Xi’s Dictatorship Threatens the Chinese State

In his quest for personal power, he’s rejected Deng Xiaoping’s economic reform path and turned the Communist Party into an assemblage of yes-men.

By George Soros


Chinese President Xi Jinping at a ceremony marking the 100th anniversary of the Chinese Communist Party’s founding in Beijing, July 1./ PHOTO: JU PENG/XINHUA VIA ZUMA PRESS


Xi Jinping, the ruler of China, suffers from several internal inconsistencies which greatly reduce the cohesion and effectiveness of his leadership. 

There is a conflict between his beliefs and his actions and between his public declarations of wanting to make China a superpower and his behavior as a domestic ruler. 

These internal contradictions have revealed themselves in the context of the growing conflict between the U.S. and China.

At the heart of this conflict is the reality that the two nations represent systems of governance that are diametrically opposed. 

The U.S. stands for a democratic, open society in which the role of the government is to protect the freedom of the individual. 

Mr. Xi believes Mao Zedong invented a superior form of organization, which he is carrying on: a totalitarian closed society in which the individual is subordinated to the one-party state. 

It is superior, in this view, because it is more disciplined, stronger and therefore bound to prevail in a contest.

Relations between China and the U.S. are rapidly deteriorating and may lead to war. 

Mr. Xi has made clear that he intends to take possession of Taiwan within the next decade, and he is increasing China’s military capacity accordingly.

He also faces an important domestic hurdle in 2022, when he intends to break the established system of succession to remain president for life. 

He feels that he needs at least another decade to concentrate the power of the one-party state and its military in his own hands. 

He knows that his plan has many enemies, and he wants to make sure they won’t have the ability to resist him.

It is against this background that the current turmoil in the financial markets is unfolding, catching many people unaware and leaving them confused. 

The confusion has compounded the turmoil.

Although I am no longer engaged in the financial markets, I used to be an active participant. 

I have also been actively engaged in China since 1984, when I introduced Communist Party reformers in China to their counterparts in my native Hungary. 

They learned a lot from each other, and I followed up by setting up foundations in both countries. 

That was the beginning of my career in what I call political philanthropy. 

My foundation in China was unique in being granted near-total independence. 

I closed it in 1989, after I learned it had come under the control of the Chinese government and just before the Tiananmen Square massacre. 

I resumed my active involvement in China in 2013 when Mr. Xi became the ruler, but this time as an outspoken opponent of what has since become a totalitarian regime.

I consider Mr. Xi the most dangerous enemy of open societies in the world. 

The Chinese people as a whole are among his victims, but domestic political opponents and religious and ethnic minorities suffer from his persecution much more. 

I find it particularly disturbing that so many Chinese people seem to find his social-credit surveillance system not only tolerable but attractive. 

It provides them social services free of charge and tells them how to stay out of trouble by not saying anything critical of Mr. Xi or his regime. 

If he could perfect the social-credit system and assure a steadily rising standard of living, his regime would become much more secure. 

But he is bound to run into difficulties on both counts.

To understand why, some historical background is necessary. 

Mr. Xi came to power in 2013, but he was the beneficiary of the bold reform agenda of his predecessor Deng Xiaoping, who had a very different concept of China’s place in the world. 

Deng realized that the West was much more developed and China had much to learn from it. 

Far from being diametrically opposed to the Western-dominated global system, Deng wanted China to rise within it. 

His approach worked wonders. 

China was accepted as a member of the World Trade Organization in 2001 with the privileges that come with the status of a less-developed country. 

China embarked on a period of unprecedented growth. 

It even dealt with the global financial crisis of 2007-08 better than the developed world.

Mr. Xi failed to understand how Deng achieved his success. 

He took it as a given and exploited it, but he harbored an intense personal resentment against Deng. 

He held Deng Xiaoping responsible for not honoring his father, Xi Zhongxun, and for removing the elder Xi from the Politburo in 1962. 

As a result, Xi Jinping grew up in the countryside in very difficult circumstances. 

He didn’t receive a proper education, never went abroad, and never learned a foreign language.

Xi Jinping devoted his life to undoing Deng’s influence on the development of China. 

His personal animosity toward Deng has played a large part in this, but other factors are equally important. 

He is intensely nationalistic and he wants China to become the dominant power in the world. 

He is also convinced that the Chinese Communist Party needs to be a Leninist party, willing to use its political and military power to impose its will. 

Xi Jinping strongly felt this was necessary to ensure that the Chinese Communist Party will be strong enough to impose the sacrifices needed to achieve his goal.

Mr. Xi realized that he needs to remain the undisputed ruler to accomplish what he considers his life’s mission. 

He doesn’t know how the financial markets operate, but he has a clear idea of what he has to do in 2022 to stay in power. 

He intends to overstep the term limits established by Deng, which governed the succession of Mr. Xi’s two predecessors, Hu Jintao and Jiang Zemin. Because many of the political class and business elite are liable to oppose Mr. Xi, he must prevent them from uniting against him. Thus, his first task is to bring to heel anyone who is rich enough to exercise independent power.

That process has been unfolding in the past year and reached a crescendo in recent weeks. It started with the sudden cancellation of a new issue by Alibaba’s Ant Group in November 2020 and the temporary disappearance of its former executive chairman, Jack Ma. Then came the disciplinary measures taken against Didi Chuxing after it floated an issue in New York in June 2021. It culminated with the banishment of three U.S.-financed tutoring companies, which had a much greater effect on international markets than Mr. Xi expected. Chinese financial authorities have tried to reassure markets but with little success.

Mr. Xi is engaged in a systematic campaign to remove or neutralize people who have amassed a fortune. His latest victim is Sun Dawu, a billionaire pig farmer. Mr. Sun has been sentenced to 18 years in prison and persuaded to “donate” the bulk of his wealth to charity.

This campaign threatens to destroy the geese that lay the golden eggs. Mr. Xi is determined to bring the creators of wealth under the control of the one-party state. He has reintroduced a dual-management structure into large privately owned companies that had largely lapsed during the reform era of Deng. Now private and state-owned companies are being run not only by their management but also a party representative who ranks higher than the company president. This creates a perverse incentive not to innovate but to await instructions from higher authorities.

China’s largest, highly leveraged real-estate company, Evergrande, has recently run into difficulties servicing its debt. The real-estate market, which has been a driver of the economic recovery, is in disarray. The authorities have always been flexible enough to deal with any crisis, but they are losing their flexibility. To illustrate, a state-owned company produced a Covid-19 vaccine, Sinopharm, which has been widely exported all over the world, but its performance is inferior to all other widely marketed vaccines. Sinopharm won’t win any friends for China.

To prevail in 2022, Mr. Xi has turned himself into a dictator. Instead of allowing the party to tell him what policies to adopt, he dictates the policies he wants it to follow. State media is now broadcasting a stunning scene in which Mr. Xi leads the Standing Committee of the Politburo in slavishly repeating after him an oath of loyalty to the party and to him personally. This must be a humiliating experience, and it is liable to turn against Mr. Xi even those who had previously accepted him.

In other words, he has turned them into his own yes-men, abolishing the legacy of Deng’s consensual rule. With Mr. Xi there is little room for checks and balances. He will find it difficult to adjust his policies to a changing reality, because he rules by intimidation. His underlings are afraid to tell him how reality has changed for fear of triggering his anger. This dynamic endangers the future of China’s one-party state.


Mr. Soros is founder of the Open Society Foundations.

Adapting to climate change

A 3°C world has no safe place

The extremes of floods and fires are not going away, but adaptation can lessen their impact


In 1745, as the river Liffey, having broken its banks, clawed at the foundations of the house in which he sat, the young Edmund Burke experienced a strange, perverse thrill. 

The man who would go on to found modern conservatism drew inspiration from this experience in a later essay on the sublime, writing of the unmatched delight that terrible destruction could stir—provided that it is watched from a certain distance.

The most terrible thing about the spectacular scenes of destruction that have played out around the world over the past weeks is that there is no safe place from which to observe them. 

The ground under the German town of Erftstadt is torn apart like tissue paper by flood waters; Lytton in British Columbia is burned from the map just a day after setting a freakishly high temperature record; cars float like dead fish through the streets-turned-canals in the Chinese city of Zhengzhou. 

All the world feels at risk, and most of it is.

Greenhouse-gas emissions have produced a planet more than 1°C (1.8°F) warmer than it was in Burke’s pre-industrial days. 

Its atmosphere, stoked up and out of joint, is producing heavy weather in ways both predicted and surprising. 

And, with emissions continuing, it will get worse.

Unfortunately, 2021 will probably be one of the 21st century’s coolest years. 

If temperatures rise by 3°C above pre-industrial levels in the coming decades—as they might even if everyone manages to honour today’s firm pledges—large parts of the tropics risk becoming too hot for outdoor work. 

Coral reefs and the livelihoods that depend on them will vanish and the Amazon rainforest will become a ghost of itself. 

Severe harvest failures will be commonplace. 

Ice sheets in Antarctica and Greenland will shrink past the point of no return, promising sea rises measured not in millimetres, as today’s are, but in metres.

Six years ago, in Paris, the countries of the world committed themselves to avoiding the worst of that nightmare by eliminating net greenhouse-gas emissions quickly enough to hold the temperature rise below 2°C. Their progress towards that end remains woefully inadequate. 

Yet even if their efforts increased dramatically enough to meet the 2°C goal, it would not stop forests from burning today; prairies would still dry out tomorrow, rivers break their banks and mountain glaciers disappear.

Cutting emissions is thus not enough. The world also urgently needs to invest in adapting to the changing climate. 

The good news is that adaptation makes political sense. 

People can clearly see the need for it. 

When a country invests in flood defences it benefits its own citizens above all others—there is no free-rider problem, as there could be for emissions reduction. 

Nor does all the money come from the public purse; companies and private individuals can see the need for adaptation and act on it. 

When they do not do so, insurance companies can open their eyes to the risks they are running.

Some adaptation is fairly easily set in place. 

Systems for warning Germans of coming floods will surely now improve. 

But other problems require much larger public investment, like that which has been put into water-management in the Netherlands. 

Rich countries can afford such things. 

Poor countries and poor people need help, which is why the Paris climate agreement calls for annual transfers of $100bn from rich to poor.

The rich countries have not yet lived up to their side of this. 

On July 20th John Kerry, President Joe Biden’s special envoy on climate change, reiterated America’s pledge to triple its support to $1.5bn for adaptation in poorer countries by 2024, part of a broader move to increase investment in adaptation and mitigation in developing countries. 

More such efforts are vital.

But they also have limits. 

Making do with less water may be possible; getting by on none is not. 

Some levels of temperature and humidity make outdoors activity impossible. 

There comes one flood too many, after which you abandon the land. 

When the reef is gone, it is gone.

If the Paris goal of keeping the rise below 2°C is met, the full extent of those limits will not be tested. 

But emission-cutting zeal may not accelerate as required. 

And the climate system could prove more sensitive than it has shown itself to be to date, as some scientists believe possible, producing more warming per tonne of carbon in the atmosphere.

Hence it is also prudent to study the most spectacular, and scary, form of adaptation: solar geoengineering. 

This seeks to make clouds or particle layers in the atmosphere a bit more mirror-like, reflecting away some sunlight. 

It cannot provide a straightforward equal and opposite response to greenhouse-gas warming; it will tend, for example, to reduce precipitation somewhat more than temperature, potentially changing rainfall patterns. 

But research over the past 15 years has suggested that solar geoengineering might significantly reduce some of the harms from greenhouse warming.

What nobody yet knows is how such schemes could be developed so as to reflect not just the interests of their instigators, but also those of all the countries they will affect. 

Different countries might seek different amounts of cooling; some ways of putting solar geoengineering into effect would help some regions while harming others. 

Nor is there yet a compelling rejoinder to the risk that the very idea of such things tomorrow reduces the incentive to be ambitious in cutting emissions today.

When good men do nothing

To think about solar geoengineering requires facing those problems—and the risk that powers with little interest in them may try out such schemes regardless. 

It also means facing squarely what kind of being humankind has become. 

Watching the rising waters of the Liffey, Burke “considered how little man is, yet in his mind how great…Master of all things, yet scarce can command anything.” 

Manipulating the climate that humanity has destabilised—unwittingly, at first—spurs similar thoughts of simultaneous power and impotence. 

It is not nature that humans cannot command, but themselves, in all their insignificance and world-altering might.

Subtle globalisers

China Inc’s new inconspicuous expansion

Chinese companies are adapting to a more hostile global climate—and thriving


Deepglint, a chinese facial-recognition firm, was one of 14 companies slapped with American sanctions on July 9th for alleged links to human-rights abuses in China’s far-western region of Xinjiang. 

It is also a globally recognised leader in its field and has raised money from Sequoia Capital and other big American investment firms. 

DeepGlint’s founders, who graduated from Stanford and Brown universities in America, must now discuss with their foreign backers the prospect of decoupling from the Western commercial sphere. 

Many Chinese companies have been forced to hold similar talks.

China Inc appears to be on the back foot. 

In America President Joe Biden has picked up where Donald Trump left off, placing restrictions on Chinese companies. 

Last year Congress passed a bill that may eventually force Chinese firms to delist from American stock exchanges, which would affect nearly $2trn in market value. 

Huawei, banned from America, has struggled to sell its 5g telecoms kit elsewhere in the West. 

ByteDance was nearly forced to divest from its prized short-video app, TikTok, over American fears that the Chinese regime could access global users’ personal data. 

Tencent, another internet giant, is said to be haggling with American regulators worried about its 40% stake in Epic Games, the developer of Fortnite.

Around the world Chinese companies are, fairly or not, viewed as instruments of the Communist Party. 

Britain’s prime minister, Boris Johnson, said on July 7th that the government would probe the Chinese acquisition of Newport Wafer Fab, the country’s largest chipmaker, on national-security grounds. 

Australia’s defence department could tear up a 99-year lease with a private Chinese company for a big port. 

Completed outbound acquisitions by Chinese firms shrivelled from some $200bn in 2016 to $36bn in 2020. 

Cross-border lending, mostly to poor countries, by some of China’s state banks has stopped growing.

It is not the first time that a wave of Chinese corporate expansion has met a frosty reception. 

When commodity giants such as cnooc, an oil firm, began buying foreign reserves, and rivals, in the 1990s, it stoked fears of resource colonialism. 

In the 2010s Chinese industrial groups’ aggressive pursuit of Western rivals from chemicals (ChemChina’s takeover of Syngenta) to cars (Geely’s of Volvo) reminded some anxious rich-world governments of Japan’s corporate conquests in the 1980s. 

At the same time, Chinese acquisitions of trophy assets such as the Waldorf Astoria hotel (by Anbang, a conglomerate) allowed other Westerners to dismiss China Inc as unserious or dodgy (a suspicion confirmed by the subsequent collapse of Anbang and a few similar groups after charges of fraud).

Now, just as innovative Chinese tech firms have captivated Wall Street, China’s increasingly authoritarian regime is itself reining in its global champions. 

President Xi Jinping appears bent on disconnecting them from Western capital markets and controlling their data. 

Tencent and Alibaba, an e-commerce behemoth, have between them lost $340bn in market value since the crackdown began late last year. 

Days after its $67bn New York flotation, Didi found its ride-hailing app banned by Chinese data regulators. 

ByteDance has scotched plans to go public in New York.

Speak softly and carry a small cheque

All this looks like a treacherous climate for Chinese companies. 

Look closer, though, and a new generation of firms is not just adapting to it but thriving. 

Many have spent years expanding global operations and now make as much money outside China as they do within. 

Some are pursuing smaller investments under the radar. 

And, inverting a decades-old trend of copying Western intellectual property (ip), a few have become tech powerhouses in their own right, selling advanced products to the world.


The scale of China Inc is formidable. 

China was the largest investor in the world in 2020. 

Foreign direct investment (fdi) from Chinese firms hit $133bn, down only slightly from 2019 despite the headwinds (see chart 1). 

The country has some 3,400 multinationals, almost as many as America and western Europe combined, reckons Bain, a consultancy. 

Around 360 big listed Chinese groups report foreign revenues. 

These amounted to around $700bn in 2020, compared with 250 large firms earning a total of $400bn in 2012, according to data from Bloomberg (see chart 2). 

In 2020 Chinese venture capitalists ploughed an estimated $3.2bn into American startups in 249 deals, the second-biggest year on record by value, calculates Rhodium Group, a research firm. 

Analysts at cb Insights say that Chinese investors’ participation in American venture deals last quarter was the highest since at least 2016.


The Chinese presence is deep as well as broad. 

Last year more than 100 of the listed firms earned at least 30% of revenues outside China; 27 earned 70% or more. 

All told, China’s top ten foreign earners booked $350bn or so in overseas sales. 

This total has grown by 10% a year on average since 2005, Bain says, twice as fast as the equivalent figure in America, Europe or Japan. 

Tencent’s foreign sales have risen at an annual rate of 40% for nearly a decade, and now make up 7% of its huge top line.

The first plank of China Inc’s new global strategy is astute localisation. 

In the past most Chinese fdi consisted of asset purchases. 

Last year, by contrast, a lot was reinvested earnings from operations abroad.

Hisense, a maker of consumer electronics, wants to treble its overseas sales, from $7.9bn in 2020 to $23.5bn in 2025, half its projected total, says Candy Pang, its head of marketing. 

That would leave a lot of money to spend on foreign factories, research and development, and marketing (it is sponsoring the 2022 football World Cup in Qatar, among other sports events).

Chinese firms have also retained their subsidiaries’ foreign leadership. 

Despite recently merging with another state-backed giant, ChemChina has allowed its foreign assets to operate as global companies. 

Pirelli, which it bought in 2015 for €7.1bn ($7.6bn), still makes tyres in Italy. 

Syngenta, for which it paid $43bn a year later, maintains a Swiss headquarters, a mostly foreign executive team, and a nine-person board with only two Chinese state officials. 

Similarly, Geely has allowed foreigners to run Volvo, and Haier, an appliance-maker, kept most of ge Appliances’ top brass after acquiring the American firm. 

“You can belong to China without having a Chinese-dominated board,” says an executive at one Chinese multinational.

The second pillar of China Inc’s new globalisation strategy is to shun mega-deals in favour of smaller ones. 

The speculative wave of outbound investments between 2015 and 2017 swallowed up $425bn in assets and raised plenty of eyebrows among foreign and Chinese regulators alike. 

By contrast, of the 235 outbound transactions so far this year only three were valued at more than $1bn.

The master of mini-dealmaking is Tencent. 

It has made at least 85 cross-border investments since the start of 2019, according to Refinitiv, a data provider. 

Many of these are small stakes taken as part of a larger consortium of investors that includes prominent non-Chinese private-equity groups. 

This year, for example, Tencent bought a 4% stake in Rakuten, a Japanese internet group, for about $600m—small change for a giant worth nearly $700bn. 

It has also continued to invest in America, with at least 12 deals over the past two-and-a-half years, including the purchase of a $150m stake in Reddit, an American online platform which hosts popular discussion forums.

Chinese companies are making their global presence felt in one last way. 

Rather than swooping into foreign countries to buy up technology, or copying Western ip, they are going out to sell their own, says Bagrin Angelov of cicc, a Beijing-based investment bank. 

Because Chinese subsidies to makers of electric cars and batteries require them to own some of the core ip, companies such as byd, catl, Gangfeng and sVolt raced to develop it. 

Having done so, they are now targeting export markets. 

byd and sVolt are setting up factories in Europe. 

So is catl, which in December also announced plans to build a $5bn one in Indonesia.

BeiDou, China’s state-owned answer to America’s gps satellite-navigation system, was used by more than 100 countries in 2020, according to ey, a consultancy. 

Chinese telecommunications services cover more than 170 countries with a population of 3bn people. 

Regardless of American sanctions, Huawei remains a popular choice for 5g networks even in parts of Europe. 

Horizon Robotics, which develops self-driving systems, counts Germany’s Volkswagen and Bosch among its partners.

And new Chinese stars are rising all the time. 

Few fashionistas probably realise than Shein, a fast-fashion darling beloved of the hip TikTok set, is Chinese. 

The company boasts the top shopping app in 50 countries—including America, where it was downloaded on more iPhones than Amazon in June. 

OneConnect, a financial-technology platform owned by Ping An, a big insurer, is selling a number of digital-banking products developed for China to banks and other firms across Asia and beyond. 

It recently designed an artificial-intelligence fraud-prevention system for a Sri Lankan lender.

These subtle corporate conquerors could still be stymied—by the heavy hand of China’s Communist rulers or America and its allies, which are bound to keep an ever beadier eye on Chinese commercial incursions. 

The go-getting Chinese multinationals would then need to adapt once again. 

They have shown themselves to be more than capable of doing so.

A World of Heat and Headwinds

The outlook for the global economy has gone from hopeful to bleak in the space of just a few months, owing to the rise of the Delta variant, climate-driven disasters, and previously underappreciated supply-chain disruptions. In fact, it is now hard not to conclude that future growth and development are in peril.

Michael Spence


PORTOVENERE, ITALY – As recently as three months ago, the global economy seemed to be on track for a relatively robust recovery. 

The supply of COVID-19 vaccines had expanded in the developed countries, raising hopes that it would spill over to developing countries in the second half of 2021 and into 2022. 

Many economies were posting impressive growth numbers as pandemic-suppressed sectors reopened. 

While clogged supply chains had produced a host of shortages and high prices for key inputs, these were seen as merely transitory problems.

The world looks very different now. 

The Delta variant is spreading rapidly, including in developed countries and among cohorts who were hitherto less vulnerable to the virus. 

The unvaccinated parts of the world – mostly lower-middle and lower-income countries – are now more vulnerable than ever. 

Moreover, the vaccine supply chain is failing. 

The principal reason is that developed countries have option contracts to buy many more vaccine doses than they need (even after accounting for an expansion of their programs to vaccinate younger people and administer booster shots). 

This lengthens the vaccine queue, thereby delaying the arrival of vaccines in much of the developing world.

The rich world’s “excess orders” need to be released and made available for purchase by other countries. 

A program to fund such purchases would not be very costly in global terms (on the order of $60-70 billion), and would yield immediate and long-term benefits in controlling the virus and preventing the emergence of dangerous new variants.

Another problem is that global supply chains have been more severely disrupted than previously thought. 

It is now apparent that the resulting shortages – in labor, semiconductors (which are used in countless industries), construction materials, containers, and shipping capacity – are not going away anytime soon. 

Surveys indicate that the inflationary effects are widespread across sectors and countries, and are likely to act as a persistent headwind to recovery and growth. 

Adding to the uncertainty, there have been pandemic-induced shifts in domestic and global supply chains that are not yet well understood and will most likely be difficult to reverse. 

Indeed, the disruptions coming out of the pandemic are broader and appear to be exerting a stronger drag on the economy than did the recent trade war between the United States and China.

But the most eye-opening development of the past three months has been the dramatic increase in the frequency, severity, and global scope of extreme weather: storms, droughts, heat waves, higher average temperatures, fires, and floods. 

Earlier this month, the Intergovernmental Panel on Climate Change delivered a new report that has been bluntly characterized as announcing “code red for humanity.” 

The collective judgment of the scientific community suggests that this year’s brutal experience is not an outlier; it is the new climate normal. 

We therefore can expect more of the same (and probably much worse) for the next 20-30 years. 

The window for preventing the kinds of events we have seen this summer is closed. 

The challenge now is to accelerate the pace of reduction of greenhouse-gas emissions to avoid even more serious – and potentially life-threatening – climate-driven outcomes in the coming decades.

Given the economic and climatic headwinds confronting the world, and that they will blow over a longer time horizon, future growth and development are in peril. 

In addition to being an obvious drag on growth, today’s supply-chain disruptions may contribute to inflationary pressures that will demand a monetary-policy response. 

Similarly, a constantly morphing virus that becomes a semi-permanent feature of life will retard global growth and specialization. 

International travel will continue to struggle to recover. 

And while digital platforms can serve as partial substitutes, the impediments to mobility eventually will hit all the global economic and financial ecosystems that support innovation.

In the past, extreme weather events were infrequent and local enough that the risks did not really affect the global macroeconomic outlook. But the new pattern already seems different. 

It is hard to think of a region that is not subject to elevated weather-related risks. 

A recent US Federal Reserve paper warns that climate change could increase the frequency and severity of economic contractions, thereby reducing growth. 

Apart from the resources devoted to driving the recovery, this new reality must eventually be reflected in asset and insurance prices.

The bottom line is that climate change is quickly becoming a noticeable factor in macroeconomic performance. 

Though we lack precise measures of economic fragility (that is, resilience in the face of shocks), it is hard not to conclude that the global economy, and especially some of its more vulnerable parts, is becoming more fragile. 

Lower-income developing countries already face significant challenges when it comes to demographic trends, adapting growth models to the digital era, and solving localized governance problems. 

Add fiscal constraints, climate-related volatility and pressure, and the long queue for vaccines, and you have the makings for a perfect storm.

Much of this is already baked into our immediate future. 

But not all of it is. 

Capital markets, for example, appear to be adjusting to the new reality, and solving the global vaccine supply challenge is neither impossibly complex nor prohibitively expensive. 

All that is needed is multilateral focus and commitment.

The United Nations climate-change conference (COP26) in Glasgow this November will be crucial, and even more difficult than past climate-change conferences. 

The objective is to strengthen the national decarbonization commitments made in Paris at COP21, so that the global aggregate is consistent with a carbon budget that limits global warming to 1.5°C relative to the pre-industrial level.

Finally, since extreme climate events will occur more frequently and globally – striking randomly almost anywhere – private and social insurance systems will need a major upgrade to become multinational in scope. 

We may need a new international financial institution to take this on, working closely with the International Monetary Fund and the World Bank.


Michael Spence, a Nobel laureate in economics, is Professor of Economics Emeritus and a former dean of the Graduate School of Business at Stanford University. He is Senior Fellow at the Hoover Institution, serves on the Academic Committee at Luohan Academy, and co-chairs the Advisory Board of the Asia Global Institute. He was chairman of the independent Commission on Growth and Development, an international body that from 2006-10 analyzed opportunities for global economic growth, and is the author of The Next Convergence: The Future of Economic Growth in a Multispeed World.  

The Antitrust War’s Opening Salvo

With a major new executive order calling for stronger enforcement of antitrust laws, Joe Biden has become the first president since Harry Truman to take a strong public anti-monopoly stand. And though his agenda will face insurmountable resistance in the courts, that does not mean it is futile.

Eric Posner


CHICAGO – US President Joe Biden’s new executive order on “Promoting Competition in the American Economy” is more significant for what it says than for what it does. 

In fact, the order doesn’t actually order anything. 

Rather, it “encourages” federal agencies with authority over market competition to use their existing legal powers to do something about the growing problem of monopoly and cartelization in the United States. 

In some cases, the relevant agencies are asked merely to “consider” ramping up enforcement; in others, they are directed to issue regulations, but the content of those regulations remains largely up to them.

Nonetheless, it would be a mistake to dismiss the order’s tentative language as mere rhetoric. 

Antitrust is the main body of law governing market competition in the US, and it has been the object of sustained attack by business interests and conservative intellectuals for more than 50 years. 

Biden is the first president since Harry Truman to take a strong public anti-monopoly stand, and he has backed it up by appointing ardent anti-monopoly advocates to his government.

The executive order is ambitious in its scope and style. In strongly worded passages, it accuses businesses of monopolistic and unfair practices in major industries, including technology, agriculture, health care, and telecommunications. 

It laments the decline of government antitrust enforcement, and identifies numerous harms that have resulted – including economic stagnation and rising inequality.

The order also establishes a new bureaucratic organization in the White House to lead the anti-monopoly effort. 

Demanding a “whole-of-government” approach, it calls on the vast resources of numerous agencies, and not just the two that traditionally oversee antitrust (the Department of Justice and the Federal Trade Commission).

Still, the Biden administration’s antitrust agenda will face significant judicial obstacles. 

Over the past 40 years, an increasingly business-friendly Supreme Court has gutted antitrust law. 

In ruling after ruling, it has weakened the standards used to evaluate anti-competitive behavior; raised the burden of bringing an antitrust case; limited the types of antitrust victims who are allowed to bring cases; allowed businesses to use arbitration clauses to protect themselves from class action lawsuits; and much else.

On top of that, the Supreme Court has disseminated throughout the judiciary a generalized suspicion of antitrust claims. 

Judges at all levels have absorbed an academic skepticism about antitrust law that is now 30 years out of date. 

Accordingly, business plaintiffs are usually seen as sore losers who have resorted to the law because they were beaten in the marketplace. 

Consumer cases are attributed to the machinations of trial lawyers. 

The pretexts businesses offer for their anti-competitive practices are swallowed whole.

So, while Biden is right that “federal government inaction” is partly to blame for the decline in antitrust enforcement, there is little that his (or any) administration can do unless it has the courts on its side. 

This probably accounts for the order’s careful language. 

Agencies like the DOJ and the FTC would surely like to enforce antitrust laws more vigorously than in the past, but they are not going to commit resources to bringing cases that will fail in court.

Still, there are grounds for optimism in the near term, because the executive order has broken new ground with what it says about labor. 

For the first time ever, a US president has declared that antitrust law should be brought to bear against employers.

Unlike the tech, agriculture, and health-care sectors, labor markets received virtually no attention from the federal government until just a few years ago, and only baby steps have been taken since then. 

But as Biden’s executive order acknowledges, “Consolidation has increased the power of corporate employers, making it harder for workers to bargain for higher wages and better work conditions.”

This new focus reflects the influence of recent economic research showing that countless labor markets have become dominated by a handful of employers. 

Such concentration is partly the result of mergers and partly the result of the natural growth of large businesses, which often locate plants and warehouses in thinly populated areas where there is little competition for workers. 

Under these conditions, employers have the upper hand, resulting not only in lower incomes for workers but also in less economic activity and output, higher prices, and greater inequality.

Employers have also entered into anti-competitive agreements with one another to fix wages or to refrain from poaching each other’s employees. 

Back in 2010, Apple, Google, and other major tech firms received a slap on the wrist when it was discovered that they had agreed not to recruit one another’s software engineers. 

But a spate of more recent cases, including several criminal indictments brought against employers, indicates that the 2010 case was no anomaly.

There is also important new research showing that non-compete clauses that block workers from securing employment with their employers’ competitors have become ubiquitous. 

Biden’s executive order rightly mentions these clauses, which prevent workers from credibly threatening to quit when bargaining for higher wages. 

While these agreements supposedly protect trade secrets, that justification beggars belief, given that they also cover unskilled workers who have no access to such information. 

Moreover, California is one of the few US states where non-compete clauses are illegal, and it hardly lacks for innovation.

Adam Smith called labor-market collusion “the natural state of things which nobody ever hears of.” 

Fortunately, US courts have acknowledged that antitrust law applies to employment practices, so the federal government has significant scope for enhanced involvement in attacking labor-market abuses. 

A vigorous federal response could make real progress in helping workers. 

It is here that Biden’s contribution to antitrust enforcement may have its most significant impact.


Eric Posner, a professor at the University of Chicago Law School, is the author, most recently, of The Demagogue’s Playbook: The Battle for American Democracy from the Founders to Trump.