Axis of Innovation: A New School of Geopolitical Economics for the Digital Age

What a difference a few decades make. Trade ministers from the United States and European Union recently felt compelled to sit down for special high-level ministerial forum in hopes of strengthening their relationship after years of transatlantic tensions on all manner of digital-age economic and trade matters—from digital service taxes to cross-border data flows—which together reflect fundamental differences of geopolitical strategy for the digital economy.

As Rob Atkinson writes in Global Trade Magazine, this never would have been necessary in the Cold War, when there was a clear, Manichean struggle between the democratic, market-based West and the authoritarian-communist East. It would have been inconceivable in those days to have such differences “across the pond.” There was strong bipartisan support in the United States—and parallel support in Europe—for a cohesive approach to the geopolitical economy that aimed to attract allies and isolate the Soviet Union and China by supporting Western business interests and spreading democracy around the world.

But now, as the Cold War fades into history and as the global economy is increasingly driven by digital and information technologies instead of heavy industry, that consensus view of the geopolitical economy has fractured. The old “free markets and free people” camp has maintained a foothold in the United States, and authoritarian statism is still deeply rooted in the parts of the East, but alongside them there are now other competing visions—including social democratic regulation in Europe and a rising form of digital protectionism in countries such as India, Indonesia, and Vietnam.

If the United States is to effectively advance its interests, which now hinge on spurring faster and deeper digital innovation and transformation, then U.S. policymakers need to recognize this new formation, while embracing a new framework for the geopolitical economy that is better suited to the times: national developmentalism. The overriding priority should be advancing domestic technology competitiveness instead of sacrificing U.S. economic interests on the altar of other foreign policy goals as America often did in the Cold War. Failure to execute this strategic pivot will produce a technologically weaker U.S. economy...

Read the rest in Global Trade Magazine.