April 7, 2025
Unintentionally, the rules-based international order not only reveals its weakness in regard to China, but also the failure of the U.S. economy due to its intrinsic flaws. If one knows the true history of the United States, as I do, Michael Froman’s Foreign Affairs article, China Has Already Remade the International System, exposes the strategic challenge-paradox the U.S. faces today. To compete with China, the U.S. would have to reindustrialize its economy, but that would run counter to the free-trade financial predatory nature of the rules-based order. The author discloses the complete absence of knowledge by the present day financial-political elites, of the scientific principles responsible for the creation of the formerly industrialized United States
We should not lose sight of the fact that Foreign Affairs is published by the Council on Foreign Relations, the century old British American policy institute that represents the thinking of the Anglo-American Establishment in the U.S.
The American System
President Trump, like his predecessors for the last sixty years, has no understanding of how the United States was created from thirteen colonies into a powerful industrial nation. It was accomplished under the guidance of Alexander Hamilton’s principles for economic growth, which later became known as the American System of Political Economy. While tariffs were one aspect of Hamilton’s policy, they are misunderstood and misapplied today. Hamilton and his followers; Fredrich List, Henry Carey, John Quincy Adams, Abraham Lincoln, William McKinley, and Franklin Roosevelt, rejected the free trade mentality that dominates conventional economic thought today. Read my article: Nations Must Study Alexander Hamilton’s Principles of Political Economy.
Froman’s argument is: China was let into the Western world order, but then violated the rules to emerge from an undeveloped peasant based economy to a robust manufacturing industrialized economic power. China’s crimes, in the eyes of the rules-based order are: not allowing the so called markets to determine the future growth of its economy. As Hamilton and other more thoughtful founding fathers knew, Adam Smith’s theories, and the so called freedom of the marketplace, were always a fraud. The marketplace was never “free,” and it never resulted in the development of an economically sovereign nation. The United States, like every other modern nation that emerged in the last four hundred years, always entailed the intervention of the state, and the practice of dirigisme (state directed credit) policies.
Historian Nancy Spannaus summarizes the core principles of the American System: That principle is the use of government-regulated credit to promote continuous scientific and technological progress through the constant upgrading of the productive powers (mental as well as physical) of the labor force. These principles conflict sharply with the laissez-faire ideas which most Americans have been told built our economic prosperity. americansystemnow.com
It is not mysterious to understand how China has transformed its economy in less than fifty years. Practitioners of the American System of Political Economy have done the same, when in charge of crafting U.S. economic policy. Tariffs or protectionism have not been historically applied simply to make money or as a political weapon against other nations, as many foolishly think today. The profitability of the American System that includes tariffs flows from a full throated commitment to industrialize the nation. This would include:
- Increasing the productivity of the economy and workforce
- Expanding the manufacturing sector
- Modernizing the agricultural sector
- Issuing low-interest public credit for investments in infrastructure
- Promoting advances in science and technology
- Upgrading educational standards
- Providing quality healthcare
- Formulating a vision for great infrastructure projects
The objective of such commitments is not to make money per se. It is to raise the standard of living of the nation’s citizens, eliminate poverty and increase the longevity of life. All of which China has accomplished in approximately two generations.
U.S. Chooses Deindustrialization
In 1971, several years before China’s Deng Xiaoping launched the modernization of China, President Nixon removed the dollar from being a gold based currency. This began the process of transforming the financial system into a gigantic gambling casino, disconnected from the physical economy. Not only is the Western financial system bloated with trillions of dollars of debt, but it also contains almost two quadrillion dollars of derivatives, which are gambling bets. The truth, which Froman does not know or will not tell, is that the rules-based order is grounded on a predatory monetarist system, which exists to exploit its financial supremacy. Their objective is to obtain and maintain political power, not create wealth for the material improvement of people’s lives.
The United States and the West has been going in the wrong direction for decades, and now they are faced with the reality of what China has accomplished in becoming an industrialized and manufacturing powerhouse. The immediate conundrum for the United States is: 1) not understanding how China achieved their level of economic success; 2) not knowing how to apply or even knowledge of the principles of the American System; and 3) not having any intention of giving up their financial-predatory mindset.
The insanity of the U.S. elites, reflecting their opposition to expanding the industrial economy of the U.S., is best exemplified by their commitment to “deindustrialization” in the 1980s. Much of this was accomplished by Paul Volker, then head of the Federal Reserve, who raised interest rates to 20% in June of 1981, suffocating the economy in his pursuit of “controlled disintegration.” Volcker’s policy shut down industry, pauperized the American consumer, only helping banks, insurance companies, brokerage firms, and money managers to make higher profits.
The political-financial elites, who actually determine U.S. economic policy intended to transform the U.S. into a “post-industrial society.” Their fantasy ridden belief was that America no longer needed a strong manufacturing sector. They intended the U.S. to become a service economy and the center of the Western financial system, surviving by purchasing cheap products from around the world. They succeeded. Tourism replaced production. The U.S. has never recovered. We witnessed the effects of this dangerous policy during the Covid 19 crisis, when the US could not produce the essential products required for the health care of its citizens.
Compare China’s policy from the 1980s forward, to expand and industrialize their economy, to that of the U.S., to contract its industrial manufacturing base.
One example that typifies the drastic difference in orientation between China and the U.S. over the last two generations, is their transportation systems. China’s high-speed rail trains travel smoothly at 215 miles an hour, compared to the antiquated U.S. Amtrak trains which plod along at an average speed of 48 miles per hour. Think about the effect of that order of magnitude difference in speed has on the productivity of an economy?
China Rejected West’s Rue-Based Order
Froman believes falsely that President Trump’s policies will succeed in rebuilding the U.S. economy. He bemoans the fact that Washington failed miserably to induce China into becoming a member of the rules-based order, refusing to submit to their free trade ideology diktats. He whines that China ignored Washington’s demands that the Chinese government stop subsidizing the production and exports of goods, which distorted the global marketplace.
He writes:
The U.S. strategy of engagement with China based on the premise that, if the United States incorporated China into the global rules-based system, China would become more like the United States…Instead of China coming to resemble the United States, the United States is behaving more like China (sic). Washington may have forged the open, liberal rules based order, but China has defined its next phase: protectionism, subsidization, restrictions on foreign investment, and industrial policy. To argue the United States must reassert its leadership to preserve the rules-based system it established is to miss the point. China’s nationalist state capitalism now dominates the international economic order.
Although Froman is acutely aware of China’s growth as an economic power in the 21st century, he has no idea how it happened. He appears clueless as to the effective policies that China employed to raise almost one billion people out of poverty, erroneously attributing the cause to globalization. China rejected the Western dictated norms of behavior, crushing the fantasies of the rules-based order that they would control China’s future.
China The New Model?
Froman continues:
The country’s [China’s] GDP grew from $34.77 billion in 1989, to $1.66 trillion by 2003, to $17.79 trillion in 2023. Hopes were high that integrating China into the rules based trading system would lead to a more peaceful and prosperous world… In 2004, China made-up 9% of the world’s manufacturing value added, leapfrogging to a massive 29% in 2023.
Over a period of 34 years, China’s GDP grew a whopping 500 times, according to the World Bank.
Froman makes the laughable analysis that President Trump is now chosen the option of becoming like China. The problem is, that neither President Trump nor any of his advisors comprehend the strategy that China adopted to build its economy. Their difficulty is compounded by their failure to comprehend or have any knowledge, of the American System of Political Economy, as practiced over centuries in the United States.
Froman points out that the proportion of the U.S. labor force employed in manufacturing has been declining for decades. However, it will not be reversed simply through President Trump’s misguided tariff policy. Froman, displaying his ignorance of American history, asserts that China has pioneered a new economic model, characterized by protectionism, constraints on foreign investment, subsidies, and industrial policy–essentially nationalist state capitalism. These policies by the government of China parallel the measures enacted by the United States when it was employing the principles embedded in the American System of Political Economy.
Froman and others, writing on behalf of the Washington Establishment, would better spend their time studying Alexander Hamilton, and his students, who understood the role of the state in nurturing industrial capitalism. They might also come to comprehend that the development of U.S. and China is not antithetical, rather both nations can expand their economies in a global system committed to economic progress.
Read my earlier posts below:
China & BRICS Choose Progress Over West’s Deindustrialization
China Not An Enemy of the US, Could Be A Partner For Global Economic Development
Lawrence Freeman is a Political-Economic Analyst for Africa, who has been involved in economic development policies for Africa for 35 years. He is a teacher, writer, public speaker, consultant on Africa, and an analyst of global strategic relations. Mr. Freeman strongly believes that economic development is an essential human right. He is the creator of the blog: lawrencefreemanafricaandtheworld.com, also publishes on: lawrencefreeman.substack.com, “Freeman’s Africa and the World,” and on X @lkfreemansafrica