The world power structure has been undergoing a fairly rapid transition in the last four decades. From an American-dominated world economic system to an Asian-dominated one, the transition means that China is becoming the world’s number one economic power. Most analysts, including the World Bank, have been predicting as much. By the end of 2014, China will be the world’s largest economy in terms of PPP (purchasing parity power). While the US now ranks 10th in the world in terms of PPP per capita, China is very poor, ranking 89th, according to the International Monetary Fund (IMF). Global power transition also means a de facto expansion of the G-7 to G-20 or even G-22, despite the objections of the US based on political considerations that have nothing to do with objective economic power of countries such as Russia.
Many political observers of the US and the international order believe that indeed the era of Pax Americana – the US-dominated international order from 1945 to the end of the 20th century – is experiencing its twilight in the early 21st century. Some believe that China along with Russia, India and Brazil would be influencing the world order later in the 21st century, especially if another deep global recession later in the century delivers a serious blow to the US and EU. Others argue that we are probably going back to pre-WWI Great Powers decentralized structure that would mean the end of globalization and a new round of nationalism, regionalism, trading bloc alliances, and instability owing to greater competition at the economic, military and political level.
America’s economic fall from global preeminence will be a gradual process largely because the US will retain the number two spot behind China, but it will remain militarily number one in the world for the balance of the century, thereby exercising enormous political and economic influence. Paradoxical as it may appear, the transition from the West to Asia actually extends, strengthens and prolongs the capitalist system rather than weakening it, just as the transition from London to New York in the 1920s did the same, despite the Great Depression. Nevertheless, the transition will continue to have an impact on the US socioeconomic structure as currently constituted because the dominant voice in managing the world system will no longer rest with the US and its junior European and Japanese partners. In other words, the IMF, World Bank, World Trade Organization, International Labor Organization, to mention just a few, will eventually have to heed the voice of the number one economic country China, rather than the number two US.
What will the transition mean for the US and its Western allies, Japan and Australia? Do we now live in a polycentric economic structure with the US remaining the world’s military superpower? Will the US play second fiddle to China economically, trying to remain influential by forging alliances to contain China? More important, does global transition entail upward socioeconomic mobility for Asians and downward mobility for the US; greater pluralism and democracy for Asia and lesser democracy for Americans? Does the transition entail greater or lesser global stability, greater or lesser lifespan for capitalism?
Beijing’s Skepticism about Global Preeminence
There is the question of whether the Chinese political elites want to replace the US as the world’s number one economy at this point or even in the next couple of decades. Does the government in Beijing believe it is in their favor to have moved this fast, raising expectations of their own population that aspires to higher living standards, greater pluralism, greater Westernization and greater voice to religious and ethnic minorities, and the end of the one-party state?
Even if the domestic demand rises to meet consumers’ higher expectations, there is a debate among China’s political and military elites if the country ought to strengthen the defense sector that lags far behind the US by a 10 to 1 ratio. Unlike Japan and South Korea that have relied on US defense support while they industrialized, China is not in a comparable position. Regardless of trade agreements and even scientific and technology contracts that even involve defense cooperation with Russia, China has to take into account nuclear-powered Russia on one side, and the military allies of the US on the other side, including India that is competing with China. These geopolitical realities require that China vastly expand both air force and navy that will go hand-in-hand with economic expansion. If the US forces China to spend itself into oblivion for the sake of military competitiveness, would China not risk serious damage to the civilian economy?
The Chinese military establishment has questioned the wisdom of the military power gap with the US, and this is one reason Beijing has been collaborating with Russia in new military technologies. Asymmetry in Chinese economic vs. US military power status present a threat to global peace in the 21st century or even a direct clash between US and China? Although Beijing has indicated with its votes at the UN Security Council that it is shy about directly confronting US interventionist policies, it tends to vote with Russia on key issues affecting the balance of power in the Middle East and Asia.
Neither Republicans under Nixon-Ford nor Democrats under Carter had any illusions that China would not become an American strategic partner like the UK, but it had its role to deter the USSR and an enormous economic potential. In the 1970s under Republican and Democrat administrations, the US made a political decision to help strengthen China economically so that it could benefit from its integration owing to cheap labor and cheap raw materials, while at the same time helping to hasten the downfall of the Soviet bloc. Achieving the goal of bringing down the Communist bloc, the US helped to create a very powerful China amid an emerging polycentric economic structure in which the US is destined to play a secondary role later in the 21st century.
Not that the world economic structure was not evolving toward a polycentric model even before China’s emergence to globalism and the downfall of the Communist bloc. However, the emergence of a very strong China and a weakened Russia created geopolitical problems for the US and Europe. It is not in China’s interest to permit the West to determine the Eurasian balance of power. Experienced US diplomats knew this while negotiating trade deals with China, but there was always the priority of undercutting the USSR.
As much as China continues to pursue economic integration with the entire world, it has a very clear geopolitical agenda that includes preventing the EU and US from reducing Eurasia into spheres of influence as was the case from the Opium Wars until the Civil War of the 1940s. The Ukrainian crisis in 2014 demonstrated to China and the world that the US and Western Europe are not only interested in securing markets and energy in the former Soviet republics, they are also pursuing containment of Russia by trying to acquire new spheres of influences.
US Eclipse from Global Power Politics: Realistic or Hyperbole?
The transition from the US and the West to China and the East does not mean that the US is about to eclipse into a global role comparable to the Russian Federation that has been on the defensive and using energy and nuclear weapons as leverage. Despite its rich land in agriculture, minerals and energy sources, and despite its defense sector and space program, Russia has lapsed into a regional power. It is highly unlikely Russia will have a major global impact in the next three to four decades as it once did during the Cold War. Unlike the USSR that was a military superpower without achieving economic superpower status but still playing a global political role, the US will retain its Western preeminent influence. This is largely because of the various international organizations from trade and financial to defense under US influence.
While it is true that wars have been responsible for many of the transitions of power from one country to the other, invariably it is internal government policies that find expression in foreign affairs that lead to the ascendancy or demise of a country. This is not to understate the role of war that assumes a militarist foreign policy and considerable defense spending. Although I am convinced that disproportionate spending on defense at the expense of the civilian economy is detrimental and has brought down great powers in the past, I do not subscribe to the theory that war is the sole cause for the decline of empires.
From the Athenian and the Roman Empire in ancient times, to the Carolingian and Angevin Empire in the Middle Ages, from the Ottoman to the Hapsburg Empire in the early modern European era, from the British to the German Empire, the combination of costly wars and disastrous domestic policies undermined the economy and social fabric led to decline and fall. At the same time, the absence of political, economic and social modernization converging of anachronistic militarist policies pushes powerful countries toward decline and fall.
Short of anything drastic like the use of nuclear weapons or costly military interventions, it is highly unlikely the US will crash like Europe and Japan after WWII or the USSR after its dissolution. Equally unlikely owing to the very close economic integration of China with the US is a direct military conflict between the two that would spell disaster for both and the rest of the world. A smooth transition is much more likely. After all, the power transition from Japan as Asia’s dominant economy to China went very smoothly when China took the number two position. A similar scenario could possibly evolve when the US lapses into number two behind China, though with the key difference that the US will retain the number one military role for at least a century.
Those who have doom and gloom scenarios for America ignore very basic facts. The US has the natural protection of the two oceans, the vastness of its rich energy, mineral and agricultural land, and neighbors highly unlikely to engage in the kind of encirclement policies that Germany felt it suffered before 1914, or the kind of containment policy the USSR endured and Russian Federation continues to endure. A containment policy toward China is also in existence at various levels, from economic, political and military, given the various trade and defense treaties of the US with Asian nations. Contrary to what many politicians, analysts and journalists assume about the dire consequences of the global power transition from US to China, from the West to East Asia, the result will be prolonging and further empowering capitalism, just as China’s integration into the global economy has contributed a major jolt for the market economy in the last three decades.
Historical Antecedents to Pax Americana and the Road to Asian Transition
While the US emerged from a British colony to emulate the mother country and become the preeminent world power in the 20th century, China was a powerful player in Asia for many centuries before the Opium Wars (1839-42 and 1856-60) that reduced its fate to a satellite of the Great Powers. Similarly, Russia from the reign of Peter the Great to Catherine the Great enjoyed regional hegemony that elevated the country to Great Power status, despite its failure to modernize the economy and government institutions. Russia’s failure to modernize its state structure and economy, the absence of a political and industrial revolution entailed failure to compete on a global basis and erosion of their power until the Bolshevik Revolution of 1917.
Revolutions in the case of the US, Russia and China propelled all three to change regime, strengthen and modernize the state structure along with the economy. The catalyst to the rising power was not anything the private sector did, as neoliberals assume, but the radical restructuring of the state apparatus that provided the mechanisms for society to modernize and explore the full potential of natural and manpower resources. Political revolution was the common denominator as much in the US as in Russia and China. Just as the English Glorious Revolution and French Revolution unleashed the channels that allowed for the Industrial Revolution to move ahead, similarly, the American Revolutionary War and especially the Civil War that accounted for national economic integration did the same.
With roots in the Monroe Doctrine, the US has actually been a force of global instability abroad through covert and overt military operations as a way of building and keeping the empire for as long as possible. The American Empire has gone through a cycle of infancy in the 19th century with internal colonization and wars against Mexico (1840s) and Spain (1898-1900), proceeding toward a policy of economic imperialism in the 20th century through integration based on the patron-client model. Pursing aggressive interventionist policies amid economic expansion, the US opted to build its defense sector in the 1890s and accelerated such spending during the 1910s. Policies based on the rise of Pax Americana are themselves the seeds of internal decay and a major cause of the cycle of decline.
The US suffered public debt deficits almost on a chronic basis from the War of Independence until the end of World War II. Deficit financing was one way that the US used to build its infrastructure in the 19th century and under the New Deal to recover from deep contraction. Because the US enjoyed political stability, with the exception of the Civil War years, and because it had at its disposal enormous natural resources and even bigger potential for growth, Europeans continued to invest in the US, and to finance the public debt that was inconsequential. The US underwent rapid industrial and agricultural development after the Civil War, emerging as the world’s number one food producer by the end of the Spanish-American War.
During the Progressive Era (1900-1920) under Republican and Democrat presidents, the public sector expanded to reflect the expansion in big business that the state had to serve and to a degree regulate amid fierce inter-sector competition where the railroads could have seriously undermined the mining and agrarian sectors by insisting on high prices under monopolistic practices. The state structure continued to strengthen and to play a catalytic role in helping in the economic expansion of the private sector, securing greater foreign markets in the Western Hemisphere as well as Asia, and looking ahead to a competitive century by securing the Panama Canal. Pax Americana was guided by the state for the benefit of the private sector, especially large corporations and banks that became even larger in the first three decades of the 20th century, contracting temporarily in the late 1920s and1930s.
London was still the world’s financial capital, but New York was quickly catching up replacing it after the end of WWI. Facing very serious economic problems and falling into debtor status, England tried to place some of the costs on its colonies. After 1920, the US could have grabbed the reigns of managing the world economy through international organizations as it did after WWII, but it opted for isolation that contributed to the Great Depression.
That the US became involved in two global wars in the 20th century, both fought outside its soil, and both weakening its European and Japanese competitors helped propel the country from Great Power status that it enjoyed during the Spanish American War to Super Power by 1945. Pax Americana was never more powerful, more prosperous, and more influential to determine the global balance of power as the Paris Peace Conference of 1919 and the various conferences proved at the end of World War II. It was not only geopolitical issues that were settled at those conferences, but also key issues about access to crude oil, minerals, and especially markets to sell the surplus products the US was producing as it industrialized very rapidly.
Besides the core issue of military and economic concentration within the G-20, there is also the question of whether the core countries, especially the US-led NATO alliance is a global force of stability or instability amid the Western decline and Asian emergence. There are scholars who argue that not just the US, but all imperial powers are forces of instability because their goal is economic, military and political expansion or influence. There are also those who maintain that in the post-Cold War world order, nationalism which had been dormant from 1945 to 1990 is about to reawaken along with intense competition because the bi-polar geopolitical division is now dead and the multi-polar one is a reality.
If the term stability according to apologists of Pax Americana means adherence to the US-imposed model of global integration, then of course there was stability by force. In this case, however, we would have to argue that Pax Romana from Augustus Caesar to Marcus Aurelius was an era of stability and peace, with minimal military intervention in order to conquer new lands, largely because Rome had created a world empire and all enemies of any consequence had been conquered. Rivaled only by the distant Chinese Empire under the Han dynasty 206 B.C.-220 A.D., Rome was left with the role of policeman of its Mediterranean-European empire. That the early Roman Empire experienced roughly two centuries of relative peace and stability does not mean that there were no social problems, despite the “Bread and Circuses” that was in essence of form of welfare to keep plebeians docile. Pax Romana shows the inexorable link between relative domestic tranquility and success in foreign affairs, something we also see in Pax Britannia as well as Pax Americana.
From the end of the Napoleonic wars in 1815 until the outbreak of the Great War in 1914, Great Britain played the role of world policeman during an era known as Pax Britannia. The vastness of the British Empire and its dominance of the seas and international trade permitted England to play such a role. However, the period from 1815 to 1914 was hardly free of smaller wars and after 1870 the global competition for colonies, semi-colonies and spheres of influence cause the wars of imperialism that ultimately led to WWI. In short, the famous Pax Britannica was not nearly as peaceful, nor effective in maintaining the international order because imperialism had its own dynamic driving the policies of the Great Powers.
Contradictions in Pax Americana and the Road to Decline
In the case of Pax Romana and Pax Britannia the end was inevitable because imperialism was the driving force of all policies. Intended for the glory of the rulers and for the benefit the socioeconomic elites, imperialism led to internal contradictions in the economy owing to parasitic military spending. Just as the Roman Empire and the British Empire collapsed largely because of decadence from within and only in part because of external forces like the Barbarian invasions, similarly, the US has been declining from within and hardly because there are any Barbarians at the gate. Of course, some apologists of Pax Americana blame everything from lack of a stronger commitment to defense and intelligence, others blames the welfare state and lack of an even more pro-business regime, still others fault the US for helping China’s global economic rise as part of a plan to undermine the USSR.
Having enjoyed Great Power status from the Spanish-American War 1898 until the outbreak of WWII, the US found itself in the preeminent economic, military and political role in the world after 1945. This was an enormous responsibility because it meant the US would have to establish and/or reorganize national and international organizations to manage the world economy and political order. The establishment of IMF and World Bank as well as NATO, Organization of American States, and South East Asian Treaty Organization to maintain military hegemony.
The degree to which the US will be able to continue exerting dominant influence in these organizations depends on domestic politics of the member nations as well as new alliances are forged. The US will find it increasingly difficult to provide military aid to all of its allies to keep them loyal in a broader containment policy toward China and Russia. Maintaining the robust alliance system in tact assumes a strong economy that can sustain a strong military. Choosing between a strong global military presence and a strong civilian economy is always seems possible and desirable to reach consensus among the elites. Despite his rhetoric that guns (militarism) and butter (social welfare based on the Great Society model) are possible, president Johnson recognized he had weakened the dollar and driven the balance of payments deficits much higher because of defense spending. When Nixon came to office, he discovered that it is either guns or butter, not both, a contradictions the Reagan administration settled in favor of guns and against the social welfare state.
US Balance of Payments Problems during the Cold War
The Bretton-Woods system established in 1944 with the IMF and World Bank as the two institutions that would manage the world capitalist economy by coordinating their policies with the Federal Reserve Bank of the US helped to solidify the dollar as a reserve currency. The dollar simply rested on the faith of the US economy, the gross domestic product, plus the balance of payments - deficit or surplus - that largely determine the currency value against other currencies. Because the dollar was and remains a reserve currency, the US could write checks as though they represented gold in the bank as collateral. While the IMF imposes austerity on debtor nations, the US has always been above such restrictive IMF conditionality and enjoyed total monetary sovereignty.
After 1945, both public and private investment increased immensely in the US that investors deemed the safest place for their money. In 1945, the US held 70% of capital in the world, and even in 1952 when Europe and Japan were beginning to recover the US held 50% of the world’s reserves, although it population was a mere 7% of the world’s total. While Europe experienced balance of payments deficits and dollar shortages from 1945 until 1953, the US was enjoying dollar surpluses and the dollar remained a very strong reserve currency. After the end of the Korean War, Europe began to accumulate dollars amid a better balance of payments situation given the trade surpluses it was enjoying with the rest of the world.
Capital outflows accelerated during the Eisenhower administration and continued thereafter, leaving the US for Europe, Japan, South Korea, Taiwan, Australia and Canada. US gold reserves began to dwindle following the trend of the rising balance of payments deficits. Some of the reasons for the gold and dollar outflow were directly related to US-based corporations investing in the rest of the world. The US military bases in Europe, Asia, and Panama, along with NATO, OAS, SEATO, and the chronic arms race at the conventional and nuclear levels absorbed enormous resources, weakening the civilian economy and adding to the drain of gold and dollars. For the privilege of maintaining global military hegemony, the US had to pay part of the bill to defend Japan, South Korea, Taiwan, Western Europe, Latin America and parts of Africa and the Middle East, especially Israel as the largest aid recipient.
Besides outflow of US public capital, there was massive outflow of private capital, chasing cheap labor, cheap raw materials and market share. The bulk of private US investment in the world has been made by the top 500 companies listed on the stock exchange. This was made possible because the US government – departments of Commerce, Agriculture, and State – but also the World Bank and IMF have been pressing for decades for favorable treatment of foreign capital, favorable tax, labor, and environmental laws, as well as guarantees against nationalization, and access for local banking capital.
With the balance of payments problem eroding the value of the dollar toward the end of the 1950s, as the IMF secretly informed the Eisenhower administration, the US could have reversed course from the costly policies of massive defense spending – from Keynesian militarism (surplus capital absorbed by the defense sector) – and moved toward a more measured and less militaristic foreign policy. However, both ruling parties decided to continue feeding the military-industrial complex that Eisenhower warned would undermine the civilian economy.
Capital outflows from the US to the rest of the world had an impact on the value of the dollar but also on the US consuming what the rest of the world was producing. Flight of capital and industry from the US to the rest of the world is not the only reason for the inevitable weakening of the US economy that went from a credit surplus to a debtor nation. The massive capital concentration combined with the parasitic defense sector spending, and a shift from social welfare to corporate welfare crippled the economy.
While critics of the US public debt argued that during the Reagan-Bush decade of the 1980s the debt tripled, US companies also tripled their borrowing. Private debt as a proportion of shareholder equity doubled over the same period reflecting the trend of mergers and massive capital concentration. The Reagan-Bush decade was not only crippling for the public debt that weakened the dollar as a reserve currency, but it was accompanied by a comparable rise in corporate debt, largely because government deregulation allowed for a businesses, including banks and insurance companies once deemed safe investments, to gamble on the stock market with massive debt.
When Ronald Reagan took over in 1980, the US public deficit was around one trillion dollars, climbing to three times that size ten years later. In just ten years of Reaganomics, massive tax breaks to the wealthy and corporations, combined with massive defense spending, the US became the world’ largest debtor nation. During the same decade, corporate mergers, leveraged buyouts, and hostile takeovers, added immensely to the privately-held debt. This meant increased reliance on foreign borrowing because the US was spending roughly five percent more than it was producing. The only thing that saved it was the dollar was still a reserve currency, something equivalent to writing checks without having any collateral in the bank. At the same time, the US was celebrating the end of the Communist bloc and the opening of fresh new markets for integration into the Western-based global economy.
The enormous balance of payments deficits, weaker dollar, and weaker economic foundation at a time that the rest of the world was trying to catch up with the US meant declining living standards for the middle class and workers. If it were not for the role of the dollar as a reserve currency and crude oil transactions conducted in dollars, the US economy would have gone into tailspin during the Nixon-Ford-Carter years. Even in the last two decades the dollar has retained its value largely because of the oil producing countries, China, and Japan have been buying US treasury securities. Of course, the buyers of the US securities really have a self interest, but this is a form of dependence that eventually could create complications for the US. For its part, the US and EU have tolerated a significantly undervalued Chinese currency that in essence helps China’s exports and limits foreign products in the Chinese market.
With other reserve currencies in the world market diminishing the dollar’s status, how long would international trade and financial transactions by relying even less on the US dollar? Tokyo and Beijing are concerned about carrying such a heavy load of US securities. For its part, the US has tolerated manipulation of their currencies and recognizes that during the global recession of 2008-2012 China’s robust growth kept the world economy from an even deeper crisis. Nevertheless, chronic US public debt means the dollar would depreciate, even if the euro has currently taken a dive because European economic prospects look much worse than those of the US.
There are those in political and financial circles in Asia favoring a single Asian currency competing with the dollar, euro and British pound sterling. This prospect ought to concern everyone in the West for it would mean the sharp drop of the dollar and the euro, especially if this comes suddenly and without lending support for the Western currencies.
While many expect the days of Pax Americana are over and strong defense is the last leg of the imperial system, no one wants a sudden death situation because it is to no one’s benefit in this interwoven global economy where interdependence is a reality and reserve currencies are based not on gold but “faith” and “in God we trust” to keep the currency going in a credit-based economy.
The signs are already there not just in the statistics of living standards, but in decline of upward social mobility and growing socioeconomic polarization. In addition, there is the absence of reversing the current trend that has been brewing in the last four decades because the political elites inexorably linked to the economic and military elites do not and will not for the rest of the century change course in any significant manner to slow down the decline in the societal structure. If were running a company in the military hardware business, I would put the company’s quarterly profits above all else because this is what investors expect.
Inordinate defense spending does not mean that the scientific and technological fields would suffer from lack of funding, but that the beneficiaries of such progress would be lessening instead of growing and this will eventually impact progress in science and technology. The global struggle for control of strategic minerals, energy, and raw materials that was intense during the Cold War has not ended and it will become more intense.
China’s Global Market Share and US Geopolitical Role
China has already started to be a major competitor in Africa and Latin America, diluting the historic trading privileges of the US and Europe by striking special deals for raw materials. The response of the US is to use its military hegemony, political influence, relative self-reliance on raw materials and energy, and the influential role of the US-based multinational corporations along with the IMF, World Bank, and WTO to continue exercising influence on the world scene.
Flight of industry and capital from the US to the rest of the world was natural because businesspeople chase the lowest cost, highest profit and fewest government regulations at the safest possible place of investment. One of the pressures that both the IMF and World Bank placed on their members resorting to currency stabilization loans (IMF) or development loans (World Bank) was and still is open investment climate, low taxes, fewest labor regulations possible, and freedom to repatriate profits.
In addition to capital and industry flight from the US, the tax laws and tax loopholes that permit corporations and individuals to shelter billions abroad so they can avoid paying taxes in the US has had a crippling impact on the fiscal structure and of course on the public debt. From the Reagan presidency to the present, we have seen the expansion of corporate welfare without a corresponding increase in productivity because of the enormous rise in speculative investments that even the IMF has condemned as a drain from productivity not just in the US but globally.
The US cannot retain its privileges in the global arena in the absence of key alliances and alignments, as was the case with the British Empire before WWI and especially during the interwar era when the home-base economy was in serious trouble and the government manipulated the economies of the colonies and dependencies to strengthen the mother country. The lack of trust on the part of all nations toward each other affords the US the luxury of retaining considerable influence. This does not mean that the end of Pax Americana will not be responsible for small crises in the international political economy that hates uncertainty and marches to the tune of market and financial stability.
Political uncertainty translates into economic uncertainty and that places pressure on investors who are motivated by fear and greed. Excessive profits and capital concentration, speculative investment, and borderline legal financial transactions intended to avoid paying taxes and deceive if not defraud investors have contributed to the decline of the capitalist system in the US. Rather than investing in research and development, rather than setting aside short-term quarterly profits for long term growth, including good salaries and benefits for employees, the private sector with the acquiescence of the state has undermined the economy, sinking it deeper into a parasitic mode that contributed to the deep recession of 2008-2012.
One irony in the process of Pax Americana’s decline is that for decades it preserved itself by diminishing the national political, economic and military sovereignty of other countries over which it exerted inordinate influence. Yet, the price the US is now paying for the privilege of creating and maintaining its global role is that it inadvertently strengthened the national sovereignty aspects of countries reacting to Pax Americana’s hegemony. This is not just in the case of extreme cases like Iran and North Korea, but of France under Charles De Gaul in the 1960s and of Russia under Putin in our time. The same holds true of South Korea, Taiwan, Argentina and Brazil, to mention just a few where national preeminence became a priority overcoming the obstacles of external dependence the US imposed.
Anything can change in the global power structure in case of unexpected wars that weaken certain countries, as was the case of the two global wars of the 20th century, while strengthening others. In 1900 it was difficult to predict that 100 years later the US and China would be the dominant economic powers, while Germany and Great Britain would have secondary roles. The irony of the Russian and Chinese Communist revolutions is that the first unfolded and resulted in a weakened nation-state by the end of the 20th century, while the other continued strengthening the state structure by adapting into the capitalist mode of production.
Even in 1970 it was impossible to predict that China would emerge so powerful while the Soviet Bloc would collapse; that Japan would fall behind China in world economic rankings; that the US would rely increasingly on its military might rather than economic power to influence the international balance of power; that India, South Africa, and Brazil would be candidates for rapid economic expansion; that Europe would revert to a pre-1914 integration model in which Germany is dominant on the Continent competing to remain a global player at the expense of and imposing economic imperialism on southern and eastern Europe by using the leverage of the common currency.
US Containment Policy and Lingering Pax Americana
There is a possibility of rival alliances unraveling in the 21st century and reshaping the global balance of power. This was the case before WWI, when suddenly Japan and Germany demanded to exercise hegemonic power at the expense of other Great Powers, without taking into account the US also emerging as a Great Power and influencing the global balance of power. If there is fairly even power distribution among several countries as was the case from 1870 to 1914, presumably the possibility of war is much greater than if there is concentration of power as there was between the USSR and US during the Cold War when the two superpowers were keeping the world balance of power and keeping their spheres of influence in check.
Theories of concentrated global power as a catalyst to stability do not necessarily mean that in the future a similar pattern is likely to take place. After all, Rome had no enemies, but scattered Barbarian tribes against the background of its many economic, political and social problems that resulted in its decline and fall. Furthermore, between 1945 and 2000 an estimated 27 million people died in regional wars in which the USSR and U.S. were usually on side or the other. This statistic alone hardly justifies the theory of power concentration as catalyst to stability.
During the Cold War, the US set out to prove to the entire world that capitalism under an elected representative system is superior because it promotes individual freedom and prosperity and social justice at the same time. This at a time of immense civil rights problems, as well as a climate of intolerance toward anyone suspected of leftist sympathies as the Communist witch hunt revealed in the 1950s. Despite the absence of social justice in America, the economy experienced steady growth in the two decades following the end of WWII, and US living standards were the highest in the world. At the same time, the US owned about one-third of the world’s wealth although it represented roughly 6% of the world’s population by 1968 when Nixon was elected president. During the Vietnam War, the US could point to its cumulative wealth, with 60% of the population owing half of the wealth indicative of a strong middle class that sustained the viable political economy.
By the end of the Bush administration and into the Obama one, the US was experiencing its worst socioeconomic polarization since the Gilded Age, with the number of billionaires and millionaires owing most of the wealth, the number of poor rising and the middle class shrinking rapidly. According to the Sadoff Investment Research Group, “the top one percent of wage-earning households in the US were reaping in around $1,264,065 in 2012 — or around 41-times as much as the average income for all wage-earners, who pulled in a comparable meager mean income of $30,997 that year.”
Socioeconomic inequality translates into political apathy and cynicism, undermining democracy and its institutions that increasingly cater to the elites. The poor not just in the US, but in general have very low participation in the political process, proving that electoral politics in practice is indeed for the middle class and the economically active working class. The argument that democracy works as long as capitalism does is indeed false because it assumes a strong middle class and not socioeconomic polarization. If the poor remain inactive in the process because they are disillusioned, they will eventually rise against the oppressive system that can call itself anything it likes but in reality it is a form of tyranny.
Continued socioeconomic inequality and low political participation by the lower strata of society will undermine bourgeois democracy in the 21st century, but it may take place in conjunction with developments in the domain of foreign affairs. Along with the decline of US economic power there is the decline of democracy as evidenced in low participation, high level of cynicism about politics, and a two-party system serving the same socioeconomic elites whose narrow interests are largely responsible for the transition of power to Asia.
Geopolitical developments as well as popular uprisings that we cannot predict today will play a role in determining the global balance of power one hundred years from now. Given the existing polycentric world power structure very likely to remain in place during the 21st century, the burden on China to keep stability and peace is great, especially because the US has more to gain and not much to lose by encouraging regional instability as with the “war on terror” and the various NGO-financed uprisings from North Africa and Syria to Ukraine. China’s foreign policy designed to engender stability as counterweight to US policy of instability will be a catalyst on the former’s success in integrating as many countries under its aegis as possible.
From 2000 until the present, China has inadvertently benefited both economically and geopolitically from US militarist adventures. The US “war on terror” and institutionalization of “anti-terrorism” is so imbued with contradictions that “terrorism” as Washington defines it has increased, Meanwhile, US spending to combat it is a major source of drain on the budget. It is difficult to predict the degree to which China will continue to derive inadvertent benefits from US interventions such as the ones in Afghanistan, Iraq, Libya, Syria, and Ukraine.
Equally difficult to predict is the harm the US could cause China’s stability by instigating a “Ukraine-style” crisis with one of the neighboring Asian countries, such as Cambodia or Mongolia. Some analysts have already described Mongolia as a US-NATO Trojan horse whose only goal is containment of both Russia and China. Clearly, Beijing can easily “manage” Mongolia in case it begins to pose a serious military threat. However, the US is already positioned to cause problems on China’s borders in order to pursue containment.
The inevitability of periodic recessions and probably two very deep recessions in the 21st century will contribute to weakening some countries while strengthening others. Powers that many people may not expect to play a role in the global scene later in the century would probably become major players, among them Australia, Canada, Norway, South Africa and Brazil, assuming their political regimes navigate society toward development. The relative strength of the state structure is the catalyst to where the Western powers will wind up at the end of the century, where East Asia will be and what unexpected players could emerge from the ashes of declining powers of today.
China’s extremely uneven geographic - development is concentrated in the major Eastern cities to the neglect of the Western rural areas - and extremely uneven social development has resulted in the kind of polarization that ought to concern the political elites. As mass communications are becoming more prevalent, the lower echelons and half of the population living in rural areas will be demanding a larger slice of the expanding economic pie. Because of its quasi-statist policies the government has a major role in poverty reduction, just as it has a role in managing the entire economy. Price inflation, however, catches up with programs intended to reduce poverty. Can China’s weaknesses help extend the life of Pax Americana as many assume would be the case?
It is entirely possible that because the US is nearly self-sufficient in raw materials and because of its historic ties in the Western Hemisphere, it could revert to near isolationism and confine itself to a regional bloc where the integration model would still have America playing the dominant role. After all, this is how it emerged into a great power after asserting itself on the Hemisphere and taking steps to become hegemonic. No doubt, a number of its neighbors, north and south are already well integrated with Asia and Europe. The US will continue to offer a large domestic market to attract some of its neighbors along with some Asian countries that may not wish total economic integration China, Japan and Australia. In other words, regionalism has worked well for the US in the past when it was on its way up as a power, and it would probably work just as well as it adjusts to a secondary role in the global arena.
While it is difficult to predict the role of today’s great powers in one hundred years, it is a safer bet to predict that the social structure will most likely remain as unequal as it is today, if not deteriorate further as population pressure and intense competition for resources leave billions of people lacking material needs to survive and outside the institutional (health and education) mainstream. There is not much evidence that there is an institutional commitment to address social justice issues any more in China than in the US, but rather to focus
on accumulation and concentration of wealth protected by a state structure.
Is there anything that governments can do to reinforce their countries by strengthening their economies or at least preventing the inevitable deterioration? Can new technologies and science help to preserve the existing political economy and current world power structure? It is true that science and technology are very important in the progress of a society. However, just as Western Europe was far ahead of any other place on earth before 1914, it quickly collapsed because of two global wars, allowing the US and USSR to fill the global power gap. Scientific and technological advances in comparison with the rest of the world did not prevent Europe’s catastrophic political-military developments from 1914 until 1945. While science and technology can make significant contributions to a society, the ultimate responsibility of a society’s direction rests with its political regime.
Perhaps there is nothing the US can do about its slow decline in the 21st century. But, is there anything it can do about managing the rise of China by strengthening trading blocs, military and political alliances? If the US and its Western allies deem China to have inordinate global power, the US will help strengthen India as a counterweight to China. This kind of indirect challenge to China is already taking place partly because corporations are in India for low-cost labor and a vast domestic market, but also because the US government is pursuing an economic and military containment strategy toward China by using India as counterweight. After all, there are those who believe India is a potential superpower that could replace China.
Not that India’s rise to a preeminent global position would necessarily help the US and EU. However, the goal is not to permit any one country to rise to the superpower status that the US once enjoyed during the early Cold War. Containing India by meddling through Pakistan is yet another strategy. Australia and Japan have been steady US allies in the China containment strategy and they can easily become even closer as the US sounds the alarms about inordinate Chinese power. Just as the US has an encirclement and containment policy toward Russia, there is one toward China, though at a much lower level of hostility because Beijing’s economic cooperation is vital to the global economy.
It is just as likely that the US would try to forge alliances and alignments that would act to slow down the rising power of China, India, Russia and Japan. The evidence for this theory is already there given the number of commercial and defense treaties the US has signed with a number of countries in the Pacific, and it could cultivate closer strategic ties with Mongolia and Cambodia to offset China. For the US strategy to work, Australia would be the key in this containment model, especially given its strategic, raw materials and expanding market significance in the world economy. Geography has always been a factor in relations between nations and regional integration has always played a key role in relations between great powers and lesser ones, patron and client states.
Direct conflict avoidance between the Great Powers may be a realistic expectation. This is not only because of nuclear deterrence that neutralizes the main rivals, but because of the interlocking economic interests and the common interests of capitalists whose loyalty to capital transcends loyalty to their respective national flags. Defense contractors, corporations in the business of building infrastructures, even entire cities, ideologues in the military, political arena and private sector have an interest in instability, conflict, and military adventures. After all, war profiteers are always lobbying not in the name of lining their pockets, but for national security, strong defense and democracy!
Continuing the existing policy of containment toward China and Russia, while pursuing instability in the Middle East in the name of US national security interests, US policy is fairly predictable. On the flip side, instigating geopolitical instability does not inspire confidence in markets, especially if it impacts energy and raw materials. The international nature of capital traded in seconds through computers as well as the massive non-Chinese investments in China by multinational corporations make it very difficult either for the US and its allies to engage in behavior that would damage the interests of capitalism, no matter how loudly “national security interests” are invoked to justify manufacturing instability.
One could argue that economic prosperity and military power means eventual decline and fall for they cannot possibly maintain a steadiness of uninterrupted growth without periodic renewal to keep up with changes in society and the international power structure. Although China managed to maintain a relatively steady power base from the Qin dynasty (221-209 B.C) until the last dynasty Ching (Manchu 1644), the imperial system failed to undergo a Renaissance, a Scientific Revolution, an Enlightenment, Industrial Revolution like Europe, so it lost its sovereignty and fell victim to European, Japanese and US exploitation after the Opium Wars. In the late 20th century, China decided to become a global power and recapture the glory it enjoyed under ancient dynasties.
If China manages to achieve its goal of reviving the glory of the imperial past, the entire global power structure will change, elevating some countries and reducing others in the power hierarchy owing to alliances and alignments in a new Asian-based world order. While we can expect for the next one hundred years a shift of countries previously in the periphery of the capitalist system – India and Brazil for example – we can also expect that the current economic and social structure will continue as it will take many very deep crises and uprisings to shake the foundations of the existing political economy and social structure. Transitions in global power do not necessarily translate into transitions in the mode of production, in the social structure, but instead they tend to extend it by preserving the world capitalist system until decay sets in from within each country because of irresolvable contradictions in the political economy that polarizes society.