In March we wrote that Europe was the most interesting geopolitical story on Earth due to historic multilateralism catalyzed by Russia’s invasion of Ukraine. The war has spurred many countries to defend democratic values related to sovereignty, governance, and human relations that are contrary to President Putin’s own view. The European Union has committed to far-reaching goals intended to counter perceptions and realities of sluggish decision-making. Germany, historically one of the more recalcitrant EU members, has led these changes in many instances.
The G7 yesterday reiterated full support for Ukraine. It remains the case that the transatlantic re-knitting is not only available and desirous but also imperative. Once hostilities end, Ukraine will be rebuilt and likely as a member of the European Union, according to statements from Brussels about a likely June 2022 preliminary decision on Kyiv’s aspirations. Such a development would either imply more conflict risk or signal a deep enough change in Russian thinking as to make the move a benign gesture. Plenty is being written about the way forward in Russia. Walter Russell Meade yesterday provided a provocative and sober essay in the WSJ calling into question the survivability of the Russian empire.
We remain of the view that “Fortress Europe” implies several opportunities for the EU, its citizens, institutions, and global investors. The pace of these openings of course is controlled first by war and then by strategic, likely sustained, investment (defense, energy, and manufacturing, for example). Our comments today turn more toward the US and evidence that public and private policymakers are uniquely engaged in bolstering America’s advantages.
A balanced view of the United States’ imperfect union includes the list of stressors on our democracy, but it also must highlight the sometimes-enviable advantages the Republic enjoys. Michael Lind’s Land of Promise is ten years old this year. The book’s sweep of US economic history retains all its pertinence today. President Biden’s recent invocation of the Defense Production Act will help garner public and private capital allocations to strategic areas of a technologically modernizing economy. Unlike Europe, the US is largely energy self-sufficient. The well-documented environmental downsides to this fact are part of the upside to greener, cleaner energy investments begun decades ago and not yet fully realized. But the picture below is one many countries/regions would gladly trade yesterday.
US policymakers are actively seeking to address shortcomings including via major legislation moving through Congress that would, among many things:
The importance of the crisis response after years of under-investment is underscored by the observation that this renewed, mostly bipartisan momentum derives from health and related economic shocks, and from the strenuous stimulative policy response. As China struggles to rebound economically and socially from the latest pandemic wave causing significant economic damage, the most recent COVID-19 charts compiled by 22V’s Strategy team show a much less troubling US depiction.
The Treasury Department will make a point this week during IMF/World Bank Spring Meetings to explain the various ways that the US is ensuring sanctions will not impede humanitarian assistance to Ukrainians, other populations crushed by the war’s madness, and even the Russian people. Joining the multilateral pushback against Putin was neither a question nor a grandstanding moment.
Perfection is a pursuit not a reality. The US possesses not only gifts and creativity but also shortfalls and challenges that nibble at or can undercut advantages if not effectively managed. Lind’s book left off at the resurgence of the Third Industrial Revolution, the base of which is a burgeoning innovation economy. We move through the third decade of the 21st Century with constructive and destructive factors perpetually in play globally. The consensus view in mid-April 2022 is that the underlying US economy is as sound as any even as QT and policy rates are generally expected to further tighten financial conditions. Policymakers in Washington and around the country are actively engaged in shoring up deficiencies revealed by recent shocks, even if not at a pace or with the strategic vision some of us might prescribe. I’ll take the home team; who you got?
