This article was written after the author attended the London Review Of Books Autumn lecture, delivered by Adam Tooze, titled ‘Adam Tooze on Electrostates, Petrostates and the New Cold War’.
“What will Professor Tooze title his next book? Doomed? Screwed? Completely f*cked?”
As an American I’m used to all kinds of political vulgarity, but English liberals have a special monopoly on the sort of defeatist vulgarity exemplified above, best embodied stateside by John Oliver. Nevertheless, these introductory remarks well prepared the audience for Adam Tooze’s lecture at the New School this past Monday, which was a eulogy to the European Left’s project of “green modernity”.
Tooze began with a revelation he experienced on a trip to Chengdu, China earlier this year to captivate the audience. He recalled sitting in a cab, window down, hearing nothing from the streets. Electric vehicles whizzed by in complete silence and startling grief struck Adam to his core.
“We have been bested. All these years of fighting, writing, advocating. All for nothing.” This tone maintained itself throughout the hour long lecture. Tooze lauded the Chinese for their ability to accomplish green industrialism at scale, manufacturing ultra-supercritical power plants and photovoltaic devices at a rate that dwarfs the West, even after the initiatives of the European Green Deal and the Biden Administration’s Inflation Reduction Act (otherwise known as the “Green New Deal” in American conservative circles).
Tooze foretold a geopolitical future determined by energy source, thus “Petrostates vs. Electrostates”, and the description for the lecture (which was sadly not fulfilled in the actual speech) included the radical prediction that America and Russia could find themselves partnering on this basis. All my ribbing aside, Tooze’s lecture was clearly the product of great intention and study, and I seek here to reconstruct how Left-Liberals understand themselves in this current moment, what that may portend for their relationship with China, and how the Right—especially with our good friend “meritocracy”—can capitalize on the situation.
The most fascinating part of Tooze’s speech concerned the conscious decision the CCP made to sacrifice some of its population, taking on a tremendous emissions burden, in order to innovate on energy technology. Allegedly, 1.5 million people were dying per year in China during the 00s and early 10s as a result of the massive coal burning undertaken to power industrialization and urbanization. By contrast, a sum of 500,000 Americans had died between 1990 and 2020 due to air pollution. Since renewables are fundamentally manufactured systems of energy (through turbines, solar panels, etc.), China was able to apply the manufacturing prowess developed by coal burning to this new sector. As Tooze sees it, China’s turn to environmentalism was a brute necessity of the CCP’s role as a “historical actor”.
It was a matter, in other words, of regime survival and perpetuation. There was no need, as was and is still largely the case in Western countries, to foist up narratives about global warming or pending cataclysmic events because China’s environmentalist pivot was an organic development.
Tooze’s praise of this process indicates an environmental accelerationism one could imagine the Abundance crowd adopting for their own purposes. More to the point, a large part of the CCP’s “power assertion program” in energy involves ultra-high voltage transmission lines from the Xinjiang province to the urban cores of China. Tooze cited this as a tremendous accomplishment, never bothering to mention the forced labor and human rights abuses that most Westerners fret over.
Despite Tooze glossing over the authoritarian features of the Chinese model, it would be inaccurate to conclude he advocates for Western adoption of such practices. Tooze reiterated the importance of democratic legitimacy on culturally specific grounds. Tooze’s criticism of the European Green Modernists is rooted in their much-too-ambitious, universalist approach to the subject matter. The Green Modernists failed to acknowledge how significant the American-led security umbrella was to their project, and, to the extent they were influential, it was through the Chinese identifying the Europeans as a boutique model to be studied and appropriated for their own purposes. The assumption that industrial scale would follow their green models was foolhardy, at best, and failed to comprehend how the Chinese could build an independent industrial civilization on top of Western modernity. Ultimately, this conceptual failure induced Tooze to propose the West’s role as a facilitator of Chinese dominance.
Lest one respond with “but, America!”, Tooze diagnoses America’s fundamental issue as one of state capacity. Tooze goes so far, in his recitation of a Jake Sullivan quotation, to offer that America lacks a meaningful state altogether. Whereas the Europeans consciously made poor choices, such as prioritizing carbon pricing over industrial policy or perfecting regulation before speed of development and adoption, the Americans are compelled by their global position, and specific past incidents, to stymie the kind of industrialism China embraces. On the critical topic of fracking, Tooze pushes back against the parapolitical Left in identifying quantitative easing, zero interest rates, and the national security priority of energy security as the true causes, as opposed to the reactionary interests of folks like the Koch Brothers, behind fracking, a technology he deems a real, front-footed innovation.
Fracking’s greatest impact was on the inundation of natural gas for domestic electricity generation and not mere oil exports. America, ostensibly a state powered by oil, is in fact, Tooze argues, an “Electrostate”, albeit with distinct dynamics from China. While China’s electrification is characterized by extreme growth, America has reshuffled energy sources within stagnant consumption for greater efficiency, cheaper cost, and a more secure energy posture. In this context, Tooze pulls on Ezra Klein and Derek Thompson’s “Abundance” and Dan Wang’s “Breakneck” to demonstrate how America is a society governed by lawyers and China by engineers. American industrial development is hampered by NEPA reviews, historical preservation, wetlands protection, local veto points, lawsuit vectors, and the like. This reflects a fundamental difference in state structure.
American politics, above all, rewards those who can minimize risks and prevent disasters ahead of time. Insofar as this is the case, America’s global leadership of the energy transition is impossible because it cannot match Chinese speed and scale. There is no reasonable pathway where America electrifies, achieves manufacturing supremacy, maintains democratic governance, and avoids a fiscal crisis. Tooze implies, against the Reindustrialize and American Dynamism movements, that the myth of manufacturing leadership is the peg which must give. Of course, the political culture of the country is such that it’s too psychologically demanding for both American voters and leadership, therefore giving way long-term to stagnation and internal contradiction.
Tooze at no point argues for “degrowth” and he largely views Chinese manufacturing capability as an overwhelming good for both the West and the “Global South”. What he did argue for in his long, windy conclusion is that America and Europe become more humble and take a back seat. Western exceptionalism is the shibboleth Western progressives must abandon. We must document and negotiate; this is the great remaining virtue of 21st century democracy.
Though this seems bleak, Tooze is certainly emphasizing genuine problems of structure and output in the West, problems that the broader liberal pundit class, if honest with itself, cannot ignore. If Tooze is any sort of frontrunner for left-liberal thought & policy then one ought expect much more Chinese dovishness contra Noah Smith and the more professional, patriotic liberal class (as an aside: it seems Donald Trump is the most China-friendly in his own administration).
On the question “will we get to rule ourselves”, then, it seems that the Right, even given a demographically unfavorable West, is better disposed to manage the crisis of manufacturing capacity and energy development while also upholding Western exceptionalism, though this requires a dramatic change in how we conceive of politics and state-economic development.
Tooze is correct in saying that the West could only achieve Chinese-level speed and scale via structural authoritarianism or a crisis which temporarily permits the West to mobilize in the way it did during the World Wars. Before exploring how to “sneak” authoritarian speed into Western postliberal democracies however, we should first at least acknowledge the sheer destructiveness of the Western welfare state and de facto affirmative action regime which dually takes from the productive and interrupts the promotion of the productive within political, academic, and scientific bureaucracies. Tooze, of course, preferred not to address the problem, but it is the foremost inhibitor of capital investment and, adding immigration policies for America, the cultivation and motivation of talented youth. The New Right’s emphasis on individual capacity for greatness is a far stronger attitude for recapturing Western exceptionalism than the predominant postliberal, affirmative action-enforced sacrifice of apex for “identity group representation”.
Tooze and team take the waning Western state and productive capacity as necessary consequences of inclusive democracy, when, in truth, they are consequences of concrete policy and cultural decisions centered around egalitarianism for the sake of stability.
Though there are convincing arguments to be made for welfare to promote democratic stability, Western states are more firmly predicated on endless growth. Our declined manufacturing posture was at least feasible as long as America could maintain dollar hegemony, but, as China attempts to rework a pseudo-gold standard, the prospect of “endless growth” cannot be taken as a given.
In America, technological innovation is largely driven by financing from venture capital firms. As much as America’s talented youth are still piling into “professional managerial” jobs (law school applications skyrocketed this year, probably due to the poor entry-level job market), the software technology and venture capital sectors have transitioned strongly in the past several years to compete for this talent pool.
Earlier this year, Y Combinator announced its “Early Decision for Students” program, which seems to counteract much of the dropout ethos of Silicon Valley, and Andreessen Horowitz created Speedrun (a spray and pray, small check incubator). However they may be criticized, they are sure to drive more applicants as finance, consulting, and legal positions dwindle in number and become more competitive. While industrial policy financing often considers National Development Banks (e.g., Germany’s KfW or China’s Development Bank), Sovereign Wealth Funds for strategic industries (e.g., Norway’s Government PensionFund or Singapore’s Temasek—an interesting fund worth studying), industrial reorganization of Federal Reserve functions, “Bad Banks” for strategic assets, or, on Tooze’s specific topic, State-organized “Green Banks”, I think it’s more worthwhile to consider how we minimize state intervention while still circumventing democracy’s alleged blindness to the future (which I don’t think is an endemic, definitional problem as much as a constitutive one, but alas).
Attached below is a chart compiled by Aaron Slodov via AI which categorizes the capital metrics of software, hardware, and tech-enabled manufacturing. Generally speaking, venture capital was designed with short fund lifespans seeking out capital-light, high-margin software.
Structurally speaking, separating what can be called “patient capital” from “growth capital” towards the aim of creating a parallel “industrial venture” asset class would be the first step.
You’ve got to pursue longer (15-20 year) fund lives, more modest return targets (3-5x as opposed to the standard 10x), and a tolerance for decade-long profitability timelines. One of the crucial components to venture funding is public pension funds (e.g., CalPERS and New York State) and LP reform could be applied here.
Some proportion of these funds could be explicitly mandated to accept lower returns for the upside of strategic development. Taking Israel’s Yozma (which jumpstarted Israel’s venture capital industry) as a further example, the government could co-invest dollar-for-dollar, providing downside protection through first-loss guarantees (when third parties agree to cover initial portion of losses on an investment in the case that a borrower defaults), and offering tax advantages such as a capital gains exemption for 15+ year holds in the relevant sectors. Another way to assist strategic deployment in venture is to extend carried interest tax benefits only for funds with 12+ year fund lives investing in hardware/manufacturing.
The SEC, moreover, could hold strategic, patient capital funds exempt from diversification and liquidity requirements which opens up longer commitments with fewer fiduciary duty concerns.
Of course, the most direct Chinese adaptation would be to develop several dozen regional manufacturing investment corporations which are publicly tradeable and without fund expiration.
They raise money from public markets, invest in manufacturing, and pay dividends from portfolio returns. All of the above might come off as “throwing the kitchen sink” at the manufacturing problem, so I’d like to reiterate that generally reducing taxes (in all shape and form) and deregulating private activity (focusing on land use measures, local power, labor rights, antitrust) are the most productive policies.
This piece has only taken a look at directed financial measures, and there has been some recent activity in the space such as JP Morgan’s recently announced pledge to invest some $10B in national security businesses. In addition, 8VC and Apollo Global Management announced their strategic partnership in the space on October 29. Such announcements seem promising, but, as industry enthusiasts know all-too-well, if announcements corresponded with genuine change we wouldn’t be having this conversation. Time will tell if these efforts can succeed and, in the case they do not, we will have to return to that question of the “lawyer” and “engineer” society.
Nevertheless, there are salient criticisms of these two proposals. The first relates to the fact that JP Morgan had already committed to much of this previously with the latent problems of financial intermediation, cherry-picking winners, and seeking out, via a more traditional venture model if you dig into the weeds, the speed and type of returns common to the space. With respect to 8VC and Apollo, this is still a very early process and so information is almost certainly incomplete, “hybrid and asset-backed solutions” as well as “non-dilutive capital” are mentioned as sources of funding which, in practice, normally signifies structured debt and credit instruments.
There are certainly concerns to be had around the cash flow obligations debt requires, by contrast with equity which can theoretically wait indefinitely. Semiconductor fabs that may take a near decade to achieve profitability might face debt service payments from day one which may result in the partnership avoiding riskier and, in some cases, the most necessary projects. Timelines are prone to slip in manufacturing and hardware as well. Another aspect of the partnership that might cause concern is contained in their prioritization of “opportunities anchored by real assets, long-term contracts and established operating models.”
If the point of Reindustrialization is to develop capacity in areas the West has lost expertise, then these likely lack established operating models and will struggle to provide traditional collateral. Private credit funds, the vehicle for Apollo, usually target annual return rates which exceed most advanced manufacturing facilities (a difference of ~10% and ~5%). Someone has to eventually pay these debts and it will either be an industrial business generating adequate cash flow (likely limits what projects are viable under the partnership) or the acquirer of the business or the capital delivered from an IPO (which raises questions around the exit-driven timeline once again). It’sdifficult not to applaud JP Morgan, 8VC, and Apollo for putting their money where their mouth is, but skepticism is also justified.
Suffice to say, nonetheless, the Abundance Left will not win. It will face too many internal complications, ranging from constituency mismatch to historical legacy, to appropriate not only “laissez-faire” economics, but even national security-oriented state intervention in the way Jake Sullivan wishes. The Abundance Left is moribund through and through and Adam Tooze’s recommendation, to become like the think tank Ember or the Net Zero Industrial Policy Lab, is evidence the Abundance Left has no self-belief in global leadership. Tooze extolls how these two think tanks track Chinese investments project-by-project, equipping the recipient countries in the Global South with information to negotiate better terms with China. Western democracy—its freedom, resources, and analytical capacity—is to be employed for helping worse-off countries navigate Chinese dominance.
This is simply not an inspiring message. How bleak, but perhaps Tooze, and, by extension, Ezra Klein, Derek Thompson, Matty Yglesias, Noah Smith, and maybe Richard Hanania, are right to smuggle in the belief that Western modernity has been eclipsed. Alternatively, perhaps it’s just another, late-stage part of the slow unraveling of the century of Woke.