Wiping America’s eye

China throws a wrench into a transpacific trade pact

Its application to join the CPTPP may not prosper, but it creates mischief



China’s request to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (cptpp) landed on the desk of Damien O’Connor, trade minister of New Zealand, on September 16th. 

The location was a fitting nod to the deal’s history. 

In 1999 a meeting between the trade ministers of two small export powerhouses, New Zealand and Singapore, kicked off what became one of the world’s largest free-trade areas. 

The timing was significant, too. 

China’s application came just a day after the announcement that America and Britain would assist Australia in building a fleet of nuclear-propelled submarines.

While the United States is still the dominant military power in Asia, China’s economic heft is now unparalleled. 

The latter’s attempt to join the 11-member trading alliance, however far-fetched it seems, raises the cptpp’s geopolitical significance beyond what was ever imagined more than two decades ago. 

It also underscores the folly of an inward-looking America abandoning the pact’s forerunner, the Trans-Pacific Partnership (tpp), in January 2017. 

The cptpp, a slight modification of that original agreement, took effect in late 2018. It is one of the most advanced trade deals in the world.

When New Zealand and Singapore first mooted a trading alliance out of frustration with the slow speed of World Trade Organisation (wto) negotiations, China was not yet even a member of the global trading body and its economic heft was piddling relative to today. 

Its share of global merchandise exports was 3.4%. 

Last year, that figure ran to 14.7%, making China the only country in the world which accounts for a double-digit share.

When America was still actively part of building the tpp alliance, it was portrayed—and sold to Americans—as a tool to keep China from exercising influence over trading rules. 

It is still difficult to imagine China’s application being successful in the near term. 

The cptpp is a detailed agreement requiring deep economic integration, and new members must be admitted by unanimous approval. 

“China is surprisingly close to meeting cptpp conditions in many areas. 

But where there are gaps, they’re huge,” according to Jeff Schott of the Peterson Institute for International Economics (piie), a think-tank in Washington, dc. 

He reckons the country has made huge strides in recent years on intellectual-property and investment rights. 

But the dominance of state-owned enterprises (soes), weak labour rights and concerns about data privacy leave a lot of ground to catch up.

The treatment of soes is a perpetual bugbear of many of China’s trading partners. 

To gain membership of the cptpp, Vietnam in particular had to agree to restrictions on support for its own state-run firms and increased transparency on their operations and structure, which China would be expected to mirror. 

Data governance is a case where China is, if anything, moving in the opposite direction to the one which would be needed for membership. 

The cptpp countries have committed themselves to promoting the cross-border transfer of information. 

In contrast, China has become the global exemplar of data localisation: a data-protection law passed last month will make it harder for foreign companies to transfer data out of the country.

The existing members of the pact are also unlikely to accept admission on a promise of changes to come. 

The relationship between China and many of its big trading partners and neighbours has soured in recent years, making membership a much harder diplomatic sell than joining the wto, which it did in 2001. 

Back then, says Kazuhito Yamashita, a former Japanese trade negotiator who was involved in the accession talks, the optimists argued that China should be allowed to join the wto and that problems could be rectified afterwards through enforcement. 

The opposing view was that it would be very difficult to change things in a communist economy. 

“That was right.”

But even if its chances of joining the cptpp soon are slim, there may be other reasons for China to announce its intention. 

Most countries did not aspire for membership in order to become part of an anti-China bloc. 

Indeed, some might even look eagerly on the potential economic gains of having China on board. 

When negotiations for America to join began in 2008, the United States was a larger trading partner than China for several of the countries that are now members of the agreement—New Zealand, Peru and Chile, for instance. 

Today, among cptpp members only Canada and Mexico trade more with America than with China. 

A piie paper published in 2019 estimated global income gains from the cptpp as it stands run to $147bn a year. 

If China were included, that would rise to $632bn. 

The benefits to many of the members would run to more than 1% of their real income.

But for other governments, relations with China have deteriorated to the extent that its admission borders on the inconceivable. 

“Countering China’s political, economic, and cyber influence is the animating motivation at the heart of many Australian and Japanese policies. 

The strategic calculus about China is solidifying in both countries,” says Nigel Cory, a trade expert at the Information Technology and Innovation Foundation in Washington, dc, and a former Australian diplomat.

Driving a wedge between countries looking at the application primarily as an economic boon and those looking at it mainly as a political threat may prove diplomatically useful for China’s rulers. 

“This is being driven by a desire to throw a spanner into the works, to have some fun,” says Charles Finny, a former New Zealand diplomat who launched the country’s trade negotiations with China in 2004.

China is already the largest member of the Regional Comprehensive Economic Partnership, a larger but shallower trade deal agreed last year. 

It contains fewer conditions for membership, but unlike the cptpp includes every big South-East Asian economy, as well as South Korea. 

Membership of both, if it were to happen, would make the country an increasingly formidable leader of commercial diplomacy in Asia.

From outside the cptpp, America has no direct bearing on the outcome of the application discussions. 

The country has influence, of course, and particularly with its immediate neighbours. 

Its free-trade deal with Mexico and Canada requires any of the three to consult with the others before commencing negotiations with a country that none currently has a trade deal with. 

Its submarine deal with Australia may also strengthen the latter’s resolve to promote America’s interests in the region, even economic ones.

Most bets are that China’s bid to join the agreement will fail. 

And yet not long ago few would have wagered that China would show more interest in membership than America. 

If the application means little else, it remains a stark illustration of just how quickly America’s commercial influence in Asia has waned.

‘More of China, less of America’: how the superpower fight is squeezing the Gulf

Caught between Washington and Beijing, Middle East states are struggling to balance relations

Andrew England in London and Simeon Kerr in Dubai 

© Getty Images | Abu Dhabi’s Crown Prince Mohammed bin Zayed and Xi Jinping meet in Beijing in 2019


As the first senior United Arab Emirates official to visit the Biden administration touched down in Washington, the message the Gulf state sought to promote was “the strength and continuity” of the partnership between the two countries. 

Yet when Anwar Gargash, diplomatic adviser to the UAE’s president, sat down with his American counterparts it was another of the Gulf state’s relationships that was the focus of much of the discussions: China.

The UAE has long been one of Washington’s closest Middle East partners; investing heavily in US assets, buying tens of billions of dollars of American weaponry and supporting the superpower in military operations, from Somalia to Afghanistan and the battle against al-Qaeda militants in Yemen.

Its deepening ties to Beijing, however, are adding a layer of strain to the alliance as Washington takes an increasingly hawkish stance towards China, and raises concerns about the potential security implications of its partners using Chinese technology, such as Huawei’s 5G telecommunications network. 

It is set to become even more sensitive for the UAE as it prepares to take a temporary seat on the UN Security Council in January, fully aware that it risks being squeezed between the competing interests of the two superpowers.

“In the past, so-called middle [sized] states could avoid making choices, but the UAE’s going to come under increasing scrutiny from both sides, depending on how it votes and the signalling when it is on the council,” says a person briefed on Gargash’s discussions in Washington. 

“The US wanted to have a conversation about this, and the sensitives about China overall.”

It is “going to come down to the hard choices you have to make”, he adds, “and the 5G issue has become the faultline for many countries”.

It is a balancing act that the UAE and other Gulf states have been grappling with since China began broadening its economic and political footprint across the Middle East two decades ago — Beijing is now the biggest buyer of crude oil from the Gulf region. 

It is a trend that has coincided with the perception among Gulf rulers that the US political establishment is bent on disengaging from the region, a sentiment exacerbated by its chaotic withdrawal from Afghanistan in August.

Saudi Arabia’s Crown Prince Mohammed bin Salman poses with the Chinese ambassador to Saudi Arabia Li Huaxin during a visit to the Great Wall of China in Beijing © Bandar Algaloud/Courtesy of Saudi Royal Court/Reuters


“There’s a trust deficit with America which is growing by the day,” says Abdulkhaleq Abdulla, an Emirati professor of politics. 

“The trend is more of China, less of America on all fronts, not just economically but politically, militarily and strategically in the years to come. 

There’s nothing America can do about it.”

For decades, Gulf leaders viewed Washington as the guarantor of their security, while the US looked to them as reliable suppliers of global energy. 

But US oil imports from the region have declined markedly over the past 10 years as a result of the shale gas boom in North America. 

In contrast, demand for oil in Asia soared, and as the economic ties deepened, the China-Gulf relationship has flourished into one that today is far more than just about crude.


With a younger, ambitious generation of Gulf leaders at the helm seeking to modernise their nations, they are increasingly looking to tap into Chinese technology and artificial intelligence for smart cities, as well as armed drones, healthcare and renewable energy.

A veteran US diplomat says the China factor has already become a “real point of acrimony” in relations with the UAE.

“This is one of those issues that make the current relationship with Abu Dhabi and other Gulf states scratchy,” the diplomat says. 

“There’s an effort to make them choose in a pretty binary fashion and the Emiratis have been equally firm in saying ‘don’t make us choose’.”

Riyadh decided to use Huawei’s 5G technology in Neom, the flagship development project in Tabuk province that will include a futuristic city © Mark Schiefelbein/AP


The Huawei factor

Gulf officials insist that Washington remains their number one ally, citing the historical security relationship and massive investments into the US, particularly in Treasury bills, as well as cultural ties that have developed as young Arabs studied in American schools and universities and feasted on its movies, soap operas and music. 

They add that there is no prospect of China replacing the US as the dominant foreign military power in the region, or the main exporter of arms to the Gulf powers.

But as more assertive rulers in Saudi Arabia and the UAE — the Middle East’s two biggest economies and traditional US partners — look to diversify their relations and project their power through broader alliances, the more they look eastward.

Often it is a pragmatic choice, officials say, as China provides technology that is cheaper and more readily available than western options, with Huawei’s 5G technology a prime example. 

Beijing is also willing to sell equipment to Gulf states that Washington is not — and it comes without political conditions.

“More and more is going to be done with China for obvious reasons,” says Ali Shihabi, a Saudi analyst. 

“First of all the Chinese are willing to transfer technology and don’t have a Congress to harass you; secondly, China is our biggest market and, thirdly, China has influence with [Saudi Arabia’s rival] Iran. 

It’s virtually Iran’s only valuable ally, so exceedingly important to Saudi Arabia.”

As an example of the blossoming relationship, he cites Riyadh’s decision to use Huawei 5G in Neom, Crown Prince Mohammed bin Salman’s $500bn flagship development project to include a futuristic city, even though the “Americans were dead set against it”. 

The tech firm is already building its biggest overseas retail outlet in the kingdom as China cements its position as Saudi Arabia’s biggest trading partner. 

Over the past two decades, trade between the two has soared from less than $4bn in 2001 to $60bn in 2020, nearly half of which was Chinese imports.

“We don’t really pivot to China but we have to be onside with China,” a senior Saudi official says. 

“With 5G, it wasn’t a question of ‘we are taking theirs over yours’, it was we are taking the best available. 

You do the same and we will buy from you. 

But we have to protect our own interests, so develop your technologies or we will develop our own.”

An artist’s impression of Neom, which will be built in northwestern Saudi Arabia © neom.com


Fight for regional influence

The kingdom, once a staunch opponent of communism and supporter of Taiwan — which Beijing characterises as a renegade province — was the laggard of the Arab world when it formally established relations with China in 1990. 

It was a move that in part had its roots in the frustration with Washington felt by the Saudi rulers.

In the mid-1980s the kingdom was desperate to secure missiles from the US as a deterrent to Iran. 

When Washington refused the request, Saudi King Fahd secretly approached Beijing and arranged to purchase Chinese ballistic missiles. 

“It was a sort of message from King Fahd, ‘we can do this’ and we are buying these,” the Saudi official says.

More recently it has been the US refusal to sell armed drones to Gulf states that has caused both Riyadh and Abu Dhabi to procure the weapons from China instead. 

After Saudi King Salman and Crown Prince Mohammed held talks with President Xi Jinping in Beijing in 2017, a deal was reportedly agreed to establish a Chinese drone factory — the Gulf’s first — at the kingdom’s King Abdulaziz City for Science and Technology.

The UAE turned to China as it scoured the globe for the resources to tackle the coronavirus outbreak © Fayez Nureldine/AFP via Getty Images


Three years later, as coronavirus hit the region, the UAE turned to China as it scoured the globe for the resources to tackle the disease. 

Group 42, a state-affiliated company chaired by Sheikh Tahnoon bin Zayed al-Nahyan, the federation’s national security adviser, quickly established ventures with Chinese firm BGI, to open a coronavirus laboratory in Abu Dhabi and conduct trials for a vaccine.

In contrast, when Khaldoon al-Mubarak, one of the most trusted lieutenants of Sheikh Mohammed bin Zayed al-Nahyan, the UAE’s de facto leader, contacted Honeywell to supply much-needed personal protective equipment, the conglomerate was unable to deliver because of a US ban on PPE exports. 

Honeywell ultimately sourced supplies from its subsidiary in China as Beijing allowed the equipment to be shipped to the UAE, before setting up a joint venture with Mubadala, a state investment fund, to manufacture it in the Gulf state.

Mubarak, the chief executive of Mubadala and the UAE’s special representative on China relations, told the FT this year that more than $100bn of the state fund’s $232bn of assets was invested in the US, before adding that it was looking to increase its investments in the Asian power. 

Mubadala is seeking to increase its investments in technology, healthcare and disruptive industries. “The sectors we like all have a significant growth trajectory in China,” Mubarak said.

Another senior UAE official says that while the relationship with China is strong, “it’s not overpowering”, adding that he does not believe it will jeopardise Abu Dhabi’s relations with the US.

The US has expressed concerns that the sale of F-35 fighter jets to the UAE risks China gaining access to its latest military technology © David McNewAFP/Getty Images


“The Emirates is a place where we like to do things quickly and sometimes western bureaucracies and corporations are slower to move and perhaps don’t see the strategic relationship as clearly as some of the Chinese do,” he says. 

He and others add that the UAE is not being treated differently from other US partners.

Yet the notion that it will not have an impact on relations with Washington is consistently being put to the test — the latest example being US concerns that the sale of F-35 fighter jets to the UAE risks China gaining access to some of America’s latest military technology.

“I am concerned about that, but I believe we are working hard both internally within the United States and with our UAE partners to ensure that’s resolved satisfactorily,” General Kenneth F McKenzie, the commander of the US central command, told a webinar this year. 

“We need to recognise that competition against Russia and China simply doesn’t only occur in the western Pacific or in the Baltics, it occurs in places like the Middle East, where they are expanding and coming in.”

A worker wearing a protective suit sprays disinfectant to stop the spread of the coronavirus in Sharjah, United Arab Emirates © Francois Nel/Getty Images


The appeal of Beijing

Saudi Arabia and the UAE have both taken formal steps to deepen their relations with China in recent years.

In January 2016 Beijing issued its first “Arab policy paper”, which looked at everything from security to commerce and counter-terrorism. 

The same month Saudi Arabia and China agreed to establish a “comprehensive strategic partnership” to enhance political, cultural, security and military ties during a visit to the kingdom by Xi. 

Gulf states are seeking to benefit from Beijing’s Belt and Road Initiative, and Prince Mohammed, the kingdom’s day-to-day ruler who co-chairs the “China-Saudi Arabia High-Level Joint Committee”, has linked it to his own “Vision 2030” plan.

The UAE and China agreed to establish their own “comprehensive strategic partnership” with a focus on economic ties, technology transfers, IT and energy when the Chinese president visited Abu Dhabi in 2018. 

But there were also political and military aspects to their agreements, including a desire to “enhance practical co-operation between the two armies” in “various forces and weapons, joint training and training of personnel and other domains”.

A Pentagon report on China’s military power, released last year, listed the UAE among countries it believed Beijing “likely considered” as locations for “military logistics facilities”. 

And from a Gulf perspective, China offers something the US and other western powers cannot — an autocratic, state-led development model that resonates with the Gulf’s dynastical rulers.

“There’s a lot to learn from China and its ability to develop the way it has is predicated on the fact it’s not a democracy . . . it can make the decisions and it has to be state led,” says the Saudi official. 

“They are becoming light years ahead on a lot of things. 

We are also studying their industrial cities, not just big industry but downstream industries, technology, and looking at how they built them so successfully.”

The US refusal to sell armed drones to Gulf states caused both Riyadh and Abu Dhabi to procure the weapons from China instead © Reuters


The Gulf states and China also appreciate pledges not to meddle in internal affairs. 

When much of the western world was chastising Prince Mohammed in the months after the 2018 murder of Jamal Khashoggi by Saudi agents, the crown prince was warmly welcomed in Beijing. 

And Prince Mohammed, whose father, King Salman, is custodian of Islam’s two holiest mosques, made no public comments about China’s mass internment of the predominantly Muslim Uyghur minority. 

Instead, he said Beijing had “the right to take anti-terrorism and de-extremisation measures for safeguarding national security”, according to a Chinese foreign ministry account of his meeting with Xi.

In August, the Associated Press quoted a Chinese woman as saying she was held in a secret detention centre in Dubai with at least two Uyghurs. 

Dubai Police dismissed the woman’s claims as “false”, insisting she was not detained. 

“Dubai does not detain any foreign nationals without following internationally accepted procedures,” the government said in a statement at the time. 

“Nor does it allow foreign governments to run any detention centres within its borders.”

Jonathan Fulton, an expert on Chinese-Middle East relations at Zayed University in Abu Dhabi, characterises the Gulf powers’ ties to Beijing as a “pretty good hedge for Gulf leaders”.

“They look at China and they see a rising power that creates a lot of opportunity and they don’t demand a whole lot, whereas western countries tend to tie in human rights issues, or political ideology,” Fulton says. 

“China’s got this very firm, non-interference principle hard baked into its foreign policy . . . ‘we’re not going to tell you what to do and we’re not going to get involved in politics’.”

He believes the US still has the ability to influence the direction of relations between China and the Gulf, but adds that “there’s no way they can stop it from happening”, adding: “I don’t think there’s any changing it, just look at markets, population projections: the global centre of gravity, economic gravity, is just constantly moving eastward.”

Others take a blunter view — particularly if Washington seeks to pressure Gulf leaders, such as Saudi Arabia’s crown prince, over human rights and other issues. 

President Joe Biden entered the White House criticising Saudi Arabia over Khashoggi’s murder and promising to reassess relations with the kingdom, while freezing some arms sales.

“I think China is going to slip in and eat more of America’s lunch in Saudi Arabia because every hassle the Americans give the kingdom, it just encourages them,” Shihabi says.

Beijing’s Time for Evergrande Choosing

Strategic ambiguity is no solution for a major debt implosion.

By The Editorial Board

The Evergrande Group headquarters building in Shenzhen, Guangdong province, China./ PHOTO: ALEX PLAVEVSKI/SHUTTERSTOCK


If Beijing has a grand plan for dealing with the slow-rolling collapse of property giant Evergrande Group, it’s one of the best kept secrets in Asia. 

It’s clear that Xi Jinping’s government will step in to protect at least some of Evergrande’s creditors, but uncertainty about who will benefit and how is becoming another risk.

Investors and Chinese policy makers had known for months about Evergrande’s problem managing more than $300 billion in liabilities. 

Since August the company has missed three coupon payments on bonds issued outside China, although it isn’t in default thanks to 30-day grace periods.

Yet no one knows what Beijing intends to do. 

A direct bailout that preserves Evergrande in its current form seems unlikely. 

The company’s woes are part of Beijing’s broader campaign to tamp down property prices and reduce real-estate debt. 

Evergrande also won’t get a Western-style orderly bankruptcy based on the legal seniority of creditors. 

This would reassure investors about China’s rule of law.

But the Communist Party won’t risk harming the small businesses among Evergrande’s suppliers or the home buyers waiting for Evergrande to build units for which they prepaid. 

Those creditors might become big losers in a traditional bankruptcy, and some have staged protests outside Evergrande offices. 

Mr. Xi can’t afford more social discontent.

Beijing’s plan so far appears to be to kick the can down the road. 

Beijing is leaning on banks to forbear delayed interest payments, and it appears to be preparing to hand uncompleted building projects to other developers. 

This is what Logan Wright of the Rhodium Group calls the “quiet bailout” because it happens without Beijing publicizing a plan.

Beyond that, it’s anyone’s guess. 

Foreign investors assume, probably correctly, that they will be big losers but no one knows how big. 

The uncertainty is roiling the overseas market for bonds issued by Evergrande and other property companies.

Evergrande’s suppliers might be the thorniest matter. 

Many have converted accounts receivable into tradable credit that circulates like money in China’s gray financial system. 

Failing to repay could create a financial panic. 

Unorthodox solutions such as offering creditors property in lieu of cash might withdraw more liquidity than Beijing intends from the economy.

Beijing also will worry about households who have bought wealth-management products backed by Evergrande. 

These are poorly regulated financial products akin to bonds that are marketed by banks and others as a “safe” high-interest alternative to low-interest savings accounts. 

Allowing these products to default would cause hardship for middle-class savers and potentially more political unrest.

Mr. Xi is running out of time to abandon the quiet bailout in favor of a more explicit plan. 

Greater clarity carries risks. 

Households and investors could react badly if they conclude that Beijing’s plan is insufficient. 

But silence is growing more dangerous as the uncertainty spreads to other companies.

Beijing isn’t the first government to deviate from normal bankruptcy rules, as Americans can attest after the 2008 financial panic. 

But if that’s not the plan, authorities should tell households and investors what is.

The Economic Mistake the Left Is Finally Confronting

By Ezra Klein

Credit...Rolf Schulten/Ullstein Bild, via Getty Images




The words “supply side” are coded, in American politics, as right wing. 

They summon the ghost of Arthur Laffer, the history of Republicans promising that cutting taxes on the rich will encourage the nation’s dispirited John Galts to work both smarter and harder, leading economies to boom and revenues to rise. 

This has made it vaguely disreputable to worry about the supply side of the economy. 

It’s as if the nonsense of phrenology had made it sordid for doctors to treat disorders of the brain.

But look closely and you can see something new and overdue emerging in American politics: supply-side progressivism.

Many of progressivism’s great dreams linger on the demand side of the ledger. 

Universal health care promises insurance people can use to buy health care. 

Food stamps give people money for food. 

Housing vouchers give them money for rent. 

Pell Grants give them money for college. 

Social Security gives them money for retirement. 

The child tax credit gives them money to care for their children. 

The minimum wage and the earned-income tax credit give workers more money. 

A universal basic income would give everyone more money.

This is the driving theory of most of the progressive policy agenda, most of the time: give people money or a money-like voucher they can use to buy something they need or even just want.

I don’t mean, in any way, to diminish the importance of those policies. 

There is little Democrats could do that will help as many people right now as making the expanded child tax credit permanent. 

The rumblings that it may be allowed to expire, or restricted only to those who pay federal income taxes, are worrying. 

If Democrats do nothing else this session, they should delete the expiration date from the biggest anti-poverty legislation they’ve passed since the Great Society.

But progressives are often uninterested in the creation of the goods and services they want everyone to have. 

This creates a problem and misses an opportunity. 

The problem is that if you subsidize the cost of something that there isn’t enough of, you’ll raise prices or force rationing. 

You can see the poisoned fruit of those mistakes in higher education and housing. 

But it also misses the opportunity to pull the technologies of the future progressives want into the present they inhabit. 

That requires a movement that takes innovation as seriously as it takes affordability.

The first problem is explored in “Cost Disease Socialism,” a new paper by the center-right Niskanen Center. 

“We are in an era of spiraling costs for core social goods — health care, housing, education, child care — which has made proposals to socialize those costs enormously compelling for many on the progressive left,” Steven Teles, Samuel Hammond and Daniel Takash write.

There are sharp limits on supply in all of these sectors, either because regulators make it hard to increase supply (zoning laws make it difficult to build new housing), because training and hiring workers is expensive (adding classrooms means adding teachers and teacher aides, expanding health insurance requires more doctors and nurses), or both. 

“This can result in a vicious cycle in which subsidies for supply-constrained goods or services merely push up prices, necessitating greater subsidies, which then push up prices, ad infinitum,” they write.

The paper is largely an appeal to Republicans to rethink their approach. 

Instead of focusing on “backward-looking deficit reduction strategies based on budgetary gimmicks or dead-on-arrival cuts to existing entitlements,” the authors urge conservatives to tackle costs directly. 

Too often, Republican proposals to cut government spending are just shell games that shift costs onto individuals. The conservative enthusiasm for moving Medicare beneficiaries onto (often more expensive!) private plans “risks being little more than an accounting trick — a purely nominal change in ‘who pays’ that would do little to address the underlying sources of cost growth.” Preach!

It would be nice to have the Republican Party the Niskanen Center imagines, one more focused on making a decent life affordable than on making vaccination optional, and I wish it well in its effort to white paper it into existence. 

For now, though, it’s Democrats who are starting to take supply-side concerns seriously.

But before we get to that, I want to widen the definition of “supply,” a dull word within which lurks thrilling possibilities. 

Supply-side progressivism shouldn’t just fix the problems of the present, it should hasten the advances of the future. 

A problem of our era is there’s too little utopian thinking, but one worthy exception is Aaron Bastani’s “Fully Automated Luxury Communism,” a leftist tract that puts the technologies in development right now — artificial intelligence, renewable energy, asteroid mining, plant and cell-based meats, and genetic editing — at the center of a post-work, post-scarcity vision.

“What if everything could change?” he asks. 

“What if, more than simply meeting the great challenges of our time — from climate change to inequality and aging — we went far beyond them, putting today’s problems behind us like we did before with large predators and, for the most part, illness. 

What if, rather than having no sense of a different future, we decided history hadn’t actually begun?”

Bastani’s vision is bracing because it insists that those of us who believe in a radically fairer, gentler, more sustainable world have a stake in bringing forward the technologies that will make that world possible. 

That is a political question as much as a technological one: Those same technologies could become accelerators of inequality and want if they’re not embedded in thoughtful policies and institutions. 

But what Bastani sees clearly is that the world we should want requires more than redistribution. 

It requires inventions and advances that render old problems obsolete and new possibilities manifold.

Climate change is the most pressing example. 

If the Biden administration gave every American a check to transition to renewables, the policy would fail, because we haven’t built that much renewable capacity, to say nothing of the supply chain needed to deploy and maintain it. 

In a world where two-thirds of emissions are now coming from middle-income countries like China and India, the only way for humanity to both address climate change and poverty is to invent our way to clean energy that is plentiful and cheap, and then spend enough to rapidly deploy it.

Or take health care. 

House and Senate Democrats are squabbling over dueling policies to let Medicare set the prices it pays for drugs. 

Europeans and Canadians pay far less for the same prescription drugs that we buy, and so House Democrats want to let Medicare set the prices of at least some drugs at 120 percent what our peer countries pay. 

Senate Democrats, according to STAT, seem to be moving toward directing Medicare to set prices based on what the Veterans Health Administration pays, which is lower than before but still higher than abroad. (It’s darkly comic that neither chamber has simply taken the position that Americans shouldn’t pay more than Canadians for prescription drugs.)

The counterargument here is frustrating, but important. 

Yes, Americans overpay compared to peer countries for drugs. 

But truly curing, managing or preventing disease is of extraordinary value to humanity. 

Pfizer and Moderna will make billions from their coronavirus vaccines, but they’ve created trillions of dollars in economic value by unfreezing economies, to say nothing of the lives saved. 

It is true that European countries free-ride off the high cost we pay for drugs, because it’s the U.S. market that drives innovation. 

But that doesn’t mean we’d be better off paying their prices, if that meant new drug development slowed. 

We don’t just want everyone to have health insurance in the future. 

We want them to be healthier; freed from diseases and pain that even the best health insurance today cannot cure or ease.

To this, progressives will note that pharmaceutical companies pump money into me-too drugs, spend gobsmacking amounts on advertising and administration, and make billions and billions in profits. 

And they’re right. 

It’s ludicrous to say that the pharmaceutical system we have now is oriented toward innovation. 

It’s oriented toward profit — sometimes that intersects with innovation and sometimes it doesn’t.

Too often, though, progressives let their argument drop there. 

They need to take the obvious next step: We should combine price controls with new policies to encourage drug development. 

That could include everything from more funding of basic research to huge prizes for discovering drugs that treat particular conditions to more public funding for drug trials. 

Years ago, Bernie Sanders had an interesting proposal for creating a system of pharmaceutical prizes in which companies could make millions or billions for inventing drugs that cured certain conditions, and those drugs would be immediately released without exclusive patent protections. 

Focusing on the need to make new drugs affordable while ignoring the need to make more of them exist is like trimming a garden you’ve stopped watering.

But this is a lesson progressives are, increasingly, learning. 

This is clearest on climate. 

Much of the spending in the Biden agenda is dedicated to increasing the supply of renewable energy and advanced batteries while building the supply of carbon-neutral transportation options. 

Democrats have realized that markets alone will not solve the climate crisis. 

And the same is true for much else on the progressive docket.

In a blog post, Jared Bernstein, a member of President Biden’s Council of Economic Advisers, and Ernie Tedeschi, a senior policy economist for the council, framed the Biden agenda as “an antidote for inflationary pressure” because much of it expands the long-term supply of the economy.

“The transportation, rail, public transit, and port investments will reduce efficiency-killing frictions that keep people and goods from getting to markets as quickly as they should,” they wrote. 

“The child and elder care investments will boost the labor supply of caretakers. 

The educational investments in pre-K and community college will eventually show up as higher productivity as a result of a better-educated work force.”

A list like this could go on. 

It’s not clear whether it’ll be in the reconciliation bill, for instance, but Biden has proposed an expansive plan to increase housing supply in part by pushing local governments to end exclusionary zoning laws. 

And in California, that’s exactly what’s happening, as I wrote a few weeks back. 

A decade ago, progressives talked often of making housing affordable, but they didn’t talk much about increasing housing supply. 

Now they do.

That’s progress.

I don’t think these various policies have cohered into a policy faction, a way progressives think of themselves, at least not yet. 

But I’d like to see that happen. 

Political movements consider solutions where they know to look for problems. 

Progressives have long known to look for problems on the demand-side of the economy — to ask whether there are goods and services people need that they cannot afford.

That will make today fairer, but to ensure tomorrow is radically better, we need to look for the choke points in the future we imagine, the places where the economy can’t or won’t supply the things we need. 

And then we need to fix them.


Ezra Klein joined Opinion in 2021. Previously, he was the founder, editor in chief and then editor-at-large of Vox; the host of the podcast, “The Ezra Klein Show”; and the author of “Why We’re Polarized.” Before that, he was a columnist and editor at The Washington Post, where he founded and led the Wonkblog vertical.