The US Renounces Neoliberalism To Compete with China: Historic Shift in 2 Speeches

In the daily succession of crises and conflicts in international news, certain momentous developments, less conspicuous but nonetheless profound, can sometimes fly under the radar. This is the case with a historic change of course currently underway at the White House, marked by two major speeches given at the end of April by Treasury Secretary Janet Yellen and National Security Advisor Jake Sullivan.

The thrust of these speeches, both passing relatively unnoticed, centered around the need for the U.S. establishment to blame an external actor (China, in this case) for the problems afflicting the American economy. These are, nonetheless, the result of decades of flawed policies created by the various administrations that have succeeded each other in the White House. When Yellen affirms that “China’s ‘unfair, nonmarket’ economic practices” have resulted in an excessive concentration of basic goods in China, causing damage to workers and businesses in the U.S. and the world, she forgets that the outsourcing of American business to Chinese territory was due to the enthusiasm of the American elite, who reaped enormous profits from this undertaking — one that was opposed by workers and unions in the U.S., but naturally without success.

Ignoring this fact, Yellen asserted that the Biden administration is now prepared to accept economic costs in order to “protect US national security interests” from threats posed by China. In order to maintain its own world dominance, Washington intends to win the competition with China and isolate Beijing, as can be deduced from the National Security Strategy outlined by the administration last October.

To this end, over many years, various U.S. administrations have adopted measures such as increasing investment in strategic sectors at home, banning exports to China of the most technologically advanced semiconductors along with the machinery that makes them, prohibiting dealings with about 600 Chinese companies (officially because of their connections to the Chinese armed forces or for reasons connected with human rights) and pushing allies to reduce their own economic ties to Beijing.

After maintaining that predictions of America’s decline have always proved to be wrong, and that even today, Washington is up to the challenge, Yellen wished to provide reassurance that the previously mentioned actions were not aimed at obtaining a competitive advantage over Beijing or stifling China’s modernization. She also went on to add that the U.S. was not seeking a complete “decoupling” from the Chinese economy, something which would be “disastrous for both countries” and could be “destabilizing for the rest of the world.”

Sullivan later clarified Yellen’s speech by borrowing an expression well loved by the president of the European Commission, Ursula von der Leyen, according to whom the West is not so much seeking a decoupling from China but rather a “de-risking” — that is to say, a reduction of risks arising from Western supply chains’ overexposure to China.

However, America’s decision to target the leading Chinese telecommunications company (Huawei) and ban exports to China of the entire gamut of the most advanced semiconductors betrays U.S. intentions to launch a full-scale economic war rather than engage in mere market competition with Beijing. In his speech, eloquently titled “Renewing American Economic Leadership,” Sullivan went further, however, casting doubt on the very basis of the globalization promoted by the U.S. in the past 30 years.

Again, without identifying the cause as stemming from particular American political decisions, he lamented that the crisis had “left many working Americans and their communities behind” and denounced the excessive dependence on global markets that had shown its negative side during the pandemic and the war in Ukraine.

Sullivan is the main proponent of a “foreign policy for the middle class,” a vague slogan which has been promoted by the Biden administration for some time, by which American foreign interests should support strategies aimed at revitalizing the American economy and society at home. Departing from this assumption, Sullivan maintained that the market does not always allocate capital in a socially optimal way, trade liberalization should not be an end in itself and privileging finance over other sectors of the economy was a mistake.

Expounding ideas that were certainly commendable in part, Sullivan threw off Washington’s prevailing neoliberal dogma based on the reduction of public spending, privatization, deregulation and openness to foreign direct investment — the “Washington Consensus,” according to a term coined in 1989. This is not, however, any sort of “rediscovering socialism” on the part of the Biden administration nor the announcement of a new universal vision, but rather something much more focused: the formulation of a utilitarian strategy aimed at seeking to preserve U.S. dominance.

We are facing an attempt to identify measures to prevent the disintegration of American society at home and, on the international level, the system of allegiances on which the Western bloc is based. Many doubts can be raised over the success of such an undertaking, given that introducing tariffs and subsidies comes at the expense of allies and that it doesn’t confront the inequality between capital and labor on the domestic front.

Robert Iannuzzi is the author of “If Washington Loses Control: The Crisis of American Unipolarity in the Middle East and the World,” 2017.