Hello, and welcome to this week’s edition of the Future In Five Questions. This week I interviewed Julius Krein, founder and editor-in-chief of American Affairs. The journal was founded to articulate the economic nationalism of the 2016 Donald Trump campaign, but has evolved into a wide-ranging, heterodox politics and policy journal. Krein is particularly interested in the role of tech and industrial policy in a “post-neoliberal” future, which he explored in a recent essay for the New Statesman. We spoke about the key differences between the dominant American firms of the 20th and 21st centuries, the changing pace and nature of tech innovation, and the shortcomings of America’s current approach to policy issues, like chip manufacturing. The following conversation has been edited and condensed for clarity: What’s one underrated big idea? Capital intensity. You can trace a lot of the problems in the American economy — problems in supply chains, the defense-industrial base, global economic imbalances — to the fact that the U.S. has a hard time dealing with capital intensity. What's happened is that China in particular, and Asia in general, have subsidized capital-intensive sectors, causing them to mainly go over there. Whereas we have adopted policies that prioritize intellectual property and financial rents, and reward sequestering capital- and labor-intensive activities away from corporate profits. That's resulted a big shift, as I write in [my recent New Statesman essay], from an economy where in the Fordist paradigm the largest and the most profitable companies were also the largest employers and investors, to the one we have today where the most profitable companies tend to have relatively low employee bases and relatively little reinvestment needs and capital expenditures. That underlies a lot of the issues with defense and industrial supply chains, as well as financialization and inequality. There's also another side to it: You hear a lot of complaints especially from the right but just in general, about the bureaucratization of science and the stagnation of innovation. I tend to think those are valid, but we characterize it as a pure ideological problem whereas I think it also reflects a change in science, where a lot of scientists are more capital-intensive today. Stanford spent $250 million on its CRISPR lab. With AI, computing power is very capital intensive. When you have all that money going into innovation and science, there's going to be bureaucracy attached to it to ensure accountability, whether it's a state bureaucracy or corporate bureaucracy. I don't think we've really figured that out. What’s a technology that you think is overhyped? ChatGPT and LLMs. Not that there's nothing there, but the practical applications seem to be things like personal assistants and customer service, much of which has already been automated to some extent and doesn't seem to herald that big of a breakthrough or fundamental productivity growth. On the other hand, some of the applications are interesting; there was the popular video about an agricultural technology that used AI to hit weeds with lasers. But the business model tends to favor consumer-driven, ad-driven, make-funny-videos-on-the-internet technologies and less so the more capital-intensive applications which I think could be far more meaningful. What book most shaped your conception of the future? I'll give you two, and stick to recent ones because this isn't a college application essay. One is called “Forging Global Fordism” by Stefan Link. It offers an important discussion of how the model of Fordist manufacturing was not just an inevitable development of capitalism, there were idiosyncratic factors and policy changes that went into it. It describes the importance of that model in the global conflicts and macroeconomic issues of the 1930s through the middle of the 20th century, a lot of which still resonate today. If anything now, we're on the opposite side. At that time, the U.S. was the undisputed manufacturing powerhouse of the world and other countries arguably might have even been a little bit better at pure research and technology. Today that's shifted, with China occupying that role. The second book I want to mention is “Europe’s Leadership Famine” by Tom Gallagher. It profiles leaders of Europe from the Cold War to the present: Helmut Kohl; Angela Merkel; Boris Johnson; Emmanuel Macron; and as the title suggests it presents a pretty damning portrait. It's about Europe, but I think there are also parallels for U.S. politics — the personalization of politics and the decline of parties; the drift of basic policymaking away from national democracies, and towards bureaucratic, transnational, corporate elite-driven power centers; how each generation of leader sees short-term trade-offs as advancing their narrow interests but then they quickly take on a momentum of their own and undermine the rationales used to adopt them. What could the government be doing regarding technology that it isn’t? When you look at U.S. industrial policy over the last few years, there's been a momentous shift insofar as an industrial policy has been adopted and one can actually talk about it now whereas in the past that topic was pretty much off the table in political and elite discussions. On the other hand, in many ways, we haven't adopted a serious industrial policy that focuses on industrial development and competitiveness. We have subsidies for chip manufacturing, but a real industrial policy by historical and international standards would see things like conditionality around company and sector performance. So once a company gets to five-nanometer chips, they get more money to go to three-nanometer, and then two, and so on. Our industrial policies avoid a lot of that stuff. They've avoided a lot of basic business issues around the environment. We’re re-running playbooks from 1958 and just adding some government loans and subsidies, as opposed to things like incentivizing the financial sector to invest and alleviate concerns around price volatility, or dealing with issues around intellectual property and fissured-economy incentives. We're talking about industrial policy now, and subsidizing certain things, but we're not actually running it in a serious way that would not just subsidize a few fabs here and there but actually motivate technological and industrial progress. What has surprised you the most this year? The continued lack of action around the defense-industrial base. It's something seemingly everyone agrees on, or a vast majority of people agree on, across the ideological spectrum. We're in the midst of the war between Russia and Ukraine; we're now in the midst of a renewed and unpredictable conflict in the Middle East. I'm not a “China's going to invade Taiwan imminently” person, but obviously, that threat is out there and it's growing more serious. If you look at the numbers, it's going to take us something like seven years to replace the ammunition used in Ukraine. The Center For Strategic and International Studies estimated that if China were to blockade Taiwan, the U.S. would be out of ammunition in something like seven days. China built 21 submarines last year, the U.S. built almost two. We can't meet our AUKUS agreements. The world seems to be getting more dangerous. The precarity of the U.S. strategic and security position as the result of a weak defense-industrial base seems really acute, and more people are talking about it but nothing really serious has been done. That's surprising to me.
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