When the enemy is everywhere, the economy is nowhere

The New York Post reports that President Trump, speaking at Mount Rushmore on Independence Day, declared communism "a mortal threat to American liberty" — not a policy disagreement, he insisted, but an existential confrontation. I have no wish to adjudicate the ideological content of that claim; political theology is not my department. What I will say, as one whose entire working life was spent watching political rhetoric swallow economic substance whole, is that the pattern deserves scrutiny.

I learned this lesson first at Versailles, and I wrote it down plainly in The Economic Consequences of the Peace: when negotiators are seized by grand moral drama — punishment, triumph, the settling of civilisational scores — they consistently underestimate the downstream economic costs of the settlement they are constructing. The drama is real; the consequences are also real; and the consequences tend to arrive on a longer timeline than the cheering. The crowds at Versailles did not cheer for the Great Depression, and yet the one helped produce the other.

What concerns me here is not communism or the lack of it. It is a narrower and more tractable question: what happens to aggregate demand, to public investment, and to the confidence of business and household alike when the political class frames all policy as a battle between liberty and its mortal enemies? The answer, I suspect, is that it becomes nearly impossible to have a serious conversation about fiscal capacity, about the level of public investment required to sustain employment, or about the international monetary arrangements needed to keep trade from curdling into beggar-thy-neighbour bilateralism. These are fiddling technical matters when civilisation itself is at stake — and so they are left to the technicians, who have no political authority to act.

"Animal spirits" — the term I used in the General Theory to describe the confidence, or its absence, that drives private investment decisions — are exquisitely sensitive to political atmosphere. A business deciding whether to build a new facility does not only calculate the expected return on capital; it forms a view about the stability of the environment in which that capital will operate. Sustained ideological emergency, real or constructed, is not a stable environment. Uncertainty does not invite long-horizon investment; it invites the hoarding of cash, the shortening of planning horizons, and the retreat from exactly the kind of private capital formation that a government might otherwise be relieved not to supply directly.

I want to be fair to the rational case on the other side. It is possible — it is indeed the classic conservative argument — that the rhetorical insistence on fundamental values clarifies political priorities and disciplines government spending by insisting on limited rather than activist government. I understand the logic. But the evidence of the last century is that this particular form of rhetorical urgency does not, in practice, produce fiscal restraint; it produces large military budgets, politically motivated tax cuts, and the steady erosion of the public investment programmes — in infrastructure, in education, in research — that are the only long-run answer to the productivity slowdown that afflicts every advanced economy. The household analogy again: tighten your belt in a crisis, yes — but a nation that permanently tightens its belt against a phantom enemy simply contracts.

What would I actually build, were I advising the Treasury rather than writing columns? The concrete work is unglamorous precisely because it is not apocalyptic: a sustained public investment programme directed at the real bottlenecks in the American economy — the infrastructure that private capital will not finance because the returns are social rather than private, the green energy transition whose upfront costs are real and whose failure costs are civilisational in a quite literal sense, the job-guarantee or buffer-stock arrangements that would put a floor under employment without waiting for animal spirits to recover on their own. None of this requires that we resolve the question of whether communism is a mortal threat. It requires only that we agree the economy has a demand side, that the state has a legitimate role in sustaining it, and that ideological theatre is a poor substitute for the patient work of full employment.