What is “the fifth risk,” the title of the latest book by Michael Lewis? The short answer is “program management,” or “the risk a society runs when it falls into the habit of responding to long-term risks with short-term solutions.”

Lewis adds: “’Program management’ is the existential threat that you never really imagine as a risk. … It is the innovation that never occurs, and the knowledge that is never created, because you have ceased to lay the groundwork for it. It is what you never learned that might have saved you.”

Any surprise that Lewis cites as an example “the ceding of technical and scientific leadership to China”? That prospect gets to the core of the current trade battle between the Trump White House and Chinese leaders. For all the talk about trade deficits and surpluses, this involves two powerhouses vying for the competitive edge in areas such as artificial intelligence, semiconductors, biotech and quantum computing.

President Trump and team aren’t just demanding that China broaden access to its markets, or stop stealing intellectual property, or quit extorting technology transfers. They want the Chinese to alter the structure of their economic system by giving up the big subsidies they route to key industries.

Will the president’s tariffs prove leverage enough? Better to have enlisted American trading partners to exert what the president seems to like — maximum pressure. Or stuck with the Trans-Pacific Partnership, designed, in part, to isolate China. It is hard to imagine the Chinese conceding on something so fundamental.

Which is why trade experts have been talking lately about the need for “constructive ambiguity,” language that sees both sides achieving gains with each saving face, all with the understanding that other rounds will follow. That would end the hardship faced by many due to the tariffs, especially American farmers and manufacturers. Its also sustains the idea of value in a relationship between two countries that account for 40 percent of global output.

For that relationship to work, China must comply with the rules to which it agreed upon entering the global trading system. Yet the concern here isn’t just Chinese practices. Let’s be straight about the role of Americans, especially in this part of the country, where we have fallen into “the habit of responding to long-term risks with short-term solutions,” or practically no response at all.

For how long has the narrative circulated about the vanishing path from high school to the factory and a secure place in the middle class? Decades. Yet Ohio and other states still struggle with how to match training to the jobs available in the new economy.

Practically everyone agrees that education is crucial to competitiveness and a higher quality of life. Yet for two decades, Ohio has failed to repair its school-funding formula, despite a court order. Its higher education system long has lacked adequate investment.

After World War II, the United States funded more than two-thirds of annual global research and development. Today, the country funds roughly one-quarter, with just single digits directed to non-defense work, say, clean energy. Close to home, Kent State University and the University of Akron could do much more to enhance their collective R&D clout. UA and the city have missed opportunities to deliver on “biomaterials.”

Many small cities and towns have suffered from the loss of manufacturing operations, due more to automation than trade. Yet the state doesn’t have anything close to a comprehensive plan for improving their prospects, research showing their problems mirror those of urban cores. Neither the state nor the federal government has made a real effort at devising something like wage insurance for workers facing a rocky transition.

In a way, such neglect fueled desperation, and resulted in Trump.

The PBS program Frontline recently reported in “Trump’s Trade War” that the Chinese were emboldened in the wake of the 2008 Wall Street calamity. They realized Americans weren’t as formidable as they thought. The Great Recession was, in part, a reflection of how we failed to prepare for the next new thing, letting down our regulatory guard.

Now the Chinese have more grand ambitions. It isn’t enough to pressure them to play by the rules. We’ve got to do more over here laying the groundwork to meet the strategic risk.

 

Douglas is the Beacon Journal/Ohio.com editorial page editor. He can be reached at mdouglas@thebeaconjournal.com.