Becomes A Developmental State...
It’s just empire, dude.
I’ve been discovering a lot of useful research in academic journals recently, and I’m resolved to share it here more often (we’re now over 5k subscribers!). Most of what I’m finding bears on international relations but does not appear in the journals narrowly associated with the discipline. Between being in the “wrong” places and the fact that nobody really reads journal articles to begin with, it might be something of a service to share the good stuff on occasion.
The latest find, by Erez Maggor, appears in Politics & Society and is called, “The Return of Industrial Policy and the No-Longer Hidden Developmental State in the United States.”
The author interprets the Biden administration’s post-neoliberal shift in economic policy as American elites’ self-conscious embrace of developmental statism.1 That interpretation contrasts with two others.
One is a view held by Daniela Gabor and others that the Bidenistas were essentially using industrial policy to “de-risk” private capital investment. Put differently, the US mobilized hundreds of billions of dollars via tax credits, subsidies, and “crowding in” effects to encourage multinational corporations to invest in the manufacturing of semiconductors and green tech. This reduced the investment risk of anyone willing to allocate capital into these sectors.
The second interpretation that the article pushes against is the idea that industrial policy is nothing new for the United States. Neoliberalism was the mobilization of state power to assert the primacy of capital over labor. It was “industrial policy” for financial services and non-industrial asset holders. The author doesn’t like this view but doesn’t offer much to reject it; he just thinks there’s more going on about that, and he’s right.
The author’s argument is a useful complement—not an invalidation of—these other perspectives. US industrial policy did de-risk private investment in key tech sectors, and it was a reshuffling of who within the capitalist class benefited from state patronage. But Biden-era industrial policy was more ambitious than these effects, at least within the imaginations of its makers.
I spoke with a number of friends and acquaintances from the administration about the IRA and the CHIPS & Science Act. They all more or less thought of themselves as doing developmental statism. And that made them far more incoherent than they realized.
What this new article doesn’t grapple with is that the Biden folks still saw the US as the global hegemon. And they had opted into a set of economic arguments that acknowledged the global economy was a capitalist world-system. Yet, they made no attempt at all to manage the contradiction between, on the one hand, fulfilling the obligations of the hegemon—which included the stability of a global financial and trading order—with the decision to become a developmental state on the other.
The contradiction is precisely in the types of policy tools you use and the purposes to which you put them. On Biden’s watch, the US was using the classic predatory policies of a hegemon that perpetuate unequal exchange with the global South (the enforcement of intellectual property regimes for the sake of exclusion, establishing quasi-monopolies in key sectors, dominating value-added processes in the production of key goods, extracting resources from poor countries but refining them elsewhere, demanding usurious interest rates on foreign-government borrowers).
There’s nothing new in all that.
But by becoming a “developmental state,” the Biden administration was also deploying the policy repertoire that developmental states use, which works against the hegemon’s policy repertoire—tariffs, incubating infant industries, selective protectionism, currency manipulation, state-owned enterprises, de-risking investment in favored sectors, etc.
We think of Trump 2.0 as world historically incoherent, but Biden’s project was pretty incoherent too. It’s also what raised alarms for me going into my book about all this with Mike Brenes, The Rivalry Peril. We were worried about what happens to the world when its hegemon becomes a developmental state. For lots of reasons, we thought it would throw off chaos, even violence, on the road to economic calamity for most countries. In a way, that actually explains a lot of the bad shit we’ve been living through the past few years—the most powerful actor in the system was trying to at once use the tools of unequal exchange and the tools of developmentalism. What?
There’s a way in which this is all a consequence of flag-brain nationalism, not seeing the world relationally. The contradiction between hegemonism and developmental statism owed to making all of it primarily about global primacy and the China threat. And once you’re anchoring state capitalism in geopolitical rivalry, you’re just doing empire, dude.
In any case, here we are, confronting the problem we warned about in The Rivalry Peril:
Washington’s national security Keynesianism appears to be a wilful attempt to close out the international economic order as it existed before 2020 while still “leading” the global economy, giving up the obligations of world policeman while continuing to exploit the advantages of world order so the United States can outcompete China. This is a grim outlook for much of the world. On what grounds can we hope that the Global South will be more than a plundered battleground for the powerful? What model of economic growth and development is there in a world forced to choose between the Chinese market and the U.S. market? And if the rest of the world suffers from economic stagnation or depression, what foreign markets will be able to consume America’s planned manufacturing surplus? A hegemon pursuing something akin to autarky leaves little of promise for others in the international system.
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For those unfamiliar, developmental statism is an approach to political economy that mobilizes state power on behalf of national economic development and state-building. It’s how the East Asian “tigers” climbed out of the agricultural mode of production to become the world’s leading growth engines within the span of a couple decades. It’s controversial mostly because the policy tools developmental statism prescribes (like industrial policy) run counter to orthodox economic thinking.