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The rise of China within American hegemony.

The past decade has seen a spate of publications on the rise of China and how its ascent will affect the rest of the world. To begin answering this question, one needs to appreciate a remarkable conjuncture: China's economic growth in the last quarter-century is probably the greatest leap in economic development a nation has ever taken, but happened in a world under a global hegemony, namely that of the United States, that has equally few precedents. The only comparison that comes to mind is U.S. industrialization in the age of the British Empire. But British dominance was never as complete as that of the present-day U.S., as is clear from the competition Britain had to face from other major powers in the imperialist division of China during the late Nineteenth Century.

Already, present-day China (or the U.S.) cannot be fully understood without taking into account the mutual relationship between this new economic powerhouse and the older hegemon. I will illustrate this with two examples: one in the realm of economy, the other in that of military power (although these are of course related). In fact I would argue that we might want to evaluate present day China from the perspective of this relationship, to avoid falling into comparisons that rely on one of the following extremes: a prescribed developmental path in which the West remains the norm, or an inscrutable civilizational divide that makes China fundamentally different.

From a long-term historical perspective China's economic rise has been a return to the norm in world history, as it existed prior to the rise of the West. But commentators disagree whether the China of our time is following a path similar to development elsewhere or is creating a fundamentally new, Chinese, way of doing things (Mahbubani, on Asia, and Leonard are good examples of these respective positions). Both of these viewpoints involve pitfalls. The idea of a single developmental path that will yield predictable outcomes can easily obscure our appreciation of ongoing events. The journalist John Pomfret gives an example of this when he points out that social protest in the P.R.C. can transform from anti-foreignerism into pro-democracy demands in a matter of days (Pomfret 142-3). A complex society, like China or the United States, is never completely at one hypothetical level of development. As Alexander Woodside has pointed out, Imperial China had dealt more effectively with the problem of Feudal power than modern Britain or Germany a century ago. But those who try to single out a specific Asian or Chinese way run into a similar problem, since they can only do so against the background of a presumed Western way, ignoring the multiplicity existing in both the West and China (See Wong on historical comparisons).

Does this leave any encompassing understanding dead in the water? While an Archimedean point is impossible to achieve, I suggest we can better turn to the institutions of global integration in which both states participate. During the last twenty years, historians have shown that globalization is much older than commonly thought. But with global integration I refer here to the dense system of communication, exchange, and competition that emerged from around the 1860s, mainly built by the empires that were carving up the globe. This integration compressed space and time in such a way that it brought everybody into a simultaneous historical time, even though not all places were integrated in an equal way. One of the most important of these structures was the gold standard. This might seem a dull subject, but we should not forget that it was the centerpiece of American presidential campaigns in the late Nineteenth Century. The present-day dollar regime--and the economic interdependence between the U.S. and P.R.C.-are the latest installment of such global arrangements, and might become as important an issue in American political campaigns of the near future.

Erez Manela recently provided another historical example of this modern global integration in his book on the "Wilsonian Moment." Earlier, historians had recognized Wilson as a major founder of Twentieth Century America's approach to the rest of the world, pursuing a Wilsonian dream of spreading liberal democracy. But Wilson's message was also heard beyond the West (in part via the communication technology of the imperial powers). Remaining unfulfilled at Versailles it sparked, as Manela shows, the beginning of anti-colonial nationalisms--from the May Fourth Movement in China to Vietnam's Ho Chi Minh--that would color the century as much as U.S. Wilsonianism.

These examples show that a focus on interactions at the global level should not equate with the assumption of a model of international relations in which nation states are basically unitary or autonomous entities. The heated debate on the gold standard in the U.S. was a sectional debate, because this institution had a different impact on the different sections of the country. Manela's work on Wilson shows that even powerful nations that determine the moral high ground might find themselves entangled in the global ideological landscapes they created. Neither does a focus on the global need to coincide with the presumed decline of the state (Mann). States are still the principal players in the construction and maintenance of global structures, but at the same time they have to operate within the networks of these structures.

The single most important component of the U.S.-China relationship at present is their mutual place within the dollar-regime. This goes back to the seventies, when both states made crucial choices in their economic policies, which would bring them closely together three decades later. Anybody who has the vaguest familiarity with China can guess that the reform policies pursued by Deng Xiaoping since the late seventies form one leg of these changes. But in the beginning of that decade the United States took as fateful a turn when Nixon took the dollar off the gold standard. Coincidentally in both the Chinese and American cases these major changes coincided with wars against Vietnam. The Sino-Vietnamese War of 1979 had to do with tensions within the Communist bloc, in particular with the rise of Deng in China and the Soviet attempt to isolate the P.R.C. via Vietnam. In America's case, War in Vietnam was not simply an effect but a key factor that drove the economic change implemented in the seventies.

Since the late sixties America had been running a huge deficit, in part because of the Vietnam War. By 1971 American diplomats could no longer restrain foreign (mainly European) governments from exchanging their dollars for gold, amounting to a run on Fort Knox (Kunz 192-222). The response, taking the dollar off gold, was an ad-hoc decision to ward off this crisis that could threaten the war-effort, as well as Nixon's re-election. Apparently, Nixon and his advisors debated more about when he was going to announce the decision to the public on Television, than about the decision itself--they were afraid to interrupt the highly popular series Bonanza.

But in hindsight, Nixon's decision to dislodge the dollar from gold laid the basis of the U.S.'s continued economic ascendancy, even after it lost its pre-eminence as a producer of goods. The dollar became purely paper money, but remained the world's reserve currency in which most international transactions are conducted. Without the ability to convert to gold, foreign governments could not do much else with their dollars other than investing them in the U.S.--partially on Wall Street but also to a large extent in U.S. government bonds. The latter gave the U.S. government a unique ability to borrow from abroad instead of lending from its own citizens. In fact, it set the United States free from the necessity faced by "normal" countries, to balance payments.

This was an overturning of the whole nature of American power. In the first half of the Twentieth Century, American military might had relied on industrial power--more specifically, an incredible knack for mass-production. Fordism is the most famous representative of this, but also interchangeable parts, developed by American gun-manufacturers. Taking the dollar off the gold standard made it possible for the U.S. to retain its primacy in the world-economy that it had gained through World War II, despite the rise of international competition from Europe and Japan.

Eventually these two major policy changes (Nixon's uncoupling of the dollar and Deng's reforms) came together with the increasing role of China as a buyer of dollar- denominated securities. As Niall Ferguson has pointed out, Asian economies relying on exports (China being by far the largest amongst these) have only increased the ease for the United States to lend money under the dollar regime. These Asian governments wanted to keep their currency relatively weak compared to the dollar, and they have intervened to this end in the world's currency markets. As a result an increasing amount of American debt was bought up by East Asian Central banks, which kept U.S. interest rates lower than otherwise could be expected (Ferguson, 281).

Recent discussion in the American public sphere(s) on the U.S. budget (and the role of China as lender) has relied on the discourse of early American history, which has precluded a complete assessment of the issue. Conservatives have taken up the issue as a major point of criticism against federal politics, in some ways harkening back to a pre-civil war distrust of banking and federal regulation. But they have overlooked the importance of exactly this dollar regime to American power since the 1970s. It was, for instance, this device that made it possible--until the crash of 2008--to wage two foreign wars without hampering domestic living standards.

Interestingly, Ferguson does not follow most observers who have characterized this economic symbiosis as a mutual lock from which neither of the two can pull free without harming themselves. He points out that the final question will always be who is most dependent on the other (261). But I do not think we can follow Ferguson's line of reasoning that there are only two possible outcomes: continued trust in the U.S. dollar accompanied by a flow of investments in the U.S., or its complete collapse, which would generate the mother of all crises. It is true that China has called in global forums, at the height of the economic crisis, for a different reserve currency than the dollar. Such calls have however also illustrated how difficult it is to find a replacement for the dollar. In fact the evolution described by Ferguson suggests a possible third course. Already the behavior of China and other East Asian states was to join the system rather than destroy it. By keeping their currencies weak opposed to the dollar they made it easier for their industries to compete. But at the same time they supported lower interest rates that benefited the U.S. with the unspoken proviso that the dollar should not be devalued, since this was the reason for China to buy into U.S. securities in the first place. What was already going on before the crisis was a shift from a dollar regime in which only the United States reaped the profits associated with seigniorage, to a system in which multiple states benefited. The direction I suggest this might hint at, which would be a more peaceful alternative to the eventual collapse of the dollar, and which we might see emerging in the next decade, would be for the U.S. to let other countries--like China--join them in running the dollar system.

Charles Maier has described such a symbiosis as American Empire, but I think his description is too America-centered to grasp the fundamental global structure of this process in which no nation has ultimate control. This process of broadening the beneficiaries of dollar-rule, visible already before the recent economic crisis, actually parallels the development of the gold standard. This earlier global regime might have appeared to be completely centered on London, from the perspective of British investors and bankers who reaped the greatest benefits from it. In reality, however, as economic historians have shown, it came to be divided from the 1870s into subblocs centered on France, Germany, the United States, Japan, etc. The battleground for the competition of these different gold standard variants was the last great silver area in the world, China (See Cohen, Rosenberg, Metzler).

The U.S. experience with the gold standard in the late Nineteenth Century provides an interesting comparison with present day China. The way China operates within the dollar regime is a fundamentally different paradigm than the use of the gold standard to allow investments into the U.S. during the late Nineteenth Century. But for both China and the U.S. these monetary regimes have been key to their economic development policy. In the P.R.C. the government might have liberalized most of the market, but it holds tight control of the value of Chinese money relative to the dollar. Similarly in Gilded Age America, despite that U.S. development happened in a setting of representative democracy, the gold standard was never put to the test of a popular vote in Congress. Instead it was restricted to the executive branch, which was during almost this whole period in the hands of Republican presidents who relied on the sectional support of the northeast, whose Industrial economy profited from the Gold standard (with the exception of G. Cleveland who represented the interest of the financial center ofNew York City) (Bensel, 2000).

The parallel between China now and America's Gilded Age has been made before, but has not been pursued beyond the popular images of robber-barons. As we already mentioned, there is probably no closer comparison to the economic development of the P.R.C. in the last three decades than the industrial development of the United States in the last three decades of the Nineteenth Century, which made the U.S. the largest economic power in the world. This comparison not only holds true for the rapidity and size of industrial expansion, but also for the extremely disjointed nature of the process in these two countries, since in both development was heavily concentrated in certain regions. Despite that the Communist Party of China as an organization has more in common with the single-party states that emerged in the Twentieth Century, its dilemmas nowadays, as an agent of development, are those of Gilded Age America. In particular it faces the same contradiction as the Republican Party, which dominated American Gilded Age politics, namely how to balance capitalist economic development with competing claims on unequally divided wealth.

The international structures that came into being from the Nineteenth Century not only brought increased exchange, but also military competition between the great powers. The Debate on a rising China has, especially in American policy making circles, also involved the question of military competition. Before anything else, it should be pointed out that since U.S. military spending is as large as that of the next 15 countries combined, America should have nothing to fear from China or anybody else. Despite the fact that China is still the second largest military spender, and its budget, which is difficult to measure, is the most rapidly increasing, it does not go beyond 20 percent of the American budget (Stockholm Peace Research Institute). On the other hand, comparisons based on budgets are skewed by the differing tasks and commitments, as well as military effectiveness. So we have to look at the ideas behind Chinese military modernization.

Some China hawks--for instance Michael Pillsbury, who was very influential on U.S. strategic planning under the previous administration (if we can believe reports from the Wall Street Journal 09/08/2005)--describe Chinese military planning as a search for high-tech asymmetric capabilities, to change the military balance by surprise: for instance, weapons that would throw the opponent's communication in disarray. This supposedly asymmetric approach in his eyes is fundamentally directed against the U.S. But it supposedly has deep roots: according to Pillsbury Chinese military planners find inspiration in the classical past of Sun Zi and other ancient strategists.

There is a great irony about invoking some sort of Oriental military tradition, harking back to Sun Zi. For it was American strategic thought, as it developed after the Vietnam War, that took a Sun Zi-like form, with the emphasis on targeting the decision making of the enemy and the search for swift victory. We know that the most influential American strategists of this period, John Boyd, drank as much from the well of Sun Zi as any Chinese strategist. The reality is that the P.R.C. military tries to follow the paradigmatic military force of the present, namely the United States military. Furthermore, academic research by John Lewis and Litai Xue has shown that this process has been challenging for the People's Liberation Army--both technologically and institutionally.

Two crucial zones of exchange have characterized global military relations in East-Asia: a north-western zone spanning from the north of the Korean Peninsula to Central Asia, and a maritime zone which also springs from Korea but spans southwards across the Asian inner seas. In the Nineteenth Century, China remained much more adept at running the former than the latter. But it is exactly in the maritime zone that it has tried to improve its capabilities in the last decades.

The P.R.C.'s military has invested a lot of effort on the development of sea power, and it is on its maritime frontiers that China has been militarily assertive in the last decades. This is even more marked if one compares with its Central Asian backyard, where the P.R.C. and U.S. have coexisted without provocation for 10 years, China policing its Xinjiang and Tibetan territories, the U.S. occupying Afghanistan. China's assertiveness on its maritime frontier does not only involve the well-known military buildup against Taiwan, but also the use of military means to underline its claims over parts of the South China Sea--claims which conflict with almost all its neighbors: Japan, South Korea, The Philippines, and Vietnam. A major reason for China's concern with the South China Sea is the resources that are present there, as well as sea-lanes to resource rich areas. To name one key variable, China is far more dependent on Middle East Oil than is the U.S., which is crucial to feed its growing economy.

No wonder China is trying to build a so-called Blue Water Navy which can project force far beyond its own shores. I have to emphasize that it is far from alone in this regard: quite a number of countries are focusing their military modernization on this nowadays. Examples in the crucial Indian Ocean are of course India but also France which has bases there. None of these countries will anytime soon be able to match the force projection capabilities of the U.S. Navy. But China faces some extra constraints in gaining naval capability commensurate with her economic power.

China might have a long coast line, but its access to the ocean seas is blocked entirely from north to south by neighboring countries and the islands they control: from the Korean peninsula; Cheju island in between Korea and Japan; Japan itself; the chain of islands under Japanese control that extend as far as sixty miles from Taiwan; Taiwan herself and then the Philippines. To the south you have another barrier formed by Indonesia and Malaysia, with the narrow Malacca strait as a crucial connection to the Indian Ocean. In order to reach blue water, Chinese ships would have to pass through a potential choke-point. Inside this barrier, its fleet could be attacked by air-forces stationed on the surrounding lands--the U.S. has strong forces in South Korea and Japan. In other words, the P.R.C. is already contained by geography. No other country that is so dependent on overseas resources has such obstacles to developing credible sea-power.

What is clear from the economic and military issues is that both the U.S. and P.R.C. governments should be careful to inform their citizens that the power of their states is limited by these global structures in which they participate. Debate in America on China will be more productive if it starts from an awareness of mutual envelopment within international systems, in which America's position is still very strong.

References

Bensel, Richard Franklin. 2000. The Political Economy of American Industrialization, 1877-1900. Cambridge: Cambridge University Press.

Cohen, Benjamin J. 1998. The Geography of Money. Ithaca (NY): Cornell University Press.

Ferguson, Niall. 2004. Colossus: The Rise and Fall of the American Empire. New York: Penguin Books.

Kunz, Diane B. 1997. Butter and Guns: America's Cold War Economic Diplomacy. New York: Free Press.

Leonard, Mark. 2008. What Does China Think? New York: Public Affairs Books.

Lewis, John Wilson and Litai Xue. 2006. Imagined Enemies: China Prepares for Uncertain War. Stanford (CA): Stanford University Press.

Mahbubani, Kishore. 2008. The New Asian Hemisphere: The Irresistible Shift of Global Power to the East. New York: Public Affairs Books.

Maier, Charles. 2006. Among Empires: American Ascendancy and Its Predecessors. Cambridge (MA): Harvard University Press.

Manela, Erez. 2007. The Wilsonian Moment: Self Determination and the International Origins of Anticolonial Nationalism. New York: Oxford University Press.

Mann, Michael. 1997. "Has Globalization Ended the Rise and Rise of the NationState," Review of International Political Economy 4, no.3, 472-496.

Metzler, Mark. 2006. Lever of Empire: The International Gold Standard and the Crisis of Liberalism in Prewar Japan. Berkeley (CA): University of California Press.

Pillsbury, Michael (ed.). 2002. Chinese Views of Future Warfare. Honolulu (HI): University Press of the Pacific.

Pomfret, John. 2007. Chinese Lessons: Five Classmates and the Story of the New China. New York: Henry Holt and Company.

Rosenberg, Emily. 1999. Financial Missionaries to the World: The Politics and Culture of Dollar Diplomacy, 1900-1930. Cambridge (MA): Harvard University Press.

Wong, R. Bin. 1997. China Transformed: Historical Change and the Limits of the EuropeanExpirience. Ithaca (NY): Cornell University Press.

Woodside, Alexander. 2006. Lost Modernities: China, Vietnam, Korea, and the Hazards of World History. Cambridge (MA): Harvard University Press.
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Author:Kim, Sungshin
Publication:East-West Connections
Date:Jan 1, 2010
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