In search of a better analogy

Donald Trump’s most enduring legacy may well be relations with China. In a country barely able to arrange mail-in ballots, a tough line on China has become a rare bi-partisan issue. Washington has reoriented itself rapidly. Obama’s Pacific Pivot had rebalanced US resources to Asia, but it is one thing to complain about undervalued exchange rates, quite another to start the biggest trade war since the 1930s; bi-lateral tariffs total $730 billion and were responsible for recession scares across the developed world in 2019.

The shift is deeper than a change in policy instruments. During the 1990s and early 2000s, US policy had been to integrate China into the world economy, turning a blind eye to its trade practices in return for cheap consumer goods and the expectation of political reform. It was hoped that economic liberalisation would lead to political liberalisation and the eventual transformation of China into another South Korea or Taiwan. Tying economic and political liberalisation together was win-win policy for the US. China would either liberalise and become a friendly member of the liberal world order, or resist reforms and stagnate into irrelevance.

This dovish optimism was dashed by the rise and resilience of Xi Jinping’s brand of authoritarian state capitalism.

Today’s escalating tensions with China are rooted in a new, hawkish, calculus. This May the White House released its Strategic Approach to China:

The PRC’s rapid economic development and increased engagement with the world did not lead to convergence with the citizen-centric, free and open order as the United States had hoped… To respond to Beijing’s challenge, the Administration has adopted a competitive approach to the PRC…

Dovish liberals continue to strike an uncomfortable balance between maintaining economic relations and condemning China’s behaviour in Xinjiang or the South China Sea. Angela Merkel has argued “against regarding China as a threat simply because it is economically successful.” However, with more and more allies lining up behind the US assault on Huawei and other Chinese technological companies, this position looks increasingly out of place.

Trump’s advisors are burning bridges to make a return to the dovish policy of the past impossible, regardless of who wins in November. Biden will be more sophisticated and less capricious, but China policy will remain stripped of optimism. China is now firmly a geopolitical competitor.

A New Cold War?

This shift comes with an accompanying analogy, the new Cold War. It provides a coherent frame for the rush of policy lurching out of the White House. Anxieties about China are useful for those lobbying for new defence projects, like the renewal of the US’ nuclear arsenal (already eighteen times larger than China’s). For the two-thirds of Americans who now distrust China, the Chinese political landscape is full of symbolic triggers – the Communist party, the red flag, military parades, and 5-year-plans (2021 will mark the fourteenth). The Cold War’s familiar ending and moralistic cast are an appealing alternative to the grim ambiguity of the post-9/11 world.

Nor is the analogy wholly at odds with events. China’s military and economic power, still partly latent, make it a gravitational pole unlike any modern nation-state except the United States or the former Soviet Union. Security policy is back. Hard questions about territory, power, and sovereignty are resurfacing into politics. Hawks are right to worry about security competition, but wrong about seeing it as a new Cold War.

The familiarity of the Cold War analogy is deceptive. Consider China’s integration into the world economy. Hawks acknowledge this but treat it as a nuance on an old dynamic. The reality is that there is no comparison between the Soviet Union and China. The Soviet Union was an autarchic block; China the success story of export led development. In 1973 Soviet Union exports to nine western countries totaled $23 billion in 2019 dollars. Chinese exports to the US alone were $452 billion in 2019. Beneath trade in goods sits trillions in cross-border financial claims. The integration extends to technology, travel, and tourism. Chinese students are an essential fixture on Western campuses and have turned education into Australia’s third largest export after coal and iron ore.

Until very recently this integration gave China’s external relationships an optimistic tinge. China does not share the missionary zeal for world Communism that animated the Soviet Union and has been content to extend its influence through debt and infrastructure diplomacy (not without their problems), not armed groups.

The scale of integration is unprecedented. In the decades prior to the First World War, the world went through its first great phase of globalisation. Germany was the challenger power of that time, then, as now, a center for manufacturing and exports. In 1913, German exports made up 16% of GDP. Today they are 47%, with total merchandise trade hovering above 70% of GDP.

Today, much of China’s strength is latent and doubts remain about the sustainability of its growth model and the CCCP’s stewardship. It is possible that Soviet style stagnation awaits, but forward-looking policy must deal in the possibility that obstacles will be overcome. If so, the Cold War analogy will not serve.

For all their differences, both hawks and doves take US hegemony as their starting point. They draw their analogies from the familiar stories of the post 1945 order. A more accurate search would go further back, to the emergence of the only suitable analogy to China, the United States itself.

1916

In 1865 the American Civil War ended. Over the next fifty years the United States would knit itself back together with westward expansion, a massive industrial boom, and waves of immigration. This culminated in 1916, when the GDP of the United States overtook the British Empire, then the world’s predominant power.

This is the starting point for ‘The Deluge,’ Adam Tooze’s history of the interwar period. The narrative, which takes in Chinese domestic politics and the Argentinian far-right alongside familiar milestones like the Kellogg-Briand pact (which rather awkwardly sought to outlaw war), is underpinned by the emergence of the United States onto the global scene. The American Century began in 1916, not 1945, with the European powers contemplating a: “universal, world-encompassing empire similar to that which the Catholic Habsburgs had once threatened to establish.”

This came as a profound shock. Contemporaries from Hitler, to Trotsky, to the British Foreign Office were painfully aware of being eclipsed by a “novel kind of super-state:”

“it was the overshadowing of the European power states – a model originating in seventeenth-century Europe and imported to Asia by Japan – by the challenges of a new era and the rise in the form of the United States of a different focus of economic, political and military authority. As a memo compiled by the British Foreign Office put it in November 1928: ‘Great Britain is faced in the United States of America with a phenomenon for which there is no parallel in our modern history – a state twenty-five times as large, five times as wealthy, three times as populous, twice as ambitious, almost invulnerable, and at least our equal in prosperity, vital energy, technical equipment, and industrial sciences”

Today, a world order organised around American hegemony appears natural; the inevitable result of long-run economic forces. Contemporaries did not see it that way. While it was clear the emergence of the United States demanded a response, there was nothing inevitable about the shape it took.

His account is full of contingency. In 1916, the US’ lead was small, and the European powers could (and did) ignore its wishes. Had events gone differently then the war might have ended before the European powers were bled white and left buried under a mountain of war debt; the 1923 agreement on British war debt required an annual payment equivalent to the budget for national education.

What emerges are repeated attempts to fashion a new world order incorporating this “novel kind of super-state.” While few European states relished their reduced role, none believed it could be ignored. The special relationship with the United States and the European project both emerged as possible responses in this period. German fascism too, with its Lebenstraum obsession, the ‘living space’ for the German people to be carved out of Eastern Europe, was partly a response to the continental sized resources of the United States.

It is here, in the three-decade attempt to fashion a new world, that we find the most productive analogy for today.

There are important differences. Today’s order is stronger than it was in 1916. There has been no war between major powers in decades. Our institutions ride decades of inertia. Unlike the British Empire in the 1920s, the United States still has the capacity to be the world’s policemen. Nor is China as powerful as the United States was. This century’s 1916 moment is unlikely to come until the 2030s and today, China’s per-capita GDP is still lower than Brazil’s. China only plans to finish modernizing its defence forces by 2035.

These differences do not detract from the core point. China will soon be a globally integrated super state not seen since the emergence of the United States in the early 20^th century. 1916 frames today’s politics around the unprecedented and the unknown. It demands we refuse easy analogies with familiar endings.

1916 suggests several lessons. Firstly, no one and no arrangement will be left unaffected. This is a question for large trading partners and regional neighbours as much as African petro-states like Angola or Brazilian soy-bean exporters. The point appears trivial, but the implication is to vastly increase the complexity of the issue. Already it is shifting the domestic calculus in states from the Solomon Islands to Serbia. The longer a systematic solution takes to organise, the greater the pressure on smaller states to act independently and unexpectedly.

Ultimately, responses must reach beyond the simple binaries of confrontation or détente. China’s scale and integration make passive coexistence insufficient. Cold-War confrontation would be wildly irresponsible given the global stakes in China and its reasonable expectations for regional influence. It is hard to escape the conclusion that the United States will simply have to make room at the top, as others once did for it.