Towards the end of 2024, Ed gave a talk at UC Berkeley’s Institute of Europe Studies & Department of Anglo-American Studies.

“Now What? Three Dilemmas for the West in the Age of Trump.”

You can read the transcript below.

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Thank you.

Today, I want to tell you guys that we messed up. 

Messed up badly. 

By “we” I mean the west. And by “badly” I mean… badly. 

Folks, we are in trouble.

How did we mess up?

I think it’s this simple: we took St. Matthew seriously. 

I am referring of course to Matthew 7:12. Do unto others as you would have them do unto you. 

We have, broadly speaking, built a civilization on this idea. 

That’s effectively democracy. That’s effectively the rule of law. A lot of American and western life is about citizenship, law, contracts, counterparties and so on.

By the way, it’s a very nice rule. It’s the Golden Rule. But here’s the thing. It does not apply to international affairs. 

In imagining that it could, after the Second World War, we built, to use fancy words, an “unsustainable equilibrium”. We created a world in which we expected there to be cooperation. 

This is the essence of it: after 1945, we all know the story, the US had prosecuted and won the war in both Europe and Asia, defeated three Great Powers and stripped them of their empires: Germany, Japan and Great Britain. 

I say that last one tongue-in-cheek, but it’s true. All three were conquered. All three were de-imperialized. And all three were brought into the embrace of the United States.

After that, the Americans looked at what they had done and thought good — from this base, we will spread markets everywhere and democracy will follow in Eurasia. 

There are different ways of expressing this idea. Trade brings peace for example. Or, the idea that progress is universal. The Americans took Jefferson’s ideas of life, liberty and the pursuit of happiness and said to the world: “there you go, over to you, if you integrate with our commercial system eventually you’ll get the message and, guess what, then St. Matthew will apply in your countries too. 

Do unto others as you would have them do unto you. 

And yet, we have seen that assumption slowly fall apart. We thought maybe in the early 1990s when we “won” the so-called Cold War that St. Matthew was on top. I think we still kind of thought that in 2001, despite the attacks. We maybe thought, well, St. Matthew’s precept is still mainly working albeit we need to nudge the Middle East. I think by 2016, with Trump’s introduction of elective trade frictions, the assumption that everyone would play ball was gone. 

St. Matthew was wrong.

So, the trouble that we are in now is that we have set ourselves up for cooperation with non-cooperative players. And I think there are three big problems as a result. 

They are these: war, money and freedom. 

Let’s start with war — always a huge problem. 

The war dilemma is this. Do you think you have a good idea as to how world wars begin? Anybody? Just think about it. What are the generic starting conditions for a world war?

Maybe that’s an unfair question to dump on you. 

But let’s think about it and start with World War One. Beforehand, we had a globalized international economy, as moderated by the British Empire, and two massive armed camps facing each other. 

Commerce and deterrence. 

So, one thing we know is that if the world is making money and if there are nonetheless two armed camps, that can lead into a conflagration. That’s “The Guns of August.”  

OK, park that. 

We also have a second example of how world wars begin, which is World War Two. Beforehand, we had the exact opposite scenario to the starting conditions of the First World War. We had a fragmented international economy, with the French and Germans basically interested in autarky and the Americans isolated. 

Meanwhile, we had asymmetric deterrence. Meaning, the Allies had allowed the Germans to get somewhat ahead on armaments and military planning. 

So here’s the point: one model of how world wars start is pretty damn similar to today. In 1914, there was commerce and there were two armed camps. Today, there is commerce and there are two armed camps: the US, UK, EU, Japan and Israel, on the one hand, and Russia, China, Iran and North Korea, on the other. 

We built the post-war world, however, on the assumption that if you avoid the problems of the 1930s, you will avoid war. Bretton Woods — an integrated global economy — was a technology for peace. Alongside that, we built deterrence, in particular the ability to deploy and employ nuclear weapons. 

What we forgot was the example of the First World War. 

Now, I don’t want to ruin everyone’s day. But I don’t think we have a good idea of how world wars begin — or how to prevent them — because our two models basically cancel each other out. 

Globalization may simply have armed our adversaries. 

So, let that sit. We think we know more about avoiding world wars than we do.

Huge problem. 

The second dilemma I’d like to discuss is, for want of a better term, money. Specifically, the dollar. 

A Belgian economist writing in the 1960s, Triffin, understood that when a nation issues a currency, the size or supply of that currency has to be anchored to the size of the issuing economy. The ratio of money and goods should be more or less stable over time — it’s actually not, due inflation — but over-supplying money is problematic. 

So, the second way we’ve messed up bigly — to borrow a word — is that we the United States, structurally and for decades, has been supplying dollars not commensurate with the size of its own fundamentals, not for the size of the US economy, but for the size of the world economy. 

That means that, should the day ever come that dollar demand dries up, those dollars could repatriate and cause massive inflation at home. 

Not “Joe Biden inflation” — massive inflation. Currency debasement. 

So, the United States — in attempting to wrap its arms around the world and provide peace and prosperity — which we have done for a while — has created a ticking time bomb in its own financial system. In essence, there exists too much American money. 

By the way, this started in the 1970s when Nixon decided to create a fiat dollar. He assumed the world economy was growing and that there would be demand for dollars. 

But this decision bit us in the behind in 2008. The financial crisis of 2008 was a mini-version of what could happen when dollars held overseas flood the US system (in that case the property asset class). 

If it becomes apparent that the US will no longer be indulged in sovereign debt, there will be a market event. And there are already anecdotal signs of illiquidity in the market for treasuries. 

To recap. The first problem is that we don’t know how world wars begin. Unless anyone wants to challenge me on that. And the second problem is that the US dollar has a gun to its head — and it’s our gun and we’re holding it to our own head because we over-supplied the dollar. 

And the third problem — which I don’t know, I think may be the biggest problem — is freedom. 

That’s a weird thing to say right? That freedom is a problem…

But it’s almost a conundrum. That is to say, somehow, someway, our adversaries — the people who want us either impoverished or dead — have realized that they can hack into our information system manipulatively. 

Let me put that a different way. 

For those of us who are American citizens, we have the First Amendment. That’s why I’m able to be here and speak. And that’s why, later, you guys can challenge me and tell me I’m that I’m an idiot and that I’m wrong. 

Good.

But for whatever reason, Uncle Sam has been extending the First Amendment to Russian troll farms. 

We have been allowing information into our system on the principle that more information is good information. Maybe that’s an Enlightenment idea. I don’t know. Ask an historian of the Enlightenment. But what I do know is that we haven’t dealt with this problem. 

So, I mentioned an economist earlier. I’d now like to mention a philosopher — Karl Popper. 

Super interesting guy. Deep thinker. I’m not claiming to understand all of his stuff. But he was very clear about what he called “The Paradox of Tolerance.”

He says, and I think this was probably with reference to Weimar Germany, that if a democracy, a tolerant society, tolerates intolerant people, eventually those people have the tyranny of the minority on their side and they can destroy tolerance and democracy.  

Karl Popper’s idea was that you take these people, bash them over the head and throw them in jail. 

Um. We’re laughing, but that feels a bit “itchy” right? Because we don’t do that in response to free speech. But hey, Lincoln suspended habeas corpus in the US Civil War pretty much because he had figured this out for himself. 

Now it’s a bigger problem for us, today, because the one thing that’s really eating away at our society is the internet. It’s pretty good for recipes and pretty good for DIY videos but it’s also a poison. 

We in the west are very good at explosions. The Colin Powell doctrine and so on. We can blow things up. But we don’t really know how to deal with corrosion — which is this idea of crappy information going into our heads — or erosion — which is the slow result. The boiling frog that sits.

By the way, I have no idea what to do about any of this. The full extent of my intellect is identifying these problems. So if you thought I was going to save the world today — sorry. 

But we can bring this all together. 

Now knowing how world wars begin is massively undermining about everything we assumed about our security. Our security know how isn’t really working. I’ll give you one example. So far as I’m concerned, Putin allowed himself into Ukraine by waving the nuclear saber. So what does that do to Mutually Assured Destruction (M.A.D.)? 

I thought M.A.D. was a deterrence for all war, including conventional. No, he’s marched on into Ukraine because he has nukes.

So we don’t know how world war begin and we’re playing with disaster with China in the South China Sea too and doing so without a serviceable theory. 

We are flying by night.

Money is a huge problem too. Here’s an anecdote. I once witnessed a fascinating argument between a former US government guy and a former banker. The argument was about China.

The US government guy told the banker: “You don’t understand China. You need to take your business out.”

And the banker told him: “No, you don’t understand China. If I take my business out, who is going to pay the taxes that pay for the government?”

We have integrated ourselves into the Chinese economy, and they into ours, in a way we did not with Soviet Russia. We defeated Soviet Russia by exporting delegation into their economy. We cannot do that with China.

Finally, on liberty, I think Putin is happy to see us reading lies. That makes him giggle. But his favorite scenario would be if we censored the internet. 

If we turn around say you know what we’re done, he’d say I told you so — there’s no difference between democracy and autocracy. It is all a sham.

So, let me make a final remark. Then we can all talk because, by the way, everything I just said may be wrong. If it is, tell me.

But here’s my last idea. 

We started by saying that we took Matthew 7:12, thinking it is a beautiful rule which it is (and it should apply in this room) but then applied it to people who are adversarial. And this has caused problems. 

What I would propose is maybe a different rule. And I will borrow from the Bible again. It is Isaiah 1:18. Come and let us reason together. 

This I think is what we have to do now. 

The post-Cold War sugar rush is gone. The assumption that Manifest Destiny and the closing of the frontier in 1890 can be repeated on the global scale — in world history — is gone. 

What we must do instead is say to our friends and adversaries, lest the latter become our enemies, we really need to sit down and talk. 

We really need to talk.

Now that’s a job for diplomats. Not for me. 

But if we don’t do that, then the alternative is stark. We are going to have to dip into the Bible a third time and find a quote about smiting and violence because it’s pretty obvious we are almost at each other’s throats.

It’s not Matthew. It’s Isaiah or it’s war.

And so, let’s do exactly that, now together, and talk.

Thank you.