The search for the panacea: Keynesian Green New Deal versus green technology-open neoliberalism, elite selection, civil-military integration, structural pacifism, industrial policy, state versus market?
At the moment there is a lot of discussion as to whether we want more government and state, more market, more or less debt, more industrial policy or less, if the economy should be converted to a war economy (Editor-in-Chief of the Münchner Merkur Georg Anastasiadis, EPP-CSU-Weber), where there are structural deficiencies in the western system, whether market-economy democracy is inferior to Russian and Chinese state oligarch capitalism, whether one should pursue a Keynesian Green New Deal or more of a technology-open green neoliberalism, whether the state, infrastructure and administrative deficiencies are due to too much neoliberalism or more to the lack of technological expertise, which are partly due to an alleged advance of the humanities, including genderism and ideology, to the detriment of the objectively verifiable natural sciences and STEM subjects in politics, business, media and administration with the associated hostility to technology, yes, whether university dropouts push their way out of the lecture hall and into politics and parliaments without having a degree or a profession, while others see the latter as professionally idiotic careerists and lobbyists like Blackrock-Merz, whether it is due to the globalization-fitted slim education system that produces more specialised, narrowminded idiots than Humboldtian generalists and holistic universal geniuses, yes, also which economic theory should be used as a basis or if „structural pacifism“ ( Ex-General Vad), hedonism and civilizationlal degeneration which thinks more in terms of values, idealism, fun, work-life- balance and soft power than in realpolitics, geopolitics and hard power like the military and economy in terms of Carl Schmitt or hard work and discipline . We do not want to go into everything, below some reading recommendations and here two interesting contributions. First in Focus Gabor Steingart:
„Guest contribution by Gabor Steingart
The ideas of Habeck’s mastermind are completely out of place in Germany
Every new generation of economic politicians also brings a new generation of economic theorists to the table. The couple dance of power and science has proven its worth: After all, one’s own actions should also appear to be scientifically sound and immunized against external criticism. Economics Minister Ludwig Erhard referred to the national economist Alfred Müller-Armack, the actual inventor of the social market economy. Helmut Schmidt was the faithful student of John Maynard Keynes; the FDP economics ministers, Lambsdorff, Bangemann, Hausmann, Rösler and Brüderle, fraternized with the Chicago boy Milton Friedman, whose supply-oriented policies (“money matters”) they wanted to transport from the lecture hall to the plenary hall. Robert Habeck – the first Green Economics Minister – also brings a house economist with him, who acts as a kind of key witness for his way of thinking. Her name is Mariana Mazzucato, and she is an Italian-American economist who teaches at University College, London. In an interview with the women’s magazine Myself, Habeck named Mazzucato as one of seven women who changed his life. He met her for the first time at the World Economic Forum in Davos – even before he became Economics Minister. He reported of the encounter: “I had read her writings extensively before and they are some of the best. In direct conversation, the woman was a power, an authority, which she produced laughing, questioning and with an easy matter-of-factness.”
Habeck’s pioneer Mazzucato sees the state as a designer The core of the core of her worldview revolves around the state, which she does not see as a spectator like Milton Friedman, nor as a referee like Ludwig Erhard, but as a goal scorer. For her, the state is not the repair shop of capitalism, but she sees it „in a shaping and market-creating role“. For them, the state is “the pioneer who leads the way”. In her book The Capital of the State she writes: „Government action should increase the courage of companies.“ „To start the green revolution and tackle climate change, we need an active state again.“ She looks at the private economy with suspicion because she only sees the apologists for short-termism at work here: „Industry will not develop through the free play of market forces because markets do not reward sustainability.“ The tragedy of Robert Habeck lies in the fact that he encountered an interesting representative of a new economic theory in her, but whose ideas mainly came from Israel, the USA, Japan and China and the German state, which still has Prussianism in its bones , are not possible“
Interesting article by Gabor Steingart about the new Green New Deal business school by Mariana Mazzucoto. So far I haven’t heard of this woman, but apparently the rest of the world has and she seems to have a wide range of supporters, now also in Germany, but not only. .Steingart criticizes the emphasis on the role of the state in the economy, which would not get along with Hayek and Ludwig Erhard. Well, Hayek’s neo-liberalism and Friedmann’s monetarism showed up in the government’s shattered exsitence, the slim state, and the financial crisis of 2008. Not a word about that. In addition, both Strauss and Schmidt endorsed industrial policy, for which AIRBUS, Tornado Eurofighter, Gallileo, ESA, etc. stand quite successfully. Internet nerd Sascha Lobo, on the other hand, criticizes the fact that state industrial policy has not worked in the Internet sector, since the German Facebook DuckduckGo demanded by Schröder was a flop, especially since China did not let German companies come up with renewable energies State equals a flop, in Elon Musk we trust! .That´s logic for Lobo. Not a ceratin error in the industrial policy, but industrial policy in itself is leading nowhere in his liberatarian or neliberal philosophy. Moreover, Steingart also praised Schmidt as a Keynesian, whereby the anti-cyclical state economic policy, including the state and the multiplier effect, is very central. Since this view, simplified mostly by both sides,, cannot be maintained in view of Made China 2035 and the Reduce Inflation Act Bidens, Steingart implicitly deviates from the fact that state intervention and industrial policy work very well elsewhere, it is up to the German state, since it subsidizes too few, but had too much bureaucracy. How would Lindner and the FDP see it, which claim subsidization everywhere. But it’s probably not just the amount, it’s what is subsidized and not.
The example of the German solar industry is also often cited, which, like Sascha Lobo cites Duckduckgo, is seen as a prime example of the harmfulness of state intervention and industrial policy (Lobo: „Please don’t use the Airbus argument“). With regard to the migration of the German solar industry to China, China expert Prof. Dr. commented:
“In my view, it is wrong to blame China for the migration of the renewable energies. The culprit was the high German subsidies (mainly pushed by the Greens), which made it possible for the Chinese to open up the market. If it weren’t for the astronomically high profit margins that the city dweller could use his energy taxes to pay for the suburban dweller’s rooftop solar array (a gigantic bottom-up redistribution scheme!), then the Chinese would have had to operate in a much smaller market with more normal prices , because dumping would not have been worthwhile and the German solar industry would not have been swept away so easily. Then, of course, the expansion of the solar industry would have been slower, but it would have been on fairer terms. The Reduce Inflation Act likes to be inflated a bit here. Overall, it sounds huge. But that’s only because you can’t see that it’s supposed to run for 10 years. What is critical about it is not the subsidy, but the sheer chauvinism that guides it — but which will end up costing the American citizen money (as chauvinism usually does).”
However, the following questions still arise: Wouldn’t the migration of the renewable energy industry to China, with fewer subsidies, lower profits, have taken place in the same way, albeit perhaps a little more slowly, but still – also because of the lower labor and production costs and other locational advantages? In addition, anti-dumping measures were apparently only taken after the emigration had already taken place and then also very tamely. Were there no education taxes ala Friedrich List for the German and European solar and wind industry?
Professor van Ess says:
““Could have“ is always hard to argue with. But I think that without subsidies, the entire package of a solar system would have been significantly more expensive and the proportion of solar modules in the price would have been significantly lower. Then the price of the solar modules would have played only a minor role, and the German suppliers would have had a locational advantage over the Chinese when it came to the overall package. However, the state wanted solar systems to be as cheap as possible and therefore passed the costs on to the German taxpayer. This is how a mass market was created. If you can produce large quantities at once, you can lower prices and the cheapest bidder wins. Of course, the Chinese were unbeatable here. I believe that they would only have been marginally interested in the German market if such a huge market had not suddenly developed there. It attracted cheap production.
Conversely, the German providers did not have the potential to serve the market. Without the Chinese, the expansion would not have progressed at this pace. If this had been allowed to grow gradually, then the German providers could have grown with it and established structures. But the way things went, German politics brought the competition into the house itself.”
But how did the USA and the rest of Europe develop their solar and wind industries? Was that an issue back then at that time? At the latest since Al Gore, one might think, or were the USA happy and energy-politically independent after the Middle East wars and after the US became the world fracking export champion through state subsidies and deregulation?
Professor van Ess assesses it as follows:
“I don’t think there have been any attempts beyond Germany to compete with China for solar modules because it was actually a cheap product that was difficult to compete with. Never heard of an American or French solar industry. That must have worked so well in Germany initially because the solar modules had been programmed into the green DNA since the late 1970s. Twenty years later, Trittin was finally able to implement it. It was just a heart’s desire. However, wind is something else. There are more providers. This is more complex and not that cheap to do. You need massive debris to be carved into the woods, not just a few cheap workers.”
In addition to China’s export successes, its apparent triumph in the solar industry, AI, high-tech, although not yet 2 nanochips, a report about the alleged superiority of the Chinese navy and its shipbuilding is now exciting the western world. Former NATO General Domroese, on the other hand, believes that this alleged supremeacy of the Chinese navy is more for American and Western home consumption propaganda purposes for new armament programs and approval processes than reality, especially since the balance of power also changes again when you include Japan’s and South Korea’s capacities. Nevertheless, he had to admit that if one also included the Russian Pacific Fleet and North Korea in addition to the Chinese potential, a different picture could emerge. But the essential point is what structural differences there are between Chinese armaments and naval policy and that of the West. The Asia Times has a very insightful article on this, which could be instructive not only for the USA, but also for NATO and the Bundeswehr, especially if they want to realize their so-called Zeitenwende/ turning point:
“US Navy laments China’s shipbuilding supremacy
US Navy Secretary says its imperative to upgrade fleet to keep pace with China but the reality is America lacks the capacity to do so
by Gabriel Honrada February 27, 2023
The US is seemingly at a loss to match China’s ascendant naval shipbuilding capacity as US Navy leaders engage in a blame game rather than addressing past failures and mismanagement.
CNN reported this month that US Navy Secretary Carlos Del Toro said the US cannot match China in terms of fleet numbers, an admission that could have significant implications for the Pacific region’s power balance.
At the National Press Club in Washington, DC, Del Toro said that China now has a larger fleet and is deploying it globally, making it imperative for the US to upgrade its fleet in response.
According to the Pentagon’s November 2022 China Military Power report, China’s People’s Liberation Army-Navy (PLA-N) is the world’s largest navy with 340 ships as of 2022. The US Navy, in comparison, had just 280 ships.
Del Toro said that China has 13 naval shipyards, with one of these facilities having more capacity than all seven US naval shipyards combined. He also highlighted problems in finding skilled labor for US naval shipbuilding programs.
A December 2022 US Congressional Research Service report states that budget cuts and other issues have resulted in layoffs of shipyard workers whose specialized skills cannot easily and readily be replaced.
In his speech, Del Toro also said China does not face the same restrictions, regulations and economic pressures that hound US shipbuilders while accusing China of using “slave labor” in its naval shipbuilding program, without providing corroborating evidence.
However, defense policy expert Blake Herzinger said that Del Toro’s remarks were typical of the US Navy’s leadership response to China’s ascendant shipbuilding program, which he said tends to criticize China rather than acknowledge US failures, CNN reported.
In a December 2018 Center for Strategic and International Studies (CSIS) report, the Washington-based think tank said the US has focused on expanding naval shipbuilding instead of integrating civilian and military shipbuilding operations.
This philosophy, the report notes, is due to the different requirements of civilian and military shipbuilding, with consolidation potentially affecting the productivity and efficiency of both.
However, in an October 2021 article for Foreign Policy, Alexander Wooley notes that US naval shipbuilding woes can be traced to the post-Cold War “peace dividend,” which resulted in the private shipbuilding industry successfully lobbying the Clinton administration to take over engineering and design work traditionally done by the US Navy.
In the late 1900s, Wooley notes, the US Navy subsequently sought cost savings by reducing in-house naval architecture and engineering staff by 75%, from 1,200 to roughly 300.
Wooley also notes that the lack of new shipbuilding facilities has left US warships staying longer at shipyards for repairs, giving little incentive for shipyards to invest in increasing production capacity and thus resulting in the loss of skilled workers, technical know-how and subcontractors.
In contrast, China has chosen to apply its civil-military fusion strategy to its naval shipbuilding program to boost productivity.
This strategy brings several other advantages including cost savings, shortened development time and production cycles, improved military equipment quality and overall more efficient production, as well as allowing military industries to leverage advances in civilian technology, notes Richard Blitzinger in a January 2021 report for the S Rajaratnam School of International Studies (RSIS) in Singapore.
The approach also builds on China’s centralized and top-down strategic culture, enabling it to quickly shift attention, capital and resources to strategic sectors such as shipbuilding.
According to the 2022 United Nations Conference on Trade and Development Statistics Handbook, China built 44.2% of the world’s merchant fleet last year, followed by South Korea at 32.4% and Japan at 17.6%. In contrast, the data shows that the US built only 0.053% of the world’s total merchant fleet in 2022.
Monty Khanna notes in a 2019 article in the peer-reviewed journal Maritime Affairs: Journal of the National Maritime Foundation of India how China manages to build warships quickly and efficiently.
Khanna notes that China’s concurrent building of warships and civilian ships in the same shipyards has allowed its shipbuilding industry to operate at capacity regardless of economic downturns, apply mass-production techniques for civilian ships to naval shipbuilding, apply advanced civilian technologies into warships, maintain surge production capability for naval shipbuilding and circumvent sanctions targeting its military modernization programs.
Still, China’s shipbuilding program has its share of challenges. For example, in a 2015 article, Andrew Erickson notes that China still relies on foreign sources for surface ship and submarine propulsion.
A June 2021 article from Deutsche Welle reports that engines from German manufacturer Motoren und Turbinen-Union (MTU) are used in China’s Luyang III destroyers and Song-class submarines, with Beijing able to evade EU sanctions due to the engines’ dual-use applications.
Moreover, Erickson also says that China still has difficulty producing sophisticated sensors. Along those lines, in September 2021, a US court sentenced a Chinese national for smuggling US hydrophones that could be used for anti-submarine warfare to the Chinese military.
Erickson also notes that adherence to quality control standards may be a weakness in China’s naval shipbuilding program due to a cultural emphasis on personal relations and pragmatism, which he argues may result in problems in compliance to strict standards compared to Western ship-builders.
He also points out that China’s centralized and top-down strategic culture can result in bureaucratic inefficiencies and ineffectiveness.
Erickson also points out that China’s shipbuilding workforce remains relatively undereducated, resulting in China being capable of building large numbers of large and small non-complex ships.
It’s a deficiency he says China is addressing through partnerships between shipyards and the creation of technical schools to boost the capacity of its shipbuilding workforce.
Interesting article in the Asia Times about the US Navy and the PLA. The main difference is seen in the fact that China did not follow the neoliberal course of Clinton and his successors, outsourcing maintenance and production and leaving it primarily to private and civilian shipping and ship building companies, but that an integrated civilian-military approach was chosen here with corresponding effects and, also a mix between state industrial policy as with Made China 2025 and market elements. As long as the unintegrated mode of production and capacity in the West were not changed, overspending alone would not achieve much. Looks like we’re going to get a similar debate on procurement and the German civil and defense industries. Maybe it’s time to throw out consultants like McKinsey. Anyway, the article points out as the main difference the Chinese civil-military integration strategy. Well, that’s the price of western neoliberalism, peace dividend ideology and „It is the economy, stupid!“ and the numerous McKinsey consultants and their to death privatized and outsourced slim state. Finally, a few reading recommendations on industrial policy and the market/state
Technological revolution in China and the USA- what about Europe and Eurasia?
Strait Times/SCMP: Chinese hitech superiority while the Asia Times doubts that citing a censored internal study of Chinese academics
Reply to Juri Koffner: Against neoliberalism- arguments for a mix of industrial Ordnungspolitik and market elements- What about Skolokow?
Technocrat- engineer meritocracy as saviors of the nation and the world?