These days, I often find myself thinking about Thornstein Veblen, capitalism’s most astute non-Marxist critic. A progenitor of institutional economics, Veblen is best known for his scathing critique of bourgeois conspicuous consumption: the habit of the newly-enriched capitalist classes to publicly display the goods and services purchased through their ever-expanding discretionary income as a way of solidifying their social status and cultural authority. Such consumption, Veblen believed, was lamentable because it was wasteful and socially destructive. Consumption was, however, only one of many aspects of capitalist life that embodied those flaws.
Much more fundamentally, Veblen thought that production under capitalism was itself wasteful and often in socially destructive ways. He unequivocally rejected ideas of heroic ‘titans of industry’ or, in today’s terms, Silicon Valley geniuses, who supposedly propel society forward through innovation and resourcefulness. Capitalism was not a source of ‘creative destruction’ but of idleness and inefficiency. Veblen insisted that while capitalists will sometimes try to beat their competitors by innovating (say, by adopting labour- or energy-saving production methods or by inventing better products that consumers will be keen to purchase), in other instances firms will profit-maximize by sabotage. By ‘sabotage,’ Veblen did not (primarily) refer to unlawful activities of physical destruction but rather to the ‘conscientious withdrawal of efficiency.’ A typical example of this kind of sabotage is the deliberate reduction of production, such as practiced by oil producers: by agreeing to restrict the production of oil below the levels that technical advances allow, oil producers maintain the profitability of their enterprise. In highlighting sabotage as a core strategy of capitalist management, Veblen called into question the idea that capitalism was a fundamentally dynamic and innovative system, an idea that was often embraced even by the fiercest critics of capitalism.
To carry out these acts of sabotage in a more coordinated way, Veblen noted, capitalists often enlisted the state (and law), an observation which brings us to the present moment. Tariffs were a typical example of state-coordinated capitalist sabotage: domestic capitalists enlisted the power of the state in order to sabotage their foreign competitors and acquire a competitive edge without the need to produce cheaper or better products. More fundamentally, according to his analysis, the elementary legal forms of capitalist societies are enabling of sabotage: ‘[O]wnership of the capital goods affords a discretionary power of misdirecting the industrial processes and perverting industrial efficiency, as well as of inhibiting or curtailing industrial processes and their output, while the outcome may still be profitable to the owner of the capital goods.’ In other words, private property rights allow the owner not only to enjoy their property, derive an income from it, or exclude others from its enjoyment. They also allow owners to under-use, misuse, or not use at all socially valuable resources insofar as their fulsome use would cause their profits to decline. The combination of unrestricted private property rights and production for profit makes sabotage endemic, and not aberrational, in capitalist societies.
International Trade Law: Regulating Sabotage
What Veblen (understandably) did not anticipate was that this coordination of capitalist sabotage could be scaled further up, beyond the realm of the state. The development of international trade law in the aftermath of World War II and, in particular, after the Cold War offered opportunities for capitalists and states to circumscribe and discipline the use of sabotage methods (e.g., quantitative restrictions, tariffs, regulatory barriers) that were disadvantageous to their specific profit-seeking strategies while legally mandating and internationalising those sabotage methods (e.g., intellectual property rights) that enabled particular firms to capture the lion’s share of global profits. Internationalising the rules pertaining to capitalist sabotage was not the only purpose of the World Trade Organization or of international trade law writ large, but it was certainly one core purpose. Of course, nobody called these practices ‘sabotage.’ Indeed, much scholarly and political work was dedicated to condemning the sabotage techniques of others, while maintaining that the sabotage techniques that benefited one’s preferred states or factions of capital enhanced (or at least did not impede) productivity.
The specific balance between permissible, mandatory, and impermissible sabotage incorporated in WTO law sought to lock in a particular configuration of global political economy. In the realm of production, this balance reflected the interests of those (primarily US) capitalists who positioned themselves at the apex of a franchise-type structure. At the top of the pyramid, dominant firms (think Apple) retain intellectual property rights and other forms of non-patentable but economically valuable knowledge. They shift production and, crucially, its associated risks to mid- and lower-tier firms that rely on high-volume fixed capital (think Taiwan’s TSMC) and on labour hyper-exploitation (think China’s Foxconn). For this model to work, international trade law had to ensure that products could cross borders multiple times before hitting the consumer market, and that firms could profit from designs and other valuable forms of knowledge. WTO law made this possible by requiring low tariffs, generally prohibiting quantitative restrictions, and offering strong protection of intellectual property rights and rigorous scrutiny of regulatory barriers.
This balance between permissible, mandatory and impermissible sabotage under international trade law relied on two (mostly implicit) assumptions: first, that growth rates on a global scale would remain robust, thereby enabling mid- and low-tier firms and their states to nevertheless gain from this lopsided arrangement; second, that the US would maintain its economic supremacy in general and, in particular, the position of its firms at the apex of this franchise system. Recent economic turmoil, caused primarily by the United States, can be partly explained by the fact that neither assumption has held.
Since 2008, global and national growth rates have remained low, with even China’s economy experiencing a marked slowdown. Concerns about secular stagnation, traditionally a subject that only concerned heterodox political economists, entered the economic mainstream. Simultaneously, Chinese capitalists and bureaucrats became increasingly dissatisfied with their positioning at the bottom or, at best, the middle of global value chains. This position is not only potentially socially destabilising (since it relies on labour hyper-exploitation and environmental destruction), but it is also a brutal one for capitalists. The profit rates and profit volumes of mid- and low-tier firms are paper-thin, with bankruptcy always lingering just around the corner. China’s recent efforts to reposition itself at the apex of various global value chains have yielded significant successes, including its global primacy in electric vehicles and solar panels.
Faced with anemic economic growth and mounting challenges to its position of primacy in the global economy, the United States’ commitment to the substantive rules and institutional structures of the WTO faltered. More precisely, while the US has remained committed to the internationalised protection of intellectual property rights, it has gained renewed appreciation for tariffs and export restrictions as methods of industrial sabotage. For example, during the first Trump administration, the US imposed tariffs and quotas on Chinese solar panels, which had become increasingly successful in the US market. The sabotaging nature of the measure was transparent: the US maintained that Chinese industry was engaged in dumping and that it had developed overcapacity when it came to solar panels. Given the ongoing climate catastrophe and urgent need to reduce greenhouse gas emissions, this charge of ‘overcapacity’ did not concern any objective social need but instead merely identified a threat to the profitability of US capitalists. China challenged these measures in front of a WTO panel and lost. It then appealed this ruling to the WTO Appellate Body, which was unable to render a verdict because, since late 2019, the United States has, on a bipartisan basis, decided to block (or sabotage, if you will) the election of a sufficient number of judges for its operation.
While there is no way of knowing for sure how the Appellate Body would have decided this case, US allegations of dumping have become harder to sustain in the intervening years. Despite the protection afforded by tariffs, the US solar panel industry is moribund, and even in the absence of a viable competitor, Chinese solar panel prices have not increased, which is what one would expect in the case of dumping. Similarly, export restrictions concerning semi-conductors failed to prevent (and perhaps even incentivised) Chinese breakthroughs in artificial intelligence. Though these interventions have proven largely ineffective, there appears to be bipartisan consensus in the US that in the struggle for primacy within global value chains, it is acceptable to embrace methods of sabotage that the US sought to minimise and discipline after 1945, even if this embrace means ignoring or directly undermining the authority of the WTO.
Sabotage All the Way Down
In some respects, then, there is continuity between Trump’s open and unapologetic embrace of tariffs as sabotage and the past actions of not only the Biden administration, but any capitalist state willing to coordinate its capitalists’ sabotage. This big-picture continuity, however, does not mean that the Trump’s tariffs should be understood as a rational strategy for restoring and safeguarding US firms’ supremacy within global value chains. Compare the initial wave of comprehensive tariffs against the whole world (applied to most products by most states and territories, including-famously-some uninhabited ones) to the tariffs against Chinese solar panels discussed above. Although the latter are potentially destructive from an environmental point of view, they served to benefit a specific faction of US capital (solar panel companies), had a concrete goal (maintaining US firms’ competitiveness in a crucial industry) and deployed a measure that was at least theoretically capable of achieving that goal. In contrast, as Adam Tooze has argued, the comprehensive wave of tariffs against the whole world, as well as Trump’s escalating tariffs against China, have no identifiable constituency within the US capitalist class. US capitalists did not lobby for a comprehensive and accelerated decoupling between China and the US for the simple reason that US firms are still at the apex of a multitude of value chains and benefit extensively from the system of international trade law that enables them to work.
Instead of treating Trump’s recent tariffs as a continuation or escalation of the trade policies adopted by the Biden administration or even during Trump’s first term, it may be worth contemplating that the destructive potential of these tariffs for US capital might be a feature and not a bug. The interdependence between US and foreign capital has forced domestic and foreign businesses alike to plead for exceptions with the inner circle of the administration, thereby ensuring both short-term economic gains for well-connected individuals and the development of patronage networks across the economy. Chaotic transitions are ideal breeding grounds for the development of direct, personal links of dependency between capitalists and political authorities. Understanding this chaotic tariff environment as a bid to remake the relationship between capital and political power in the US has the additional advantage of potentially accounting for another aspect of this administration’s foreign policy, namely its obsession with territorial expansionism. If political authority becomes the direct source of economic power, such that states do not simply create, regulate or guarantee opportunities for profit- and rent-seeking but rather directly distribute them to their political allies while denying them from their enemies, then direct sovereign control of territory becomes essential for capitalist accumulation.
To return to Veblen, such forms of capitalism can work wonders for the conspicuous consumption of politically-connected capitalists. It is hard, though, to imagine how such a personalised capitalist state, in which arbitrary power is the norm, would be able to operate as organiser of global capitalism in the way that the US has done since the end of World War II. In this context, China’s initiation of a WTO dispute concerning Trump’s ‘reciprocal tariffs’ can be seen as a form public signalling to other states and their capitalists—China is making clear its ongoing commitment to the institution and its rules and, thereby, its willingness to become at least a partial guarantor of the global capitalist order. Indeed, China Daily, a publication owned by the Chinese Community Party, framed China’s reaction as offering ‘other countries a reference for defending their interests through multilateralism and reinforc[ing] the importance of a rules-based global trading system amid rising unilateral pressures.’
Reframing international trade law as a way of scaling up capitalist sabotage helps us understand with some precision what is old and what is new in Trump’s tariff policies. Consciously undermining society’s ability to produce ‘what it needs and wants with less’ (in the words of Yochai Benkler) is nothing new; indeed, it is inherent to any economic system centered around profit. Neither is using quantitative measures and tariffs to pursue such ends. However, sabotaging the productive capacities of both foreign and domestic firms, while loudly abandoning the USA’s role as organiser and guarantor of the global capitalist order, is a genuinely novel development. Its importance is impossible to overstate.
