It is widely claimed that the USA and its NATO allies won last cold war. In 1989 the Soviet Union collapsed, and for a decade NATO and the US banks reigned supreme, even trying to impose their economic model on the rump of their former adversary, with predictably disastrous consequences.
Few would claim that the Soviets won, but many had cause to regret that the war took place at all. The development of Africa was compromised when its newly independent political structures were undermined by strongmen tied to one side or the other. South America fared little better. Korea and Vietnam were among many countries to endure tragic loss of human life in the name of nebulous goals. Even though the fragile peace gave us i-phones and second cars, it is reasonable to argue that we were all losers in the cold war. At least they somehow avoided nuclear war.
This week sees the twentieth anniversary of the 9/11 attacks, and a chance to reflect on the wars, cold or hot, of the last twenty years. Many commentators have linked the shock of that attack to the suspicion, nationalism and introspection now prevalent in the USA, epitomized by Donald Trump. Perhaps that era reached an end last month with the ignominious withdrawal from Afghanistan. The USA is surely ripe for a new philosophy. We have reached a tipping point.
While the USA was wasting its resources and focus in the Middle East, a new kid has emerged on the block. The world’s most populous nation started focusing on development over ideology under Deng and has used its own playbook to create spectacular success, taking more than half its huge population out of poverty.
China’s leaders have been very clever. Until recently they have not tried to challenge things that the USA and its allies hold dear, complying more or less with the so-called rules based order that is essentially a recipe for the moneyed nations to do whatever they like. Instead they worked out what those moneyed nations craved and set out to provide it. First China became the cheap manufacturing and logistics hub for the developed world. Once this created some wealth, it propped up the western financial system by offering tempting investments and depositing its own money. Lastly it offered its own growing market as customers for western firms to grow. The west loved it and those of us who own stocks became richer as a result.
Nowadays we like to moan about how China cheated, but it is not really a substantial claim. Western firms were all too happy to allow local partners into their Chinese ventures and for intellectual property to leak, because the benefits outweighed the costs.
China became richer, and many of its citizens reaped the benefits. Gradually, this allowed the leaders to become bolder. The massive trade surplus did not all have to sit in western securities: some could be invested in other countries, shoring up the Chinese supply chains and building leverage. Some limited military leverage could be created too – not to attack anybody beyond its own backyard, but to deter others from interfering. The citizens were so happy becoming richer that they became more trusting in the leaders even when some liberties were removed. It is a fair bargain when some national pride is warranted and there is more pork on the table.
Through all this, the goals of the Chinese leaders have been clear and consistent. They want to grow the prosperity of their people, while avoiding internal strife, minimising external threats and dealing with what they see as historical anomalies such as Tibet, Hong Kong or Taiwan. The leaders have showed strategic patience and executional brilliance.
Perhaps it won’t last, but perhaps it is time to revisit the patronising orthodoxy favouring democracy and capitalism. Picking winners does not work if the goals are corrupt or short-term political, but the Chinese certainly seem to be developing a strong track record.
We are led to believe that China has changed over the last ten years, but in reality it is not China but America. Problems were bubbling under, but then came Trump. He tried to humiliate China, an experience the leaders will not forget. China has taken away many lessons. It must make its economy independent of America. It must build leverage to counteract future building. America is not to be trusted. America will lose a staring contest. And America will bluster but not act.
I do not have the expertise to explain how, but I see the recent Chinese moves to rebalance its economy as primarily to build defence and leverage against America. It does not wish to use these tools, but is creating them just in case. It is a wise move. Trump is gone, for now, but one of the few things Congress can agree on just now is a desire to bully China. One sad example concerns the berating of Anthony Fauci for allegedly collaborating with China on research about infectious diseases. Surely that should be lauded? But nobody is truing to defend it, only to claim it did not happen.
The drift towards a new cold war seems rather inevitable. Who will win? Well, America has military power, but seems to lose most conflicts and has little appetite to confront China regarding its “historical anomalies”. America has money, but look closely and a lot of it is actually Chinese. America has cultural strengths, but smart young Chinese are happy in China – something that smart young Russians never thought. America has the best universities, but I would not expect that lead to survive one more generation.
If we think about the USA and China as two giant companies, which one should we invest in? One has unified leadership, clear and consistent long-term goals, a committed workforce, credible plans, key points of leverage and a strong culture of execution. The other is the USA.
The Economist’s excellent Chaguan column tried to explain Chinese economic policy a couple of weeks ago. There were valid criticisms about some nanny state tendencies, such as curtailing private tutoring and limiting screen gaming time for kids. But the broad thrust was impressive. It featured development (taking the other half out of poverty), controlling inequality, avoiding corruption, growing strategic sectors, and using the untrammelled power of the state for rapid execution. If a party credibly offered that in its manifesto in the west, it would have my vote.
Of course China has challenges. The four goals usually work well in parallel but may also lead to potential conflicts. Much is also made of the unfavourable demographic outlook. Some welfare structures must be developed. There are economic imbalances to handle. Six per cent growth will not be achievable indefinitely, but they seem in a strong position to handle most of the challenges.
I wonder if Anthony Blinken and his team, chastened in Afghanistan in the process of rebuilding competence after the carnage of Trump, might be coming to realise how futile this new cold war actually is for the USA. I am encouraged to read that Biden and Xi talked for ninety minutes yesterday. There is an alternative path available. China can meet its goals quite well with authentic American collaboration, if US credibility can be re-established over time.
Most wars do not have winners, only losers. We will all lose if the USA continues down the wrong path. Perhaps the UN, or people like the Pope or an Angela Merkel with more time on her hands, can help. The opportunities at this tipping point will surely be fleeting.
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