US paradigm shifts

In one of his latest press conferences explaining the reasons for the US withdrawal from Afghanistan, President Joe Biden said that the US had in 20 years spent between one trillion and two trillion dollars.

This is more than the GDP of Italy and more than the entire stimulus package of the European Union after Covid. But the waste of resources was not the central issue, nor did anyone recriminate or press to understand how and why this mountain of money was squandered.

The main point was the chaos of the American withdrawal, the future of the countries, both Afghanistan and America, and the fate of the poor Afghans in the hands of the vicious Taliban.

That such a significant amount of capital has become a detail in policy decisions and public debate indicates a radical shift in the US paradigm for interpreting the world.

From the collapse of the Soviet empire in 1989 up to a few months ago, the central issue in public debate was the management of the economy: the increase in wealth, the solidity of accounts and ever-increasing returns on the stock market.

In this paradigm, China was crucial. It was a sizable low-cost production base and a potentially huge development market, so it was a vital part of the global value chain and the economic/globalist paradigm.

But it was grounded on a premise: China, at some point, when it became large enough economically, had to integrate fully into the global value chain. That is, it would need a fully convertible currency and a domestic market open to foreign investment like the US or European markets.

This did not happen. At that point, it became unsustainable to maintain a free global exchange system guided only by economic rules. It was because a significant player did not respect the rules of others and played with different principles that subverted the general methods.

After that realization, the paradigm shifted in the US, the global rule setter. Economics and financial accounts are no longer that important. What counts is politics and strategy, which sets the basic rules that make the market work. But if the rules are not fixed, the market is unfair and only an excuse for the abuse of power of the biggest bully of the moment.

If the US paradigm changes from economic to political, China's contribution is no longer very relevant; it can be contaminated and radioactive. This changes the whole way of looking at politics within Western countries and America.

If the goal is not the management of an orderly market but the political defeat of the "enemy subversive to the global market," then accounts may not add up because the money serves the higher purpose of defeating the enemy.

This sets new goals and benchmarks, particularly for European allies who have been harnessed for 20 years in the chains of budgetary returns.

The problem, of course, is not trivial because America itself in the early 1990s raised the peremptory question of "accounts in order," and the Europeans adopted it a decade later, also looking to Washington. In the early 1990s, financial attacks from Wall Street brought down the European Monetary System and its fixed exchange rate system without a common currency.

Now America is turning around, without much explanation, as if it were natural to do so when there is nothing natural about paradigm shifts. Of course, in Europe, this raises alarms and perplexity, and rightly so.

But these justified concerns cannot deny the reality: It is a new situation. Things have been going on in a certain way for 30 years, but now things are changing.

It is dramatic but perhaps less surprising than two centuries ago, when every five to 10 years a war broke out in Europe, progressively changing the politics and economy of the continent.

Back then, spending on the armed forces was half the state budget, not today's 2-3% of GDP. There will probably be a military expenditure increase compared to the current percentages, but without reaching the 19th-century volumes.

This is not a return to the 1800s, but neither can we think that the 1800s and the millennia of history that preceded it no longer exist and that history before 1989 is over.

This raises fundamental questions for China. It thought until now that the promise of benefits and returns would be enough to win Westerners madly interested in cash. If the paradigm is now strategic, all of this ceases to matter.