Containing China Economically

Assuming that we can summon the courage to contain Beijing militarily, the next leg of the containment stool is to restrain China economically. Military containment will prevent China from overrunning other lands and peoples, but only economic containment can bring the Chinese Communist Party to its knees (or its senses).

In Cold War I, it was very difficult for the West to put economic pressure on the Soviets because the USSR existed almost entirely outside the global economy. If the Soviet Union couldn’t produce a particular good, and couldn’t import it from China, the country simply went without that good—even if it was food.

Many observers believe that economic warfare against China is both difficult and unwise as a result of the opposite challenge: Because China is so fully incorporated into the global economy of today, the West can’t hurt China without hurting itself.

But I suggest that “hurt” is a relative phenomenon. Yes, if we put economic pressure on China and the Chinese economy slows further, that will certainly affect global growth rates.

But it’s important to keep in mind that much of what has passed as legitimate economic growth over the past few decades has in fact been a kind of “dirty” growth, tainted by the suffering of millions of Chinese, Uighurs, Tibetans, Nepalese, Macanese, Hong Kong people and countless others. And it has been “dangerous” growth, simply increasing China’s clout in the world.

In any event, whether we affirmatively seek to interfere with Chinese growth or not, the future world economy will very much play out against China anyway, as globalism continues its slow retreat almost everywhere. The economic aspect of Cold War II is intended simply to ensure—and, if possible, to accelerate—China’s relative decline.

Many people imagine that the reaction against globalism is a temporary phenomenon associated with Donald Trump, Brexit, yellow vests, and so on. As soon as the current fetish for populism passes, goes this way of thinking, newly elected leaders will return to globalism with pent-up zeal.

That, however, is wishful thinking—it ignores what has actually been happening over the past 30 years. To understand why, let’s go back three decades, to 1989.

Following the collapse of the Soviet Union, the world became unipolar for the first time since the peak of Roman power in the second century. (And even Rome had to contend with the mighty Persian Empire.) It was also the most unipolar world in history: most experts estimate that the U.S. military is seven-to-ten times more powerful than the militaries of the entire rest of the world combined.

Although you would never know it from what passes for education in American universities, the U.S. used its massive power more wisely and unselfishly—by far—than any power in history. (Although, of course, hardly without the occasional blemish.) The most important thing the U.S. did was to put the American military in charge of guaranteeing the security of trade routes all over the world, especially the sea and air lanes.

Although small, localized wars might break out in the Middle East or Africa or even Eastern Europe (Crimea, the Balkans), those conflicts didn’t compromise international trade. If they had, the U.S. would have come down much, much harder on the belligerents.

The result of this long, secure peace was extraordinary economic growth in which the world’s peoples became wealthier by far than ever before—wealthier, indeed, than could ever have been imagined. Several billion people who had lived in abject poverty since the beginning of time now live in something approaching relative affluence.

It is hardly too much to say that, if you had to pick the best 30 years in which to be a human being over the entire course of human history, you could do a lot worse than choose to be alive between 1989 and 2019.

Still, when the USSR collapsed, America’s military might was vastly more dominant than America’s economic might—we represented only about 25 percent of the global economy, not seven times the rest of the world’s GDP.

So why would a country producing only one-quarter of the world’s economic output agree to fund the entire bill for global security? It only made sense as long as two critical factors remained in place: the world had to remain unipolar, and America had to benefit from the system at least as much as anyone else.

Unfortunately, neither condition exists today. The aggressive rise of China has returned the world to something like the bipolar, two-bloc world that existed while the USSR flourished. China is, today, a legitimate challenger to American supremacy economically, diplomatically and, increasingly, militarily.

And it has turned out that Americans weren’t, in fact, the principal beneficiaries of global growth. Those beneficiaries were countries whose economies are powered by exports, especially China, Germany, South Korea, and the emerging markets. Exports represent only about 12 percent of U.S. GDP.

Worse, to the extent that America did benefit from the securer world it created, policed, and funded, far too much of that benefit went to a small elite that has, in effect, decoupled from the rest of America economically, educationally, and culturally.

Looking at the past three decades without the rose-colored glasses favored by Davos Man, what we find is that America created and protected a world that was designed to lead to its own demise. We funded Chinese growth and protected it from harm, while the Chinese (along with most of the rest of the world) were simply free riders.

Donald Trump is the first American President to act aggressively against the abuses of globalism, but he will not be the last. In fact, a Hillary Clinton Administration, although of course it would have been very different in style, might have been even more hard-nosed about asserting American interests against the Chinese.

Next week we’ll look in more detail at how China is likely to fare in a world where globalism is in retreat.

Next up: Cold War II, Part 8