National Debt and Global Order

PRINCETON – As we entered the new year, all indications pointed to a remaking of the global order. Donald Trump was inaugurated as President of the United States, Chinese President Xi Jinping delivered a defense of globalization at Davos, and far-right leaders such as Marine Le Pen and Geert Wilders held an “alternative European summit” in the German city of Koblenz.

Trump and his populist allies in Europe have denounced globalization, while Xi now stands as its principal defender. But Trump’s message, in particular, is conflicted: pursuing strictly national economic interests may require less international cooperation, but bolstering security requires more.

The nationalist thrust of Trump’s inaugural address echoed the isolationism championed by the racist aviator Charles Lindbergh, who, as a spokesman for the America First Committee, lobbied to keep the US out of World War II. And now Trump, blaming previous US leaders for the economic hardships confronting many Americans, has renounced the country’s historical role in creating and sustaining the post-war order. While his objection to “global America” is not new, hearing it from a US president certainly is.

Trump’s vision is centered on the politics of debt. Having overseen a large debt-financed real-estate business, his intuition is that debt renegotiation can be used to win back for America what “other countries” have supposedly taken from it. He has focused on China and Germany, because they maintain large bilateral trade surpluses with the US – totaling $366 billion and $74 billion, respectively, in 2015. Just before the inauguration, he suggested that he might impose high tariffs on imported German cars, singling out BMW with particular relish.