Our Contemporary International Economy

(suspenseful music)(horn blares) (crowd applauds)(camera shutter clicks) – The US government is quietly reshaping the global economy in ways that will changeour world forever. (tense music) You can see this in just one sentence from Joe Biden's firstaddress to Congress. (Congress applauding).

– Think about it, there is simply no reason whythe blades for wind turbines can't be built in Pittsburghinstead of Beijing. No reason, no reason, none.(Congress applauds) – This seems just like a boring political statement, but I promise this statementis a bigger deal than it seems because it marks a newera in our global system, a system that all of us participate in,.

Whether we know it or not, or maybe it's a rerunof an economic system that the globe turned to rightbefore the Second World War. – There's no reason whyAmerican workers can't lead the world in the production of electric vehicles and batteries. I mean, there is no reason. We have the capacity.(Congress applauds) (tense music)(machine flutters).

– In this video, Iwant to peek under the hood of the endlessly complex andfascinating global economy, to show you just how deeplyconnected we've all become and how those connectionsare being cut and weaponized. All of this thanks tonew threats, new risks, new realizations, new values, and above all, a new rivalrybetween two great powers. This is the world that we are moving into. It's how things willwork for decades to come,.

And it's important that we understand it. (suspenseful music) So let me give you an overview of what is becomingthe new global economy. – The new tariffs from both sides went into effect earlier this morning. – The UStariffs have kicked in. – China can't put as many tariffs on us as we can put on them.

– China is still the biggestthreat to the United States. (tense music) – Folks, weneed to make these chips right here in America. – Hey, so for a long time I'vebeen at war with marketers, people who call my phone, eventhough I don't want them to, and who send me emails, even though I never gavethem my email address. We're all familiar with this.

It's called spam, and itis increasingly a problem. But then I recently learnedthat I actually have the right to request that I be takenoff of all of the lists that people use to buyand sell my information. The problem is, even thoughI have all these rights, I'm not gonna go through the process of like requesting a formallike removal of my name off of every one of these hundreds of data broker lists that I'm on.

Incogni is the sponsor of today's video, which is why I'm talking about this. I'm very grateful to them forsupporting our journalism. I signed up for Incogni, and I gave them permissionto act on my behalf to go take my name offof data broker lists, and then they start theprocess of requesting that your name be taken off. Some of these companies are kind of shady.

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It is incogni.com/johnnyharris. When you click the link, youget a pretty big discount. It's like 60% off when yousign up for the annual plan. I do the annual plan because once you're taken off these lists, you immediately get put back on, and Incogni constantlymonitors month after month to make sure that youstay off these lists. So yeah, big discount.

Click the link in my description, use the code, and you'llget the big discount. You can try it out and see ifit clears your life of spam and makes you feel like youhave a little more privacy in your life. Let's dive into this story. It's a big one, it's an important one, and I'm excited to share it with you. (mysterious music).

The economy that we live in, that we all take for granted,is actually relatively new. The clothes that you'rewearing right now, the computer or the phone that you'relooking at to watch this video, the materials that yourhouse is made out of, the fibers in the blanketthat you use at night, the food you eat, all of it is a product of perhaps one of the mostsignificant achievements of our species: global trade.

(mysterious music)(camera shutter clicking) Early on, humans discoveredthe magic that occurs when a group of people specialize in producing somethingvaluable like grain. They make more than they need, and then they take that excess and they give it to another group who also made too much of something because they specialize in aspecific thing, maybe textiles.

And through this exchange, both parties benefit way morethan they could on their own. It was this kind of cooperationthat leveled our species up beyond any other animal on Earth. So we just kept doing it. In fact, the history ofour human civilization is largely the history of people trading on an ever-growing scale. Today, this is normal.We call it the economy.

By the time the 1900s rolled around, we had a pretty connected world. There was global trade all over the place, but it was still pretty clunky. Everyone had different traderules, different currencies. Countries were worried thatforeign products would threaten their domestic producers, sothey put up trade barriers and imposed big tariffs onstuff coming into their country. Then, 70 years, ago came that war.

That almost tore this world apart. (explosions thunder)(engines rumble) Out of the ashes of that war, the US emerged as the mostpowerful country ever. It had troops and influencein every corner of the globe. And with that new power, the US and its allies wrote a new playbook for the world economy.(dollar sign chimes) They would make it so that the US dollar.

Was the top currency. Everything would kind ofbe pegged to the US dollar. This helped stabilize the whole system. It helped it move more predictably. It helped countries send andreceive money across borders. The US also got countries together with the goal of loweringthe taxes imposed on products flowing in andout of their country: tariffs. And through all these efforts,.

All these new rules, borders opened up. Investors could put theirmoney almost anywhere on Earth to grow new businesses. Corporations could look to far away lands for cheaper workers toset up their factories. The world became one big market, and it started to benefithundreds of millions of people. (bright music) So much so that evenanti-capitalist China couldn't stay.

Out of this global economy thatwas so unrecognizably open, that was so much more open than anything the world had ever seen. There was way too much moneyto be made, so China jumped in. They said that theywould remain communists, but they would open up a fewdozen of their coastal cities to be open for businessin this new global market. Millions of China's rural poor flocked to the coastal cities, thesegateways to the global market.

They showed up ready towork, and to work for cheap. A world away, over in the United States, corporations looked atall of their factories in places like Detroit and Buffalo, and realized that it wouldmake a lot more sense for them to move all ofthese factories to China where they could pay workersa fraction of the wage. And, spoiler alert, allthese coastal cities in China that opened up to the globaleconomy soon looked like this.

Hundreds of millions ofpeople in China lifted out of poverty and thrust into thisnew middle and upper class, all thanks to the magicof the global economy based on the rules and policies that the US had set up after World War II. It was so good for China anda bunch of other countries, but for the many Americanswhose jobs had just been given to someone in like Shanghai,this didn't feel like magic. It felt like betrayal,.

Like a recipe for poverty and ghost towns. (haunting music) This China shock was oneof the first big tastes of the economic pain that thisglobal economy could inflict on huge numbers of people. But to everyone else,it was totally worth it, because thanks to this system, people were suddenly seeingprices at their stores drop further than seemed possible.

Washing machines, shoes,tools, toasters, couches, shirts, socks, toys,mattresses, lawn chairs, anything you can think of is now flowing from Chinese factories and available for dirtcheap at your local Walmart, all while transforming the lives of people in places like Vietnam,India, Chile, and Thailand, who saw huge economicgrowth during these years. So by the '80s, China'sfully in the global economy,.

And it is a gravy train. The US and UK both elect leaders who love this free-tradeglobal capitalism. – More trade, not less isthe wave of the future. – The new system was boosted by all of this new technologythat was coming out, making it easier to passinformation across borders, to move money, to move people, to move goods across the globe.

A globe. Promise to obey. If we all believe and obey these rules, it creates the conditions that made the world intoa giant marketplace, where a corporation couldsource whatever they needed to make their product fromanywhere in the world, whatever made the most economic sense. Soon, products as simple as a T-shirt.

Would travel along anunfathomably complex supply chain, using material and labor from many countries all around the globe, before eventually showing up conveniently just in time at the store. Policy had created masscooperation between billions of people who don'tspeak the same language, who don't know each other, but are somehow all gettingin on the same market.

This mental construct of economic policy is what created globalization, the globalization we know today. And what's crazy to me is that, if you tinker with thepolicy, if you mess with this, you can reverse a lotof this globalization, which is exactly what'shappening right now. – There is simply no reason whythe blades for wind turbines can't be built in Pittsburghinstead of Beijing.

– Okay, but let's stickto our timeline here. We're kind of in the '90s. And I'll tell you, people inthe '90s would've never guessed what direction this story is about to go. The Soviet Union had just fallen, free trade and global capitalism had unambiguously beat communism, and the magic of the freemarket was seen as the solution for pretty much everything.

Free trade had just ended global conflict between these greatsuperpowers, maybe forever. Free trade was eradicating global poverty. Free trade was pushingcountries to adopt democracy. And here's Bill Clinton, giddy about how good it's all going, predicting that free tradewould bring democracy to China. – The more China liberalizes its economy, the more fully it will liberatethe potential of its people,.

Their initiative, their imagination, their remarkable spirit of enterprise. And when individuals havethe power not just to dream, but to realize their dreams, they will demand a greater say. – Free trade would preventour age-old human curse, war, by so deeply entangling countries in mutually beneficial deals that it wouldn't make sense to fight.

After all, free trade had turned Europe from a continent ravaged bywar to this tightly-knit group where everyone's holdinghands and smiling together. Why wouldn't this naturallyjust happen to the whole globe? China continued to make stuff and send it to the United States. Our dependency on them andthem on us continue to grow, and that would surelyprevent any conflict, right? Um, no.(deflated music).

It's looking like that'snot how it's gonna turn out. In fact, it's kind of the opposite. – The new tariffs from both sides went into effect earlier this morning. The US has imposed 10% tariffs on $200 billion worth of Chinese imports. – China is our military'smost consequential strategic competitor and pacing challenge. – In a relatively sudden shift,.

Governments around theworld are undoing a lot of this globalization, thissolution to all of our problems. They're rejecting it. India is paying companiesto keep their production within their own borders, especially for important industries like pharmaceuticals and electronics. South Korea is givingtaxpayer money to companies to produce green energy infrastructure.

Instead of waiting for thefree market to come build it. Japan is paying companies tomove production back to Japan and to move their supplychains away from China. Australia is using taxpayer money to encourage mining companiesto establish the processing of rare-earth mineralfacilities within their borders instead of abroad. Nigeria is imposingrestrictions on foreign goods that they want to seeproduced domestically,.

Like rice and cement. They don't wanna bereliant on other countries. And then you've got Europe, where tons of countries areinvesting government money and protecting homegrown industries that have always been directedby the global economy, like energy, agriculture, and cars. The government gettinginvolved in these markets incentivizes companiesand consumers to make.

And sell these products in country as opposed to lookingabroad at the global market. And of course, leading out on all of this is the OG of the modernfree-market global economy, the United States, who issuddenly changing course from how they've been operating, all the way up until like Obama. Like, Obama spent a great deal of his time trying to increase freetrade, especially with Asia.

Then, first under Trumpand now under Biden, the US is overhauling its economic policy to turn back some of this free trade. And what's crazy is that both Republicans and Democrats seem to agreethat we should do this and fast. (upbeat music)- There is no reason. We have the capacity.(Congress applauds) – Some of these policiesinclude huge government spending bills, like the CHIPS Act,.

Which would allocate over 50billion government dollars to companies that produce microchips here in the United States,instead of in Asia, where the free market hadpulled them to set up. This is also happening in other industries that the government has deemed vital, like critical minerals,cars, and clean energy. But they're not just giving subsidies, like, it's not justgovernment money washing down.

On all these industries,it's also barriers. Biden is imposing tariffs on imports, which protects domesticproducers of certain industries because they no longer have to compete with the global market. They're also banning American companies from selling certain products to China. They're increasingscrutiny on any investment that comes in from places like China.

Like, this is a big shift. And the question is, what happened? How did we get from this free-trade heyday that was supposed to usherin world peace to this? (upbeat music) – Markets have been whipsawed all morning, and now afternoon, by thisongoing trade war with China. – The short answer is one word, the answer to all of this: protection.

Here's my list of four protections that best explain this bigshift in economic policy. (mysterious music)First, workers, which we already kindof talked about briefly with the China shock. For all the winners of the global economy, there were lots of losers, and a lot of them were communities who found themselves out of work.

As their jobs went tocheaper overseas locations. Now listen, economists argue as to how big of a problem this actually was, and you can read allabout it in my sources, but the point is that closed factories and unemployed communitiesin the Rust Belt have a major psychologicaleffect on people who fear that their jobsmight just disappear, either abroad or be taken over by AI.

So the government istrying to calm people down by pumping money into certain sectors to keep jobs in America. The next big realizationabout the global economy: It doesn't really care much about how much carbon itpumps into our atmosphere. Our world is barreling towardsa very real climate crisis, and governments realize they're gonna have to force the market to get serious.

About things like electriccars, solar panels, and other green infrastructure. The free market is notgoing to incentivize this. And if it doesn't happen, we're gonna have a muchbigger problem on our hands. (mysterious music) One of the best partsof the global economy is that our products get made by materials that are being tossed aroundthe globe at the perfect time,.

At the perfect place, to all come together to be made into a final product, all to arrive at a shelf at some store so that we can purchase it. These supply chains are insane, and they cross the entire planet. And it works great until the world shut downin a global pandemic, leaving people around the world.

Without the productsthat they either needed or just kinda got used to having. Again, economists argue abouthow big of a deal this was. A lot of them are like, “No, the supply chains heldup really well during COVID.” But regardless of what someacademic economist is saying at MIT, all of us are leftwith a pretty bad taste in our mouth about supplychains after COVID. The system feels too fragile.

A lot of us feel tooreliant on a fragile system of far away global connections that could be rocked at any moment, which has led to theseprotectionist policies that these governments hopewill bring supply chains back inside of their borders. Okay, finally, and perhapsthe most important explanation in all of this, is that BillClinton was totally wrong. Free trade didn't incentivize China.

Into a democratic revolution. The world did not join together in one big free-trade market, too entangled to fight with each other. In fact, quite the opposite has happened. – Relations between theworld's two largest economies are at their most tense in years. – After joining the global economy, China got really rich really fast.

They've kind of started tochallenge the US at its own game, and now they have one ofthe biggest militaries on the planet, and they use that military to assert their influencearound their region. They use their newfound wealth to project influence around the world by building stuff orgiving loans to people. And they're kind of tryingto dethrone the United States as the one who's calling the shots.

On the global economic order. I made a whole video about this that you can go watch if you want, but the big point hereis that the US is worried about the rapid rise oftheir rival across the ocean, especially when the rise of that rival is in part fueled by American technology, specifically these littlesilicon chips, microchips, that make weapons smart,.

And that will be the brainsthat power the AI revolution. A lot of Joe Biden'sprotectionist policies are actually just aimed right at China, trying to stop themfrom using our own tech to get ahead of us. Again, I made an entirevideo about microchips. You can go to that. I've kind of made a videoabout a lot of these things. But yeah, Joe Biden is alsotrying to get the supply chains.

For these microchips outof China's neighborhood, meaning out of Taiwan, bringingthem back inside our borders to places like New Albany, Ohio, nice and safe in themiddle of our continent. So you're gonna see a lotmore moments like this with American presidents orpoliticians with hard hats on, speaking at construction sites. – Folks, we need to make thesechips right here in America to bring down everydaycost and create good jobs.

America's back, andAmerica's leading the way. (tense music) – This last point is kindof a brutal recognition for a lot of people,including me, to be honest, that our theory that wewould all be more peaceful if we were more economicallyentangled is kind of wrong, at least for now. In fact, these economicentanglements are looking like they might turninto tools of conflict.

As opposed to preventers of conflict. Like, China has a near monopoly on a lot of the rare-earth elementsthat we need to make a ton of very important products,including military weapons. And if push comes to shove, they could very realisticallyuse this as leverage and cut us off in the exact same way that we cut them off microchips. I mean, this just happened.

Vladimir Putin turned off the pipelines that pumped natural gas into Europe, the gas that is needed to heat the homes and run the factories, showing us that economic entanglements can actually be a weapon, and flipping this wholetheory on its head. But yeah, Joe Biden is pouring money into bringing production home,.

And he has a lot of supportfrom all sides of the aisle. So it's like economic nationalism. The government is gettinginvolved to undo some of what the free market did in its heyday, which was to distributeproduction of stuff where it made the most economic sense, not where it protected people. – That means we will invent it in America and make it in America,.

And we're gonna make surewe include all of America. – So that's where we're at. The world is reacting tosome weaknesses that they see in the global free-trade system. They're putting up barriersin the name of protection. And no one's really sure what that means. Like, it's kind of hardto not look at this and draw some parallels with the 1930s when a series of economiccrises led countries.

To put up trade barriersin the name of protection, which then led to evergreater economic strife, leading to unrest andeventually culminating in the Second World War.(deflated music) But don't read too far into that. I'm not trying to likedo one of those things where I'm like, “Every hundred years, history repeats itself.” That's not what I think is happening here.

But there's some similarities that we should probablyjust keep an eye on. A suite of crises thatmake us turn inward, that surge populism andeconomic nationalism and the rise of tensionsbetween great powers. (bright music) Hey, before you go, I needto tell you one last thing, which is that we madeprobably our last batch of the poster that I designed last year.

It's a poster called “All Maps Are Wrong,” and I'm very proud of it. It shows all the ways thatyou can take our Earth and project it onto a 2D plane, which always comes with some distortion. Anyway, it's kind of anerdy map-lover thing, and if you're into that, youshould go over and check it out before they're all gone. This is probably gonna be our last batch,.

So get 'em while they last, and the link's in the description.

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