Why does the US advocate a free market while doing its utmost to stifle it? The current US-China economic war is a perfect example of this perplexing question.
The legacy of Milton Friedman, the founder of America's modern political economy, was a representation of this very dichotomy: the use, misuse and manipulation of the concept of the free market. Through the Chicago School of Economics, whose disciples have proved most consequential in the formation of the US approach to foreign policy, especially in South America, Milton constantly championed the virtues of the free market, emphasising a supposed link between freedom and capitalism, and insisting that governments should not micromanage markets.
However, theory and practice are two different notions that hardly ever match. The "Chicago Boys" — South American economists who were mostly educated under Friedman himself — were dispatched in the 1970s and 80s to advise some of the continent's most notorious dictatorships on how to manage their economies. They advocated selective free-market economics that seemed only to serve the interests of the US and, to a lesser degree, the ruling classes of various South American nations. The bloodbaths that ensued in much of the continent during those years can still be felt to this day, from Chile to Argentina and beyond.
Friedman died in 2006, after receiving accolades from his own government, as well as the British government of Margaret Thatcher. His supposed wisdom, though, continues to shape the mindset of mainstream US economists to this day, thus allowing for the unresolved dichotomy to persist: how can the US government "stay out" of the free market while, simultaneously, intervening to control this very market whenever the outcomes do not suit its interests?
Contrary to the common perception, the economic war with China was not initiated by the Trump administration when the then US president slapped a series of tariffs on Chinese exports to the US, starting in June 2018. It has existed for much longer. Even the supposedly more amiable Barack Obama administration was engaged in this war. We could argue that Obama's Pivot to Asia in 2012 was a renewed declaration of economic war.
When the current administration in Washington declared a major 'reset' in its foreign policy, Joe Biden did not see the need to engage with China through friendly diplomatic channels. The hostilities continued simply because this "conflict" has been the status quo ante for decades.
In April, a bipartisan push at the US Congress raised the heat on Beijing by linking the latter's human rights record with its economic practices, and proposed to funnel billions of dollars into the US economy to, essentially, micromanage the "free market" in favour of the US and challenge China's ascendancy.
On 25 May, the Chairman of the US House of Representatives Foreign Affairs Committee, Gregory Meeks, introduced the 470-page draft "Ensuring American Global Leadership and Engagement Act". This EAGLE Act "addresses a range of issues, including increased investment to promote US manufacturing, trade, work with allies and partners, re-engagement in international organisations and recognition of the treatment of China's Uyghur Muslim minority as genocide," reported Reuters.
The Bill advanced after a Senate vote two days later and is expected, once finalised and signed into law, to serve as the legal and political foundation of Biden's economic war on China. Like previous administrations, Biden is motivated by the Chicago Boys' mentality: a free market that suits the interests of the US and economic war when it deviates from this objective.
One of the most baffling aspects of the US-Chinese economic war is that both countries are similar in terms of economic ambitions. In some ways, the Chinese copied aspects of the American economic model of yesteryear. China is a capitalist country managed by a "Communist Party". The party's intervention in the economy uses unique ideological justification and political discourse, but is similar to the US government's management of the US economy, especially during times of crisis, such as the 2008 recession, for example.
This "conflict" is hardly motivated by an ideology or human rights violations, but by the fact that China's economy continues to soar, thus increasing its share of the global economic largesse. With an 18.3 per cent growth in the first quarter of 2021 — the biggest jump in GDP since 1992 — the Chinese momentum is eclipsing the performance of the economies of the US and its European allies. With economic power, political influence follows, and China now hopes to rearrange global alliances, not just in Asia, Africa and South America, but in Europe too.
According to many mainstream analysts, such as Stuart Anderson writing in Forbes in June last year, Trump's economic war on China has failed. That failure is the direct result of, as Panos Mourdoukoutas concluded, also in Forbes, "the lack of clear direction of what the American side wants from China." This lack of clarity continues to "give Beijing an upper hand."
The ill-defined US objectives in China continue to characterise the Biden administration as well. Even the massively expensive Congressional Bill, once it becomes law, will not be able to tell us what the US endgame is.
The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.