Russia and the Asia-Pacific Region

Artyom Lukin: Realism Meets Neo-Marxism: will capitalism bring an end to American hegemony?

June 7, 2013
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The rivalry between the US and China for primacy in the Asia-Pacific, and then possibly on a global scale, is becoming the main story of world politics in the first decades of the twenty-first century.

 

But how, in the first place, did China grow so strong as to be able to challenge the world’s only (as yet) super-power? The answer is well known: the colossal growth of China’s economy. From 1980 to 2012, the PRC’s GDP increased 50 times.[1] As one might have expected, Beijing is now converting its new-found economic strength into military might and diplomatic influence. This is inevitably changing the international equilibrium and calling into question the continuation of American hegemony.

 

The biggest irony is that it is the US itself who helped China become an economic giant. The fateful move was taken in the late 1970s and early 1980s, when Washington enthusiastically supported Deng Xiaoping’s “open door” policy and decided to fully integrate China into the global capitalist economy. In 1980, China was granted the most favored nation status in its trade with the US.[2] The same year the US approved China’s accession to the IMF and the World Bank. In 2001, after reaching a deal with the US, the PRC joined the WTO, which finalized its entry into the world trade and financial system. As a result, China gained access to Western markets, capital, and technologies.

 

Opening entry for China into the world’s largest American market, and along with that into the Washington-controlled system of global finance and trade, the US initially pursued primarily political goals. First, the US wanted to reward China for its active participation in the anti-Soviet coalition. Second, Americans expected that the admission of China into the world market would encourage the country’s further opening and in due course would result not only in economic but also political liberalization of China’s domestic regime.

 

To be sure, economic rationale was also present from the very beginning. America, as the leader of the capitalist order, is “programmed” to incessantly expand its boundaries, drawing more and more countries into the system. American corporations felt some interest in China, viewing it as a potentially lucrative future market. However, almost no one in the US could have imagined back then just how vitally important it would become.

 

Political calculations of the 1970s and 1980s that pushed the US to open commerce with China are no longer relevant. The Soviet Union, which China was supposed to counteract, has long since disappeared. The Western hopes for China’s internal political liberalization gradually faded away. It has been more than three decades since the start of market reforms in the PRC, but China remains an autocracy – economic liberalization refuses to translate into political freedoms.  It seems that China is following the “Singaporization” scenario, that is, prosperous economy co-existing with authoritarian political system.

 

Having lost political rationale, Sino-American economic relations now have exclusively material motivation. The growth in the volume of commerce between the two countries is impressive, to say the least. Whereas in 1981 China accounted for 1.1% of the US foreign trade, in 2009 this figure stood at 14.0%.[3]

 

First, China has become central to American economy – both for citizen  consumers, and businesses – as a supplier of relatively cheap merchandise. Sino-American trade has topped half a trillion dollars. China is now the US’s second trade partner (following Canada) and it’s biggest source of imports.

 

Second, China feeds American financial system with cheap capital. China is the number one holder of the US public debt (holding more than 1.2 trillion dollars of US IOUs).

 

Third, American corporations are reaping profits thanks to abundant and relatively inexpensive Chinese labor, placing orders to manufacture labor-intensive products in China. For instance, the lion’s share of the profits from the sales of I-Phones goes to the American-owned Apple, although the gadgets are assembled at Chinese factories.

 

There is no doubt that America has become much wealthier thanks to commerce with China. But has it become stronger strategically? Hardly so. By contrast, China, having engaged in trade with the US and integrated into the world economy, has not only become remarkably richer, but also substantially increased its political-military clout against other players, including America. What happened is a very good testimony to Kenneth Waltz’s relative gains  theory. According to Waltz, what matters in international politics is not whether states receive absolute benefits from cooperation, but who reaps more benefits. It is strategically important who gains relatively more, as uneven distribution of benefits alters the balance of power. Balance-of-power logic prescribes a state to forego cooperation with another nation, however lucrative it may be, if the other party wins still more.[4] America has obviously neglected this prescription.

 

This point is well captured by Barry Buzan and Ole Waever who point out that economic exchange with illiberal and modernizing states such as China puts the West in a dilemma: “To pursue trade and investment with them is to gamble that the liberal logic of interdependence and domestic transformation (from market to democracy) will work more quickly and powerfully than the realist logic of strengthening an opponent that one day you may have to fight”.[5]

 

Having recognized the danger which emanates from the continuation of unimpeded commercial relations with China, some strategists in the US are starting to sound the alarm, calling for “geo-economic containment” of China which should involve restricting it’s access to American and other foreign markets. [6] In fact, what is being suggested is to partially or even completely exclude China from the global capitalist system. In principle such a strategy can be executed – as long as China’s economy is still weaker than America’s and depends on American market to a greater degree than the other way around.

 

Nevertheless, it is unlikely that such advice will ever be heeded. For the US, the economic considerations of profits are clearly prevailing over the political imperatives of the balance of power. According to one of America’s leading economists, director of the Peterson Institute of International Economics C. Fred Bergsten, “too many Americans receive too many benefits from their actual or potential dealings with China for policymakers to jeopardize the relationship”.[7] He is echoed by Henry M. Paulson, the treasury secretary under George W. Bush: “I believe that engagement [with China] is the only path to success… Even if it were possible to block China’s growth, it would not be in the United States’ interest to try”.[8]

 

For American corporate top managers, as the political scientist Edward Luttwak observes disapprovingly, “next-quarter impacts on their own firms is as far as they try to calculate”. [9]  Business executives have few concerns about the long-term effects on the US of economic interaction with China. There are serious divisions in how China is perceived by American business and security communities. Despite security risks associated with Beijing, American companies continue to invest in the PRC. 89 percent of the US companies operating in China made a profit in 2011 and, understandably, they press Washington to go easy on Beijing to protect those profits. [10]

 

The US advocates of economic cooperation with China are quick to refer to the so-called commercial peace proposition, which postulates that intensive economic interaction pacifies international relations and makes war between interdependent countries all but impossible. However, as history teaches, even high levels of interdependence, such as that achieved in Europe before the World War I, cannot insure against violent conflict.[11]

 

Capitalism made America a super power and the world hegemon. This same capitalism may soon strip the US of its primacy. As the neo-Marxist thinker Immanuel Wallerstein asserts, inherent dynamics of the capitalist world-system leads to periodic changes of its hegemonic state.[12] There is no reason why the US’s current dominance should be immune to this pattern. Yet it is ironic that Pax Americana is being destroyed by China, who was drawn into capitalism by America’s own efforts and has been able to take full advantage of the most effective economic model the mankind has ever invented.

 

Until recently, the strivings of the capitalist American economy and the geopolitical imperatives of the American nation-state were more or less in agreement. Capitalism fueled the US rise on the world stage, while the American state promoted capitalism globally in every possible way. Nowadays, the logic of capitalism, obsessed with profits, and the logic of national security interests, concerned with the emergence of a “peer competitor”, are increasingly diverging. American political class is aware of the risks present in economic relations with China, but it is not willing to abandon benefits generated by the China trade.  Severance or even some restrictions on economic exchange with China would result in Walmarts’ empty shelves, higher interest rates, and the loss of hefty profits for many American firms.

 

The only imaginable scenario that the US cuts economic ties with China is a major armed conflict breaking out between the two powers. This would galvanize Washington into action, even at the cost of huge economic losses. Such a clash cannot be entirely ruled out, especially if Chinese nationalism grows more aggressive, triggering conflicts with the neighbors that are covered by the US defense obligations like Japan or the Philippines. In this sense, impatient Chinese great-power nationalism could ruin Beijing’s rise and save American hegemony. However, the Chinese leadership certainly understands the danger of a premature confrontation with the US, so it would do its best to control nationalist impulses impacting its foreign policy.

 

The current US policy toward China is often called congagement (containment + engagement), which essentially stands for containing the PRC diplomatically and militarily, while at the same time expanding economic and social links with it. There is an inherent contradiction in such a strategy. How can you resist the rise of political influence of your rival and facilitate, via economic exchange, its growth  – both at the same time? Such a course will eventually end in a fiasco. Obama’s Pacific pivot, or rebalancing, highlighted the need to respond to Chinese challenge, but has in fact changed little. For the US, the dilemma between the demands of capitalist economy and the imperatives of high politics remains unresolved, and perhaps insolvable. Capitalism gave rise to the US global preeminence. It is this same capitalism that now seems destined to bring an end to it.

 

Artyom Lukin is Associate Professor of International Relations and Deputy Director for Research at the School of Regional and International Studies, Far Eastern Federal University, Vladivostok. Email: artlukin@mail.ru



 

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