‘The US and China are in a league of their own’

In your book “Ten Lessons for a Post-Pandemic World” you talk about how Covid-19 could be a catalyst for redefined global policies on growth, inequality and climate. As some countries in the West are starting to emerge from the pandemic’s darkest hour, do you see us actually heading in that direction?

There is a fitting saying: Nobody fixes the roof when the sun is shining. If you look at points where countries made serious reforms – you know this very well in the Greek case – it’s when things are really bad. The pandemic has dislocated all of us. It has forced us to reconsider how we work, how we live, how often we go to the office or travel. And it has also caused us to ask the crucial question: If the government can help in these circumstances, can it help in others? And what would be the wisest way to do it?

If Biden gets even half of his infrastructure and stimulus bills done he will spend 4 to 5 trillion dollars, most of it investing in the bottom half of the economic scale. In my lifetime of following American politics ever since I came here in 1982, every major fiscal effort by the federal government has been either tax cuts for the rich or wars. This is the first significant fiscal exercise whose majority of benefits will be investment for the long term or support for poor and lower middle class people.

And Republicans don’t have a very strong argument against it. Some say it may trigger too much debt – but I don’t remember the same complaints in the 50 years of tax cuts which expanded the deficit. In ideological terms, the debate has been very interesting: You are noticing that the more activist side of this equation is on the offense, and the austerity side is on the defense. I would argue the same thing is happening in Europe. Draghi’s view in Europe used to be an outlier, now it’s mainstream. So I think there’s a real opportunity for a recognition that long-term, inclusive sustainable growth can only come if the government plays a vital role in assisting a market economy. I think we’re ideologically there, and we’re getting there in policy terms as well.

I’m glad you mentioned Europe, because you also use it as a vehicle for one of the central arguments in your book. You suggest that the pandemic has already led to a more interconnected Europe, and may continue to do so. What led you to this assessment?

Europeans sometimes forget how historical the EU is as an achievement. France and Germany went to war three times between 1879 and 1945 – and twice they dragged the whole world in. It is extraordinary that, today, Europe has achieved a pooling of sovereignty for which there is no historical precedent of any scale. For the last 30 years, every time there is a crisis people confidently predict the end of the eurozone or of European cooperation. But what always ends up happening in the long run is a reassertion of an enlightened self-interest that considers the solution to be more Europe, not less.

In the pandemic, for example, you saw signs of petty nationalism: closing of borders, vaccine export controls. But look at where it fundamentally led: For the first time France and Germany are guaranteeing the debt of all EU countries – something they had been unwilling to do during the crisis of 2008-09. I think that’s just how the EU progresses. It always looks like it’s collapsing, but if you travel 10 or 20 years ago you realize that it’s always becoming deeper and stronger.

And yet, as you argue in your book, we are now in a bipolar world with the US and China as the dominant forces. Europe does enjoy relative power – mostly regulatory – but could it ever challenge these two to a more tripolar order?

The reason I call it a bipolar world is because the US and China are in a league of their own. The US is the biggest economy in the world, and China is second but also larger than the third, fourth, fifth and sixth economies combined. The same applies for defense budgets: These two powers tower above the rest. That is because of one fundamental premise I hold, which I think I’m right about: Europe cannot be a single, unitary actor in the geopolitical space.

If it were to be, then it would certainly be a tripolar world. You raised the one area where Europe’s power does matter, creating a strange tripolar world: the regulation of tech, trade rules, and things like intellectual property tax regimes. There, Europe is very powerful because it speaks with one voice. Where the EU could also play a useful role is in checking the US in areas where it’s being hypocritical or applying double standards – things like tariffs or human rights issues globally.

But on geopolitical issues it remains fractured: It does not, and will not speak with one voice. Those who want it to, I believe, are asking for too much. These countries have been sovereign nations for a long time, with deep traditions of statecraft and a rooted sense of national interest. Emmanuel Macron is not going to subcontract his foreign policy to a bureaucrat in Brussels, neither is Angela Merkel, or Kyriakos Mitsotakis.

In this bipolar post-pandemic world, you present two possible scenarios: one where the US and China find themselves locked into ever-ascending competitive spirals, and one of healthy competition and cooperation. Is the West in a position to trust China? One and a half years after the outbreak of the virus in Wuhan, the investigation into its origins remains extremely murky.

There’s no question that the goal must be the integration of China into an open rules-based system. This requires a very different behavior, a country that is more transparent and less neuralgic about its phobias. Look at the way it is now trying to hold the economic relationship with Australia hostage, demanding that Australian think tanks should not criticize the Chinese government. These are behaviors we have to ensure do not get ratified by the international system, and do not infect it.

But China is a very different country, a very different political system, and a very different civilization – and is also internally obsessed. The conversion of China is, to me, a foolish task to undertake, one that would wreck the international order. The moderation of Chinese behavior to make it compatible with an open rules-based system seems to be the right goal and to do that we can use the usual mixture of inducement and potential punishments, of carrots and sticks. The key is how to navigate the space of integrating China by asking for it to moderate its behavior without trying to convert it. This, for me, is the central challenge that the West faces.