The Importance of Ideology

Humans seek patterns in order to stabilize their relationship to their surroundings. The first month of Donald Trump’s second term has been rich in new policies, staff reductions, bureaucratic reorganizations, and diplomatic initiatives. The patterns have not been so easy to identify, though. So people take inadequate information and construct what patterns they can with it — patterns that make sense to them, but might not be related to what the prime actor, in this case the Trump administration, thinks it is doing.

For example, officials of the Department of Government Efficiency (DOGE) are extracting datasets from a number of government agencies; Elon Musk seems to be running DOGE; Elon Musk has an AI company, xAI; so maybe DOGE is extracting data to feed xAI? That is a pattern, but is it in any way truthful? Similarly, the president’s Ukraine policy is seen by some as part of a larger strategy to lure Russia away from its partnership with China; others see the same policy as encouraging aggressive states to acquire territory by force, which could spur both Russia and China to greater belligerence, contrary to US interests, while not harming their current partnership at all. These are opposite patterns, both mildly supported by current information but still fundamentally speculative. This kind of chaos does not render decision-making easy, for investors or anyone else.

SIG’s view is that there is an identifiable pattern to the White House’s initiatives. The core intention is to counter what the Center for Renewing America calls the censorship-industrial complex. One example of this complex identified by the center is the National Endowment for Democracy, which they say is “a ‘quasi-independent’ non-governmental organization (NGO) that operates as a front for the State Department and Central Intelligence Agency (CIA) [and] serves as the tip of the proverbial iceberg for a sprawling censorship industrial complex.” The sprawl, as envisioned by the center in a report dated 7 February 2025, reaches across federal agencies, universities, and corporations, particularly any corporations that deal in information, creating a “global nexus of governmental, non-profit, and private sector entities that work together to monitor and stifle speech that threatens the elite political and ideological consensus. These entities include agencies like the Cybersecurity and Infrastructure Security Agency (CISA), tech giants like Meta or Twitter, higher-education affiliated centers like the Stanford Internet Observatory, and non-profits such as Meedan. These organizations are utilizing the strands of institutional power to establish the political, policy, and moral predicate to justify the policing of free expression in a direct threat to foundational God-given rights recognized in the U.S. Constitution.”

The center sees this process as decades-long, originating in American disinformation abroad by intelligence and security agencies which eventually enabled these agencies to “cultivate an ecosystem — through partnerships with NGOs and the private sector — that quickly took root at the domestic level” (emphasis in original). The center concludes that “it remains to be seen whether or not it is even possible to fully defang the progressive orthodoxy in these agencies without dismantling them and starting over. It may very well be the case that there is no other choice but to take it all down.” 

The Center for Renewing America is a vigorous non-governmental organization founded by Russell Vought in January 2021. Vought served in the first Trump administration as deputy director of the Office of Management and Budget, then as its director. While Trump was out of office, Vought and the center published (December 2022) a budget plan for Congress called “A Commitment to End Woke and Weaponized Government.” Vought and the center played a major role in the Heritage Foundation’s Project 2025, an effort to construct an agenda for a second Trump presidency. Vought was policy director for the Republican National Committee’s platform committee during the successful 2024 campaign. (The author of the February 2025 report quoted above, CRA senior advisor Wade Miller, was political director for Texas Senator Ted Cruz’s 2018 campaign then chief of staff for Texas Congressman Chip Roy, himself a former Cruz chief of staff.) Vought became budget director for the current administration on 7 February as well as acting administrator for the Consumer Financial Protection Bureau. The center published a brief on 10 February urging that the consumer bureau be closed.

The point here is not that the Center for Renewing America and Russell Vought are influential in the Trump administration, although they clearly are. (The US budget director is not a trivial position. The center’s policy papers on Ukraine, the State Department, and immigration, among other topics, anticipated as well as anything the policies that the Trump administration is now adopting.) The point rather is that the worldview expressed in Wade Miller’s article quoted above, which stresses a long-standing US government conspiracy with NGOs and tech corporations to suppress conservative speech, appears to be an animating force within the administration. Vought, Miller, and the center are not the originators of this worldview, they are simply articulating it.

Seeing Trump administration policies through this lens helps to make sense of them. For example, Vice President Vance’s speech at the annual Munich security conference last week baffled many observers with its exclusive emphasis on threats to freedom of speech in Europe. “The organizers of this very conference,” Vance said, “have banned lawmakers representing populist parties on both the left and the right from participating in these conversations….[T]o many of us on the other side of the Atlantic, it looks more and more like old, entrenched interests hiding behind ugly, Soviet-era words like ‘misinformation’ and ‘disinformation,’ who simply don’t like the idea that somebody with an alternative viewpoint might express a different opinion.”

Reluctant to understand Vance’s words as meaning more or less what they said, commentators sought other explanatory patterns, such as a White House effort to further US dominance of European technology markets. A similar disconnect applied to criticisms of the administration’s dismantling of USAID and the State Department’s foreign-aid infrastructure, of its rejection of environmental legislation to combat climate change, and its Ukraine policy. But claims that USAID was pursuing a woke agenda or that pre-Trump Ukraine policy involved “spending American blood and treasure to ensure the continuation of a liberal and feminist social revolution in the furthest corners of Europe,” regardless of their accuracy, were genuinely felt.

Two notable recent failures of political-risk analysis were the underestimation of Trump’s “economic nationalism” in his first term and of Xi Jinping’s commitment to Communist Party control of the private sector. In both cases, ideology was discounted by an analytical confidence in constraints that reality was expected to impose on ideological ambition. Certainly those constraints existed, but their ability to prevail was wildly overestimated. Something similar is happening today with the Trump administration. People look to oligarchic power grabs or oil-company influence or Russian disinformation campaigns — patterns that make sense to them — rather than to the stated beliefs of powerful actors.

Nonetheless those beliefs are real. Looking for other, supposedly more sensible explanations can lead to poor analysis.   

Feeling Better and Feeling Worse – Part 6

by Dee Smith

We have quite recently left a period of history that was anomalous in several important ways. To understand what is happening now, it is essential to be aware of this and to understand how it is changing.

For the past 25 years, we have been moving from a period of relative quiescence into a period with very different characteristics. In some ways, this represents a return to unhappy norms of human history. In other ways, it represents a radical departure. But in all ways, it is leading to a very different world: one that is becoming less and less familiar, more and more quickly.

Unfortunately, many of the changes underway have produced or could produce very unpleasant and threatening outcomes. The series has looked at a few of these trends, but many cannot be included for obvious reasons of space. I have given short shrift to genetic engineering and its twin children, bio-error and bio-terror. And to AI, to resource depletion, to population and demographic changes. And to trans-national crime, the rise of authoritarianism and nationalism. And perhaps the most significant omissions: the twin potentially existential threats of climate change and environmental degradation.

Especially when considered in combination, these departures from perceived norms of the last half of the 20th century also represent a major, mass psychological problem. First, we are attuned, by both biological and cultural evolution, to expect that the near future will be like the recent past. Change was very slow through much of human pre-history. This expectation of continuity is now called recency bias and is closely related to the problem of induction in philosophy. Because we expect things essentially to remain the same, we are very alarmed when they change abruptly. But many major changes are often very abrupt. What this means is that we are unprepared to envision and come to terms with, let alone navigate, what is hurtling toward us with accelerating velocity — in fact, what is already happening. Our ability to grasp where change is leading, even change we see widespread evidence of, is woefully inadequate.

Second, the post-WWII period is commonly remembered now as a golden era that has since been lost. We want to think that the past was better and can be regained. The reason this is a mass problem is that in fact, for those of us who lived through it, the postwar period was enormously stressful. The US and the Soviet Union had arsenals trained on each other that could destroy human civilization several times over (and there were several close calls). There was also a stream of smaller conflicts and crises, often proxy wars engaged in by the two superpowers. This was not a short list. Ranging from Somalia to the Congo, from the Balkans to Iran, and from Peru to, of course, Iraq, many also featured repeating cycles of violence and conflict.

When the Cold War finally ended, social expectations were shaped by the  “long decade” between the fall of the Berlin Wall in 1989 and the World Trade Center attacks in 2001, a period during which almost everyone, in the West at least, fooled themselves into believing that we had entered a new, optimistic, and peaceful era — Francis Fukuyama’s “end of history”.  

The post-war half-century was indeed one of positive social and economic change in which millions of lives were improved markedly. People in many (but certainly not all) parts of the world today live with advantages — luxuries, even — unimaginable even to royalty 500 years ago. To give just a few examples: we mostly do not suffer from unremitting pain, as people once did from something as simple as an infected tooth. Many today have clean drinking water most of the time. We have such a high-calorie diet that obesity has become a huge problem, one that — again through more technology — is beginning to be addressed by pharmaceuticals.

The relative political and economic stability of the post-war period enabled these trends to advance dramatically. Eventually, despite all the conflicts and problems, more than a billion people were pulled out of extreme poverty. And the relative social quiescence extended to many aspects of life in general. Murder, for example, was very frequent globally 100 years ago; now it is much less so in most societies.

Strangely, the relative quiescence of this period included the climate as well. Most of the 20th century was fairly stable and predictable from a climate standpoint. This stability, combined with the technologies of the green revolution, allowed modern society to feed many more people that anyone had ever imagined. Although the increased human production of greenhouse gases (GHG) began to escalate in the 19th century, the concentrations were too low to have noticeable climate effects. And even as the levels increased in the 20th century, the parallel escalating injection of aerosol pollutants into the atmosphere from industrial civilization, which reflect sunlight, more or less balanced out the effects of increasing carbon and other GHGs. Global temperatures not only did not rise, in some decades they fell. But that ended around 1980, and a key cause was the global — and successful — effort to dramatically reduce air pollution. There was a kind of Faustian bargain to this: reducing industrial aerosol pollution (which was sickening and killing people) removed the “cap” it had placed on warming from GHGs.

And that is a prime example of unintended consequences, a concept key to understanding what is happening today.

The America Stack

Investing in technology got a lot harder in the past two weeks. Tech investors, particularly in AI, have traditionally assumed the best products would scale: pick the winner, and you will win big. That assumption will sometimes still prove valid, but it now seems fundamentally outdated. Technology markets are fragmenting for reasons that are not changing soon. That is making investors’ lives difficult.

The proximate cause for the drop in US tech stocks was DeepSeek’s launch of AI products that seemed to perform tasks that the company’s American competitors do at much greater cost. A Chinese company whose actual workings are opaque even by Chinese standards, DeepSeek surprised markets. The specific instance was indeed unanticipated, but the broader phenomenon, as SIGnal readers know, should not have been. The US has been tightening the screws on Chinese technology for years. The first Trump administration took technology containment to a new level and the Biden administration went further still. Neither administration explained what a realistic endgame was. But it was obvious that China and Chinese companies were not simply going to yield and give up. Every US sanction and prohibition has been met with Chinese innovation. The resulting products might not match their US analogues byte-for-byte, but they don’t have to. They just have to be good enough to enter the markets. Then they can win on price.

DeepSeek’s ability to do that burst the AI bubble, which was inflated by confidence in the US tech sector’s ability — supported by government spending and other encouragements — to prevail on the global scale. That confidence is now weakening, not just because a Chinese tech company can compete with America’s best but because the “global scale” has been shown to be a fiction. Neither of the world’s two largest economies is going to either give up on protecting and subsidizing its tech companies or open its digital markets to the other.

More profoundly, though, the extraordinarily tight relationship between the second Trump administration and US tech majors, symbolized by the prominent display of the leaders of X/SpaceX/Starlink, Meta/Facebook, and Google/Alphabet at the new president’s inauguration, signaled that the distinction between Silicon Valley and Washington is disappearing. The paradox is that this will make the US less dominant internationally, even if the opposite was the goal. The power of the Valley was rooted in its capacity for transcending American nationalism. Now that it has full White House backing, the Valley is losing that capacity.

Apart from China, one example of this phenomenon is the Eurostack. The term has an interesting past as it is derivative of the “India stack,” or the subcontinent’s attempt under Narendra Modi to develop domestic digital infrastructure based on control of data, payment systems, and citizen/consumer identity. This is commonly referred to by the acronym DPI (data, payments, identity). When a state can shape and integrate all three of these as the basis for a national digital infrastructure, it can control the nature of its own digital development. Historians of imperialism will savor the irony of the European Union, whose leading members all have imperial pasts of varying extent, looking to the land of the Raj and the Princely States for a model of how to gain control over its digital future. Europe has not often turned to India for geopolitical policy solutions. But that is what it is doing today.

There are counter-currents. For countries like Australia or Taiwan, which find themselves on the frontline of resistance to Chinese digital dominance, joining the US tech sphere of influence makes an immediate sense. The EU is much less sure, and the Trump administration’s indifference to European opinion can only increase its doubts. The US has inadvertently become a driver of digital non-alignment. Assuming India sticks to current policy — and there is every reason to think it will, even if Modi’s own power slips — then the world’s most populous nation and the world’s three largest economies are all pulling in the same direction, which is away from each other.

What of the rest? Consider the UAE. At the end of last year, the UAE’s position, arrived at after long debate and involving considerable discomfort, was to align digitally with what we might have to start calling the America Stack. The symbol of this was the deal last spring between G42, the UAE’s AI-investment flagship, and Microsoft. G42 is run by the UAE’s national security adviser and financed by the state’s sovereign wealth fund, Mubadala. Once the Trump administration’s tech direction became clear, however, G42 pivoted and announced (January 28) that it had become agnostic as to technology.

The demise of global scaling has been gradual over the past decade-plus, but as Ernest Hemingway said of bankruptcy, it can happen “gradually, then suddenly.” Investors now have to pick their way among the India Stack, the China Stack, the America Stack, and (if it happens) the Eurostack. It is unlikely that any invested company will be able to participate, much less thrive, in all four.

The Change is Already Here

The commentary on how Donald Trump’s presidency might transform global reality after his inauguration on Monday has been boundless. So has commentary in individual countries on what Trump might mean for them. But as commentators anticipate the Trump future they often miss how much the furniture has already been moved, before Trump’s actual ascension to office. Trump the negotiator may value his own unpredictability, but much of the reaction to his second presidency is baked in. He is not a novelty and neither, from a foreign perspective, is the America that decided to re-elect him.  

The 16 years of Obama-Trump-Biden isn’t quite a generation, but those are usually reckoned at 20-30 years, so 4 more years of Trump just about gets there. The 16 years of Bill Clinton and George W. Bush formed a fairly coherent mini-era of strong growth (ending with the 2008 collapse) and post-Cold War openness (ending with terrorist action and reaction, and the emergence of the China-US relationship as the core of geopolitics and geoeconomics). The past 16 years have been much more about the re-shaping, and relative diminution, of the West and the institutions it built and dominated; the rise of leaderless regions to economic prominence, utterly dependent on globalized markets but without the power or ambition to decisively shape them (Southeast Asia and the Gulf, in particular, but also Central/Eastern Europe, Africa and, perhaps, Latin America, as well as not-so-leaderless India); and the none too successful efforts of the US and China to assert dominance. The resulting “order” has been described as multi-polar, but there is a noticeable shortage of effective poles. 

It is this second era that was solidified by the defeat of Biden-Harris and the victory of Trump. There were once expectations (or hopes) among some that the first Trump administration was an anomaly and Biden would effect a restoration of sorts, pushing the US and the world order it dominated back toward a Clinton-Bush-Obama normalcy. Such expectations underestimated a number of deeper transformations after 2008, notably technological transformations but also changes in the US itself as well as the endurance of Xi Jinping’s version of China. Both Xi’s China and Trump’s US were often seen as exceptions to post-Cold War rules of globalization and the spread of liberal democracy and peace. That view finally expired last November. 

The speed with which businesses have adjusted to Trump reflects an acceptance of realities that predated the last election cycle.  So too do the policies of foreign actors. Many of these have been discussed in previous SIGnal posts, most recently on the Gulf. Japan is reluctantly adjusting its relationship with China. Europe is coming to accept that the sweeping and radical proposals of Enrico Letta and Mario Draghi, both commissioned by the EU, may actually have to be followed if the EU is to last. The heads of Europe’s telecommunications champions, Nokia and Ericsson, have recently pressed, along with SAP, for the Italians’ proposals to be implemented. These three tech giants do not know what Trump’s tech policies will be. They are simply acknowledging that the landscape has permanently changed.

In developed-world national politics, the dominant mode is one of turbulence (Canada, Britain, Taiwan, Germany, the Netherlands, France) sometimes veering into chaos (South Korea). Governments struggle to manage deep transformations in technology, demographics, climate, geopolitics, and geoeconomics. What they are being compelled to accept is that the United States is no longer willing or able to back even an imperfect ordering of world power along lines that will benefit all. Despite some false dawns along the way, that trend began sometime in the younger Bush’s presidency. What has changed is the sense of its permanence.

All of this has occurred before the inauguration. The new president and Congress may believe that they can control this process but the major work has already been done.

The Uses of “Overcapacity”

Since US Treasury Secretary Janet Yellen’s visit to China in April 2024, during which she focused on “China’s industrial overcapacity,” the belief has settled in that China’s protection of its own market and mercantile approach to everyone else’s markets amounts to a massive unfair trade practice based on state-sponsored hyperproduction. Yellen and the European Union both focused on green-economy sectors (solar panels, electric vehicles), conjuring a scenario in which China would underprice the Western green economy to such an extent that it would never develop, giving China a geo-economic stranglehold on the post-carbon future. At that point, economic policy began to seem actually immoral. SIG’s view is that this popular argument is partial at best and certainly misleading.

Strictly speaking, “overcapacity” means having a production capacity in excess of demand. It is measured by the capacity-utilization rate. In an efficient, market-based economy capacity utilization should be around 80 percent. In China’s electric-vehicle industry, the capacity utilization rate is much higher than that, which means that the sector has the opposite of overcapacity. There is enough demand, domestic and international, for China’s biggest electric-vehicle maker (and largest private employer), BYD, to operate at close to 100% capacity. It is true that capacity-utilization rates  in China’s solar-panel industry are much lower, but that tends to depress prices (in order to stimulate demand). Affordable Chinese solar panels have been the key to the spread of solar-panel usage across the globe, speeding the green transition and stimulating the growth of panel-installation and maintenance industries. With cheap panels available, the cost of solar energy in the US dropped 40 percent over the past decade, and solar’s share of electrical power generation has gone from 0.1 percent in 2010 to 6 percent.

The current narrative on Chinese overcapacity also overemphasizes the China part. The three leading electric-vehicle exporters in China are BYD, SAIC, and  … Tesla. BYD’s largest shareholder for years has been Berkshire Hathaway. Pension-fund favorite BlackRock has also been a major and long-time shareholder. BYD certainly did receive government incentives for EV development and production but the benefits of its ensuing success did not only accrue to China or the Chinese.

The case of state-owned SAIC might seem simpler. However, SAIC and its state-owned competitor FAW have both been leaders in joining with Western automakers. There are FAW-Toyota and FAW-Volkswagen, along with SAIC-GM-Wuling, SAIC-GM, and SAIC-Volkswagen. These ventures, many begun in the 1990s, were created to bring Japanese, German, and American internal-combustion-engine manufacturing technology and expertise into Chinese industry, and to get Chinese-market access for the Western partners. FAW-Volkswagen was second to BYD in 2023 car sales in China. Other similar joint ventures (SAIC-Volkswagen, GAC-Toyota, SAIC-GM, FAW-Toyota) were in the top 10.

These corporate relationships have changed over time. Non-Chinese venture partners today learn at least as much as their Chinese counterparts do from working together. That process occurs with green companies as well. SAIC-GM-Wuling is third in the 2023 ranking of Chinese sales of new-energy vehicles (NEVs, which includes battery electric vehicles and plug-in hybrids), after Tesla and market leader BYD.

In short, Western and Japanese multinationals and investors have been part of, and have benefitted from, the growth of Chinese production and consumption that is behind the charge of overcapacity.

That is not so true of these sectors in countries like India, Brazil, or Turkey. They have perhaps piggy-backed on the overcapacity narrative, joining “the chorus of naysayers voicing concerns over China’s overcapacity conundrum,” as Bloomberg put it. The number of investigations brought by China’s trading partners against it more than doubled from 2023 to 2024 (from 69 to 160). Among the 28 trading partners involved, developing countries played an unusually large role. The major sources of complaint in 2024 were, in order of importance, India, the EU, Brazil, and the US, rather drawing into question BRICS solidarity, but Thailand, Peru, and Chinese ally Pakistan were also active. A strikingly high number of cases were brought after Yellen’s China visit and the related publicity given to overcapacity.

What is going on? States are using tariffs, non-tariff trade barriers, dumping complaints, and so on partly because of genuine concerns about unfair trade practices, partly in response to political pressure from domestic sources, and partly to force Chinese companies (including those with Western and Japanese investors or partners) to relocate manufacturing from China to their own territories, transfer technology to their own industries, and create jobs for their own citizens. The charge of overcapacity, especially in green industries like electric-vehicle production, gives a moral sheen to the unedifying process of using consumers as hostages to force in-country location of production. It is a hard pill for China to swallow. China has ample unemployment problems of its own. But the successes of Chinese manufacturing lead competing countries to desperate measures, particularly as US-China decoupling and US industrial policy force Chinese companies into less lucrative markets.

Ultimately this could have the effect of diffusing green-economy production and technology, notably in poorer manufacturing countries. That ought to be good for the planet. It can at least be good for investors as it creates opportunities that are not subject to the increasingly capricious US-China conflict.