Advertisement

Supported by

The Ezra Klein Show

By Ezra Klein

Produced by Jack McCordick

This is an edited transcript of “The Ezra Klein Show.” You can listen to the episode wherever you get your podcasts.

At the World Economic Forum in Davos, Switzerland, last week, Mark Carney, the prime minister of Canada, gave a speech that sent shock waves through the international community.

Archival clip of Mark Carney: Let me be direct: We are in the midst of a rupture, not a transition.

Archival clip of Carney: Canadians know that our old, comfortable assumptions that our geography and alliance memberships automatically conferred prosperity and security — that assumption is no longer valid.

Archival clip of Carney: We know the old order is not coming back. We shouldn’t mourn it. Nostalgia is not a strategy. But we believe that from the fracture, we can build something bigger, better, stronger, more just.

To understand why this speech has been such an international-relations earthquake, I think you need to understand something about him: Carney is as establishment as you get. He’s a technocrat’s technocrat — a former governor of the Bank of Canada, a former governor of the Bank of England.

For Carney, this kind of figure, to come out at Davos in front of all those assembled government elites and business elites — at this moment when President Trump is threatening tariffs on Europe in order to take over Greenland — for him to come out and say that we are living in a rupture and that the old order, in which you could have values-based relationships with the United States of America, is over, for Carney, a leader of Canada, America’s geographically and in many ways spiritually closest ally, to say this is a breaking point. I think that’s a moment that is going to be remembered for a long time.

Beneath Carney’s analysis of what is happening is an idea I’ve been following for some time: weaponized interdependence. This idea comes from the international-relations theorists and professors Henry Farrell and Abraham Newman in their book “Underground Empire: How America Weaponized the World Economy.” The basic concept is that over time, in this globalized, woven-together world, there are a lot of ways in which being on American technologies and in American financial markets gave the United States leverage. This system was fine for our allies and for the world, as long as we didn’t use that leverage too much. But now we’ve begun to make that a way we can harm them, a way we can extort them, a way we can control them, and that has really changed the nature of the bargain.

Henry Farrell is an international-relations professor at Johns Hopkins University. In addition to being an author of “Underground Empire,” he is the author of an excellent Substack, Programmable Mutter. I wanted to have him on the show to talk me through Carney’s speech, whether the old order is ending and what that might mean for the one to come.

Note: This episode touches on the clashes over immigration enforcement in Minneapolis and the killing of Renee Good, but it was recorded on Friday, before the killing of Alex Pretti.

Ezra Klein: Henry Farrell, welcome to the show.

Henry Farrell: I’m delighted to be here.

I want to begin with this clip of Mark Carney, the prime minister of Canada, speaking at Davos.

Archival clip of Carney: This bargain no longer works. Let me be direct: We are in the midst of a rupture, not a transition. Over the past two decades, a series of crises in finance, health, energy and geopolitics have laid bare the risks of extreme global integration.

But more recently, great powers have begun using economic integration as weapons, tariffs as leverage, financial infrastructure as coercion, supply chains as vulnerabilities to be exploited. You cannot live within the lie of mutual benefit through integration when integration becomes the source of your subordination.

“When integration becomes the source of your subordination” — what is he saying there?

In a weird way, it feels like he is channeling things that Abe Newman — my co-author on “Underground Empire” — and I started saying six or seven years ago. I’m not claiming that we are the people who discovered it, but this was not the consensus when we were writing.

It has become a new kind of consensus now, which is: If we think about globalization back in the 1990s and the 2000s, it seemed like it was an incredible opportunity to build a new kind of economic world in which markets dominated, rather than geopolitics.

So you have all of these ideas floating around that we’re past the world of the Cold War, we’re past the world of the Berlin Wall and we’re now in a new world where it is going to be possible to rebuild politics around market competition.

You don’t have to worry about your neighbors invading you. You don’t have to worry about all of these political risks. Instead, you just focus on being the most competitive market that you absolutely can be.

This leads to enormous amounts of integration of the sorts that Carney is talking about. We see supply chains becoming global. We see these financial systems, which are focused on the United States, becoming a means through which people can send money back and forth without really worrying or thinking about the politics behind it. We see this entire plumbing for this new global economy becoming established.

All of this seems great and awesome and functional, but we’re in a world now where, as Carney says, the plumbing has become political. All of these means that we use to integrate the world, all of these financial systems, all of these trade and production systems are suddenly being turned against countries.

The United States, which actually has been doing this in a much quieter and perhaps less threatening way to many countries, at least for decades, is, in fact, the country that is pushing this the hardest.

Give me some examples of this. Give me an example before Trump of the United States doing this in a quieter way and then give me an example of what Carney is talking about now when he says that great powers are using economic integration as weapons — and he clearly means us.

This really began post-Sept. 11, 2001, when the United States looks at this attack that has happened and it tries to figure out the ways in which terrorists have been able to take advantage of this porous international system of economics, which allows them to send money back and forth.

They begin to start thinking about what kinds of tools they can use to stop it. I think it really begins to get going with a measure against a bank that is very closely associated with North Korea. The United States begins to target that bank. You see suddenly when that happens, a massive flight of money away from the bank. The bank nearly goes under.

When you say they target that bank, slow down a little bit. What do they do?

There’s this whole complicated system, and let me just explain — maybe the best place to start is with the U.S. dollar.

If you are an international bank, you need to have access to the U.S. dollar because the U.S. dollar is the lingua franca of the global economy. This is the currency that everybody exchanges in and out of. That means, in practice, that you have to have correspondent relations with a bank in the United States.

You effectively become subject indirectly or directly to U.S. regulation because if you don’t have these banking relations that would allow you to clear transactions through U.S. dollars, you effectively stop becoming an international bank.

This then means that you are in a world — as the United States discovers — where it is possible for the United States to effectively declare that a bank or another institution is a pariah, that nobody should have anything to do with it. And any bank that wants to maintain access to the U.S. dollar, which means most banks in the world, is going to respect that demand from the United States.

So, suddenly the United States is able to turn the entire global banking system into a means of power projection. It uses this first against terrorists, obviously, then against rogue states such as North Korea.

But we begin to see over the intervening years that we get more and more ambitious.

I think that the most important example of this came with respect to Iran. The Obama administration very carefully, very slowly ratchets up pressure, withdrawing the ability of Iranian banks to use the international system and also ratcheting up pressure against any other bank in any other country that wants to touch the Iranian system in any way, and Iran suddenly discovers that it cannot get paid for its oil anymore.

It is having to barter. It has to barter for, say, “We will send you X amount of oil, and in return we’ll get 500 tons of grain” or “We will get a crateload of zippers.” All of these crazy things that Iran has to do in order to try to get paid, and Iran wants to get out from under that.

This, I think, is a good example of how the United States is effectively able to use this power to cut an entire country out of the global financial system.

Iran does figure out ways around this over time. It does, especially under the Trump administration, begin to figure out alternative shadowy payment systems. There are real limits to this, but these techniques are perfected from administration to administration, and they’re handed on a little bit like a baton in a relay race.

This is not to say that this is the product of grand planning. At every moment, I think these are officials who are desperately improvising to try to do whatever the policy need of the moment demands. But over time, they create this entire ramshackle system for coercion, which turns out to be pretty extraordinary and to have pretty extraordinary powers.

One example of this that was striking to me was the Trump administration placed sanctions on some top judges and prosecutors of the International Criminal Court because of bringing suit against Benjamin Netanyahu. Tell me a bit about that moment and what happened.

Really, what’s happening here is, of course, the Trump administration sees the International Criminal Court and all of these other international organizations as being, in a sense, illegitimate.

This is not just about Trumpism itself. This has always been a tension between the United States and this global system. On the one hand, the United States does want to take advantage of it. There are many people in the United States who see global human rights as being a very, very important thing that we need to protect.

But the United States, like every other country, does not want itself to be constrained by the system when the system acts against it. The United States has never actually signed onto the International Criminal Court, and both Democrats and Republicans have been somewhat resistant to it.

When the Trump administration sees what is happening with Netanyahu, it begins to go after these International Criminal Court officials. These officials suddenly find they can’t use credit cards because credit cards all rely upon these payment systems. They can’t use Google.

You discover that there’s this entire incredibly boring-seeming infrastructure of institutions, of communication systems, of money that is really what underpins our ordinary life. It’s possible to live without access to these systems, as these judges and other officials who have been targeted have discovered, but it is a real pain.

What Carney is describing here, what he describes as “a rupture, not a transition,” is not just the use of these tools but the use of these tools for something. What, to you, is the rupture he’s describing?

I think it is worth going back to this whole idea of the liberal international order. Two academics — Deudney and Ikenberry — come up with this idea, and their argument is pretty straightforward: that the United States is incredibly powerful and that that power is actually a problem for other countries.

If you are another country that wants to deal with the United States, you worry that it is too powerful for you, you might make some concession, and then the United States decides it wants a little bit more and wants a little bit more, and you find yourself in a situation of complete vassalage, of complete dependence.

Their argument is that the way that the U.S. has worked over the decades after World War II is to create something that amounts to an international quasi-constitution — that is, a set of relationships through which it binds itself, through which it effectively makes it more difficult for itself to abuse its allies and other countries that are dependent upon it.

From this perspective, the more that the Trump administration takes that role, the more that the Trump administration decides to use that leverage, the less other countries want to trust it. This is why I think many people like Deudney and Ikenberry — people who felt that the liberal international order was a wonderful thing, why they are extremely despondent about the world — they see, from their perspective, the United States as effectively having thrown away this massive advantage.

Because if you are self-restrained in this way, you actually are able to encourage much richer, much deeper integration with other countries, and everybody ends up better off as a result.

You’ve called what we’re doing the “enshittification of American power.” Tell me about that idea.

OK, this is a term that we are taking very directly from Cory Doctorow, who is a science-fiction writer and general thinker who is also, I guess, a [expletive] stirrer.

He uses this to talk about the way in which the platform economy works. More or less, his argument is that typically platforms start out as being absolutely awesome. You have these wonderful uses that you can make of Google Search and whatever. It is beautiful. You have incredible access to information.

But over time, the platform has these incentives to get [expletive] and [expletive] and [expletive] for the user. It basically begins to see the ways in which the users are not the customers. The customers are, of course, the advertisers.

For example, if you’re using Google these days: You look up a restaurant. Google does not want you to go to that restaurant’s home page. It wants you to click on some affiliate link to DoorDash or somebody else so you order via Google rather than via the restaurant.

Our argument is that if you look at the ways in which United States power and United States hegemony works, it’s a similar system. We are seeing the increased [expletive] of all of these platforms that the United States provides that the world relies on.

The dollar clearing system, which we’ve already talked about — the way in which the U.S. is able to use the dollar in order to leverage its advantage against other countries — we can also think about weapons systems as being very similar. Once you buy, for example, a fifth-generation fighter aircraft, you are not just buying the aircraft. You’re buying into this extensive platform that you need to support the aircraft, to provide the information that allows you to figure out where to target things, all of these other bits and pieces.

And the United States can shut that off. So this is one of the big dilemmas that Canada faces. Canada is very, very deeply bought into these platforms. Canada is more deeply integrated into the United States military structure, I think, than any other ally.

Suddenly, it’s in a world where it has to make some extremely difficult choices. Does it try to withdraw from these military platforms? What kinds of consequences does that have? Once a platform becomes [expletive], you’re kind of like somebody trying to figure out: Do you leave Google, or do you stick with Google? Do you leave Facebook, or do you stick with Facebook?

None of the choices that you have are great.

I want to hold for a minute on the motivation of [expletive], which is, as I understand Doctorow’s argument, that when these tech platforms want to attract people to the platform, they add a lot of value to the user.

When you are using early Google Search, early Facebook, and it really does what you want it to do, you almost cannot believe how good it is — at no cost to you — at doing what you want it to do. And over time, when you’re locked in and it’s very, very hard to get out, they then move from adding value to your life to extracting value from you.

They cover you in ads, and they manipulate you, and they draw your attention in and do all these things that change the bargain.

Trump and the people around him seem to have seen the liberal world order under American leadership as something similar. It is now so hard for other countries to extricate themselves from it — from us — that you can begin to squeeze them, and to not squeeze them is to leave money, tribute, power on the table.

You could maybe make Canada the 51st state. You could maybe have Greenland. You can........

© The New York Times