The destructive new logic that threatens globalisation

Since 1945 the world economy has run according to a system of rules and norms underwritten by America. This brought about unprecedented economic integration that boosted growth, lifted hundreds of millions of people out of poverty and helped the West prevail over Soviet Russia in the cold war. Today the system is in peril. Countries are racing to subsidise green industry, lure manufacturing away from friend and foe alike and restrict the flow of goods and capital. Mutual benefit is out and national gain is in. An era of zero-sum thinking has begun.

The old system was already under strain, as America’s interest in maintaining it waned after the global financial crisis of 2007-09. But President Joe Biden’s abandonment of free-market rules for an aggressive industrial policy has dealt it a fresh blow. America has unleashed vast subsidies, amounting to $465bn, for green energy, electric cars and semiconductors. These are laced with requirements that production should be local. Bureaucrats tasked with scrutinising inward investments to prevent undue foreign influence over the economy now themselves hold sway over sectors making up 60% of the stockmarket. And officials are banning the flow of ever more exports—notably of high-end chips and chipmaking equipment to China.