Henry Farrell, the political scientist who originated the idea of weaponized interdependence with Abraham Newman and wrote Underground Empire with him, takes apart two documents published days apart: Mark Carney's speech ending the trade talks between the United States and Canada, and Scott Bessent's Financial Times op-ed telling America's allies to make a Pascal's wager on Washington. Demetri Kofinas presses him on whether the administration has any strategy at all, why the institutions failed to restrain the president, and what happens to a world economy built on interdependence when the country that built it starts swinging a hammer at it.
👤 Guest: Henry Farrell, the SNF Agora Professor at Johns Hopkins SAIS who originated the idea of weaponized interdependence with Abraham Newman and co-wrote Underground Empire with him
🎙️ Host: Demetri Kofinas, the media entrepreneur and financial analyst who created and hosts Hidden Forces
📰 Published: 31 August 2026 on the Hidden Forces feed · recorded 26 August 2026
🔴 YouTube | 🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 52 min | ✅ Time saved: 27 min
Key Takeaways
Carney quit the trade talks because the deal on offer was permanent subservience, not a bad price
Farrell reads it as the second stage of the argument Carney made at Davos, that "nostalgia is not a strategy"
Canada is choosing to absorb the tariffs that follow rather than accept the position
Bessent's op-ed asks other countries to appease the United States the way Pascal said to appease God
Farrell called it "a deeply weird op-ed" and its register that of "sinners in the hands of an angry God"
The sinners are the countries that will not fall into line; Trump is both prophet and enforcer
The threat is loud because the follow-through is doubtful — speak bigly and carry a soft stick
The question Bessent will not answer is whether Washington would visit that wrath on China over Iranian oil
Farrell says the markets have already answered no, which exposes the United States "playing from an empty deck"
There is no strategy behind the chaos, only a court in which everyone has to face the king
"Flexible realism" in the National Security Strategy amounts to saying the United States will do what it wants
Other governments have stopped planning around American intentions and started planning around American unpredictability
What is at risk is not solvency but belief, and belief can turn a political crisis into a financial one
A large share of American power comes from other actors' faith in American power rather than from the material itself
Farrell compares the past week's fixes to a sticking plaster "on top of a suppurating and festering wound"
The Constitution's defense against a bad president was rival ambitions, and the party stopped supplying them
Federalist 10 set ambition against ambition; a president used to have to fight his own side as well as the other one
The unitary executive doctrine removes the second brake, down to civil servants reclassified as at-will employees
The deeper cause is governments across the developed world that cannot answer the problems people have
Farrell puts the loss of public trust ahead of constitutional design as the thing to fix
He points to Mamdani in New York as the live experiment in closing that loop, and wants the center and the right to copy it
Populism is a style until it delivers, and Roosevelt's answer was to run experiments and kill the failures
Farrell quotes the Great Depression demand for "bold, persistent experimentation"
The open question is whether voters and the media will tolerate a politician who says one thing did not work
What Trump wants is neo-royalism — clans carving up the world economy, not states bargaining
Farrell credits Abraham Newman and Stacie Goddard with the framework, and reads Davos as an attempted coronation
Carney played the small boy in the emperor's procession, and Farrell does not think the project is working
Flexible realism is incoherent because credibility is built out of being inflexible
Thomas Schelling's argument was that a country's greatest asset is its credibility
Others still take American coercion seriously and no longer take American long-term thinking seriously at all
None of this is reversible, and none of it is fated to end badly either
The National Security Council is "a ghost of its former self" and the expertise of government has dissolved with it
Rebuilding from scratch is the one advantage of having the institutions broken
Interdependence was a bet, and Washington's dealer's advantage is what made it fragile
The same networks that carry the gains carry the threat of being cut off from the dollar system
Farrell wants resilience built alongside interdependence, plus a conversation about restraint modeled on Cold War arms control
Big Tariff Day ended with the United States discovering it held a busted flush
Bessent had said Washington held all the aces and Beijing only low cards
Farrell says the two countries have lived since in a fragile mutual awareness that each can devastate the other
Farrell Came at the Economy Through Its Politics, Not Its Math
Kofinas opened by noting that the conversation had been booked before either of the two events it would end up turning on, and asked Farrell for his background first.
Farrell is from Ireland and was interested in political science and economics from the start. "I was not quite smart enough at math to be a good economist, but I was always very interested in the politics of the economy."
What interests him is not the market clearing but the fight around it — the ways actors use, in his phrase, fair means and foul to gain position and to shape markets in ways that suit their own interests even when those do not suit anyone else's
That is the ground he and Abraham Newman have worked for the last couple of decades
Carney Walked Away Because What Was on Offer Was Permanent Subservience
Kofinas set up the first of the two documents: Carney had spoken at Davos about six months earlier, in a conversation Farrell had with Ezra Klein at the time, and had now announced the breakdown of trade negotiations with the United States and said Canada was under attack from Washington.
Farrell said Carney is building on the Davos argument rather than replacing it. "He was very fond of saying that nostalgia is not a strategy." The old world system has gone, and it is not coming back.
The second stage is a judgment about what the negotiation was actually for. Carney has looked at how the United States wants to create "a permanently subservient position for Canada," Farrell said, and concluded Canada gains nothing from that arrangement
Having concluded it, Carney is prepared to take the short-term costs — Farrell described those as Donald Trump getting mad at you, deciding to tariff the hell out of all of your industries, and using whatever other pressure comes to hand
Bessent's Op-Ed Asks Other Countries to Appease Washington the Way Pascal Said to Appease God
The second document is Bessent's Financial Times piece declaring an economic D-Day, which compares the choice facing other countries to Pascal's wager. Farrell called it "a deeply weird op-ed" and said the comparison is the interesting part.
The instruction, as he reads it, is to treat the United States as a deity. "You have to think about the United States as if you need to do everything you possibly can in order to appease this wrathful deity before it decides to smite you with lightning bolts."
Pascal's wager says that even a non-believer should behave as though God exists, because the downside of being wrong is eternity in the fire
Bessent's version substitutes Washington for God: get on the wrong side of it and you would wish you were in hell instead
The register is 17th-century, and Farrell said so directly. "So this is really, it feels like to me, like one of the 17th century puritan preachers, sort of sinners in the hands of an angry God, except that the sinners are the recalcitrant countries of the rest of the world, and the angry God is the United States of America, with Donald Trump as its prophet, and also as its enforcer."
Kofinas read it as an insurance argument. What Bessent is saying, he suggested, is that the realization of Trump's worst instincts represents tail risk, and that there is no premium a country should not pay to insure itself against that tail risk actualizing
Speak Bigly and Carry a Soft Stick
Farrell's counter-reading is that the volume is the evidence of weakness. "Well, the other thing that this makes me feel like, it feels like it is a angry, fundamentalist preacher who is losing his congregation, who is losing his audience, and is upping the rhetoric in order to try and keep the few fearful parishioners who are still there in the benches."
He inverted Theodore Roosevelt to make the point. The famous formulation is to speak softly and carry a big stick — moderate the rhetoric, keep the real threat in reserve. "So I think what we're seeing here is that Scott Bessent is adhering to an approach to US foreign policy, which is speak bigly and carry a soft stick."
The question the op-ed cannot answer is about China. The country doing the most to support Iran, or capable of doing the most, is China. If China keeps importing Iranian oil, is the United States going to visit the wrath of God on China's head?
Farrell said the markets and everybody else are betting no, and that the threat is empty
"And in a certain sense, I think Bessent, by using this kind of ridiculous rhetoric, is really exposing how the United States is playing from an empty deck."
The Davos Panic Is the Tell
Kofinas brought in Stanley Druckenmiller, Bessent's mentor, who had written a Wall Street Journal op-ed. Kofinas noted that the op-ed was partly written by AI, which he called disappointing on the grounds that Druckenmiller is a brilliant person who can afford a copy editor. On the substance he hedged that he reads a lot and might be conflating it with something else, but "I remember him essentially suggesting that what Bessent wrote was more of a sign of panic than it was of strength, to your point."
Farrell said the pattern was visible at Davos.
"It was really interesting to watch the commentary coming from Bessent and from Lutnick, who I think are the Tweedledum and the Tweedledee of this particular administration, where they begin going into Davos more or less saying that the entire world is going to fall at our feet, that the resistance of Europeans is ridiculous."
What followed, he said, was a genuine sense of panic once it became clear the Europeans would push back, and a switch to arguing that this is not in everybody's best interest and can we all get along
He was careful not to make it a claim about intelligence. "And my read of this, and I don't know Bessent from Adam, but my sense is that he is not a particularly stupid individual." The man does not have many cards and is doing the best he can
"But I think at a certain point where you've been coasting on empty for a long while, you do begin to panic." After that, Farrell said, you start pressing buttons at random in the hope that something will come along and save you
There Is No Strategy, Only a Court in Which Everyone Has to Face the King
Kofinas laid out his own framework and asked Farrell to test it. In his reading there is no deeper strategy: a capricious leader, a set of fiefdoms whose lords compete for the king's attention, some of them pursuing graft, some of them — he put Bessent in this category — pursuing something he cannot identify. Cabinet members arrive thinking they can tell the president what he wants to hear, bend over backwards where they have to, and still shift the vector enough to do some good. What the second term has shown, he said, is that no amount of backbending is enough and no amount of chaos is enough, and that the whole thing is running up against some kind of wall.
Farrell agreed, and said the official doctrine is a cover for the absence.
The National Security Strategy's new doctrine is called flexible realism. "And as far as I can make out, flexible realism does nothing more than to say the United States is going to do what it wants, and everybody else had better react accordingly." He treats it as an effort to paper over the fact that there is no strategic position, rather than as a strategy
The court analogy has a literature behind it. Farrell pointed to a famous article by Chris Ansell and John Padgett on the Medici, and on Cosimo Medici in particular, who was very good at making sure that whatever anyone else did, he had the last word
Cosimo built a spider's web in which he always kept his own flexibility and everyone else had to orient toward him, and he got his way a lot
What Trump is doing, Farrell said, is "a really stupid version of that." It is not a strategy — it is a demand to be the person everyone reacts to, and it holds even when it leads to wildly stupid outcomes in the short, medium and long term
The consequence is that other countries have stopped planning around American intentions and started planning around American unpredictability. They have not fled, he said, but they are building long-term strategies on the assumption that the United States does not have one, that it is flailing, and that it can do huge damage to them and colossal damage to itself
The answer they reach is insulation — cutting themselves off from the chaos as far as they can, which is the exact opposite of what Bessent is demanding
The Danger Is a Political Crisis That Arrives Looking Like a Financial One
Kofinas pushed on perception. Bessent has spent a lifetime in financial markets and is attuned to it, and the administration is trying to manage perceptions of American competence and imperial strength while also trying to bring the war in Iran to a conclusion and deliver on the promise to end the war in Ukraine. The worry, he said, is that the rest of the world calls Washington's bluff.
Farrell said that worry is visible in the bond market, where there is a lot of concern about what is happening to people's belief in the full faith and credit of the United States. He then split the American position in two.
The material side is still strong. The United States remains central to the global financial system and has an enormously powerful army, even if huge amounts of the ammunition and the material it needs have been dissipated in what he called the foolish war against Iran
"I think back to Bismarck back in the 19th century, saying that God loves fools, drunks, and the United States of America, which is perhaps its own weird version of Pascal's wager in reverse."
The other side is belief, and belief compounds. A great deal of what the United States gets comes not from material power but from other actors' belief in that material power and in continued American centrality
The failure mode he describes is not counterparty risk but political risk wearing a financial costume: people stop believing the country is capable of acting in even an enlightened version of its own self-interest, everyone hedges, and the hedges compound into panics
On the response so far: "And so we get things like the efforts to try and spend over the last week, which are like trying to put a sticking plaster on top of a suppurating and festering wound and telling people to just ignore all of the nasty stuff that is dripping out."
Federalist 10 Assumed Rival Ambitions, and the Party Stopped Supplying Them
Kofinas said the consensus among Trump's detractors and his supporters alike was that the institutions would restrain him, and that consensus has not held. Farrell traced the failure to a mechanism the framers built and the country stopped feeding.
The design is in Federalist Paper Number 10. The way to deal with political ambition is to set ambition against ambition, so that competing drives for power exhaust each other and something roughly resembling the common good survives
The first brake was factional politics inside a president's own party. Presidents have always had to contend not just with the opposition but with people on their own side who wanted different things, which forced perpetual compromise
That brake has weakened: the Republican Party now works much more closely in lockstep with the president than past parties have, and with a lock on all three parts of the government, a lot of the opposition disappears
The second brake was the administrative state. As it grew it created its own independent power bases, which made governing harder but also ensured that a single deeply stupid person could not override everything. Farrell put it as a self-correction on air: "Furthermore we have within the government, there also has been within the federal government, there also have been sort of various different power bases."
The unitary executive doctrine dismantles the second brake, and the Supreme Court has encouraged it. The theory, crudely stated, is that the president was elected and the executive's job is to do his will, which is what the current majority on the court believes and has embraced
Appointees are yes men; inspectors general have been fired or terrorized
"And you have, and this is the reforms that are going through at the moment, you have ordinary civil servants suddenly being classified effectively as at will employees so that if they do not jump five feet when the president tells them to jump five feet, they are in danger of getting fired."
"And so this then creates, I think, almost this perfect storm in which if you put somebody who is fundamentally not competent at the top of the system, you begin to get all of the crazy bad stuff happening that we see happening right now."
The Deeper Cause Is Governments That Cannot Answer the Problems People Actually Have
Kofinas noted that the unitary executive theory is not new — an administration 25 years ago had a vice president who pushed it, and members who lamented the executive power lost after Watergate — and asked how far back the institutional weakening runs, and how much of it is the imperial presidency that Arthur Schlesinger named versus a broader loss of public trust.
Farrell called it a huge question and said the trust half of it is not an American problem.
The general failure is capacity. Governments across the developed world are struggling to deal with a more complex world and are increasingly unable to pay attention to ordinary people
People do not agree on which problems matter — he gave climate change as the example, with some deeply worried and others pretending it is not happening — but they agree that government is not responding to the things they want it to respond to
He described his own working life as two halves: international politics and international economic coercion on one side, and the Agora Institute at Johns Hopkins on the other, thinking about democracy and about institutional reforms that would make it more responsive
His live example is Mamdani in New York, and he was explicit that you do not have to buy the politics — which he placed well to the left of the Democratic Party — to see what is being attempted
The attempt is a feedback loop: find what the public in New York wants, get the government to actually do it, then use social media to communicate back that the message was heard and acted on
Farrell thinks the answer to the trust problem comes more from people on the center and the right adopting that approach than from constitutional redesign or from geopolitics
The last stressor is China. The United States is no longer the only big gorilla in town and is dealing with the relative loss of its own power, influence and authority, on top of everything else
The Mamdani Test Is Delivery, and Roosevelt's Answer Was to Run Experiments
Kofinas observed that Trump gets along well with Mamdani — well enough, in some cases, to make his aides visibly uncomfortable — and that Mamdani's governing style looks like Trump's, minus the veering off course. Trump regularly A/B tested ideas with the public, promoted whatever resonated, and put forward proposals heading into his second term, some of them associated with Doge, that were very popular with his base and that he has largely not followed through on. What, he asked, is the difference between two populist styles that both run on social media?
Farrell said the styles really are similar, and that the difference will be settled by delivery.
The test is whether Mamdani can use the capacities of government to do things people want done. He cited a debate between Ezra Klein and Chris Hayes around the time Mamdani was rising, in which both liked the style and wondered about the follow-through
As far as Farrell can see, the follow-through is happening
The BQE is the case in point, and it cuts both ways. Kofinas named the expressway; Farrell said the policy is clearly populist and the promise was made on the way into office
"People want the Expressway to be fixed, and he has entered office actually making promises to do all those things, but it's going to take a long time to fix the BQE." It stays in the promises category until it is delivered
The historical parallel he reaches for is the Great Depression. "And back in the Great Depression, Franklin Roosevelt says that what the country needs, what the country demands, is bold, persistent experimentation." Try things, build on what works, discard what does not
He reads Mamdani's city-run grocery stores as an experiment in that sense
The hard part is not starting experiments but killing them. Some will work, some will not, some will be minor disasters, and the open question for Farrell is whether a politician can say this did not work, here is another way, and have the public and the media bear it
Neo-Royalism: Clans Instead of States, and a Coronation That Carney Disrupted
Kofinas traced his own changing read of the administration — first that Trump wanted to reset the terms of the rules-based system, then that he wanted to abandon it, then that he and his coalition wanted to tear it apart — and said none of those is sufficient any more. The Bessent op-ed reads to him like an attempt to convert the soft power of American primacy into a new form of imperial hard power, a dark empire.
Farrell said that is right, and pointed to a framework from his co-author Abraham Newman and the political scientist Stacie Goddard.
They call it neo-royalism. "They suggest that what Trump and people around Trump want to do is to move into a world in which this is much less about states and state interests and much more about different clans in a certain sense."
Clans linked by family, or simply by convenience, carving up the world economy around their own interests
Davos was meant to be the coronation. Farrell reads it as an attempt to have Trump recognized by everyone as more than the first among equals — the sun king around which the system gravitates — with the congregation of the rich and powerful as the venue for the defection from the old order to the new
"And then we have, I think, Mark Carney, acting a little bit like the small boy in the procession of the emperor who has no clothes, rudely pointing this out and sort of effectively completely disrupting the ceremonial aspect of this."
He called it a tendency rather than a strategy, with two halves: that the United States should press its interests bluntly even when others dislike it, and that the interests of the administration, of Trump personally and of the country all coincide
"So this is, like Louis XIV, the Sun King, l'etat, c'est moi, the state, it is me."
And he does not think it is working. People are not aligning themselves toward it the way the administration expects, partly because of what happened at Davos and much more because the approach itself does not work
Flexible Realism Fails Because Credibility Is Built Out of Being Inflexible
The incoherence is in the word flexible. A country that wants to get things done has to be fundamentally inflexible in certain ways — capable of making binding guarantees and binding threats, and thinking hard about its own credibility
"And this is the argument that old style realists like Thomas Schelling, who won the Nobel Prize in economics used to make, is that a country's greatest asset, in a certain sense, is its credibility."
Chop and change, break promises when they stop being convenient, make grandiose threats that evaporate the next day, and people stop believing you
The result is an asymmetry. "On the one hand, people still take the United States' capacity to use coercion quite seriously, but they don't take seriously its capacity to do anything that involves long-term thinking."
"I think that this is much more like I'm sort of, I don't know, grandpa has been on a bender and is waving around his shotgun." You say what you have to say to keep grandpa from firing, but you are humoring him, not treating him as a serious actor capable of thinking long term
Kofinas answered with a coordination problem of his own. A majoritarian coalition that would otherwise agree on a political agenda has not emerged in a form able to state what it wants and push it through as a new kind of populist governance
The institutional weakening is global but not uniform. Farrell agreed the institutions have been weakened, agreed that is why Trump has been emboldened, and agreed it is happening in many countries — while insisting it manifests differently in each
"Italy is now governed by a formerly and not especially formerly fascist party, but its capacity to do stuff is limited, both by the Italian constitution and by the European Union."
"And so I think that a lot depends on the particular institutions of a particular country and the United States has a particularly bad case." He puts the American vulnerability down to its particular mode of presidentialism
Not Reversible, and Not Doomed Either
Kofinas asked whether the trend can be reversed or has to run its course, and what the ingredients of a reversal would be.
Farrell's answer was that reversal is the wrong frame. "And this gets back to, I think, to Carney's point, that nostalgia is not a strategy, which I take as being an argument that whatever emerges from this is not going to resemble the kind of consensus that we had from, say, the early 1990s through to 2012, 2014, 2015 was when the wheels began to come off." He does not think that world is available, and does not think a system can be built to go back to it.
Equally, he sees no reason to believe a spiral of misery is fated. The prospects lie in rebuilding something different from the ruins rather than restoring what was there
Part of the case for that is that the old system was not working. A lot of what gave Trump the room to do what he has done emerged long before he was particularly interested in politics
The damage is real and he named it. "We see in foreign policy, for example, the National Security Council is a ghost of its former self." Enormous amounts of government expertise have shrunken and dissolved over the last several years
The one advantage of having to build from scratch is getting to ask what the institutions are for. That requires a dialogue between politicians and a public coherent enough to back real institutional experimentation, which he called hard but not impossible
Internationally he was more tentative. The world will be much messier, because economic coercion and the risks of globalized networks are now visible in a way they were not, and he said plainly that he has no grandiose schemes and can only wave his hands toward the kinds of experiments worth trying
Interdependence Was a Bet, and Washington Took the Dealer's Advantage
Kofinas read a line from Underground Empire back to its author: that we may be on the verge of a greater catastrophe, brought about not by chance but by battles that tear apart the silken webs that weave the world economy together. He asked what the two of them meant.
Farrell said the global economy rests on the assumption that intertwining national systems produces better outcomes than keeping them apart, and gave three instances of the bet.
Global markets are the basic form of it — interdependent markets built on the idea that globalization pays
The internet gives most of the world a common store of knowledge and common access, with restrictions and variation by region
Supply chains are where the shift is starkest. Trade used to be mostly raw materials or finished goods. "Now we live in a world where still complex products very often involve huge numbers of different components and sub components, perhaps from thousands of different suppliers in 70 or 80 different countries."
The insight in the book is that the bet is fragile, and that Washington made it more so. "And so the insight that I think that Abe and I had when we were writing this book is that this interdependence is very, very fragile."
The United States promoted the interdependent world and simultaneously decided it was reasonable to take a dealer's advantage inside it — using the networks to get its way and to threaten others, for instance with being cut off from a financial system that runs on the dollar
The warning was about erosion; the present is about demolition. The United States had been chipping away at those mechanisms, and Farrell said the administration is now going in with a massive hammer, smashing half at random at this or that part of the system
His prescription is not independence. Full separation of national systems would be disastrous in a variety of ways. What he wants is interdependence and resilience together — independent capacities so that countries cannot be held hostage over a crucial component or a piece of financial plumbing, plus far more conversation between powers about how restraint works
The model is Schelling again, whose problem was nuclear conflagration and whose method was to get Washington and Moscow to coordinate expectations about what each would grudgingly accept and what would be treated as out of line
Big Tariff Day Ended With the United States Holding a Busted Flush
Farrell said the moment that stayed with him and Newman came last year, when the administration imposed its tariffs on China.
The claim was that the hand was one-sided. "And Bessent more or less says that we have all of the aces in our hand. China only has low cards to play."
A couple of weeks later Beijing played a card of its own, and Farrell said the United States discovered it was holding a busted flush
He dates the recognition from there, and said you can see it in speeches by Marco Rubio and others: the moment the United States understood that China is capable of substantially damaging its economy
What has held since is awareness, not agreement. The two countries have been living in a somewhat fragile state of mutual awareness that each could do things to devastate the other
Whether anyone has tried to build from that toward something more stable, he does not know. "Then again, I'm not the person you would want to turn to for insights on what is happening deep within the Trump administration."
Kofinas closed the public hour by naming weaponized interdependence as the term Farrell and Newman coined, and said the second hour — on the premium feed — would take a second framework, one built on a term coined by Cory Doctorow, a recent guest on the show, and apply it to the financial messaging systems, dollar-clearing networks and surveillance architecture underneath American power.
Farrell's bottom line is that the United States can still hurt people and can no longer credibly promise them anything, and that a country whose threats are loud and whose follow-through is doubtful gets treated as a hazard to insulate against rather than a system worth joining.
Books & Resources Mentioned
Underground Empire: How America Weaponized the World Economy – Henry Farrell and Abraham Newman (The book the conversation was built around; Kofinas read its warning about battles that tear apart the silken webs of the world economy back to its author)
Scott Bessent's Financial Times op-ed (The economic D-Day piece and its Pascal's wager, which Farrell called "a deeply weird op-ed")
Stanley Druckenmiller's Wall Street Journal op-ed (Kofinas said it was partly written by AI, and remembered it as suggesting Bessent's piece showed "a sign of panic" rather than strength — while allowing he might be conflating it with something else he had read)
Federalist Paper Number 10 (Where the framers set ambition against ambition — the mechanism Farrell says has stopped working)
Chris Ansell and John Padgett's article on the Medici (The study of Cosimo Medici keeping everyone oriented toward him that Farrell used to describe Trump's court, calling it "a really stupid version of that")
Stacie Goddard and Abraham Newman on neo-royalism (The framework Farrell leaned on for a world organized around clans rather than states)
The SNF Agora Institute at Johns Hopkins (Where Farrell said he has spent half his working life on the problems of democracy and on institutional reforms that would make it more responsive)
Cory Doctorow's earlier Hidden Forces episode (The prior conversation Kofinas pointed listeners back to as groundwork for the framework the second hour applies to American power)
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