Published: 19th August 2016
(a version of this article was published at Prospectmagazine.co.uk on 18/08/2016)
Every now and again, people think they detect shifts in the world’s centre of gravity, and make bold predictions of change they eventually wish they hadn’t. How should we think about today’s global axis between the US on the one hand and China and Asia on the other?
People do get things wrong. As dawn broke on the 20th century, Germany was going to seek ‘a place in the sun’. In 1941, the American publisher, Henry Luce was the first to proclaim the American century had arrived. By the 1980’s, America’s imperial over-stretch featured in Paul Kennedy’s book ‘The Rise and Fall of the Great Powers’, and Japan, where the Emperor’s gardens in Tokyo were valued more highly than California’s real estate, was going to buy America and claim global leadership.
By the time the USSR and communist regimes in Eastern Europe had collapsed, and Japan’s bubble burst, a new rivalry – at least of thinking – could be detected. Francis Fukuyama famously wrote ‘The End of History and the Last Man’ in 1992, and had already claimed 3 years earlier, as deputy director of the US State Department’s policy planning staff, ‘the exhaustion of viable systematic alternatives to Western liberalism’. One almighty financial crisis later, of course, this view didn’t hold up so well.
For other people, though, it was Japan’s neighbours in East Asia, including China, that were poised to pick up the baton. At a meeting between Deng Xiaoping and Indian Prime Minister Rajiv Ghandi in 1988, Deng is reported to have said the next century would be the century of Asia and the Pacific.
Deng wasn’t the first to think Asia, with China at its heart, would evolve this way. Its geopolitical significance was articulated back in 1944, as the tide in the Pacific War turned in favour of the United States. Nicholas John Spykman, a geographer and strategist, wrote ‘The Geography of Peace’, in which he emphasised the strategic and maritime significance to the US of what he called the ‘rimland’, or the countries and islands on the rim of the continental powers of the US, Europe, and the then USSR. The geography of the rim ran from Southern Europe and the Maghreb, east through the Persian gulf, into the Indian Ocean, across to the South China Sea and up to Japan and the north-west of China. Spykman said that whoever controlled this rimland would rule Eurasia, and the destiny of the world – a judgement that has been embedded in US military, foreign and international economic policies to this day.
President Obama’s support for the Trans Pacific Partnership trade deal, whose fate is dependent on the US election, and the military’s view about future strategic challenges emanating largely out of the Pacific region and the littorals of the Indian Ocean are testament to Spykman’s judgement. It is also, of course, increasingly part of a more assertive China’s Weltanschauung, as demonstrated economically via the One Belt One Road strategy, and militarily and politically through China’s naval military build-up and its assertion of maritime rights in the South and East China Seas.
In this now real economic, political and military rivalry, there are those who subscribe, especially in the wake of the Western financial crisis of 2007-09, to the title of a book published by Singapore’s Professor Kishore Mahbubani in 2008, called ’The New Asian Hemisphere: the irresistible shift in global power to the East’. Mahbubani’s theme was that Sino-centric Asia was blessed with a superior economic model to the broken and debt-ridden free market, liberal capitalist variety. There might no longer be strong ideological differences between the West and the Orient, but there were and are strong differences in their economic and social models, and approaches to foreign trade and investment centred around the role of the state and state institutions. Put simply, Asia was better and better suited at pursuing economic and social goals in the modern era.
As though to top it all out, Martin Jacques wrote the voluminous ‘When China Rules The World’ in 2009, in which he brought the sense of a Chinese civilisation with strong elements of continuity to life, rather than the achievements of relatively young (by comparison) nation states. Note the title didn’t say why it might rule the world or what the challenges might be, but ‘when’, as if pre-ordained.
Take a step back, and the idea about extrapolating China’s and Asia’s future in 2008-09 now looks like hubris. In 2011, China’s economic growth peaked, and it has been downhill ever since. In fact, the slowdown in economic growth looks increasingly structural, misallocation of resources is rife, a debt burden is accumulating that is unparalleled for a country with China’s per capita income, and it is unique among emerging countries for confronting the consequences of rapid ageing this early. President Xi Jinping has amassed more power than any leader since Mao, put the Communist Party at the centre of decision-making, usurping the function of government ministries, and presided over the development of what some analysts describe as a ‘controlocracy’. No one pretends China won’t continue to be a hugely important country, dominating Asia, but its pretensions to global leadership, let alone ruling the world, now ring rather hollow.
We have been warned before about extrapolations that go awry.
In 1994, the renowned economist Paul Krugman, wrote in the magazine Foreign Affairs about the ‘Myth of Asia’s Miracle’. He asserted there was nothing special about Asia’s economic advance in the 1980s and 1990s that couldn’t be explained by the mechanical relationship between inputs and output. It was, in effect, more about perspiration, in his view, than inspiration. Though he was vilified at the time across the region, the Asian crisis in 1997-98 didn’t do his cred any harm.
In 2013, your scribe wrote an essay, later published at length by the Centre for European Reform, called ‘Asia’s Fading Miracle’ in which the key themes were that the miracle was about catching up, commodities and globalisation, we had arrived at the end of extrapolation, and that China, itself, faced a rising threat of financial instability over the medium-term and of slipping into the ‘middle income trap’.
And this week, Tyler Cowen, Professor at George Mason University, wrote an opinion piece in which he dismisses the idea there is any such thing as an economic miracle. He asserts that most of the world’s wealthiest and best governed countries owe their status to slow, steady growth and good governance, or put another way, robust inclusive institutions. The counter-part to this is that ‘miracle growth’ is mostly about catch-up that utilises borrowed and adapted technologies.
A look around certainly testifies to this view. The Asian growth model suddenly looks rather pedestrian. Still faster than in the West as it should be but a pale comparison of the go-go years of the 2000s. Investment and exports are under a cloud, consumption is restrained, social security systems are immature, and political and corruption problems are common.
Few people enthuse about the US right now. No one can understand really how Donald Trump came to be a candidate for the highest office on the planet, productivity growth and business start-ups are weak, and there is a social and middle class angst that hasn’t been there in our lifetimes. But, as I suggested at the outset, history has made fools of those who thought they could see clearly shifts in global power, and we might well ask trenchant questions about the balance between substance and hype in China ruling the world, the BRICS in the world economy, and the Asian Century. One contrarian, worth noting is the US political scientist and Harvard professor, Joseph Nye, who wrote in his 2015 book ‘Is the American Century Over?’ that America’s role in the global system rested on the exercise of economic, military and soft power, as well as its unique geography, the last of these having been considered as the source of power by none other than Napoleon.
America’s economic power will surely diminish relatively as China’s GDP finally exceeds it though in per capita terms, China will remain far away for a very long time, and America’s innovative capacity still remains a lot stronger. Its military power is unparalleled and even though China will catch up, the gap will remain large and China must avoid financial and economic unrest, which it is on course to address. US soft power and influence, though, will keep the US prominent if not dominant for as far out as we care to think, unless, that is, the November election should see Trump become its totem. As Nye, says, the American Century should last for some time to come, even though it’ll look different from what Luce had originally imagined.