„The world has become much more multilateral“
In her keynote speech at the Frankfurt Book Fair Economic Prize Ceremony (October 18, 2024), Julia Friedlander discussed the role of the U.S. economy in the upcoming U.S. elections.
By Julia Friedlander
Good evening. I was delighted to receive the invitation to join the Book Fair this year and would like to thank Handelsblatt for asking me to share a few key theses on American economic policy with you, just three weeks before election day in the United States. For the past 2.5 years, I have served as CEO of the Atlantik-Brücke, a transatlantic policy network that has fostered relations across the Atlantic among politicians, industry representatives and academics for over 70 years. Our organization played a key role in ensuring Germany received the Marshall Plan and accelerated its path into NATO just a few years later. Our task is to find and execute the modern version of this legacy. I am the first American to hold this position, after serving for a decade in the US federal government, in the Central Intelligence Agency, in the Treasury Department and in the White House.
Those following the presidential debate probably see a patchwork of campaign slogans and policy proposals either directly or indirectly related to the state of the economy. Some are more viable than others, but in the end despite all the partisan rancor, both Harris and Trump are circling around the same concepts—what is the role of the state in the economy, and how do we trade with the rest of the world?
Never have voters been so concerned with the country’s identity
Never have voters been so concerned with the country’s identity as an industrialized nation and global market participant. Go to a bar in a rural part of America and ask around—everyone is deliberating the future of the American economy and their own ability to make their way within it. The intense debate among the electorate and political leadership of both parties reflects a new era in the politics of global competition.
Just about every day in Germany I hear some version of the following: the US is “stepping back from the rules-based trade order that it itself designed” or the US is “turning against its own very nature into protectionism.” The US is certainly changing, and I cannot say I personally agree with every choice that my government leadership has made in recent years, but these assertions in Europe reflect a certain myopia with regards to US policy.
When did this criticism begin? In March 2017, I sat in one of the first of thousands of meetings with external guests that I would hold in the following years. This was at the very beginning of the Trump administration, and I came as a civil servant appointed to the National Security Council. A guest from Germany asked me what the transatlantic priorities would be, expecting that I would mention Russia, or perhaps NATO expansion in the Balkans. But after the first cabinet meetings I attended, sitting in the back row, I had a different thesis: I think it will be China. With a quizzical look, the guest said: “You don’t really mean that, Julia?” Today the two of us laugh about that meeting. Six years later, we are dealing with a radically different concept of geoeconomics and a lot of open questions how we secure economic prosperity.
“Tariffs, public investment and various trade barriers have always been cornerstones of our country.”
Has the US taken a brand new path in the Trump and Biden years? Even I felt like I first heard the word industrial policy in 2018. After all, I was inoculated with free market economy at every available opportunity throughout my education. Crucially, my parents, born a few years after the war, were not. A quick trip through American history shows that the fervor of neoliberalism is an exception rather than a rule for the country. At the end of the 19th century, the first anti-trust laws and reams of import/export bans were introduced, largely to compete with Great Britain, but several are still in force today. The New Deal in the 1930s, the war economy of the 1940s, the GI Bill and Great Society in the 1950s and 1960s expanded and continued to redefine the state and its role in the economy and wealth creation. Tariffs, public investment and various trade barriers have always been cornerstones of our country- sometimes irreplaceable assets, sometimes counterproductive, sometimes simply political gamesmanship.
With that in mind, we can view the creation of the WTO as a figment of an era in our shared economic history, not the fulfillment of that history. Just as the Bretton Woods institutions were founded after the destruction of the Second World War to aid indebted countries and establish the backbone of the international monetary system, so too did the neoliberal era seize on a moment of unparalleled economic advantage in the West to lay the groundwork for an open economic trading system that would deliver unmitigated good for working- and middle-class citizens of rich countries. Speaking with counterparts in Germany it appears they elevate the WTO to biblical heights: on the sixth day God created the WTO and on the seventh day he rested. It would be great if that were true—or still true.
Globalization has not “retreated,” it has deepened and grown many new facets
It would also be great, or at least intellectually simpler, to agree with many policymakers who assess that Europe is caught in a “great power conflict” between China and the US. Sure, the “one world, two systems” debate is raging in Washington, but reality is more complicated than two-block confrontation. Accelerated by the pandemic and fragmentation of supply chains, economic dependencies and wealth are more equally distributed. Emerging economies worldwide are looking to profit from this great shake-up and find new comparative advantages for themselves. To understand the turn away from formal trade agreements in the United States, I’m just as interested in Brazil, Mexico, Indonesia, Saudia Arabia, and Turkey as I am with China.
Globalization has not “retreated,” it has deepened and grown many new facets with many more players who are asking for a seat at the head table. When it comes down to it, the United States and Europe must relearn how to compete in a world that has become much more multilateral than in the days when we so gladly championed multilateralism.
It also seems like we have overlooked or conveniently forgotten some of the foundational economic theory that got us to this point in the first place. Who remembers their first trade theory class? What does Ricardo tell us? That lowering barriers to trade will result in an overall increase in economic welfare but will also serve as an economic equalizer. Wealthy countries will, over time, converge compared with their partners. And that countries will seek comparative advantage and market specialization. It did not occur to the architects of contemporary trade policy that the industrialized world could ever lose its overwhelming wealth and innovation advantage vis-à-vis China.
It took decades for public sentiment to turn against globalization at the ballot box
But that is has happened in the United States, starting in the 1970s. In the years directly following the implementation of the North American Free Trade Agreement with Canada and Mexico, for example, thousands of factories closed. Yet it took decades for public sentiment to turn against globalization at the ballot box, epitomized in the surprise election of Donald Trump in 2016. If this has been happening for forty years, why did it take so long for us to digest the consequences politically? Why were our policymakers not taking notice of deindustrialization? Were they still focused on the net benefit for the US market, as good arrived in the United States at ever more affordable prices, seemingly overnight? Put simply, why did Washington think that cheap televisions made up for the decline in stable employment in manufacturing? Why didn’t the industrial centers of the Midwest balk on Barack Obama the way they ultimately did on Hillary Clinton?
First, the country was preoccupied with cleaning up the global financing crisis. The G20 became the primary global economic player, allowing the US to resolve a banking meltdown in international fora. After all, the financial sector was at fault for house foreclosures and the great recession, not international trade. If anything, globalization was lauded for hauling the American consumption-based economy out of its deepest moment. Deindustrialization was not a focus of the Obama Administration.
What would have been the political response if TikTok and X had existed in 2008, when markets bottomed out?
Second, personal experiences were not shared as easily without social media. The risks of disinformation and spread of hate speech are massive destabilizing factors in our political discourse, but we are really witnessing a great democratization of ideas. The lived reality of the American economy is now a collective public experience. Sixty percent of the country lives paycheck to paycheck. Public debates about the rising costs of groceries and housing are ubiquitous over social media channels, while government press releases can easily go unnoticed. Play a mental game with yourself: what would have been the political response if TikTok and X had existed in 2008, when markets bottomed out. No one could have hidden the sheer panic back then among leadership in New York and Washington from today’s observant public forum. Through the fog of constant information and often irrational discourse online, governments are now held immediately accountable to the economic needs of their electorates.
If for a moment you can set aside all the bad memes and tweets and outrageous things Donald Trump says—his candidacy, as well as the core of Joe Biden’s economic policies, are symptoms of the historical period we now live in. Europe is changing course as well, for very similar reasons. Demand in emerging markets scooped Germany out of crisis in 2012. Now those very markets pose risks to the economic model due to the stark realities of globalized competition. International rules in need of recalibration. Germany talks about tariff policies all the time: on electric vehicles from China, on Brazilian agricultural products, on American steel. But the strength of both Berlin and Brussels will lie in standard-setting, investment and financial reform. That is the new form of rules-based wealth creation. Not an easy path, and no one knows the rules yet.
I hope this is helpful, if sobering, context to help unpack the current economic moment and why our elections look as they do. Thank you for your attention,