It will be clear from statistics that President Trump’s battle to retain US primacy has been less than successful, in large part because he has surrounded himself with the favourites of Wall Street. It remains to be seen whether President Biden will be similarly handicapped in his efforts at reversing US’ drift towards second class status…writes Prof. Madhav Nalapat
Once he got elected in 2016 on a platform opposing the chokehold of Wall Street over US politics, President Donald J. Trump filled key economic slots in his administration with individuals steeped in and obedient to the traditions and interests of Wall Street. This is the location in New York that caused the 1930s depression and the 2008 financial crash, among other similar human (or inhumane) tragedies. In its functioning, Wall Street functions not as a part of the broader United States but as a separate entity that is focused entirely on itself rather than on the interests of its host, the US as a country.
Such a disconnect in thinking and acting between the interests of the country at large and Wall Street is embedded into the minds of those steeped in the workings of the Street in a way absent in the City of London or in the financial centres of Frankfurt or Zurich, in each of which the anchor to individual national needs and interests is much stronger than is the case with Wall Street.
Having entered the White House on January 20, 2017 as its legal tenant for a full Presidential term, Donald Trump forgot about the unemployed and the economically devastated citizens of voting locations that were converted by competition from China into economic wastelands. Instead, his focus was on the US stock market. As long as that kept rising, he was certain that he would be re-elected. Ignored voters had a different choice, Joe Biden.
Once in a way, such as in friendly references to that lifelong campaigner against the influence of Wall Street Senator Bernard Sanders or Senator Elizabeth Warren, the 45th President of the US expressed during the 2016 campaign Wall Street-phobic sentiments that ensured millions more votes than he would otherwise have got against Hillary Clinton, a politician who has been unable to conceal the linkages that she and her husband have with Wall Street.
However, even a President Hillary Clinton would not have filled the top tier of the economic component of her Cabinet with as many friends and agents of Wall Street as Trump did. And unlike those with such connections, most of the Wall Streeters have lasted through the shifting personnel strands of the Trump presidency. This is not to say that the 45th President of the US was himself a creature of the Street, only that he was dazzled enough by its products to, once elected, throw into the dustbin his campaign promise to rid policymaking in the Washington Beltway of Wall Street influence.
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The national security apparatus in the US has since 2013 studied more seriously the reality of the PRC under CCP General Secretary Xi Jinping. Since 2012, he has been moving forward steadily to replace the US as the “tiger on the mountain”. It was only in the final two years of his stay in the White House that Barack Obama was able to shake off the influence of Wall Street enough to begin a series of countermoves designed to protect the primacy of US interests from encroachment by the formidable challenger that was President Xi. Despite the Wall Streeters in his entourage, President Trump had sufficient common sense to understand that the top position (which was in every field an obsession of his) was in danger so far as the US was concerned.
Without admitting that President Obama may have been right in some of the stances the country’s first African-American President finally took, Donald Trump carried forward the policy of his predecessor, this time with klaxons hooting and bells ringing rather than the muted rhetoric of the Obama era during the two years that he escaped from the Clinton shadow into which he had placed himself immediately after getting elected in 2008.
In the process, the pragmatic Obama jettisoned several of the Clinton-phobic aides who had been instrumental in his victory in exchange for members of the Clinton durbar. The truth remains that while there has been much sound and fury concerning the trade war that President Trump launched against the PRC, very little light has been shed on its meagre results. This when Cold War 2.0 has been an obvious fact of international life since the first decade of the 21st century.
THE US-CHINA CURRENCY WAR
It would be a conspiracy theory too far to claim that the Covid-19 pandemic was intentionally created in a Wuhan laboratory to kneecap those economies that were (or could in future be) commercial rivals of China. However, even if authorities in Beijing were innocent of any intent to spread the pandemic far and wide through flights from affected locations to cities across the world, such a spread became inevitable through such traffic.
lso, the constriction in domestic production in the US and Europe that was caused by the effects of, and responses to, the pandemic caused the PRC to just record the highest trade surplus in its history. The absence of any substantive decoupling of production facilities based in China (in part because conditions in India are judged by several investors to still be far from what they need to be to emerge as a significant alternative) has resulted in the PRC retaining its status as the Factory of the World, trade war or no trade war, decoupling or not.
This analyst has been pointing out for some time that the leadership of the PRC was, if not consciously working towards a reset of the US dollar to a much lower and less stable level, at the least they expected this to happen. The digitalisation of the RMB and the imprimatur given to blockchain by General Secretary Xi Jinping are steps in the direction of displacing the dollar as the reserve currency of the world, a status that it has had since 1941, when President Franklin D Roosevelt ensured that the US entered the war as a consequence of the bombing of Pearl Harbour by the Japanese navy.
In the currency war, judging by the index used by both Wall Street as well as the Trump White House (stock prices), the MSCI (China index) has risen by 23% during the pandemic, as opposed to 12.6% registered by S&P 500 or the 11.06% of India’s Nifty. Had Wall Street not been continuing to feed Chinese companies with dollars, this would not have happened.
Soon after the latest large-scale intrusion by the PLA on May 3, Prime Minister Narendra Modi banned TikTok, hitting a blow at the sucking up of mountains of meta data by PRC entities who are engaged in ramping up their country’s Artificial Intelligence capabilities. No other country has followed India in this unprecedented move so far, with even the Trump ban on TikTok quickly being overturned by a US court (to the relief of Big Tech in that country, which masochistically supports the PRC as a consequence of the titbits that it is fed from that well-stocked table).
PRC tech champions have done spectacularly well during the pandemic, sucking up vast amounts of meta data and establishing leadership positions in segments such as online shopping that they were previously lagging behind in. In online gaming and video streaming, Several PRC entities are far ahead of many US and European competitors, including in the home markets of the latter while the Chinese market remains shut except for domestic champions. In India, reports are that Huawei has been allowed to participate in 5G trials. In both price as well as quality, the company is likely to outperform the competition.
BATTLE FOR US PRIMACY RAGING
It will be clear from the statistics that President Trump’s battle to retain US primacy has been less than successful, in large part because he has surrounded himself with the favourites of Wall Street. It remains to be seen whether President Biden will be similarly handicapped in his efforts at reversing the US drift towards second class status that has been witnessed for some time, certainly since the trillion dollar Lost Wars launched by President George W. Bush and Vice-President Dick Cheney and the 2008 crash.
Now that Hunter Biden is under investigation for influence peddling as a consequence of the generous compensation received by him from Chinese companies, efforts will be ongoing to compare incoming President Biden’s policies towards the PRC with the largesse handed out to his only surviving child from his first wife.
Both Jill and Joe Biden are known to be exceptionally decent human beings. Those familiar with the Bidens say that the bond between father and son has become exceptionally close after the passing away of Beau Biden, an idealist who would have been an immense success in public life. The question is: will Wall Street sabotage the Biden counter-offensive against efforts to displace the US from global primacy, they way the interests supporting them have substantially succeeded in the case of his predecessor?
If there is a failure by Joe Biden to rein in the onward march of the PRC, the blame will be placed not on Wall Street but on the 46th President of the US. It will be alleged that such failure is the inevitable consequence of the manner in which Hunter Biden was looked after financially by old friends in the PRC. Senators Sanders and Warren are right about Wall Street, and President Biden could do worse than to consult them more often about the battle for retaining primacy for the US and its values. Trump talked a lot, acted much less than he ought to have. The reverse needs to take place.
Those focused on ensuring the continued primacy of not simply the US geopolitical ascendancy but the spread of its values warn that across the world, the success of the China Model is leading to a spurt in public acceptance of authoritarian structures and values. Whether in Brazil, Poland, Hungary, Turkey or Russia, liberal democrats have given way to autocrats largely as a consequence of public support.
The forecast that the end of Cold War 1.0 between the USSR and the US led to the “end of history” has proved to be less than accurate. Cold War 2.0 has made an appearance that even the Atlanticist speechwriters for President-elect Biden may not for long be able to ignore by constantly referring to the dead “Asia-Pacific” construct rather than the reality of the Indo-Pacific. Once sworn in on January 20 next year, Biden will need to sabotage the Wall Street saboteurs.
In a way that his predecessor failed to do, the 46th US President needs to concentrate on (a) holding investment managers personally accountable for sending capital from the US in hundreds of billions to PRC entities that have linkages with defence production and other security related entities. The US Senate and House of Representatives will need to pass enabling legislation for this, as sabotage of the saboteurs may not be possible through executive orders alone, (b) work towards a BRI debt moratorium of 15 years followed by a 15 year period of repayment for any country that seeks to take advantage of such a provision, (c) cut off banks and other financial entities from the SWIFT system that violate sanctions designed to maintain primacy of the global democratic alliance that is taking shape, (d) delist ADRs from stock exchanges that are not compatible with domestic accounting rules. Rather than go alone in such matters, both Atlanticist as well as Indo-Pacific partners need to be brought on board with such measures, and adopt them as well. The key to the battle is access to money, and Wall Street and others that prize cash above liberty and security need to be taught otherwise, not simply by sound and fury but by the light of action.