What Joe Biden can learn from Richard Nixon’s script


Saying “Richard Nixon”, most Americans think of “Watergate” and “scandal.” Older and better-read people may still remember that he was the one who established diplomatic relations with China.

But a deeper analysis shows that the challenges facing the Nixon administration—from changing perceptions of the United States’ position in the world, to the pressures of globalization, to the difficulty of balancing economic and foreign policy—are exactly what President Joe Biden faces today. Challenge.

In fact, you might argue that the U.S. is now at a pivot point very similar to that in 1971, when Nixon and his senior advisers decided to cut the link between the U.S. dollar and gold, thereby eliminating a significant part of the U.S. economy The key pillar. Bretton Woods settlement. In fact, this is exactly what Jeffrey Garten argues in his important new book, Three Days in Camp David: How the 1971 secret meeting changed the global economy.

Garten is perfect for telling this story. He has worked in the field of foreign affairs and finance: he was the deputy secretary of commerce of the Clinton administration and the managing director of the Blackstone Group. He also conducted extensive interviews with several famous people, who are the lines in the musical. Hamilton To go is actually “in the room where it happened”. The complete list of 44 interviewees—from Henry Kissinger and Paul Walker to Alan Greenspan and George Schultz—is impressive and exhaustive.

Why is this story so important today? Because now and then, an era in the history of the global monetary system is coming to an end. It can be said that this started with Nixon’s decision to break the dollar’s peg to gold. This helped make U.S. exports more competitive (the “America First” strategy at the time) and resolved the trade imbalance caused by the flow of large amounts of U.S. dollars abroad.

It also greatly increases the central bank’s leverage over the economyNixon (and almost all governments since then) did not make a politically difficult choice among various interest groups, but instead shifted the blame to the Fed. Higher interest rates suppressed inflation, and the U.S. dollar eventually reflowed into the United States.

However, this replaced strict restrictions on speculation and laid the foundation for the financialization of the economy, because securitization, rather than lending, has become the core business of the US financial system, which is now too large to fail.

The Biden administration hopes that this global economic paradigm can be maintained—in fact, if the president is to implement his fiscal stimulus plan, it depends on relatively low interest rates and The power of the dollar Enable the United States to borrow.

But from inflationary pressures to trade divergence to The recent popular gold, Cryptocurrency The rise of sovereign-backed digital currencies (such as the digital renminbi, which China hopes to become a larger part of its trade and financial system) shows that we are once again at a tipping point.

Should the current paradigm rest The U.S. dollar and any dollar-based assets can depreciate quickly. When the Biden administration considers these pressures and how to deal with them, it is wise to learn three lessons from Nixon’s script.

First, populism must be balanced through in-depth contacts with allies. In terms of policy, Nixon’s administration was uneven: his Treasury Secretary John Connery was an unscrupulous nationalist, but National Security Adviser Henry Kissinger was the ultimate globalist. A group of competitors sat around the table to ensure an honest debate on how to balance domestic demand with the reality of foreign markets.

The government-led industrial strategy is also crucial. Who knew that Peter Peterson, Nixon’s special adviser, was the best economic planner?He advocated a tougher stance on international competition (urging Nixon to “eliminate any Marshall Plan mentality”), but also advocated a “domestic solution to the problem” approach, including high-growth public investment technology, Worker retraining with Local economics -All signs of the Biden method.

What Nixon did, and what Biden has not done, is to articulate a vision of what the global economy should look like. He rejected the views of his predecessors, John F. Kennedy and Lyndon Johnson, who, as Garten said, “behave as if America’s commitment to world peace, stability, and prosperity has no limits,” or at home. In Nixon’s alternative vision, the United States will no longer assume responsibility for the rest of the world alone, but will lead a new alliance of allies, including Germany and Japan.

In the beginning, it was “severe unilateral action”, and finally through a better (if still imperfect) monetary system, a series of nuclear weapons treaties, and new international organizations to eradicate poverty and strengthen food security, thereby increasing the US’s global presence. Participation. But this is only because the government can maintain Both domestic and international demand are at hand.

Between the tech giants, state-owned China and the peak of financialization, today’s situation is undoubtedly more complicated. But the fundamental challenge is the same: how can the United States save itself without giving up the world? Some Camp David-style scenario planning will be orderly.

rana.foroohar@ft.com

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