Ep 186: Walter Russell Mead on Trump, Strategy, and Mercantilism

Walter Russell Mead, Alexander Hamilton Professor of Strategy and Statecraft at the University of Florida's Hamilton Center and columnist for The Wall Street Journal

Aaron MacLean:

Hi, I'm Aaron MacLean. Thanks for joining the School of War. I am delighted to welcome to the show today, Walter Russell Meade, who is the Ravenel B. Curry III Distinguished Fellow in Strategy and Statesmanship at the Hudson Institute. He's also, and this is a new development and an exciting one, the Alexander Hamilton Professor of Strategy and Statecraft with the Hamilton Center for Classical and Civic Education at the University of Florida. And of course, he contributes to the global view column at the Wall Street Journal. Walter, welcome to School of War.

Walter Russell Mead:

Good to be here.

Aaron MacLean:

We are audio only, so I feel like I should inform listeners that you are showing already your Florida school pride with your Gators tie.

Walter Russell Mead:

It's a pretty important piece of apparel, especially during March Madness down there.

Aaron MacLean:

How are you looking there? How are you feeling?

Walter Russell Mead:

I'm really enjoying it. They do warn me that if you've got a swimming pool in Florida, you can expect gators in it, not like students, but Florida gators from the swamp checking out your pool in the spring. So look before you leap seems to be a very important idea here.

Aaron MacLean:

Well, in a way, students would also be alarming if you didn't invite them. If you just walk out in some students are in your pool, that's probably also-

Walter Russell Mead:

That would be a bad day. Yes.

Aaron MacLean:

So Walter, I regret, and it is my fault entirely that we have not had you on the show up till now because there's so many subjects that we cover that you're really well positioned to speak to in a really thoughtful way. My subject today though, you're perhaps one of a very small handful of people who could help me and help our listeners understand, and that's the subject of the role of economics in strategy and then in particular how Trump views the role of economics in strategy.

And I have this theory that I want to run by you, which is that a lot of observers of America during the second Trump administration underrate the significance of economics for Trump's thinking about the world, strange as that may seem after all these years. But that when you see the news, for example, apparently just yesterday, he apparently said to Zelensky on the phone that he wanted some sort of American ownership stake in Ukrainian energy facilities, the Ukrainian nuclear plants, or if you look at the idea of the Trump Riviera in Gaza, that the United States is going to have some sort of, the flippant way of talking about it is like some sort of Trump resort, a different way of talking about it would be some sort of East India company type commercial concern.

These are not the policy visions of an isolationist. They're also not exactly interventionism as we have come to understand it in recent American history. They're something else entirely. And I just want to put it to you that Trump is not an isolationist, that he has some sort of economic vision that's central to his grand strategy and that has something to do with a very old idea, which is mercantilism. And I wanted to solicit your reaction to that.

Walter Russell Mead:

Yeah, certainly just there is a clear way in which Trump is more catalystic in his thinking and that he thinks that trade surpluses are good and trade deficits are bad. And that's almost the definition of mercantilism though. Honestly, it's a little anachronistic since people didn't really talk about trade deficits and trade surpluses in the 18th century in the heyday of this. But he does clearly believe that a country that makes a lot of stuff and sells it to other people is in better shape than a country that just buys a lot of stuff from other people. More independent is creating more jobs and so on and so forth. I'm not sure that I would... Yes, it's more catalystic, but sometimes I think about physiocracy as almost a better analogy, another 18th century economic idea.

Aaron MacLean:

You're going to have to spell that one out for me.

Walter Russell Mead:

I'm looking at you on the camera here, and you were nodding so wisely. It was a perfect nod. I thought you were-

Aaron MacLean:

That's my instinct to pretend that I know what I'm talking about.

Walter Russell Mead:

Did you go to a liberal arts program sometime in your youth?

Aaron MacLean:

I got to remember-

Walter Russell Mead:

Did you go to a seminar we're nodding while the professor droned on about the reading?

Aaron MacLean:

Well, it's a form of code switching because then also feigned ignorance often works well in the podcasting format, but I actually in this case it is real ignorance,

Walter Russell Mead:

Right. Because it looked to me like, "Well, could you explain that for our reader? Our listener?"

Aaron MacLean:

Yes. For those listeners who foolishly don't know what physiocracy is. Yeah.

Walter Russell Mead:

Right. Well, this was an idea that a number French thinkers had in the 18th century where the only real value was produced by farmers who produced food and everyone else was parasitical to that. So manufacturers making silk gloves, they were eating food, but they weren't making food. And there's a sense in which the approach to manufacturing in this administration is a little bit that services aren't real economic activity. It's the people who make things. It's the manufacturer bashing metal is doing something more somehow than someone who is packaging something or designing something or in other way selling a service.

And so they want to step up our focus on manufacturing, making real things. And I think both of those in a way are as economic ideas a little bit simplistic. There obviously is some truth in both of them. If no one was growing food, we would all be in bad shape no matter how many beautiful silk gloves we were making. And also if we always ran a trade deficit from here to the end of time, we would at some point get into a lot of trouble. So there's some truth in both of those. It's hard. We look at the stock market response to Trump's early moves in foreign economic policy with tariffs and all. And we can see that not everybody buys the mercantilist theory of trade here.

Aaron MacLean:

There is one way in which what you've been saying for the last couple minutes seems to make a kind of sense, and it's when you think about national security concerns and the need for an industrial base that produces, as it were real things in the form of ships or in the form of munitions, et cetera. Where there is general consensus that we have fallen radically behind. But that's a much narrower version of the idea that is say, "Okay, well maybe we shouldn't have outsourced all the production of critical defense items to China." That's slightly overstates the reality, but unfortunately only slightly. Maybe we should have actually spent more and done things that were viewed in pure economic terms as a little irrational to make sure that we had an industrial base that could support the kind of war-making capacity that we need to stay safe. I don't think anyone, we're not going to meet with much disagreement on that front right now. But what you described in my suspicion, what Trump actually believes is much, much broader than that.

Walter Russell Mead:

Yeah, because for Trump, this was his approach to Japan back in the 1970s and 80s was where there really wasn't a national security dimension to our trade deficits with Japan at that time. But Trump was very exercised about them as were many Americans. But I think there's also, there's something a little bit more going on here and in some ways more interesting because if we think about the difference between the first Trump term and what we're looking at now, what we see is the big difference is Silicon Valley. That in the first term, yes, there was Peter Thiel and a few other voices that were in support of Trump, but they were seen as weirdos and the rest of the tech world was trying to disown them and whatever. But this time what we see is that some of the core figures, whether you think of Mark Zuckerberg or obviously Bezos now, Trump, Elon Musk, the tech universe, the techno verse has embraced the MAGA verse.

Aaron MacLean:

Well, how does that fit into the seeming embrace by the President and the administration to restore manufacturing, is at the center of a lot of this? I guess Musk is an unusual case because he does make things. He makes cars and rockets and what have you, but a lot of these other companies or figures that you're mentioning or alluding to, like these tech companies, they don't make things, for the most part, they're making software to the extent that they're making things and they are providing services at a massive scale. So help me understand how those two things go together?

Walter Russell Mead:

Well, suppose you're one of the tech companies, it's more pure IT play. You don't import very many manufactured goods, a few chips here and there or a lot of chips, and you're very concerned about security of supply. So definitely you're all about not getting a bunch of Huawei chips in your proprietary systems, but you don't necessarily really care if there's a bunch of tariffs on goods that your business model isn't involved with. In fact, that's a tax that other people are paying. It's almost a subsidy to you to the extent that the federal tax burden went from excise taxes on what you produce or income taxes that you pay, went to tariffs on things that aren't key to your business model. That's lovely. But you would also say if you're a tech company, do you really care that much about low-skill immigration?

Honestly, you don't. Suppose you get a MAGA president like Donald Trump and he says, "I'm going to close the border. No low-skill immigration." If you operate a chain of fast food franchises or a apartment building company or any other kinds of companies that rely on constant stream of low-wage labor, this is going to make you very unhappy. But Palantir is not hiring a lot of low-wage immigrants, and if because the border is closed, the landscaping companies have to charge more for labor, and so the landscaping bill at your campus is now 30% higher.

This is not a real problem for you. It's a small incidental expense. So these companies actually do not care about some of the ways in which MAGA populism is seen by other Republicans and conventional economic thinkers as some kind of anti-business populism. They don't see it that way at all. Same thing by the way, on labor unions. I don't think that what keeps Andy Karp up at night is the fear that the employees at Palantir are going to form a labor union and adopt all kinds of union work rules and drive up his labor costs. That's not his issue. And so if you want to let populism have free rein, why wouldn't you go ahead and even be in favor of some of these things?

Aaron MacLean:

Well, the picture you're painting there then I was about to say is more one of tolerating things that don't affect you rather than advocating for things that directly benefit you.

Walter Russell Mead:

Yes. But that's again, if you think about politics and coalitions, how do you get a coalition between Jacksonian populism and the corporate world? If you think about it, that's been a continual problem for Hamiltonians in American history because Hamiltonians are not a mass constituency. That's been a problem since the Federalist Party. Where are the soldiers that are going to fight for your party? And that was a problem for the Whig party. The Republican Party saw that for a very long time. Arguably what you could be seeing here is not so much Trump as a backward looking figure looking to mercantilism and 18th century ideologies, but a 21st century figure who's thinking about a different balance between free market theory and American politics and corporate America's to-do list.

Aaron MacLean:

That's really interesting. At the risk of defying that possibility that you just outlined, I did want to ask you a backward looking question though, just to help listeners orient a bit better on the conversation that we're having, which is to say we live here in 2025. In a world where, or at least in America I should specify, where all of a sudden going to a high tariff system where we are emphasizing trade surpluses, manufacturing at home, et cetera revolutionary.

Of course, you go back far enough, it wouldn't have seemed revolutionary at all. And yet the world and the Anglo-American world did evolve from a more mercantilist place to a place where something like free trade was more the dominating principle. Would you mind talking for a moment about why that evolution occurred? Maybe start with how did things used to work? You've written, people probably know your most recent book is Ark of the Covenant about the US-Israel relationship, and then you're famous for Special Providence. You wrote a brilliant book called God and Gold about the Anglo-American strategic tradition in which economics plays a central role. How did things used to work and why did the Anglo-American tradition move away from them?

Walter Russell Mead:

Right. Well, a lot of it had to do with English politics in the 19th century, a subject that I know that all of our listeners are endlessly fascinated by. But traditionally in Britain, you had a landed interest of gentry, farmers, Earls and Dukes and whatnot who owned large countryside estates and didn't really want to pay a lot of tax on their income from land is easy to tax because everybody can see how much of it you have and it's easy to more or less measure the income of a landed farmer. And then you had manufacturers and merchants in the cities and who was going to pay how much tax?

One of the ways that the landlords had, the landed interest had shaped things in their favor was to say, "Okay, we're going to have very high taxes on imports of grain because this will protect the security of our grain supply." Manufacturers hated that. Among other things, since they had to pay workers enough to buy the food that they needed to live on, the higher the tax for grain was the more expensive bread was, so the more manufacturers were having to pay wages for it. This made free trade theory very popular among manufacturers and also among workers. You tell somebody who's working in a factory or just trying to feed a family that the reason that the loaf of bread that you eat costs so much is because of tariffs that are meant to benefit the wealthy aristocrats living in splendor on the land. This does not make you happy.

You had a lot of political agitation coming into repeal of the corn laws. Corn is what in England, they often call it any grain of wheat of any kind. So this can cause a certain amount of confusion between Americans and Brits at various moments. But okay, repeal of the corn laws, big event in English, political history, and then you shift over into free trade with the idea that goes back to Adam Smith was advocating for this in 1776 saying that specialization of labor raises general productivity. That if you can buy things more cheaply from somewhere else, that raises people's living standard. Economists developed theories of comparative advantage that if Ireland can grow potatoes better than France and France can make silk gloves better than Ireland, they're both better off if Ireland grows a lot of potatoes and France makes a lot of silk gloves, however you cook it.

So you go from that to also then English manufacturers really want to be able to sell a lot of stuff internationally because in the 19th century, they had a technological lead, they had marketing leads, they really knew what they were doing. So opening markets in other countries to British commerce was a very big deal. And the Brits pushed for free trade policies, not only for themselves, but for the whole world. And that made Britain a lot more prosperous, accelerated the rise of its manufacturing. But other countries, including the United States, caught onto something here, which is we'll have tariffs against British goods coming into our markets. This will encourage the development of our domestic manufacturers who'll get big in our markets. Like in the US we had a large national market, bigger than the British national market. And so then we will sell. Once our companies get really good and established, they'll be able to sell globally too.

So free trade works really well at the zenith of British power, but as other countries catch up with Britain technologically and also aren't playing fair or having high tariffs themselves while enjoying the British free trade system, this ultimately by around 1900, you start getting a lot more people in Britain beginning to think, "Wait a minute, is this really working?" And they start looking for things, they call it imperial preference. The idea we'll give preference to other countries within the British Empire. So Canada can trade freely with Britain, and Britain can trade freely with Canada, but the United States, well, maybe we should have some reciprocity going here. It's a big argument that the issue of trade after having been a very consensus thing in Britain at the zenith of the free trade era starts becoming more controversial.

Aaron MacLean:

Well, it sounds a little bit like here in the United States. Over time, over the course of the 20th century, moving to a more and more liberalized free trade system, which worked well at a kind of zenith until China was admitted into the WTO. And again, if you set aside Trump's Maximalist critique of the system, you'd find a lot more consensus. Again, approaching I think near universal consensus, certainly on the right, and probably to an extent on the left as well, it is the China shock that is the most significant factor here. It is the factor which is most important in the diminishment of American manufacturing. And if there's any place where there is a case for raising barriers on trade and economic exchange, it's with respect to China specifically, and then this administration and Trump seems to then take the idea much further and apply it to all sorts of other countries that weren't really in the conversation before Trump became a major political force.

Walter Russell Mead:

Well, I think you have two eras of trade policy layered on each other. The first one is after 1945, as the US is looking at how do you get the world economy back from World War II? And then as the Cold War takes shape, how do you solidify Western Europe and other countries in the free world for the fight against the Soviet Union, the Cold War? Allowing other countries to discriminate against American goods to some degree while America accepted their exports was seen as a worthwhile trade-off for two reasons. One is you had to get these economies going again.

They basically needed dollars because that was the only currency with which could really buy a lot of stuff back then. So they needed to be able to run trade surpluses with the US or at least cut their trade deficits. So we allowed our European allies, Japan, Taiwan, others, to go right ahead and develop a discriminatory tariff system. And arguably in 1990 when the Cold War ends and these countries by and large, the Germanys, the Japans don't really need a helping hand from the United States. That would've been a really good time to rethink this stuff.

But meanwhile, at the same time, also you have not just China, but you have India, you have Singapore, Malaysia, Indonesia, a lot of countries who have adopted this development model of you become a cheap source of goods, which you then trade into a richer market. And that's how you bootstrapped yourself up. By the way, I think the place where this was really invented was in the American South after the Civil War where the south didn't have any capital and so on. And so all it had to offer was lower wages, less regulation. And so it tried to entice northern capital in there and then it could sell into the common market of the unified American national market behind a tariff wall in many cases. And so the south pioneered the strategy which other people have borrowed globally.

Aaron MacLean:

You wrote a great couple of pieces in Tablet about this.

Walter Russell Mead:

I did, if I say so myself. But in 1990, you start getting the other thing, which is the pressure for China into the World Trade Organization, which is the new organization that was going to really regularize trade. And here this was a disaster. And Trump is absolutely right when he talks about it as a disaster. And there were several things wrong with it. China, we did not insist on either rules that were tough enough to prevent systemic cheating by China or an enforcement mechanism that could enforce the rules that were there, very slow, very weak. Like all international organizations, it actually doesn't work very well because none of the parties to the agreement really want an organization that's strong enough that it can effectively make them do things they don't want to do. So it's a worthless, it's a weak cop who's also enforcing a bad set of rules.

But what I think makes a lot of ordinary Americans mad is that the American corporate sector, rather than saying, "Wait a minute, this is atrocious. China's systemic cheating is going to be terrible," said, "Great, I'm going to build a factory in China and I'll take advantage of China's ability to cheat. I'll get subsidies. The Chinese, in order to get me to invest there are going to give me subsidies, tax holidays. They're going to kill any of my workers that don't like the working conditions that I have. They're going to push people off the land so that I can have a cheap, simple land purchase agreement, all of this stuff." And so corporate America bought into China's systemic cheating. That has set off a lot of the populist anger that Trump taps into. And it's legitimate. It's legitimate. This has nothing to do with abstract theories of free trade. Now under pure free trade, if China weren't cheating, it would benefit from trading with the United States, but it would not have become an economic and geopolitical superpower and peer rival in 30 years.

But it isn't just America that China cheated, obviously the Europeans and others, but we think about the failure say of the Arab world to industrialize in Egypt, a country which has a lot of poor people in it, who would be very, very happy to have jobs making goods for the European market, which is just across the Mediterranean from them. And Europe would be a lot better off if Egypt, if some of the factory development that had gone on in China had gone on in Egypt. But China was good enough at what it did and ruthless enough at the way it did it that it made it much more difficult for countries like Egypt to get onto that manufacturing path.

Aaron MacLean:

You speak of this popular anger and justified anger with regard to China. One thing that struck me some years ago was even though in general foreign policy is not a common matter of conversation or concern for the average voter and the numbers bear that out, whatever poll you look at, it was always striking to me that the exception to this, and I saw polls that indicated this was the case in perhaps surprising places, so China was the exception. People did think about China and they knew they didn't like it, and they knew that if the politician that was representing them was tough on China, they liked that politician a little bit better.

And the same people who felt that way would not be surprising to discover they're also the people who feel like elites are screwing them. And as you lay it out, they were. There's some truth to the matter that there was a collusion between... Collusion makes it sound perhaps more systematic and centrally controlled than in reality it was. But there was a natural following of incentives such that corporate America was in fact cooperating with a Chinese mercantilism, which by the way was being centrally manipulated by Chinese authorities to strategic ends, which are now really biting.

Walter Russell Mead:

Exactly.

Aaron MacLean:

In ways that massively disadvantaged Americans, but also now America.

Walter Russell Mead:

And again, it is not a kind of Adam Smith case of using your comparative advantages or Ricardian, I suppose I should say that yes, China does have certain advantages, and in any free trading system, China would be a place where a lot of people would want to import and export from. But what China does is it systematically directs state credit to certain things. It favors industries at all levels of government. As we say, it suppresses any kind of labor organization. It uses political prisoners or groups like the Uighurs as low-wage laborers for things like this so that it's not one firm in America, factory in America, innocently competing with a factory in China. It's a country in China that is trying to destroy the factory in America for strategic ends. And for people, for the average American voter to be hearing all these years from the kind of business establishment and the intellectual establishment, some degree in a bipartisan way that, "Oh, well, this is just free trade. This is the invisible hand of the market." It wasn't true. It wasn't true.

Aaron MacLean:

So taking a tougher line on China, tariffs on China one way or the other, trying to unscrew this situation and restore it to some kind of sanity that on the right is an 80/20, 90/10 issue maybe with pretty broad popular appeal, I would say across a lot of Americans. One of the interesting things about China is it is a bipartisan issue to this day. And the labor unions and the human rights activists who tend to be more vocal on the left than on the right have always had an anti-China streak, even if maybe not quite always extending their views to the security questions. That all said, this administration's going much broader than that. It's not all about China, it's about Canada, it's about Japan, it's about the Europeans, it's about countries that actually we need if we're going to stand up to the Chinese desire to run the show.

And I want to ask you about how you think this is all going to work out. I want to ask you related question, what this is going to mean for the dollar, which is obviously central, and maybe you would speak to this. The role of the American dollar in international economics is central to American power. But if we want to jack up tariffs and we want a weaker dollar to help exports, how's that going to play out? The markets are, we'll just say they're nervous though maybe that shouldn't... The President doesn't seem to think that that is going to hold him back in the way that maybe it did during the first term. Walter, help us understand the stakes here and where things might go.

Walter Russell Mead:

All right, well, you just asked a very complicated set of questions.

Aaron MacLean:

I did, I did. I'm sorry. You're the man for that.

Walter Russell Mead:

We live in a complicated world, so I would expect a question wouldn't be a simple question. But look to distinguish several things, I talked about that post-World War II set of tariff arrangements. When Trump is talking to Germany and England and Japan about tariffs and South Korea, he's really saying, "We don't need that 1948 deal anymore where in order to help you guys recover from World War II we allowed non-reciprocal tariffs." So that's an agenda item that he has that it strikes me as perfectly legitimate, considered abstractly. Why should the EU charge higher tariffs on American cars than America charges on European cars? Now, you can argue that if we respond to Europe as, let's just say hypothetically Europe has a 10% tariff on American cars and we have a 1% tariff on EU cars. I have no idea what the real numbers are, but here we go. We're both liberal arts majors here doing [inaudible 00:34:45] in a wicked world.

Aaron MacLean:

You do a better job of faking it than me.

Walter Russell Mead:

All right, so if you raise our tariff on cars to 9%, to 10%, you're basically just making it harder for Americans to buy that Mercedes-Benz they want. They're not getting anything from it. So you could make the argument that just following their bad behavior makes everyone worse off. And so why should you do it? And that is the pure free trade argument against Trump's tariffs on these well-established allies. Trump would answer, "The only way to get them to reduce their tariffs is for us to give them a taste of their own medicine. And then when they see that, then they can agree."

And he repeatedly says, "Reciprocity is a beautiful word." And I think if the EU were to seriously come to the US and say, "Let's do it, let's be serious about reciprocity and do it." I think you might see a Trump administration coming with a very free trade approach to the European Union or Canada. Now actually with Canada and Mexico, there's another wrinkle, which is that some of that is really about Canada, I'm sorry, about China in that because we have this North American free trade area, China would love to get its nose under that tent.

And so have a factory in Mexico that basically assembles a lot of parts that were made in China and then pushes them over the border and it gets free admittance to the US and it's just the higher... The more we try to change our trade relationship with China, the more China is going to look for loopholes like this. So I think to some degree the Trump approach to Canada and Mexico is, "All right, if we're going to have a North American free trade area, then it needs tougher rules about Chinese products." Which again, I think is legitimate. Now, if I were President of Mexico or the Prime Minister of Canada, it might say, "Mr. Trump, Mr. President, you were president just one short term ago when we revised NAFTA and you told us we had a deal and it was a beautiful deal. And that's the deal you're challenging now. So I sign another deal with you. What guarantee do I have that 18 months from now, you're not going to come at me again?"

So I think you can argue legitimately that even if the underlying goals there are smart, the tactics have not been stupendous. Okay. So that's the trade dimension of the stuff with our rich allies. Now with our poor allies, it's more of an issue because Indonesia and Malaysia and Thailand and some of these other countries are going to say, "Look, okay, we're not as poor as Japan in 1948. We're not starving. But for our government to be stable, our economies need to grow and our economies need to be able to grow, but we're a poor country and we need to be able to export to rich countries in order to grow the way so many other countries have done. And you want us to align with you against China. Okay, so what's in it here? What's in it for us? And how do I tell my voters that working with the United States helps them?"

So there's a different case for tariffs and poor countries and arguably there's a stronger case for allowing some carefully monitored and controlled non-reciprocal tariff arrangements with key allies, particularly close to China or whatever. There's that. But then at the same time that we are having these trade fights, getting back to our rich allies, if Trump is saying, "I want Canada to be the 51st state," and people go, "Oh, ha, ha, ha ha, you're just kidding." He says, "No, no, I really mean it. I want them to be the 51st state." "You couldn't possibly mean that." "Yes, I mean that." And you stir the trade stuff into that mix. You have something rather potent. And in the same way, if Trump is flipping, putting into question, where does NATO stand in the hierarchy of foreign policy?

And so I'm going to fight the Europeans not just about tariffs, but also about defense and how strong am I going to be for NATO, blah, blah, blah, blah, blah. You have instead of a specific economic fight over a set of issues, you get into a general fog of anger and polarization. I guess the President thinks in some ways this maximizes his leverage. We should not forget that the way Trump has managed and Biden followed him in this to get trade law interpreted.

President of the United States can basically tariff anything he wants to any level he wants. Now no president is going to want to give that power up. Among other things, it's like, "I can now say to almost every CEO in America what their stock price is going to be because I can tariff your business into a crisis or I can give you some kind of relief and make you rich. Gosh, I need some help with my reelection campaign or I need with my presidential library or whatever." So this is huge power. And again, to any congressperson, "I can devastate the industries in your district or I can make the industries in your district really prosperous." So that's another dimension to this whole tariff thing, which has nothing to do with free market theory, alliance policy or anything other than domestic politics.

Aaron MacLean:

It's insane that the Congress effectively has given that power away, but it has. That ship has sailed like a lot of other ships. There is an interesting potential future here, by the way. This is a bit more about domestic American politics than grand strategy though. We're right now sitting here in March of 2025, everyone is talking about Trump as an expansionist force for executive power. In some ways that's obviously true. In other ways it's a continuation of trends that President Biden was happy to embrace himself. But there is a future here where if things go wrong, there's a recession or whatever, the Republicans lose the Congress, maybe even the Senate. That seems unlikely given the math. But you could see one outcome of this. One outcome of this administration's policies is actually a restriction of presidential power because if you have the Congress in the hands of the other party and so absolutely galvanized by what they see as executive overreach. I don't know, I could see it. I don't think it's likely because the trend lines seem to always run the other direction, but it seems possible at least.

Walter Russell Mead:

Well, it's interesting. If Democrats were smarter and more serious than they are, the time to have done something would've been during the lame duck session of Congress after the presidential election. You might have been able to get 60 senators to sign on to a sort of ending certain national emergencies, looking very seriously at the basis of these massive executive orders and just taking away the legal foundation of these things. But for all the talk about how this is an existential fight to save democracy and Trump is a future autocrat, all of this stuff, as far as I can tell, there really wasn't any effort. Republicans wouldn't have given the Democrats everything they wanted. But there are a number of Republicans in the Senate, the name Rand Paul comes to mind and others who in principle would like to see limits on the executive.

I think you could probably get 60 votes if you were very intelligent and very thoughtful. The fact that we didn't, that this just tells you in a sense how far the US Congress is from being a body that can reasonably exercise the powers that it has under the US Constitution. And because we actually do need a government and we're going to have a government, there's a law of nature stronger than any constitution or anything. A society will have a government and that government will do the things that society that must be done. And because Congress is just unable and or unwilling to play the role the founders assigned to it, basically the executive and the judiciary are carving out their own slices. And while it's far less than ideal, we do in fact need government.

Aaron MacLean:

I want to be respectful of your time, but one last question before I let you go. I want to come back to you on this issue of the dollar. I want to ask you to explain why the dollar matters to an audience that is mostly interested in military and security affairs, but how that question underlies so much else of that the United States is capable of doing. And then just speculate for a few seconds, if you would, on what everything we've been talking about in terms of Trump administration policies might mean for the role of the US dollar in international economics. Presumably if you want to buy less stuff from the other guys and sell more of our stuff to them, that means you want a weaker dollar. Help us understand how this might play out here in the years to come.

Walter Russell Mead:

Well, I guess I am not as much of a dollar fetishist as some people are who follow these issues. A lot of our enemies think that the core of American strength is the reserve, the fact that the dollar is the international reserve currency, and there's certainly some things that we get benefits from. It's easier to sanction people who've annoyed you. I would feel that was a more important power if I thought that sanctions accomplished very much. In general, I think personally that sanctions are a way of when you don't want to do something, you don't really want to do something serious about something, but you don't want to admit either to yourself or to anybody else that you're not going to do anything serious, sanctions are the great way to go.

Aaron MacLean:

It's the foreign policy version of sending something to committee for study, you would say?

Walter Russell Mead:

It's a blue-ribbon commission. I sanction this, I sanction that. It's especially important for Congress because in American society people get mad and they want their congressmen to do something. When it comes to foreign policy, there are not many things a congressperson can do. Congress's ability to legislate foreign policy is small. Sanctions are something you could do. So I think that is fundamentally why we have as many sanctions as we do. And there I would say that by and large international reserve currency of the status of the dollar has exposed us to dangerous temptations, which we've signally failed to resist and led to a kind of undisciplined and careless use of sanctions, which cumulatively undermine confidence in American competence and leadership and which also create a delusional atmosphere in America, in American public opinion about what our country is and isn't doing in the world. So there's that.

But also there is a great thing about having an international reserve currency, which is that we issue dollars and other people keep them. There's a great story when Calvin Coolidge had retired from being president, he was in his cottage in Vermont, his place in Vermont, his house, and a local carpenter came by because he needed his front steps fixed, carpenter fixed him. And Coolidge says, "Well, how much does that cost?" And the carpenter said, "That's going to be $5, Mr. President." And so Coolidge picks out $5 and the carpenter says, "Excuse me. I got a request. Would you mind autographing that for me? Just because I don't plan to spend it. I just want to show my kid that I did work for the President of the United States. We're got to keep it as a memento." And Coolidge said, "Really?" He said, "You just want to keep it? You don't want to spend it?" Carpenter said, "Yes, Sir, that's exactly it." And Coolidge said, "Well," he says, "in that case, would you take a check?"

And this is what to some degree, having a reserve currency lets you do is write a lot of checks that won't be cashed. And so when the US has a budget deficit, we just issue paper and it's wonderful paper. We issue certificates and you can know that they're worth something because they say, "If you take this to the Treasury of the United States and present it to the Treasury Department, we will replace it with another certificate of equal value." And that's a good business. And it does, again, though, it tempts our politicians into amazing irresponsibility because if you can delude yourself into the fantasy that borrowing doesn't hurt, you lose any sense of prioritization and discipline about spending. And it is pretty clear that that's one of the serious governance problems that we as a society have. We don't prioritize, we don't strategize. We just spend, spend, spend. We're getting ourselves in a lot of trouble.

So again for these reasons and some others, I don't actually think that the reserve currency status of the dollar is the citadel of American strength and that if we lose that everything is gone. After all the dollar was not a reserve currency when we became a global superpower. It was no obstacle to our becoming a superpower to any degree. That role of the dollar was a consequence of our power much more than a cause of it. Now, I want our enemies to continue to believe that attacking the reserve status of the dollar is the most important way they could defeat the United States. I want them up all night scheming with these weaving complex plots, et cetera. And if they want to add to that and the international Jews who control finance and let them go completely crazy on insane theories of how the world works, much better for them to do that than to be thinking about useful things.

Now, all of that said, in general, you're better off the more your currency is worth, the better off you are. And that's not just because we can all have much nicer travel overseas. It's an expression of the world's confidence in your economy fundamentally. It's their desire for the goods that you produce. People want to hold dollars because they want to buy goods in the United States but also because they want to buy stocks in American company. American stock market has been a terrific place to have your money. Do you want it to become a bad place for foreigners to put money? No, I think not. You couldn't do that without reducing the wealth of Americans. So I'm in the odd position of not agreeing with the Trump administration's belief that it should be a concern of the United States to reduce the value of the dollar, but also not really in agreement with people who think that defending the reserve currency status of the dollar should be the guide to our national strategy in any sense.

Aaron MacLean:

Walter, this has been a really fascinating conversation. Obviously we could keep going for a long time like this. Maybe you'll come back sometime and talk about your own view. We've talked a lot about what others think is the wise thing to do in economic and foreign policy and critiqued it one way or the other. We should have you back to talk about what you think the wise thing to do is, and your idea of patriotic markets.

Walter Russell Mead:

Oh, come on. Critiquing other people is so much more fun and easier than putting forward constructive solutions of your own.

Aaron MacLean:

And now that you are officially the Hamilton Professor at the Hamilton Center-

Walter Russell Mead:

For Strategy and Statecraft, man.

Aaron MacLean:

But it suggests that you have things to profess and I guess it's a little on the nose, I suppose we might now finally conclude from a Hamiltonian perspective.

Walter Russell Mead:

There we go. Yeah. As the Alexander Hamilton professor at the Alexander Hamilton Center, I do find myself thinking about what would Alex say?

Aaron MacLean:

Walter Russell Mead, thank you so much for your time today. It was great.

Walter Russell Mead:

Good seeing you.

Aaron MacLean:

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