Crashing the Car of Pax Americana

[ed. Excellent.]

My ask of you in reading this note is that we make an effort to hold several conflicting ideas in our heads at the same time. Like, for example, that the American socioeconomic system desperately needs fixing after decades of venal corruption from (mostly) Democratic but (also) Republican Administrations AND there is an underlying global system worth preserving that gives the United States enormous privilege, wealth and freedom of action in the world. Or, for example, that there’s no reason to doubt the authentic intentions of Donald Trump and his Administration to improve the position of the United States AND their economic policies can have the unintended consequence of blasting the underlying global system to smithereens, making it impossible to achieve their goals. It’s really not easy to hold all of these ideas simultaneously! Every bit of party propaganda from the left and the right, every big voice on social media, everyone wants you to give yourself over to a single idea of party purity and ignore everything else. But it’s just not true.

The truth is that the United States became as sclerotic and bloated under Joe Biden as the Soviet Union under Leonid Brezhnev, and that Joe Biden’s cognitive decline and its obscene cover-up made the United States government a global patsy and a domestic feeding trough. The truth is that our border policy was stupidly permissive. The truth is that we really do need to eliminate vast swaths of the Federal bureaucracy and the Christmas tree funding programs that always grow and never shrink. The truth is that a Department of Government Efficiency is a really good idea.

AND the truth is that the purpose of government is not efficiency for efficiency’s sake. AND the truth is that the quality of mercy is not strained and neither is due process, so that justice may be sure but never cruel. AND the truth is that spending money to curry political favor abroad through CIA USAID programs is a lot cheaper and a lot more efficient than sending in the Marines, AND is a lot more profitable than seeing the Chinese take our place in the world. AND the truth is that we have three co-equal branches of government, where the unconstitutionality of a President ‘vetoing’ Congressionally-authorized spending programs through Executive Order is well-settled law. AND the truth is that government debt isn’t like our own personal debt, so that we can’t go broke as a nation AND we’re nowhere near having a budget crisis AND we have the strongest, most vital economy in the world AND we can still grow our way to a more equitable prosperity without breaking a global system that works so formidably to our advantage.

This underlying global system has a name. It’s called Pax Americana.

• Pax Americana is the Bretton Woods monetary system and the Plaza Accords and the SWIFT banking system and the unquestioned dominance of the USD as the world’s reserve currency.

• Pax Americana is the NATO alliance and the Pacific Fleet and CENTCOM and the NSA and the unquestioned dominance of the US military as the world’s security arbiter.

• Pax Americana is the American brands, American universities, American entrepreneurialism, and most of all the American stories that have dominated the hearts and minds of everyone on Earth for the past 50 years.

• Pax Americana is the ability of the United States to set the rules for every coordination game in the world. The rules of trade, the rules of intellectual property, the rules of money, the rules of culture, the rules of war … all of those rules were made by us. Only by us! And in return we gave the rest of the world two things: global peace (pretty much) enforced by a blue-water navy with force projection capabilities anywhere in the world, and unfettered access (pretty much) to the buying power of the American consumer.

The results of Pax Americana?

• The United States has seen more than 300 million citizens lifted into the highest standard of living in the history of the world, as we have exchanged intangible things like services and the full faith and credit of the US government for tangible things like oil and semiconductors and food at an unimaginable scale.

• The world has seen more than a billion people lifted out of crushing poverty, mostly in China and India but everywhere else, too, as the capacity to make tangible things has shifted permanently (yes, permanently) from West to East.

My strong, unwavering belief is that Pax Americana is a damn good deal for the United States AND the world, especially as American leadership in AI opens up an entirely new realm of intangible things that the United States can trade for tangible things. Is it a perfect deal for the United States? No. Do other countries free ride on our provision of security and an end-market of the American consumer? Absolutely. Has the system been internally captured by oligarchs and professional politicians, so that the distribution of this great wealth flowing to the United States goes less and less to ‘average’ Americans? 100%. Should we aggressively prune and reform the Pax Americana system? Should we root out its foreign free riders and domestic leeches? Yes, please!

But that’s not what this Administration believes. Neither Donald Trump nor his key advisors believe that Pax Americana is a good deal at all, much less a damn good deal like I believe. They believe the United States is being cheated and taken advantage of without end, both internationally and domestically. They don’t want to fix the Pax Americana regime of coordination through multilateral rule-setting. They want to blow up the entire deal and replace it with an America First regime of competition through bilateral engagement.

I appreciate their frustration. I share a lot of it. But I am desperately opposed to crashing the Pax Americana car, Annie Hall style, because the America First system that this Administration wants to have as a replacement is not a stable system that is possible to have as a replacement. The end result of blowing up Pax Americana and its – yes – globalist system of rules and institutions and alliances that coordinates the flow of capital, labor, goods, services and culture without ‘winning’ any head-to-head relationship will be a system that is both worse for the United States AND the world. Here’s why: 

by Ben Hunt, Epsilon Theory |  Read more:
Image: Annie Hall

[ed. From the comments:]

***

I spent almost eight years working in the Appalachian Basin. You have no idea just how bad it is and how deep the pain runs. (You also probably don’t know just how hilariously well armed the Amish are in that part of Ohio; some of those guys could put on a gun show by doing nothing more than opening their barn doors)

How can we keep Pax Americana going in a way that benefits all Americans - and by benefit I mean offers lives of dignity with meaningful work, meaningful relationships and recognition of value?

What if that’s not what a lot of those people want? Because in my experience down there this was not a universal goal, nor would it even carry the majority of the population on any given day.

When the shale boom came it brought with it billions of dollars of absolutely free money that was handed out in exchange for what the residents previously believed was damn near worthless land. Tens of billions flowed from the ground and into the pockets of landowners. All the hotels and motels were full every night for years. Every restaurant was packed day and night. Energy companies paved roads, donated to every local community organization, soccer team, bought every animal from every 4H kid at every county fair. Every county courthouse was filled with landmen who spent all day making copies of deed records, at 25¢ a page. Thousands of pages, by 15-20 guys, every day. The Recorder’s office was running a machine that spat out $5,000/d, every day, for months. Companies cut checks directly to the county for expanded hours so their people could work before and after regular closing times. They paid tens of thousands for a few extra hours a day over the course of a few months. Government revenues ballooned.

Then what happened?

Hundreds of good paying jobs were created overnight…and most went to workers from Texas, Louisiana, and Oklahoma, not Ohio or Pennsylvania. Know why? Nobody could pass a drug test. No, I’m not shitting you. I had a friend who had a wireline company and he tried to hire two locals. Both didn’t even show up for the drug test. That was the last time he bothered to even advertise his job opening in the area. He hired professionals from out of state. Less hassle.

Before a single cubic foot of gas or barrel of oil came out of the ground the local Ford dealership made news as it catapulted to the top of the list of highest volume dealers in the state. It seemed like every farm large and small had a new F-150 in the gravel driveway.

The casinos across the river had multiple record years in a row after a decade of a slow decline. Strip clubs boomed.

And nobody really built anything. The families who were rich before were simply even more rich after. One prominent local attorney—whose conduct would have gotten him disbarred in any other place—tightened his grip on the area, and after a particularly major payout bought a second home in Lake Como, Italy.

The old men dying of black lung kept on dying. The young men continued their drift into addiction, which had started to take hold years before that. Crime went up despite poverty going down.

The local wastewater treatment plants were at least smart enough to make deals with the service companies to clean the used frac water. Again, government receipts grew, but how much of that made it to the people? (Not much)

Nobody bothered to clean up the brownfields and open a new facility making drill pipe. That ended up happening an hour north instead. It took two years for the owner of a previously defunct gravel yard to open back up, despite the fact that he was sitting on a gold mine. (I know this because I tried to buy part of it from him and he not only wouldn’t sell but quite literally did not understand the magnitude of what was about to happen)

Very little changed because the people didn’t want anything to change. Many of them talked about Weirton Steel as if it was still 1981, and cursed the foreigners (ArcelorMittal) who owned what was left of it. (And in a small twist of irony the man who bought that bankrupt company off of the employees in 2002–for a hilariously low ball price—would go on to be the Secretary of Commerce under the first term of the president that they voted for in overwhelming numbers) It’s been 15 years of oil and gas money steadily flowing to the area, and nothing has changed. The complaint that “there aren’t any jobs” is old enough to drink. Some people had the good sense to leave. Everyone else was just more comfortable staying and watching everything die.

I’m not unsympathetic, but the way these folks are talked about—and talk about themselves—you’d think they had no agency of their own. They think their salvation is just around the corner, if only we’d just blew up every working institution around the globe they’d make it to the other side of this mess. It’s paternalistic horseshit that Trump is selling and they’re lining up around the block to get their wheelbarrow full of it.