Chen Guoxiang's Perspective: The Global Return of Conservative Economics – Reshaping the State's Role and a New Competitive Landscape

Over the past decade, global economic policy has undergone a profound paradigm shift. This is neither a revival of laissez-faire capitalism nor an extension of traditional Keynesianism, but rather a composite governance model integrating national strategy, geopolitical security, and industrial upgrading objectives. This trend can be accurately defined as the strong resurgence of 'conservative economics'—a systematic response to the structural contradictions accumulated under neoliberal globalization, as well as shocks from pandemics and geopolitical conflicts.

Japan's Strategic Breakthrough After Three Decades of Stagnation: The Takagi Asami Economic Model

Japan's case is a vivid microcosm of this global shift. Since the 1991 bubble collapse, Japan has been trapped in prolonged deflation and low growth. While traditional monetary policies (such as quantitative easing and negative interest rates) have maintained financial stability, they have failed to effectively stimulate real investment and consumption due to deeply entrenched 'deflationary expectations' among businesses and households, resulting in a 'liquidity trap'.

In this context, the underlying logic of Takagi Asami's economic model is clear and grounded in realism: the government's role must shift from a 'night-watchman' to an active 'promoter'. The core strategy is to use moderate inflation and nominal GDP growth as catalysts to dynamically dilute the world's heaviest public debt burden. The specific approach involves large-scale fiscal expansion, investing in infrastructure and strategic emerging industries, with the goal of sustaining nominal GDP growth above debt interest rates—improving fiscal health relatively by 'growing the pie'. This is a high-risk bet: if growth falls short, massive deficits could trigger a sovereign credit crisis; but if successful, Japan may finally escape long-term stagnation and reshape its global economic standing.

Collective Policy Shift Among Major Economies: From 'Efficiency First' to 'Security First'

Japan is not an isolated case. Major global economies are showing a strong common trend: the government's 'visible hand' is re-expanding its functional boundaries, guided by national strategy, security prioritization, and industrial protectionism.

The U.S. shift is the most illustrative. From Trump's tariff wars and manufacturing reshoring to the Biden administration's different political rhetoric but more systematic institutionalization, laws such as the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act mark America's departure from the Washington Consensus. The U.S. has entered a new era of state-led industrial policy oriented toward strategic competition, directly intervening in critical sectors like semiconductors and clean energy.

Europe is following a similar trajectory. Germany and France are promoting energy transition and the return of key manufacturing, while the EU level advocates 'strategic autonomy', aiming to reduce external dependencies in defense, digital economy, and supply chains. New regulations such as the Foreign Subsidies Regulation and the Digital Markets Act essentially erect protective walls around the internal market.

In East Asia, Japan, South Korea, and Taiwan have long adopted industry-oriented models, further strengthening this strategy in response to supply chain restructuring. China, under its state capitalism model, is making massive strategic investments in semiconductors, AI, and new energy.

Despite differing political systems and tools, their core理念 is converging as never before: in an era where global competition manifests as a battle for technological and supply chain dominance, nations must actively shape future competitiveness. The fundamental drivers of this shift stem from the global financial crisis, pandemic-exposed supply chain vulnerabilities, and energy and technology blockade risks from the Russia-Ukraine conflict and U.S.-China tech war. Supply chain disruptions and security threats are now real, so the core of contemporary conservative economics is to revise the 'efficiency-first' principle, emphasizing 'efficiency on the basis of security'.

Supply-Side Restructuring, Technological Revolution, and Political Narrative Shift

Contemporary conservative economics emphasizes deep restructuring of the economy's supply side. Governments are no longer content with merely regulating aggregate demand but are directly involved in industrial planning, key technology R&D, and future standard-setting. The nature of fiscal expansion has shifted to 'strategic expansion', concentrating limited resources on advanced manufacturing, defense technology, and clean energy—areas critical to national security and future competitiveness—rather than universal welfare spending.

The digital technology revolution, represented by artificial intelligence (AI), is a key driver of this return. AI is redefining production efficiency, labor structures, and business models, becoming a strategic high ground fiercely contested by nations. Governments are therefore elevating AI to a core national strategy, investing public resources in foundational algorithm research, computing infrastructure, and talent development—investments with long-term externalities that cannot be fully left to market mechanisms. U.S. efforts to secure AI hardware supply chains, Europe's establishment of a 'data sovereignty' framework, and Japan-South Korea's strengthened cooperation in semiconductor materials all reflect this trend.

These policies collectively point to a reality: the driving mechanism of economic globalization is shifting from a pure market logic of efficiency pursuit to a strategic logic that balances efficiency and security—even prioritizing security in specific domains. Countries are striving to build a 'prosperity within secure boundaries' system within their strategic perimeters.

At the same time, this return also signifies a profound shift in domestic political narratives. Unlike post-financial crisis narratives focused on income distribution and social equity, contemporary conservative narratives emphasize order and efficiency first, advocating growing the wealth 'pie' through industrial upgrading and technological innovation before perfecting systems for fair distribution. This provides legitimacy for proactive industrial policies and responds to the anxieties of the middle class and workers regarding employment and national futures.

Industrial Policy, Regionalization, and the New Competitive Landscape

Looking ahead, industrial policy will once again become a mainstream global regulatory tool. Fiscal policy will shift from demand management to becoming an investment engine serving long-term national strategies, with public spending concentrated on strategic infrastructure, basic science, and breakthroughs in technological bottlenecks.

Globalization will undergo structural restructuring. The era of 'hyper-globalization' is ending, replaced by 'slowbalization' or 'friend-shoring'—characterized by regional economic blocs and 'supply chain alliances'. Internal economic cycles within North America, Europe, and East Asia will become tighter, while cross-regional flows may face more security reviews and technological barriers.

Future economic competition will no longer be merely about multinational corporations vying for market share, but a comprehensive contest among nations in governance capability, strategic resilience, innovation system efficiency, and industrial policy precision. This marks the arrival of a new era where the roles of government and market are redefined, and national competitiveness is deeply integrated with security boundaries.

*Author is a senior media professional