Chartbook

Chartbook 458 Postscript - A conversation with Barnaby Raine about politics, economics, continuities of violence and hyper-agency.

Adam Tooze — Sun, 12 Jul 2026 11:30:42 GMT

“…there’s a lot of talk today about rupture, because there’s a sense that five hundred years of Western hegemony are coming unstuck.” (Barnaby Raine)

Postscript is a new podcast of reflective interviews and discussion from the relaunched Tribune magazine, hosted in London by Barnaby Raine. In this opening episode, it was my pleasure to be in conversation with Barnaby, my former student and dear friend.

This is an excerpt from the transcript of our conversation about history, economics, philosophy and politics.

Postcript Tooze Conversation With Raine May 2026

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Barnaby: Yes, this is exactly what I grapple with. I think the reason the promise of freedom that animated people from the weavers of the 1840s to the anti-colonial revolutionaries of the 1970s — the belief that the arc of history bends toward justice, that the whole world contained the resources to overturn every system of domination and make people free everywhere, freedom not in the narrow liberal sense of non-interference but, the freedom to define oneself, Nina Simone’s sense of freedom, a feeling, an enduring condition — the reason that became less believable is that it was umbilically attached to particular historical subjects: people with a direct experience of unfreedom. Workers who experienced capitalist exploitation. The colonized. Women who experienced patriarchal domination. Those oppressive experiences remain, but the specific texture of experience that generated the idea of its own negation — the idea of a possible freedom — was attached, in Britain, at the start of the twentieth century, to the miners who founded the Labour Party and led our only-ever general strike, and nearly led another in the 1970s; then to car workers, another militant subject. Both are gone now — Britain still makes cars, but with far fewer workers doing it.

Adam: And also the foundation — the Archimedean point from which they could exercise leverage — was real. Very manifest: cars, coal, energy. Exactly. So what I hear you saying is that, at the same historical moment, both the agent of this project of liberation and the standpoint on which it rested became destabilized.

Barnaby: Yes. Absolutely. I read neoliberalism as the concerted disassembly of emancipatory subjects — a project of destroying working-class life-worlds. That’s why Thatcher had to go to war with the miners: they were the social subject that had grounded and organized socialist politics. It’s moving to see those old miners’ banners and the idea of an immanent freedom in people working collectively, socially, under tough conditions. We’re both familiar with Timothy Mitchell’s work on carbon democracy — the importance of miners in creating even democratic cultures. So they had to be destroyed. Anti-colonial revolutionary projects had to be destroyed and defanged by the IMF and the World Bank. There was a concerted disassembly of emancipatory subjects, and so of the standpoint from which a possible freedom could even be imagined.

So the question for us is: in the rubble we now inhabit, what kinds of possible freedom can we imagine? The challenge that comes from a sharp, smart, realist liberalism — and I think a lot of our dialogue has been engaging with this challenge — is: is there any historical guarantee that any concept of total human emancipation should be born out of the mess of our present at all? Can we instead proceed with something less than that?

Barnaby: That leads to a question I want to put to you. Do you understand your own project — including your brief dialogue with the Biden administration in America, and your interest in the politics of contemporary China and its state, its party — as an attempt to find resources of hope that are really resources of technocratic statecraft, rather than a politics of universal human freedom? Do you think my bar is simply too high, and you’re trying to do something grittier and more realist by using existing power to make the world marginally better?

Adam: Setting me personally aside — I’m very moved by the diagnosis of the fragmenting of the historic subjects of universal emancipation. My generation lived through that dismantling; our identities and lives were shaped by it. So yes, that’s fair to say. And I’m also not a person of faith, and I don’t think most people of my kind are — we’re not carried by the promise of any great emancipation. It’s telling that there’s been a revival of religion in certain segments of the British upper-middle and professional class, because one feels the lack of it — especially, I’d say, in the face of the threat of AI, which now intrudes directly into the realm of our own intellectual production.

So yes, I’m attached to a more minimal kind of immanence: what can we do from within the current moment, however we define it? That’s when the “science” comes in — you use whatever tools of statistics, economic analysis, sociology, or anthropology you have to map the terrain and work out what will actually make a difference. A very provisional, ameliorist project — because I’m preoccupied with crisis, with the mere patching of a sinking ship, or a boiler about to explode. That image of management has its own historical legacy, going back to a similar moment: liberalism in its triumphant nineteenth-century form was broken by the catastrophe of the First World War. My reference point — and I think the archetype for people working in the political sphere I’m interested in — is John Maynard Keynes, who explicitly tried to redefine liberalism not merely as a technology of government but as a technology of government defined in relation to the broader trajectory of democracy, including the Labour Party and the general strike. Not a timeless universal project, but a specific historical invention required at a moment when the certainties of the nineteenth century had broken down and his contemporaries hadn’t grasped the scale of the shock.

If there’s one thing his politics is committed to, it’s shaking people awake — not to apocalypse and its inevitability, but to the fragility of the world, and to the urgency of shaking off old superstitions and trying to control whatever is controllable, which in his terms meant things like macroeconomics and money. I think that’s still very relevant — think of the climate question, or the great shift of power from West to Asia — that same effort to shake the mainstream conversation out of its complacency, out of the assumption that things will simply continue in the neoliberal mould of the last half-century. And then, in the next step, to think about what’s possible for government, for collective action, with the actual instruments of power available. That’s the project, for me. And where you and I really intersect — what’s made our conversations so fruitful over the years — is the shared sense that both the agent and the standpoint are, in this particular moment, in flux.

…

Barnaby: Is that, in one sense, a very limited kind of political project?

Adam: Clearly it is. I find those essays of Keynes from the 1920s and 30s — before he wrote The General Theory in 1936, which I can’t really recommend as light reading — fascinating. Essays in Persuasion, a collection from the late 1920s, is something anyone who reads a newspaper can digest. But it is a very limited politics — a kind of late-Edwardian sensibility translated into the twentieth century. If you want to “own” this Keynesian legacy, I think you either take it to a very general level, in which case, far from being the losers of the twentieth century, “we’re all Keynesians now” in some sense — or you go, and I find this more attractive, to the position that Keynesianism went through successive iterations, and its most radical form was really in the 1970s, because earlier Keynesianism was dancing, so to speak, in a telephone box: operating within a currency system still ultimately tied to gold (Bretton Woods). An underrated break in human history, at the civilizational level, comes in the early 1970s when the major currencies separate from gold entirely — something Keynes had long argued for, since he was a strong conventionalist about money (gold/money is no different from law; we shouldn’t fetishize it as something substantive). That opens up a realm of radical experimentation in economic policy — and also new repressive efforts to shut that freedom down.

Just as one would want to grant Marxism, a theory shaped in the mid-nineteenth century, in the first encounter with Victorian industrialism, an afterlife that constantly reinvents itself, … One of the most striking essays in those 1920s collections is where he says liberalism will have a brilliant future if it can address certain technical monetary questions — plus two others: the drug question and the sex question. If we can talk about drugs and sex, he says, we’ll be in the political mainstream. So tell me Keynesianism lost the twentieth century.

…

Barnaby: In 1925–26 Keynes goes to the Soviet Union and loves it — because he sees, in the ballet, what he regards as the great achievement of nineteenth-century civilization (he’s married to a Russian ballerina, after all). It seems to me that in the crisis of the 70s and 80s, including the downfall of the Soviet Union, people don’t want to be managed. Managing people works only as long as you can deliver the goods; when you can’t, and your only claim has ever been “we’re delivering the goods,” you’ve lost the thing I’m actually interested in reviving in socialist and communist traditions — a politics of freedom, a hope in the transformation of human relations that isn’t limited to “we’ll give you things.”

So in that crisis moment of 2020–21, was there a missed opportunity? What might an ambitious left-Keynesian coalition, with socialist politics, have looked like in that American emergency — Black Lives Matter, the pandemic, and then the coming of inflation, which I know you read directly as a question of distributional class politics?

Adam: We don’t have to speculate — it was the vision of the Green New Deal, which emerged from the electoral breakthrough slightly after Corbyn’s in the UK, after the 2018 US midterms (everyone should watch the midterms this year for exactly this reason — think of AOC’s breakthrough in Bronx). That opened a window onto a vision that, in the end, got cut down Keynesian-style to little more than green industrial policy, …. But it started out as a genuinely comprehensive vision for the transformation of American society — one that answered the degrowth critique directly by saying: yes, we’ll do industrial policy for green energy and infrastructure, proper modern railways, housing — but its central focus was a feminist politics of care, presented not as a normative concession, not as “woke,” but as a realistic account of what the American working class actually consists of and needs: public support for social reproduction. ….

Barnaby: So climate politics, for you, becomes something other than Keynesianism in the narrow, purely managerial sense — the “gentleman in Whitehall knows best,” as the 1945 Labour manifesto put it about nutrition and public health. One version of climate Keynesianism is just the gentleman in Whitehall, or in the Fed, writing the checks and making the decisions. … How do you imagine a climate politics activating political subjects beyond just the managerial elite?

Adam: Climate politics is fascinating because it comes in so many different shades, and it poses the problem of priorities in a genuinely disorienting way. You can construct various kinds of ecological Marxism going back to the mid-nineteenth century — that’s fair, it’s there — but broadly speaking, I think Marx’s own thought was a rebellion against the Malthusian logic of restraint. Malthus, the late-eighteenth/early-nineteenth-century theologian, damned the French Revolution as condemned to failure because food supply couldn’t keep pace with the population growth that would follow from the sexual license of a liberated citizenry — a theologically ordained disaster of overpopulation and collapse. Marx has no time for this. He’s fully aware of the damage capitalist growth does to nature, including the human body — some of the most vivid passages in Capital — but broadly speaking, Marxism was a cornucopian, expansive vision, and was generally read that way.

Then along comes a new sense of constraint from the late 1960s and early 1970s, in some cases overtly neo-Malthusian, and it’s genuinely difficult to reconcile. This is part of the challenge this series is trying to address: how do you imagine the emancipatory subject once you can no longer presume an endless abundance of ever-greater mobilization of natural resources? There are still huge technological feats underway, but if we’re remotely serious, we can no longer ignore our best guess that this can’t be sustained. That’s a vertiginous, unprecedented, scientifically grounded realization — never before have governments promised their citizens’ grandchildren a livable planet. That’s a new level of governmental ambition, and I don’t say that dismissively — it’s part of the terrifying reality we live in.

From that realization spring endless different versions of environmentalism. There’s a dominant neoliberal version in the UK and Europe — Keynesianism attenuated to its thinnest, most evaporated form: “we’ll design a market that takes care of this.” It’s actually a very Keynesian idea to design a market that solves the problem, but it’s the most minimal version, and the promise is that you don’t have to do any actual politics — which turns out to be totally naive. It’s a bit like pretending that regulating the money supply to control inflation involves no politics; of course who gets financial credit, and at what price, is a deeply political decision, and the same goes for who gets carbon credits and at what price.

A second strand is a flat-out developmental Keynesianism — a national green investment board, a national green energy system — which I think of as more or less indispensable (I’m not against carbon pricing either; I just think we should be honest about its politics). And the third — you’re right — is the Green New Deal in its original American form, which does imply the self-conscious construction of a new political subject. Part of that draws on the legacy of the civil rights movement going back to the 1960s, part on Jesse Jackson’s Rainbow Coalition from the 1980s, and part on a new definition of climate-exposed, environmentally at-risk groups that comes out of the American environmental justice movement — much stronger in the US than in Europe from the 1980s onward, because of the stark hierarchies of environmental risk between Black communities and the rest of the population — the “Cancer Alley” sacrifice zones in Louisiana. Put all that together and you get the idea of “frontline communities,” which AOC and her team formulated as a new subject of progressive politics. …

Barnaby: In the 1980s the British feminist Anna Coote said the key question isn’t how we re-industrialize to secure full employment, but how we care for and support our children.

Adam: It’s mind-bending to me how little that cuts through — even in the UK, at least there’s some infrastructure of childcare, but practically no rich society spends as little on childcare as the United States, and the private cost of self-provisioning is exorbitant, especially in a city like New York, which is exactly the social crisis Mamdani’s momentum comes out of. I find that a wholly convincing lens on the impasse of democratic politics under capitalist conditions in the US right now.

Barnaby: So is there a very broad politics — I might even say a politics of freedom — immanent to the experience of climate catastrophe, which, rather than a story of industrial progress, says: capitalism has broken and is breaking and destroying the world, and we want to repair what’s broken, to care for people abandoned by a de-industrializing, never-fully-post-industrial capitalism in the global North? Is there a class politics that assembles people declared surplus to requirements, for quite a radical vision of what’s sometimes called degrowth — instead of the British state’s current obsession with returning to mid-twentieth or even mid-2000s growth rates as the only route to improvement? Can we think about politics beyond that obsession with growth?

Adam: On the first part — yes, such a project existed, had an aim, had a beginning and an end, and was broken and lost in the struggles of 2021–22.

Barnaby: You mean the Green New Deal?

Adam: The Green New Deal, yes. … On the degrowth agenda: My only real problem with “degrowth” is the label, and the political question of how you get there. It seems evident to me that for rich societies that have already reached, by any reasonable per-capita standard, a level of affluence sufficient for freedom and flourishing, the central priority should no longer be aggregate average growth — which can be deeply misleading given inequality (dramatically so in the US) — but quality of life, distribution, the basic infrastructure of social reproduction, mobilizing both workers and the “clients” of that relationship. That’s clear. So why wouldn’t you build a democratic politics around the central question of how we care — for children, for elders, for people with illness or mental-health needs? Answer those questions and we’re for real.

The problem — and it’s not really debatable — is that in Europe growth rates are now so small that we are de facto in a post-growth world anyway. … the question is how you build a coalition — it’s a hegemonic project, you have to build your own coalition, formulate the alternative, and on the other hand silence the other side; this has to be a politics of power.

One of the genuinely ambiguous turns in the “just transition” discourse that came out of the global labour movement in the 2010s — in the US, in South Africa — is the idea that a just transition can leave no one behind. It can’t. We’ve got to leave some people behind. Democratic politics of coalition doesn’t require a hundred percent consent; you need a solid majority sustaining you to push through radical change to the distributional bargain, and your claim has to be, at some level, that this is justifiable on some calculus that applies to a broader group — otherwise you’re engaged in a kind of sectarian politics.

But the first and central question is the problem of power, posed at three levels: electorally, whatever your system, you have to play it and win it — the Democrats are living the consequences of that, and Britain is staring at the same thing after local election results split five parties between sixteen and twenty-six percent under first-past-the-post, a recipe for randomness. You have to build political-economy coalitions — interest groups — and you have to get at the technocracy, the inside levers of power (Corbynism had elements of that project too). Degrowth, as currently formulated, doesn’t meet that standard — it’s often couched in a rather naked normativity that ends up looking detached from reality, and we can’t afford to look out of touch, because that just leaves the field to people like Reeves celebrating 0.8% growth. We’re caught in a bad standoff between a politics of degrowth that isn’t really a politics, and a politics of growth that isn’t really a politics either.

Barnaby: I’d think of assembling those interest groups into a coalition as ultimately involving leaving behind the capitalists — those who appropriate.

Adam: That’s a dangerous thing to attempt, and the successful programmes of transformation have generally involved coalitions with some capitalists. You have to pick your partners, find the weak spots, find the “right victims.” Coal is the paradigm case — the hard-edged strategy around 2021 and the Glasgow COP, for all its razzmatazz with Boris Johnson and Mark Carney and the mobilization of $133 trillion in notional finance, was that a coalition of NGOs and activists realized coal is a sitting duck. Insofar as Britain has genuinely decarbonized, that’s downstream of the destruction of the National Union of Mineworkers in the 1980s, which opened the door to a ruthless, privatized, corporate-driven offshore wind sector — not even British companies, plugged into an unbundled, privatized electricity system. So it’s rapid decarbonization by global standards, but against the backdrop of the destruction of that blocking labour coalition – neoliberalism not as ideology but as class politics. Compare Germany, notionally the great leader of European green politics — nowhere near as far down the decarbonization path, in part because of the rearguard action of a small but effective group of coal-mining unions who’ve delayed and massively slowed the transition. I don’t think of either of these as a model.

But it’s instructive for thinking about the coalition you’re describing: where are the weak spots? In 2016, when Trump first came to power, you could have bought the entire American coal sector for less than a billion dollars, because every major coal company was effectively bankrupt. …

Barnaby: I wonder if, alongside Keynes, there’s another very different twentieth-century model for reinventing socialism and rethinking political subjects — Lenin. Lenin faces the historic crisis of a certain Marxist optimism — the labour movement in a place like Britain ascending gradually until it’s strong enough to overthrow capitalism. Instead he faces a labour movement split apart by imperialism, and reimagines a political subject that includes Russian peasants, British workers, and colonized peasants in India and China, Chinese nationalists too.

Adam: He’s one of the first modern thinkers of the global condition — what we now flatly call “globalization,” though he saw it far more dramatically, and grasped the weight of Asia in that story early on.

Barnaby: He rethinks the space of politics away from a Western-centric, nationalist frame — and rethinks its time too, because he has a sense of the coming catastrophe of the First World War, not just a linear story of progress. He’s trying to think a possible politics that emerges from the agency of people subordinated by a capitalist world-system, rather than from the standpoint of state technocrats asking who can be brought into a coalition — rather than the proletariat emerging fully formed as a single universal class, the way the 1848 Marxist vision has it.

Adam: Exactly. My third book — my toughest book — I was genuinely struggling with Lenin, struggling from my standpoint, because he is so incredibly compelling. He writes like he’s blogging — the first Substacker, really, if you read him at marxists.org: you can read him day by day, writing the most brilliant political commentary in real time,

Barnarby: it’s conjunctural analysis,

Adam: written in medias res, from the middle of things, but constantly searching for the underlying structure. For me the three figures are Lenin, Keynes, and Carl Schmitt, the German conservative — though one shouldn’t worship individuals; Gramsci in the notebooks is doing something similar, Bukharin anticipates Lenin, and Hobson anticipates Lenin before him. But there’s a milieu of thought reaching across these figures that speaks to our situation, because we’re in the same soup they were in, a hundred years down the line.

…

Barnaby: So I want to ask: how does your liberalism engage with China now, and think about the increasingly peripheral position of places like Britain and even America? There are two obvious liberal reactions to the rise of China. One doubles down on the claim that liberal democracy means voting every few years, various civil liberties, even the freedom to organize trade unions — not that there’s much of that left in Britain, but more than in China

Adam: — and the consequences of bucking that in China are far more severe.

Barnaby: So there’s a terrified liberal view: the end of Western civilization will bring something much worse, and we’ll come to appreciate the limited freedoms liberal democracy afforded us. And there’s another, more Keynesian liberal view, delighted by what looks like a more efficient technocratic management of the state in China than the West has managed for a long time — though there’s a real question of whether that’s true, or just an Orientalist image of efficient, calculating Chinese machines. You’re sometimes associated with that second, adulatory position.

Adam: People accuse me of one or the other — either not understanding the technical deficiencies of Chinese solutions on their own terms, or being willfully blind to the repression, the violence, or indeed the payoff of the Chinese regime. I’m not one for historical analogies, because I’m so interested in the sheer protean force of change — but there are things we can learn from having been here before. The obvious analogy to Stalinism in the 1930s, the Popular Front moment, the struggles progressive intellectuals went through in defining their position then — including my grandparents, whose choice was to side with the Soviet Union and commit themselves to its power and its project.

Barnaby: To spy for it.

Adam: My maternal grandfather was, in fact, a KGB asset.

Adam: It makes me so impatient. It makes me impatient, because I think both sides of the current debate involve such poor thinking, and it’s so blind to actual Chinese history. What’s striking about the Chinese Revolution is that it saw the Soviet Revolution’s deformation under Stalin directly, and Mao’s entire politics in the 50s, 60s, and the Cultural Revolution is about fighting against bureaucratization — that catastrophic, violent, and yet also transformative process of the Cultural Revolution, without which you can’t think or see anything about modern China at all. So that’s where I start: not the external liberal reflex of “they don’t respect freedoms the way we do,” nor the equally shallow “aren’t their high-speed trains fantastic.” My engagement is trying to develop a practice of engaging with the China, including with the regime, of deep immersion with Chinese oppositional culture, which serves as a constant internal check on my own technocratic enthusiasm. …. So the bigger project is understanding this as an absolutely radical new stage of the story we’ve been discussing since the 1850s. The crisis of the 1970s was far more violent and existential in China than anywhere else, and out of it comes, to put it crudely, the victory of the hard developmentalist wing of the Communist Party — Deng Xiaoping’s “development is the hard truth,” not love of Western markets or the rule of law or pluralism. It’s literally what Stalin said to factory managers in 1931–32: either we do this, or they crush us. That’s what Deng is echoing, and everything after is a continuation of that logic. No one in the West should exaggerate the extent to which the opening-up was a comprehensive surrender, or underestimate the willingness of the Party to reinvent itself against what it sees as the subversion of Party autonomy by the socioeconomic transformation it has itself unleashed. In my view they’re the latest innovators in the party-form as a mode of political power — quite distinct from the little liberal parties in the West that merely take turns governing. I’d draw analogies to Modi’s BJP and the RSS, or Erdoğan’s AK Party in Turkey — different in degree of formal democracy, but all emerging from real struggles for power, and all enjoying genuinely mass, plebiscitary support. These aren’t merely minor totalitarian experiments; they’re transformative national projects reconfiguring the relationship with the state.

And then, let’s talk about the railways — but only in the context of understanding what that choice was about. The railway decision in China was made in 2008–09 against the backdrop of what the Party understood as an epic collapse of Western economic leadership. There’s an explicit, stated-out-loud recognition that major economic crises are followed by major surges in technological innovation, again and again in modern history, and that China had missed these waves before and wasn’t going to miss this one, because missing them is the root of China’s historical subordination. They see this as a sovereigntist project — that’s what the railways are about: building dominance in a specific technology, out-competing Europe and Japan. The same is true of green energy — those solar panels aren’t just an achievement in decarbonization; they’re a statement of the same project, and, as critical anthropologists and sociologists point out, also a claim on the territory of Xinjiang, on the Gobi Desert, on the incorporation of Inner Mongolia into a multiethnic Chinese state.

Barnaby: So am I wrong that twentieth-century ways of thinking about politics are now in a kind of crisis — is Chinese capitalism state capitalism or not, is it the return of 1950s Stalinist ideas of nation and development, and is the “postscript” only a story of Western centrism giving way to a civilization simply moving its center — such that the choice facing somewhere like Britain is between chaining ourselves to a decaying petrostate in America or being servile to an electrification state in China, which is also building plenty of coal-fired power stations, but has a vision of state power controlling and allying with markets rather than fossil fuels that are running out?

Adam: I’d simply say: Comrade, it’s uneven and combined development. Both things true at once. To speak of a “postscript” as far as India, Turkey, or China are concerned is vastly premature — they’re only opening the second century of Chinese communism, and they mean that for real. At the same time, you’re right about the West’s situation. Once, the British General Strike of 1926 sent ripples through the Communist International, prompted major strategic reassessments by Comintern leaders. Britain will never again have that kind of relevance. Does that matter to the sixty-odd million people who live on this island? Of course — it’s a local problem with intense local significance, and because of its history, a wider, almost microcosmic fascination. But America and Europe are still equipped with genuinely powerful levers of power, so America’s crisis is, to an extent, everyone’s crisis.

At the same time, there is a project in Asia — my only caution would be: don’t think of it as an extension of our twentieth century. We really need new categories, new chronologies. And also the internal critique of that project — because for many, arguably most, right-thinking, critically-minded Chinese intellectuals I know, there’s a profound disappointment that this is the outcome. This was never — and I think of Hobsbawm’s famous response to Ignatieff, when the liberal Ignatieff challenged him on Stalinism on camera — Hobsbawm says: do you even think the most sophisticated of us believed this was actually a socialist paradise? Those who thought hard about it thought of it as necessary, better than the alternatives, essential as a lever against fascism, which would have meant the end of the world. That’s the spirit in which I approach Chinese green technology …

Barnaby: So what are the parameters for a future politics, in your view, that understands the decline of American power without desperately trying to arrest it — which seems to be the only thing European states are currently interested in, shoring up NATO, hoping the Western alliance can somehow endure? What are the contours of an alternative politics that doesn’t lament the decline of Western civilization, that sees the shift in the centre of gravity, isn’t starry-eyed about China just because it’s building lots of railways, but is more connected to the new-left critiques emerging within China itself? Is there an alternative horizon there?

Adam: I’m smiling, because when you ask me for my framework — Europe is the only conceivable space in which that could be realized. Not that I wholeheartedly endorse everything the existing EU stands for, but to put it another way: the UK, in its current form, cannot be a meaningful unit for that kind of project — and that becomes truer by the day. You might say that’s not the priority, but if you ask me where the space for an alternative politics lies, taking the spatial direction you opened up earlier, that’s where I invest my — heartbroken — hopes. And I think it has to be a new kind of pick-and-mix, following the template of 1920s Keynesianism before it solidified into technocratic General Theory orthodoxy in the 50s and 60s: a genuine question about what belongs in the coalition and what doesn’t, how you articulate those elements. We’ve been talking throughout about how you find and build powerful coalitions around the most urgent projects — for me in recent years, that’s meant climate change and the energy transition — but that clearly has to extend to other domains too.

One area where you and I differ most sharply on the EU is immigration policy, the grim “Fortress Europe” approach the EU pursues, which I’d want to counterpose with a genuinely Keynesian politics of investment — in this comprehensive sense — to reduce the zero-sum dynamic, because it’s the distributional struggles that provide the rocket fuel for xenophobes and racists. I’m out and proud on that: it’s one of the great outstanding challenges for Europe, whether narrowly conceived as the EU or as Britain — our relationship with Western Asia and Africa is the frontier of a challenging future politics, and it has to go hand in hand with greater openness, a consistent struggle against racism (tacit or otherwise), and this comprehensive politics of sustainable living we’ve been discussing.

Barnaby: Here I think we actually get to the nub of it — one of the differences between Keynes and Lenin. Lenin says everyone should read Keynes’s The Economic Consequences of the Peace, his denunciation of the Treaty of Versailles — Lenin says if you read it, you’ll become a Bolshevik, even though Keynes himself wasn’t one, because Keynes documented the savagery with which the victorious powers behaved at the end of the First World War. But Keynes thinks there’s a genuinely open, contingent space in which those states could have done otherwise, whereas Lenin has a much more fixed account of how European capitalists will behave. And I think that’s there in the very idea of Europe as something recoverable — to me, the idea of Europe is one of the most violent ideas in world history. It’s no coincidence that the European Union is a fortress, that its Common Agricultural Policy impoverishes African farmers, that it has a neocolonial relationship even to its own internal periphery — Greece, Italy, Ireland. And I think there was a moment where you grappled with that and came out, as far as I’m concerned, on the right side: in grappling with the genocide in Gaza, where Western civilization showed the scale of its brutality, with the support of the Biden administration writing the checks — the administration you’d previously engaged with — and the support of the entire German political establishment. Some critics on the American right implicitly read the violence in Gaza as somehow a “Jewish problem.” I read it as a Western-civilization problem. Theodor Herzl, the founder of Zionism, wrote admiringly to Cecil Rhodes, the great British colonizer of Southern Africa — admiringly in no nice sense. To me the violence written into the idea of Europe is there in the killing fields of Gaza, and you, a liberal, chose to say that most liberals were doing something barbaric in supporting this genocide, or being silent about it.

Adam: It’s interesting — you posed it as a Jewish problem or a Western-civilization problem; I’d simply say it’s a political problem. I understand that “Western civilization” gets continuously invoked to justify appalling terror and violence, and has historically been used that way — but that’s only one use of the term, one possibility in its development, and the same is true of “Europe.” I’m fairly committed to a project of transformation, fungibility, openness — which can also, as we’re seeing with Israel, include terrifying escalations toward ever greater violence. That’s what we’ve seen in the Zionist project over the last twenty or thirty years, with Netanyahu emerging — in no way downplaying that it was a settler-colonial project from the start, and that such projects are almost always violent given their inherent logic. But let’s grant that Gaza is a whole new level of manifest destruction. … — if we believe in that kind of openness in history, we have to credit the possibility of total disaster too, which is clearly where we are. But I don’t approach that from a deterministic standpoint — I approach it as a matter of constant contingency, constant choice. Since it’s very hard for me to meaningfully dissociate myself from Western civilization, I think of it as an everyday project of trying not to be complicit in something bad — an everyday project of waking up and trying to be a decent human being, not a sexist, not a racist, listening to critiques when they happen and taking them seriously. In this case it wasn’t hard. It was an opportunity to totally fail, and it was crucial not to fail — not in any especially dramatic way; it was, as people say, just “not failing.” Right there in front of you was a test of whether you can tell the difference between disaster and something in any way defensible.

Politics is always a weighing of means and ends that never stops, and, as a historian of the Second World War who admires David Edgerton’s work, I recognize in the particular kind of war Israel fought in Gaza — if you can even call it a war — the distinctive hallmarks of what I’ve called “liberal militarism”: stand-off militarism, in which you demonize the enemy, establish a logic where any casualty on your own side is by definition excessive, which then justifies unlimited violence to suppress an opponent whose very “unreasonableness” confirms it deserves destruction. No one in Britain can distance themselves from that logic, because that’s the kind of war we waged against Germany in the later stages of the Second World War, and in that context I don’t disapprove of it — I own the violence. You can debate whether it was a reasonable use of resources, but it’s a matter of judgment: in the struggle against fascism, do I believe in machines that kill fascists? Yes.

In Gaza we’re talking about the illegitimate imposition, in the twenty-first century, of a settler-colonial project dating to the late nineteenth and early twentieth centuries. And there I say: no. Full stop. Not in my name, not with my support, not with my tax dollars, not with my acceptance or approval — and I won’t be silent about it either.

Barnaby: But the Second World War is a dangerously powerful image precisely because it’s so exceptional. … it just so happened that the British Empire in World War II, and French imperial power conscripting colonized people it had no intention of freeing, happened to be fighting something we now regard as so much worse that we can retroactively affirm that war.

Adam: I disagree. I don’t buy the accidentalism at all. There was something written into the logic of Western civilization that meant Britain would end up on the “better” side, fighting Germany — something written into the logic of historical development that placed fascism and Nazism in the relationship they had to British imperial liberalism in the 1930s and 40s. That was in no way accidental. Nor, is the derailment of the more radical democratic project of the Weimar Republic and the backlash against it accidental.

… for the political health and culture of Britain, it might actually be better if we forgot the Second World War a bit, because it makes people saccharine and complacent. But I was taking the other route — the Bomber Harris route, so to speak: to say that what I see in Gaza is, indeed, reminscent of our way of war. … In my reading, though, Western civilization comes with an imperative to make political and moral choices in relation to that inheritance. It doesn’t guarantee you’ll get it right, and all too often … it’s opened the door to disaster. Politics is the key.

Barnaby: I think there’s a pretty thoroughgoing continuity in this thing called Western civilization, though

Adam: — there are continuities within it. But, it’s multiple, braided, many-faceted — t … you would have a hard time coming up with the last settler-colonial project that did something like Gaza in full view of the global press. I think it’s exceptional, extraordinary in scale, in part because it’s so self-discrediting — you’d think, given those continuities, someone in the PR department would be saying “this has to end.” …

Barnaby: Well — there is a structural limit in the politics produced, here in Britain, by people who drove peasants off the land to make them landless labourers, then went to Africa, kidnapped people, transported and enslaved them for free labour; whose descendants went to the Americas and committed genocide there. That continuous history — leading to King Leopold’s killing fields in the Congo, to Agent Orange and napalm destroying lives in Vietnam, to the killing fields of Gaza — is only one aspect of a story of Western civilization that also produced, for instance, the modern labour movement.

But it’s such a violent story — and the imperialists and capitalists in that story are so peculiarly violent, that British culture of the “stiff upper lip” that could plan torture and genocide and then sit down for high tea. There’s something so contemptuous in it. As E.P. Thompson, the great British Marxist, put it: European civilization is peculiarly contemptuous of human love and human life. I think there’s something peculiarly violent in that culture, which — and this is the great tragedy I mourn as a Jew — Zionism has taken wholesale from the West, abandoning what I think of as our different culture. Of course the major tragedy of Zionism is Palestinian, not Jewish — but that’s my own, personal grief. I think there’s a violence built into that “openness” and “fungibility” that has a limit. You could get EU politicians to agree to some kind of Marshall Plan to ease the conditions producing anti-migrant politics, but the idea of Europe, of Western civilization, as this peculiarly rational, enlightened core of the world that ought to be the world’s center — there’s a violence built into that idea, and we need a politics that steps outside it entirely.

….

Adam: You’re right to sense that this is really the nub of our difference. Because I see exactly what you are saying. But I think your reading of culture’s effects is far too deterministic. Is Pete Hegseth, with his crusader tattoos, a legitimate, predictable product of a certain strand of Western Christianity? Absolutely — he wears it on his sleeve, he says it himself. Is it necessary? Obviously not — we haven’t had someone quite that insane in the Defense Department before, and plenty of people in the Pentagon thought he was manifestly unsuited to the job. It’s the result of a chain of contingent events that led to that point. So — is it a mere accident that Hegseth ended up in that position at this particular moment? No, I’d concede the situation is overdetermined; we’re not talking about a bonkers lottery in which Donald Trump and his merry band of crusaders end up in power. That’s not a mere lottery result — you can trace lines of determination. But are they necessary? Is this the normal mode in which American power functions? Did every prior administration, faced with the prospect of attacking Iran alongside Israel, think “that looks cool, I’d love to fight that war” and then hold back for another year because, remember, there’s the Strait of Hormuz, remember the Carter Doctrine? I won’t say restraint was the norm — but up to this point, everyone coming out of white Western civilization who’s held power in the Pentagon has, no doubt, had “wet dreams” about fighting a crusader war and has gone that is a “wet dream” that is not what we are going to do. What we urgently need to explain about the current moment — I gave a lecture at the New School a year or two ago about this, calling it “hyper-agency” — is why a bunch of men with such wet dreams, whether it’s Netanyahu’s project of total revision of the region’s boundaries, or Elon Musk going to Mars, or Trump simply living out the fantasy in real time, or Hegseth — are now actually exercising the power to act on them. That’s the urgent question. I wouldn’t for a second deny that any of this is somehow alien to Western civilization — that would be completely unhelpful. But it’s a question of self-regulation: up to this point, everyone in their right mind in that system has been able to tell the difference between a white crusader fantasy and something they’re actually going to do.

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Chartbook 457: The metamorphoses of the dollar

Adam Tooze — Wed, 08 Jul 2026 14:34:45 GMT

The general question I find myself preoccupied with right now is how we think - or fail to think - radical economic change. In other words, how we struggle to understand economic history in the full sense.

This is what my forthcoming book on climate-energy is going to be about.

Another case in point is the question of the global monetary system and, in particular, the question of the future of the dollar system. Even as conventional discourse appears to question the status quo, even as it asks what will succeed the dollar as a world “reserve currency”, the framing of the question obscures its own particular historical conditions. It reifies the idea of a reserve currency and obscures how dynamic the currency and financial system is.

The very idea of a “currency system”, or a “hegemonic currency”, or “reserve currency”, or “lead currency” is, first and foremost, a simplifying and stabilizing notion. In the face of a disorderly and fast-moving world, there is something comforting about asking: “Well … what does history tell us about the future of the dollar system?” At the very least such a question presumes that there is such a thing as the dollar system to talk about.

Indeed, if we start from the assumption that the world economy is organized around “reserve currencies”, we can assemble the world’s economic history into an orderly sequence: From Genoa, to the Netherlands, to Britain, to the US, the reserve currency follow each other in sequence.

It is chronological schematics like this, which then frame the way in which we ask the prospective, forward-looking question: “what comes after the dollar?” There was the sterling system. Now we are in the dollar system. So, what comes next?

But that logic is only compelling if the units being placed in sequence are sufficiently similar to form a series. Was the Dutch commercial or financial system, or that of Genoa, or Spain, or Portugal really similar to that of the 19th century British Empire or the United States in the 20th century? At an elementary level, they were all widely used currencies. But beyond that, such analogies surely obscure as much as they reveal.

Might it be more helpful to think of the history of currencies in the way that we think about technologies. A horse-drawn coach, a steam train, a petrol-powered motor vehicle, a modern high speed train, an EV, are all modes of ground transport. As such they can be placed in a historical sequence. But each innovation does not smoothly replace its predecessors. There are qualitative breaks. At times they coexist side by side. The category of “ground transport” is not meaningless. But, most of us would, surely, agree that at some point in the early 20th century the designation “horseless carriage”, though not exactly false, had outlived its usefulness.

In the same spirit, it is common place to refer to the pound sterling as the predecessor to the dollar as a “reserve currency”. But that conflate quite unlike systems under an overly general rubric. And, even talk of the dollar system, which by common consent began in the middle of the twentieth century, conflates very unlike moments in financial history. Within the dollar era there are phases as distinct as the Model T Ford, a Ford 150 truck and a modern EV.

In a piece published in the FT earlier this week, I argued that in asking about the future of the dollar, we all too easily fall into these traps.

What is the dollar system based on and how will it evolve? As we mark the 250th anniversary of the United States, our ability to realistically address those questions is clouded by all manner of myths. It is commonplace, for instance, to observe that since the second world war, the dollar has replaced the pound as the reserve currency of the world. But if that is true, it is because the dollar system has been repeatedly reinvented. Today, it is once again in a new and volatile configuration, quite different from that of 15 years ago let alone the 1940s. … ….

Here I want to double down. The era of gold-sterling, was quite distinct from what came after. It had relative longevity. A reasonably full accounting of the “dollar system”, by contrast, would suggest that we have been through at least five distinct dollar regimes, each with its own, particular political economy.

My intention in making this point is not to argue for “splitting” against “lumping”, but to insist that we not underestimate the restless dynamic of uneven and combined development. If, as Barry Eichengreen quips in his recent history of money, the successor to the dollar was the dollar, that is because it wasn’t. The dollar before and after 1971 was quite different. The global dollar is not one thing, but something constantly shifting. To take up a phrase suggested by Giovanni Arrighi, what we have to reckon with is the way in which the dollar system has undergone repeated metamorphosis.

The era in which the pound sterling and the City of London and the Bank of England were the dominant players in global finance, was not an era of fiat currency. It was first and foremost the era of the gold standard. It was not sterling as such that was the anchor of the system, but the attachment of the British currency and the unprecedented array of financial connections organized around London, to gold. It was the Bank of England’s management of that peg that established the credibility and durability of the system.

It was only after the fiscal and monetary shock of World War I that currencies - mainly the pound sterling and the US dollar - began to be held as reserves on a large scale, with the US dollar rapidly coming to the fore. But the vast majority of reserves continued to be held as gold. The graph on the left showing the dollar-sterling balance, appears again on the right-hand graph as the thin and dwindling dark-red slither atop a far larger reserve of gold.

Source: Eichengreen and Flandreau

When the Great Depression decoupled first the pound (1931) and then the dollar (1933) from gold, reserve holding of currencies again dwindled to insignificance. But what also became clear is that in extremis, highly sophisticated and dynamic economies, like that of Nazi Germany, could function over long periods with minimal reserve backing and other major currency blocks - like the sterling bloc - could “float” in a managed way.

The truly dollar-centric world began amidst the aftermath of the third great fiscal and monetary shock of the 20th century - World War II. In the 1940s this recentered the non-Communist world on America’s loan program and the Marshall Plan. The Bretton Woods system, though decided on in 1944, was, at first, a failed experiment. From 1944 to 1958, in the aftermath of World War II and the early Cold War, the dollar system was a complex and asymmetric alliance system, with the Europeans operating their own European Payments Union and the British maintaining the sterling zone. This was dollar system #1.

If we ask what configuration of interests within the United States itself sustained this new order, with the USA as the anchor of a newly reconfigured global capitalism, I would point to Leo Panitch and Sam Gindin’s excellent The Making of Global Capitalism: The Political Economy of American Empire, with which I find myself in near total agreement.

Dollar system #2 began in 1958 when the Bretton Woods model finally came into effect. The dollar was anchored on gold and the other major currencies of the American power bloc maintained fixed exchange rates with full convertibility for trade and long-term capital movements. This, however, was no straight forward replacement for the Edwardian golden age. With a far lower degree of globalization in proportional terms, the Bretton Woods system actually set out to mark a deliberate break with what was seen as the anachronistic Edwardian age.

But, though short-term capital movements were regulated, the forces of financial speculation were stirring. By the late 1950s, Wall Street was reviving from its historic defeat in the 1930s Great Depression and began to chafe against the regulatory power conferred on the state by Bretton Woods. The balance of class forces was shifting. By the 1960s the offshore eurodollar market centered around US financial players domiciled in the City of London was in full swing. This and the contrary economic policies of the US, UK, Germany and Japan, made upholding the Bretton Woods system increasingly difficult. The Bretton Woods system - dollar # 2 - was never a robust and solid architecture, analogous to the prewar gold standard. It began to fail almost as soon as it was put into effect. To keep it going the system was given additional support by restricting gold flows and setting up swap lines.

In the early 1970s those efforts failed. Nixon undid the gold peg. This could easily be seen as a humbling defeat for US authority. The international politics of the period - Vietnam, OPEC, NIEO, Soviet advances - certainly were a challenge. But, in the financial sphere, the 1970s and the period that followed - dollar #3, call it the Wall Street dollar - are far better understood as a triumphant period of upsurge by an unfettered Wall Street.

It is with regard to this transition that Eichengreen makes his quip:

But dollar #3 really was not dollar #2. Crucially, the new dollar opened the era of fita currency and that went hand in hand with a phase of explosive globalization. This conjuncture is unlike anything previously seen. Initially, it was unstable. Inflation and balance of payments imbalances led to questions being asked about possible alternatives to the dollar as a lead currency. Those were definitively answered by the interest rate shock delivered in 1979 by Volcker.

Floating exchange rates and unfettered capital mobility supercharged by the expansion of private finance were now the core of the Washington consensus, with independent central banks replacing the gold anchor as the guardians of stability. The result, after long last, was a return to a regime of capital mobility which matched and even exceeded that before 1914 and a return of financial crises. This is vividly demonstrated by one of the better graphs in Reinhart and Rogoff’s perversely mis-titled bestseller of 2009, This Time is Different.

As waves of financial crises swept the emerging markets in the 1980s, actually existing neoliberalism devolved into a regime of recurring crisis. For all its appeals to discipline and non-discretionary policy, for America’s neoliberal elites, the decades of the third dollar regime (dollar #3) were an era of ad hoc crisis-fighting. In interventions in Latin America, Mexico and the Asian financial crisis, what emerged was a tight nexus between the senior figures of Wall Street, the Fed system and the US Treasury. This was the era in which it became normal for former CEOs of Goldman Sachs to inherit the top job at the Treasury.

But, if the world was in the end saved from crisis, it had less to do with the daring-do of a posse of Beltway super heroes than a new metamorphosis of the dollar system. The major emerging markets, and above all China, did not want saving. Out of the high-octane danger-world of the Wall Street Dollar (#3), they made a fourth dollar regime - Bretton Woods 2.0. This was defined by a government-directed accumulation of reserves, notably in dollars, above all as a form of self-insurance against financial crisis.

The system was dubbed Bretton Woods 2.0, because emerging markets, having experienced the turmoil of the 1980s and 1990s, pegged their currencies unilaterally against the dollar at competitive rates and then, on the back of their trade surpluses, progressively accumulated reserves.

Source: RBA

This suited exporting businesses in the emerging markets. It offered a degree of security to their governments. Wall Street was only too happy to oblige with the financial intermediation, even if exchange controls hampered the entirely free flow of capital. There was always the prospect that, in due course, China would “converge”.

When stacked into an aggregate, we see the dramatic scale of this reserve accumulation. It was from the late 1990s that for the first time the large-scale accumulation of fiat currency, dollar reserves began.

Not all the reserves accumulated were in dollars, but dollars predominated. And they were above all accumulated by official reserve holders in the big Emerging Markets. Bretton Woods 2.0 - dollar #4 - was a world of exorbitant privilege. But one made not by the US, but by the policy choices of the rest of the world and most notably China. The privilege consisted in the ability of the US to borrow at lower interest rates, as foreign holdings of debt piled up. The burden to the US came in the pressure exercised on US domestic producers in exposed sectors and competitors in export markets - China Shock 1.0.

When we ask, who, after sterling and the dollar will come next as a reserve currency, it is this model - Bretton Woods 2.0/ dollar regime #4 - that we project both into the future and past. It was, in fact, very particular to a period that ran, roughly speaking, between 2000 and 2015.

In the mid 2010s the large reserve holders stopped building new official reserves. The emerging markets led by China went on pegging their currencies and controlling capital flows, the trade surpluses continued accumulating, the US went on issuing debt, at an accelerating rate after 2018. But, that debt was no longer being accumulated by official “reserve managers”. Without fanfare, the dollar system was again shifting gear, dollar #4 was giving way to dollar #5. The shift is clearly evident in the figures for foreign holdings of US Treasuries, the key reserve asset.

If in the era of Bretton Woods 2.0, it was official reserve accumulation that covered America’s balance of payments imbalance, it was now inflows of funds into American private assets, attracted by the dramatic dominance of American financial markets over all possible competitors.

US fiscal deficits continue on an unprecedented scale. Foreigners continue to buy Treasuries, but given the huge deficits, these make up a smaller share of total new issuance. These boost demand and corporate profits. That in turn validates foreign investment in those assets. As in Bretton Woods 4.0, the circuit closes, but in a new way.

As I argued in the FT piece

America’s unequal, K-shaped economy is the honeypot of global capitalism. Unlike in the classic phase of Bretton Woods 2.0, it is not China leading the way. Since 2015 Beijing has imposed tight capital controls that trap $50-60tn in Chinese bank accounts behind a financial firewall. Official reserve accumulation is one thing. A private capital exodus from Xi Jinping’s China would be quite another. America’s deficits are financed by inflows from Europe, South Korea, Taiwan and Japan. What then, should we call this latest phase of the dollar system? Bastard Bretton Woods? The hedge fund dollar? Given the latter’s outsized role in Treasury markets, it is tempting. But relative value trades are too technical to really capture the flavour of this era. Discussing the question in Beijing with a Chinese colleague who specialises in Marxist political economy, he remarked that the quality of a currency system is ultimately defined by the class relations that underpin it. In that spirit, perhaps the best label for the current era would be the “billionaire dollar” in honour of President Donald Trump and his shameless self-enrichment. Or perhaps that should be the “trillionaire dollar” after Elon Musk and the SpaceX IPO, which has redefined the parameters of wealth. Certainly, in the current iteration of the dollar system, anyone worrying too much about America’s chronic fiscal incontinence can easily seem out of touch. We aren’t in the 1990s any more. But if that is so, perhaps it is also time to stop speaking of the dollar as a reserve currency, with all its time-honoured connotations of bank vaults, probity and solidity. America’s currency today is, above all, a promise of liquidity and a vehicle for outsized and unfettered capital accumulation:

Dollar #5, is the “profit dollar”.

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Chartbook 456 Alien v. Predator or MAGA meets AI - a "crossover" monument to the USA at 250.

Adam Tooze — Sun, 05 Jul 2026 02:40:50 GMT

We live in a world of divergent, incongruent but overlapping shocks. In recent years, I’ve been trying to capture this agglomeration of heterogeneous historical forces with the notion of the polycrisis. On the occasion of the 250th anniversary of the USA it seems as though we may need a more graphic image.

In pop culture there is a genre known as “crossover”, where the main protagonists of different fictional universes - often monsters - are brought together in one narrative space.

King Kong v. Godzilla

Alien v. Predator

Apparently there is one, unofficial fan-fiction universe, Batman: Dead End, in which Batman, Alien and Predator converge.

The plotline goes as follows:

During a stormy night in Gotham City, the Joker escapes from Arkham Asylum while Batman prepares to hunt for him. Batman finds and corners the Joker in an alleyway, but before Batman can take him back to the asylum, the Joker is quickly dragged off by a Xenomorph and is presumably killed. Another Xenomorph attacks Batman, but is killed by a Yautja, “Big Red”, who Batman fights and defeats. Suddenly, more Yautja appear just as more Xenomorphs emerge from the darkness behind Batman. The film ends abruptly with a cliffhanger as Batman is surrounded by the Xenomorphs and the Predators.

I had to look it up, but Xenomorphs are the monsters from the Alien series and Yautja’s are Predators whose obsession is trophy-hunting other life forms.

From the point of view of anyone trying to narrate our current reality, such crossovers may serve as a fertile image: Not one nightmare, not one drama, not one cast of “bad guys” v. “good guys”, but distinct, overlapping dystopias, in a giant melange.

In 2026 we have the China shock discourse - the global division of labour being upended by China’s gigantic growth model - some sort of East Asian mechatronic giant, more or less effectively corralled by the CPC on a mission of historic national rejuvenation.

Then we have the war-mongering “middle powers” - the likes of Russia, Israel, UAE unleashing regional mayhem.

And we have the US, still straddling the world with its military and financial infrastructure, but caught internally by the dynamics of MAGA and AI.

Source: Friedrich Ebert Stiftung

You might say that a three-way Batman: Dead End crossover seems quite fitting.

But does it really make sense to characterize the USA on its 250th anniversary as a single character, whether monstrous or not?

For China the type-casting makes a kind of sense. China truly is a shock. I never get tired of saying so. It is unprecedented in size and scale and dynamism. It is China. It is not altogether crazy for serious people to wonder whether China might be the force that suspends the basic economic logic of comparative advantage. Will China make everything?

But as historically unprecedented as it may be, in more general terms Beijing’s program is recognizable as a super-sized version of the world-historic states that emerged in the 20th-century - the USA, the Soviet Union. It is bent on making history on a new scale, but, in general terms, in familiar ways. However quixotic and macro-economically unbalanced its economic policy may be, its governance issues are those of a familiar macroeconomics. Godzilla, King Kong, take your pick.

Can one say the same thing for the USA on its 250th anniversary? Does “America’ have a program? Does it form anything resembling a single coherent power, whether for better or worse? At this point, surely, it would be embarrassing to claim so. Better surely to concede that elite coherence has collapsed and that the US as it enters its second quarter millennium, is best thought of not as a single coherent agent, but as an incubator, a petri dish, a “zone” from which things emerge that defy summation in a single graphic image.

A Jefferson liberal might reply, well isn’t that precisely the point. Is that precisely what the US was always supposed to be? Not a single power-state, but a space for the individual pursuit of life, liberty and happiness? Well, yes. But it was always more than that. And in the 20th century, in particular, the US was transformed into a power-state of global proportions. We cannot escape that world. The Pentagon, the world-spanning influence of the dollar, US global reach, are legacies of that post-Jefferson, non-Jeffersonian version of the US.

And it was, in fact, from the midst of that process of transformation, in the 1930s and 1940s, that the comic book imagination of the US emerged. So if we grant that the US has always been a “zone” as much as a single coherent state, let us concede that Jefferson or suburban imagery is candy coated. In the current moment, the environment that comes to mind is not a slave-based idyll like Jefferson’s Monticello, but Batman’s Gotham city - a mythical, corrupt and depraved urban sprawl, located somewhere in New Jersey.

On the national anniversary, the USA as “zone” is presided over by a president who is shamelessly engaged in haphazard and fly-by-night self-enrichment to the tune of a few billion dollars or so, mainly through crypto scams. Meanwhile, the broligarchs - the real lords of Gotham city - play for the serious money, with rockets, chips, AI models, a hundred billion, a trillion at a time.

For birthday entertainment, the White House hosts cage fights.

The Pentagon is a war-fighting machine that has command-chain issues and unleashes mayhem with global implications in coalitions with other powers, for which it lacks any obvious national rationale.

Dotted across this landscape there are, of course, much private prosperity, livable communities, comfortable suburbs and highly potent centers of innovation. In those centers engineers from all over the world work to generate new technologies of finance, fossil energy and tech. If we are looking for powerful, world-changing monsters in Gotham city, right now, AI is where it is at.

On a panel in Beijing I found myself answering questions about AI from an assembled crowd of serious-minded Chinese STEM students. Being me, they weren’t asking me technical questions. What they wanted to know was how this technology that was so enhancing and so empowering, can also pose such a dramatic threat to our ways of life, and work, and culture and science?

Being in the PRC, I thought I might try to invoke Marx AI’s ruthless incorporation of human IP is, after all, nothing if not a staggering confirmation of Marx’s basic vision of capitalist political economy. This is not the first time that human creativity and labour appear in history as an alienated and crushing objective force that transforms all our lives willy-nilly. I thought some basic notions about the “forces” and “relations of production” might be familiar in Beijing. I was wrong. Some of the older folks in the room smirked at me, as though we were sharing a private joke amongst old=timers. As far as the eager young STEM types were concerned I received blank stares. I think they thought I had lost my marbles.

So - thinking of recent movies - I tried again, this time with Oppenheimer.

What is so shocking about AI, surely, is that at least potentially, it is a technology that may utterly transform the world - the world of work, culture, leisure, but also warfare. It may. It may not. We don’t know. We certainly cannot calculate the ramifications. Yet, nevertheless, “we” are pushing the technology anyway.

In this very general sense, AI can be thought of as analogous to the atom bomb and to the hydrogen bomb that followed and to the intercontinental missiles that would deliver them. It was a camera on the tip of aV2, one of Wernher von Braun’s early creations, fired vertically upwards that gave us our first glimpse of our planet from the outside. That changed things. Eight years later, in time for the 250th anniversary, rocket-man Elon Musk would become the world’s first trillionaire.

The contrast between Werner von Braun and Elon Musk is telling. Who is the “we” that pushed these breakneck innovations in the mid 20th century and in the 2020s? The world-transforming technologies of the mid 20th century were driven by engineers, like von Braun. But, ultimately, they were under state control. Oppenheimer was who he was, because of the Manhattan project. You might say that the likes of von Braun and Oppenheimer, the new men of “big science”, built the state that they served. The mid-twentieth century techno-scientific state apparatus did not preexist their efforts. But it is telling that they chose the state as their vehicle. By contrast, AI harnesses the engineering talents of the world to privately developed technology, private money and the giant unfettered egos of tech entrepreneurs.

Of course, the contrast is not absolute. Private firms were involved in the Manhattan project and in the US nuclear-industrial complex thereafter. And state interest, finance and technology have flowed into Silicon Valley, helping to propel America’s 21st century tech miracle. But who could deny the huge difference in the political economies of nuclear on the one side and big tech/AI on the other. To invoke moon shots and NASA has an almost nostalgic feel. That is precisely the world that Elon Musk has set out to kill.

So what is the politics of AI? Whose strategy is it? Is it Alien, Predator, or the Death Star? We can give educated answers. But the basic point is that it is not already decided. The Biden and Trump administrations have wrestled with this question without conclusive answer. The basic drivers of innovation remain with the Broligarchs and the excited sources of private finance that are backing them.

It is not Sparta, or Potsdam, or Rome, or London, or Beijing, or any other familiar model of state-directed industrial and technological power. The leadership at Palantir talk as though they want to see a powerful technological state resurrected. But they themselves are figures that belong in Gotham City.

And to that vision, furthermore, they can harness resources of macroeconomic scale. This isn’t the kind of state-guided industrial policy that has unleashed China shock 2.0. But it has similar dimensions. This is micro-into-macro on a giant scale. The BIS in its Annual Economic Report, is just the latest high-level agency to spell out the scale of the potential AI shock.

It is the latest authoritative agency to spell out that this tech boom is endogenously generating a China-scale investment and credit boom.

Vast quantities of money are pouring in this boom, which is sustained by huge optimism about returns. This is widely dispersed across US society. In 1998 those at the bottom end of the US income distribution had a small share of their tiny savings in the stock market. Now the bottom quintile have fifteen percent of their “wealth” in stocks, double the share in 1998. For the top 1 percent we need a different scale. Their exposure is fifty percent or more.

Big tech is fueled not only by shares but also by bond issuance to a broad group of investors. But at the core, the AI firms are also engaged in massive amounts of circular financing.

And what is the ultimate scenario that sustains this huge boom? The scenario that validates this collective upsurge in financial wealth is what the students in Beijing were asking me about. The promise, for the investors it is a promise, to totally disrupt our familiar way of life, our ways of living and working. The promise that sustains the upsurge in wealth is that the AI-bros will deliver a shock that is orders of magnitude larger than anything contemplated by even the most extreme “China shock” scenarios.

Is anyone taking action to seriously regulate or guide this? In an ad hoc fashion the Pentagon intervenes when it fears that a super-powerful new model may pose national security risks. But otherwise there is excitement about the giant wealth being generated an silence. Is anyone in Washington thinking seriously about the broader social and economic implications? What would you expect in our “crossover” reality in which MAGA meets AI?

In the graph below, the BIS becomes the latest authoritative body to calmly contemplate a future, driven by the US-centric AI boom, in which the labour share of income collapses to 20 percent over the next forty years. In other words, the wealth of the US and much of the rest of the world by way of US markets is riding high on a vision in which the balance between capital and labor is upended in the next half century.

It is an extreme scenario, but one being actively worked towards by the “AI bloc” and one on which trillions of dollars are being wagered. Amidst the red, white and blue and the hot dogs, let that stand as a “crossover” monument to the USA at 250.

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Chartbook 455: The AI boom, China's walled-in-wealth and the financial barriers that separate the two. - World Economy July 2026.

Adam Tooze — Wed, 01 Jul 2026 13:16:34 GMT

In the world economy right now there are two powerful forces at work. The AI boom is driving a K-shaped expansion in the US, which is rippling across the whole world economy. The impact of delivering AI may be huge but it lies in the future. Meanwhile, China’s on-going supply-driven expansion, delivers abundance, but also deflationary pressure. To add to the peculiarity of the summer of 2026, there is a sense that though both these forces are at work in the same world, at the same time, the two are to a degree separated and disconnected.

If the American AI boom and the China-deflation were colliding on the Sino-US axis, with Trump and his gang in charge, we might be looking at something quite dramatic. The US AI boom is sucking in imports at a furious rate. These, however, come not from China, but above all from Taiwan and Mexico (sic).

Meanwhile, the bilateral, Sino-US relationship is oddly calm. What “constructive strategic stability” actually means remains to be seen, but the China-US trade truce is holding. The bilateral US-China deficit has narrowed, dramatically. At least cosmetically, America’s protectionism is working.

It no doubt helps that the US has effectively excluded many of the products that make up the leading edge of China’s export drive. The US is not worrying, as Europe is, about an influx of Chinese EV. For all his green credentials Biden did not hesitate to impose 100 percent tariffs on Chinese EV and Trump is dismantling the IRA’s energy transition subsidies. As a result, the debate around China shock 2.0 is largely about China-Europe, not China-US. That is painful for the Europeans, but less explosive for the world economy, so far at least.

Meanwhile, though China’s overall trade surplus continues at records levels, the associated accumulation of fx reserves, commonly denominated in dollars, is disguised. It takes forensic work by analysts like Brad Setser, to show where the earnings are piling up.

All the while, China is holding the US-led AI boom at arms length - its own kind of disconnection. In technological terms, in the AI race, China’s tech giants are the only ones that can compete with the US. But the stock market valuations of the Chinese platforms do not compare to those on Wall Street, or even those of South Korea’s chip-makers.

Source: Bloomberg

Much to their chagrin, China’s wealthiest investors are barred from participating in one of the greatest run-ups in asset prices in history. The concomitant of the exchange rate manipulation that keeps the yuan undervalued - the bug bear of the China Shock 2.0 crowd - are capital controls that wall-in tens of trillions in Chinese wealth. China’s moguls are prevented from fully joining the tech party. China’s stock market lags woefully behind the world.

This spring there were reports of somewhere between $800 bn and $ 1 trillion that left China in 2025. That is a statistical measure of net flows that was given added color by the reports coming at the same moment, of a crackdown by the Chinese authorities on offshore accounts. A series of brokerage firms – Longbridge Securities, Tiger Brokers (both based in Singapore), and Futu Holdings in Hong Kong – were fined a total of $330 million by Beijing for serving mainland Chinese clients without proper licenses.

Why is Beijing so hawkish on capital flows? Control-freakery aside they have every reason to be concerned about the potential for very large and volatile movements on capital account. Once you impose controls, behind the wall of the dam, tremendous pressure can build up. Even if we discount political concerns, or other possible motives for “capital flight”, viewed simply in terms of portfolio allocation, China’s wealthy are massively underweight dollar assets. According to analyst Richard Casey there are “$50 tn in CNY deposits constrained to low CNY yields, collapsing real estate, underperforming equities and gold.” Financial repression - in the extended sense - is a core component of China’s political economy.

So we have a strange combination. On the one hand, urgent calls for China to revalue its currency upwards to create a level playing field for industrial competition with Europe. On the other hand, speculation swirling around Hong Kong and Singapore, that if the Chinese balance of payments were fully liberalized the result would be huge outflows, resulting not in a revaluation of the yuan but a crash. One might envisage a scenario, for instance, akin to 2015-2016, when over a trillion dollars in reserves drained and Beijing was forced to impose its current, stricter forms of capital account regulation. Highly-respected JP Morgan analyst Michael Cembalest puts this in dramatic terms:

China has achieved its growth targets via one of the largest monetary expansions the world has ever seen: at $60 trillion, China’s domestic banking assets have reached ~50% of global GDP. If China fully opened its capital account, possible outflows could crush the RMB and trigger a collapse in Chinese equity/real estate markets.

The limitation of capital flows is not just technically reminiscent of Bretton Woods, it also has about it the flavor of mid-century political economy. Beijing will tolerate and promote national wealth creation, but it does not grant to its bourgeoisie unlimited free disposal of its wealth, especially if that might destabilize the national balance of payments.

The relationship between Beijing and China’s wealth elite is fluid and opaque. In general, Chinese citizens can transfer only $50,000 (€43,000) a year abroad. But there are ways of getting far greater amounts of wealth out of the country. Those are more “complicated”. For large sums this involves share issuance outside China and complicated structures of offshore ownership. Beijing is now moving against those. As Bloomberg reports:

The clampdown threatens a five-step playbook that wealthy Chinese have followed for years, to Hong Kong’s benefit. They would build a successful business in China, list it on a global exchange, pay out billions of dollars in dividends to themselves and other shareholders, set up a family office abroad and snap up foreign real estate. These moves kept their fortunes relatively immune from President Xi Jinping’s restrictions, including the annual limit on overseas transfers.
This model relied on so-called red-chip firms — entities registered outside China that hold assets and businesses within it. Founders could incorporate their companies abroad and raise money in a US or Hong Kong listing without direct oversight from China tax authorities. Companies that have gone this route include some of the nation’s biggest tech giants. The popularity of the strategy is reflected in the number of family offices in Hong Kong, which jumped 25% to 3,384 at the end of last year from 2023.
China is now targeting red-chip structures by restricting their IPO applications. As a result, Hong Kong listings by mainland Chinese companies using this pathway have all but disappeared this year, according to data from the Hong Kong Exchange.
That’s pushed Chinese founders to opt instead for H-share listings in Hong Kong, which are reserved for companies incorporated on the mainland. Even there, the firms face new restrictions. Previously, there was more flexibility about whether proceeds from these sales needed to be returned to the mainland. But a directive from China’s central bank and the State Administration of Foreign Exchange that came into effect on April 1 clarified that the money needs to go back to China unless the company gets special approval.

The pressure comes in different forms. Recently, according to Li Yuan of the New York Times, Beijing has not just been issuing fines. It has given “several Hong Kong and Singaporean-based brokerages with significant mainland clientele two years to wind down those accounts. It expanded rules on overseas investment to explicitly cover individuals for the first time, threatening to confiscate vaguely defined “illegal gains.” In Hong Kong, long a gateway to overseas investing for mainland residents, banks and brokerages have tightened requirements for opening an account. Some brokerages told their mainland clients that the clients could sell U.S. stocks but not buy them. The Chinese social media app known as RedNote announced that it had cracked down on posts teaching people how to open U.S. stock trading accounts.”

The balance of capital account control and exchange rate management is not straight forward. In its balancing act with regard to the yuan’s exchange rate, it no doubt suited Beijing to allow some degree of outflow. The money flowing out helped to offset the upward revaluation pressure from the trade side. But there is only so much license that Beijing will grant. One might infer that two things have destabilized this prevailing balance and triggered Beijing’s crackdown.

One is the unmistakable desire of China’s elite to get a lot of its money out of China and into global assets. Again there are no doubt political reasons for this. But one should not underestimate the magnetic attraction of what is going on in the US. If Elon is becoming a trillionaire (my spellcheck does not even like the word) no one wants to be left out! As the Economist reports: “America’s towering tech debuts on the stock market have already caught the jealous eye of Chinese investors. At the Lujiazui financial forum in Shanghai this month, some mainlanders grumbled about their exclusion from the recent SpaceX listing.” Beijing, “cannot shake the suspicion that capital outflows are “unpatriotic and damaging to the Communist Party’s prestige”, as Gabriel Wildau of Teneo, a consultancy, has put it. They do not like to see their citizens betting on foreign “tech narratives” that compete or conflict with their own vision of the future. If money is to stride out of China, it must pass through portals of their approval”.

The other new factor is that China’s government needs money and with that comes an incentive to tax the rich. Levying effective income taxes would be a start. As an excellent report by Bloomberg on the crackdown on capital mobility put it: “It started with a tax bill.”

The public crackdown followed a series of behind-the-scenes moves within China’s borders, where tax officials have become increasingly aggressive as they attempt to extract more revenues from the country’s wealthy. In Beijing, Shanghai and Guangzhou, individuals have been told that investigations into their taxes could look back at least to 2018, people familiar said, requesting not to be named because the matter is private. … The individuals being targeted are usually rich — often having more than $30 million in their accounts, the people said. They are typically people of Chinese origin who obtained foreign passports but later returned to live in China. Some of them used offshore trust structures to manage their wealth. Those contacted are facing levies of up to 20% on investment gains, along with potential penalties for overdue payments, the people said. The final amounts are sometimes negotiable, they added. There have been no official circulars on the matter but only private negotiations between the individuals and local tax officials, the people added. The tax officials have ramped up the pressure, in some extreme cases threatening to involve the police.

My aim in raising these points, is not to dispute that the yuan is undervalued for trade purposes or to argue against those calling for it to be revalued. The point is to underline the conditions that enable us, in the trade-centric “China shock 2.0”-framing, to treat the trade balance in isolation and to call for a revaluation of the exchange rate without regard to broader capital flows. What makes this possible is precisely the rigged balance of payments, which bottles up capital, represses capital flows, limits aspirations to partake in the global AI boom and enables the currency to remain within government control. What makes exchange rate policy possible is the lopsided and tense political economy of China’s party-state-managed-capitalism. And that framing suffuses even the proposals that come from the West.

Those calling for a revaluation of the yuan to redress China shock 2.0 do not, for obvious reasons, suggest that China should liberalize its balance of payments. The suggestion is that it should maintain the existing system of controls but promote a revaluation of the currency. The political economy of that proposal is worth spelling out: A revaluation would, first and foremost, improve the terms of trade for Chinese consumers. It would encourage imports. It would also reduce exports and thus employment in export sectors. It would further squeeze export-orientated businesses. And, under the current circumstances, to make it work will also require robust exchange controls. To push the currency up against the downward pressure of outbound capital flows, Beijing would need to tighten its grip on the Chinese bourgeoisie. Under current conditions, more financial repression is the unmistakeable implication of calling for revaluation.

In a world of unrestricted flows for both trade and capital investment things would be far more complicated. In the short-run, a scenario of crash devaluation could not be ruled out. And what about the medium- and long-run? In due course the yuan would likely recover. But, certainly, fully floating rates and capital mobility are no guarantees of trade balance or vigorous industrial employment in rich, import-happy economies, like the US or much of the EU. The eurozone led by Germany and Japan have, after all, sustained running surpluses with the US, counterbalanced by large purchases of US assets without any kind of coercive mechanism in play. In an earlier post I referred to this not as a “dollar trap” but a gilded cage, in which wealth holders in other advanced economies co-benefit from America’s lop-sided model of K-shaped, pro-business, pro-profit growth. According to one recent estimate, over the last decade since 2015, non-US investors have benefited from a staggering $13tn in profits from their US assets. Little wonder that the Chinese bourgeoisie would like in on that game. That would drive the yuan down, not up and would maintain the imbalance on the basis of a new political economy.

We don’t generally recommend revaluations of the euro to address the chronic issue of Germany’s trade surpluses because what would be the means of bringing it about? You can only seriously talk about currency policy if you have the PRC’s system of controls, or some functional equivalent e.g. capital import restrictions, or clever trade regulations, or some credible agreement between central banks. In the North Atlantic economy all of that was left behind in the 1990s and the return of such talk from Trump and his crew is generally regarded as a scandal.

The fact that in the context of the China Shock 2.0 debate, we can seriously talk about the possibility of targeting an exchange rate for the yuan, suitable to rebalance the flow of trade, most especially in industrial goods, with a view to “fairness” and domestic social equilibrium in both exporting and importing countries, is a backhanded compliment to the increasing weight and influence of China’s model of economic management. As argued in a previous post, it would be more convincing if it were combined with disciplining also of European capital, to actually deliver the investment and innovation necessary to drive modern economic growth.

If we talk about currency policy without talking about financial repression and capital discipline are we not indulging in euphemism?

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Chartbook

Top Links 1165 Broken confidence. Patient capital in China. Forgotten feminist. On the banks of the Dordogne.

Top Links 1164 "Everybody's profiting". The map of Russian fuel shortages. Bad nights. Underdevelopment and war.

Trump makes the stock market his scoreboard, but many Americans aren’t even in the game

Top Links 1163 America's AI deficit. The Qatari veto at VW. Scientific decoupling & poets of the apocalypse.

Top Links 1162 Remaking the Fed. The transformer bottleneck. Botswana's beef & the rampaging Ebola outbreak.

Top Links 1161 Running the MAGA economy hot. Precarious Palantir. Modern man, a yellowed old tiger & progress against dementia.

Chartbook 458 Postscript - A conversation with Barnaby Raine about politics, economics, continuities of violence and hyper-agency.

Top Links 1160 Who gets power in contemporary America? Empire on suicide watch. Saba Saba day & singing the Vietnam blues.

Top Links 1159 In AI, revenue just caught up with depreciation. When will China make Mythos? How Indonesia invented sea denial & "Bombed Happiness".

Top Links 1158 Skewed wealth distributions. Leaving gold. Jacques Bainville and India's invisible women.

Top Links 1157 Data centers and "industrial resolve". Cannibalizing Lululemon. African urbanization & Foucault's secret Canadian file.

Top Links 1156 Pricey BBQ. Exaggerating Huawei. The US in 1930. Ukraine striking back.

Chartbook 457: The metamorphoses of the dollar

Top Links 1155 MAGA's economic self-harm. A snapshot of the food system. Grossman's "music of destruction" & Adorno on the paradoxes of historiography.

Top Links 1154 Exxon - not like other oil majors. Polycrisis as supply shock. The mapmaker of Wounded Knee.

Top Links 1153 Trump's money. Canada's pipeline to Asia. Russia is losing the space race & China's generals.

Chartbook 456 Alien v. Predator or MAGA meets AI - a "crossover" monument to the USA at 250.

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Top Links 1151 No more visas. The distributed solar boom. The triumph of Excel & "a bride married to amazement".

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Chartbook 455: The AI boom, China's walled-in-wealth and the financial barriers that separate the two. - World Economy July 2026.