Fluent Essays

Discussion prompt for reflection: What does the future of U.S.-China relations look like? Will the liberal international order survive, will there be new hybrids of accepted political-economic models for emerging powers? Refer both to the readings and current events.400 wordsAssigned Readings:Naná De Graaff and Bastiaan Van Apeldoorn, “US–China relations and the liberal world order: contending elites, colliding visions?” International Affairs, vol. 94, no. 1, 2018, 113-131.“A Post-American World?” Chapter 5 in Ho-fung Hung, The China Boom: Why China Will Not Rule the World, 2016, 115-144. VIDEO: Ben Leffel speaks about China in the current global economic order, increasing U.S. export penetration into China, debt and currency valuation: https://vimeo.com/meragecomputing/review/273539107/bb81c6fa42 (Links to an external site.) china_boom_post_american_world.pdf liberalworldorder.pdf Unformatted Attachment Preview CONTEMPORARY ASIA IN THE WORLD DAVID C. KANG AND VICTOR D. CHA, EDITORS This series aims to address a gap in the public-policy and scholarly discussion of Asia. It seeks to promote books and studies that are on the cutting edge of their disciplines or promote multidisciplinary or interdisciplinary research but are also accessible to a wider readership. The editors seek to showcase the best scholarly and public-policy arguments on Asia from any field, including politics, history, economics, and cultural studies. The China Boom VVHY CHINA WILL NOT RULE THE WORLD Beyond the Final Score: The Politics qf Sport in Asia, Victor D. Cha, 2008 The Power of the Internet in China: Citizen Activism Online, Guobin Yang, 2009 China and India: Prospectsfor Peace, Jonathan Holslag, 2010 India, Pakistan, and the Bomb: Debating Nuclear Stability in South Asia, Sumit Ganguly and S. Paul Kapur, 2010 Living with the Dragon: How the American Public Views the Rise of China, Benjamin I. Page and Tao Xie, 2010 East Asia Before the West: Five Centuries of Trade and Tribute, David C. Kang, Ho-fung Hung 2010 Harmony and War: Confucian Culture and Chinese Power Politics, Yuan-Kang Wang, 2011 Strong Society, Smart State: The Rise ofPublic Opinion in Chinas Japan Policy, James Reilly, 2 012 Asias Space Race: National Motivations, Regional Rivalries, and International Risks, James Clay Moltz, 2012 Never Forget National Humiliation: Historical Memory in Chinese Politics and Foreign Relations, Zheng Wang, 2012 Green Innovation in China: Chinas Wind Power Industry and the Global Transition to a Low-CarbonEconomy, Joanna I. Lewis, 2013 The Great Kanta Earthquake and the Chimera ofNational Reconstruction in Japan, J. Charles Schencking, 2013 Security and Profit in Chinas Energy Policy: Hedging Against Risk, 0ystein Tunsj0, 2013 - Return ofthe Dragon: Rising China and Regional Security, Denny Roy, 2013 Contemporary Japanese Politics: Institutional Changes and Power Shifts, Tomohito Shinoda, 2013 COLUMBIA UNIVERSITY PRESS Contentious Activism and Inter-Korean Relations, Danielle L. Chubb, 2014 Dams and Development in China: The Moral Economy of Water and Power, Bryan Tilt, 2014 Marching Through Suffering: Loss and Survival in North Korea, Sandra Fahy, 2015 The Japan-South Korea Identity Clash: East Asian Security and the United States, Brad Glosserman and Scott Snyder, 2015 Nation at Play: A History ofSport in Indi(l,, Ronojoy Sen, 2015 NEW YORK 114 GLOBAL EFFECTS, COMING DEMISE strengths and weaknesses of two different models of political economy, which is too complicated to deal with here. Time will tell whether the Chinese path or the Indian path will prevail or the two paths will eventually meet in the middle point when China and India continue to balance their political economies in opposite directions. This chapter demonstrates that China made a solid contribution to reduction in global income inequality in 1980-2010, even if we take into consideration the drastic increase in internal inequality in China. But it also shows that this contribution is set to fade or reverse when Chinas average income level surpasses the world average. The continuation of the historic reduction in global inequality over the past several decades depends on whether other populous poor countries can grow rapidly in the new international context of development precipitated by the China boom. China has surely changed the context of development with its competitive manufactured exports and its huge appetite for raw materials. Whether this context is enhancing or hindering the prospect of development in the developing world varies from country to country. It is therefore uncertain whether the historic reversal of the two-centuries-long trend of polarization between the West and the rest in 1980- · 2010 will continue into decades to come. The prospect of economic growth never involves just economic processes. It also depends on the balance of power and relative negotiation advantages and disadvantages among different countries in the international system. We cannot get a full sense of what the future of global inequality will look like unless we seriously consider the influence of geopolitics. Many have claimed that China, making use of its increasing economic influence in the world, has been fundamentally reshaping the global political order by toppling the United States from its position of dominance and that developing countries are empowered politically under the new geopolitical configuration brought about by Chinas rise. In the next chapter, I show that this perception of Chinas subversive impact on the global political order is greatly exaggerated. FIVE A Post-American World? accompanying the economic rise of China, the global political center of gravity has been shifting from West to East and from developed countries to developing ones. British writer Martin Jacquess book When China Rules the World (2009), discussed in the introduction, is an example of this argument. Roger Altman, a veteran investment banker and former deputy secretary of the U.S. Treasury, published the article The Great Crash, 2008: The Geopolitical Setback for the West (2009) in Foreign Affairs in the wake of the global financial crisis, arguing that the Wests financial distress and Chinas continuous robust economic performance were accelerating the waning of Americans global power and the waxing of Chinas. Journalist Fareed Zakaria even titled his 2009 best seller The Post-American World, seeing the rise of China at the expense of the United States as a global power shift comparable to the rise of the West during the Renaissance and rise of the United States in the twentieth century. This stipulation of Chinas rising global power at the expense of the West in general and of the United States in particular is in fact a continuation of the theme of u:s. decline raised since the 1970s. This theme crosses the left-right divide and is shared by conservative, liberal, and radical authors. For example, looking closely at the U.S. defeat in Vietnam and its persistent fiscal, economic, and sociopolitical crises in the MANY ASSERT THAT, 116 GLOBAL EFFECTS, COMING DEMISE 1970s, in conjunction with economic challenges from West Germany and Japan, Marxian world-system analysts reason inductively that the United States had entered a phase of hegemonic decline just as the United Kingdom did in the early twentieth century and as the Dutch did in the eighteenth century (Wallerstein 1979; Arrighi 1994; Arrighi and Silver 1999; Chase-Dunn et al. 2005). Drawing on experiences of past hegemonic transitions from the Dutch to the British and from the British to the Americans, world systemists have for several decades enthusiastically looked for potential candidates for a new hegemon that will provide global leadership and reformulate the world system, with Germany (or a unifying Europe) and Japan topping the list in the 1970s through the 1990s. In more recent years, they have started to see China as a plausible new global leader in the twenty-first century, with Andre Gunder Franks bookReORIENT (1998) spearheading such speculation. From a different vantage point, Samuel Huntington (1996) also sees the long decline of U.S. and Western power in politicomilitary, demographic, and economic terms. He argues that territories controlled by Western powers have been receding ever since the decolonizatioll movement began in the mid-twentieth century. Demographically, low birth rates have been turning the Western population into a minority in the world. Economically, the Sinic world has been roaring ahead and in this view is poised to replace the Western world as the worlds economic center. Huntington purports that the Sinic world, empowered by its newfound economic might, is becoming increasingly assertive and is developing an alliance with the Muslim world, which has been predisposeci to hate Western civilization. The shift in global power from the West to the East will eventually lead to a showdown between Western civilization and the Sinic-Islamic alliance. This persistent view of the decline of the West and the concomitant rise of Chinas global power has become so popular that U.S. politicians have started running campaign commercials accusing their opponents of being responsible for American decline and an imminent Chinese domination of the country. 1 But more sober writers find that the perception of falling U.S. global power and the rise of China as a new subversive superpower may be exaggerated and that China is little more than a status quo power in the international system (see, e.g., Johnston 2003; Shambaugh 2013). The situation is the same as when talk of the rise A POST-AMERICAN WORLD? 117 of Germany and Japan as challengers to the United States back in the 1970s was exaggerated. In this chapter, I discuss how the decline of U.S. dominance in world politics, although true, has been slowed and delayed thanks ironically to support from its supposed challengers, China above all. I also discuss how China has botii helped to perpetuate the existing U.S.-centered global neoliberal order and reshaped the balance of power in this order at the same time. The crux of these paradoxes is the U.S. dollars persistent hegemony in the world economy. World Power and World Money After three decades of discussion about a U.S. decline, some scholars have started to find anomalies in this thesis, despite the similarities of this supposed decline to earlier hegemonic declines -that is, the eighteenth-century Dutch decline and the early-twentieth-century British decline. For example, Giovanni Arrighi (1994) notes that the United States, even with the absolute economic supremacy that it once enjoyed in the 1950s and 1960s gone, has managed to maintain a military apparatus that is still far beyond challenge by any other major capitalist power. In particular, Europe and Japan, the two economic powers that at one time posed grave challenges to the United States, have only negligible military capability and depend on the United States for their security needs. This military superiority leads Arrighi to postulate that one possible post-American-hegemony scenario would be a U.S.-centered global empire, which would rest on Americas unmatched means of coercion around the world. Moreover, the economic challenge that Japan and Europe once posed to the United States has been unsustainable. Japan has sunk into an economic quagmire since the 1990s, and Europes integration encountered huge obstacles when nationalist sentiments against the European Union rose in the 2000s and when the euro crisis erupted after 2008. Moreover, the U.S. share of world GDP has not declined as dramatically as the hegemonic decline thesis suggests, dropping from a height of 39 percent in ;1-960 to 23 percent in 2010 (figure 5.1) (World Bank n.d.). Leo Panitch and Sam Gindin (2012) even claim that U.S. global power fully recovered from the economic crisis and the setback in Vietnam in the 1970s and reached its zenith by the 2000s, when it successfully imposed the global 118 GLOBAL EFFECTS, COMING DEMISE 45 United States -Eurozone --- Japan --- China - 40 c.. 0 (.9 35 O .::: 0 :?; .....0 ...ca 30 25 Q) .c (/) 20 Q) Ol ...,ca C: 15 Q) 1:: Q) c.. 10 5 0 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 Year FIGURE 5.1 Share of world GDP in current U.S. dollars, 1960-2012. Source: World Bank n.d. neoliberal order on all corners of the post-Cold War world. The productive and state capacity of the United States has in truth deteriorated from the 1970s to today, as illustrated by its worsening current account and fiscal deficits, but the question is how and why it can still hold up its economic dominance and sustain a formidable military apparatus. Looking closely, we find that the persisting U.S. economic and military power is attributable largely to the ongoing status of the U.S. dollar as the most widely used reserve currency and international transaction currency in the world for the past thirty years. The internationally dominant status of the dollar, which many refer to as the dollar standard (e.g., Bai 2012), allows the United States to borrow internationally at low interest rates and to print money to repay its debt as a last resort. This capability to borrow in its own currency has permitted the United States to solve many instances of domestic economic malaise and to maintain the most enormous, active war machine in the world through external indebtedness, while avoiding the kind of debt crises that have wreaked havoc on many developing economies because they have had to borrow A POST-AMERICAN WORLD? 119 in creditors currency (mostly U.S. donars). Some refer to the exceptional advantage the dollar standard confers to the United States as an exorbitant privilege (Eichengreen 2011) or an extreme form of seigniorage, under which all foreign private and public iilstitutions relying on the dollar as the medium of economic activities are effectively paying tribute to the United States. Ironically, the persistence of this exorbitant privilege is now being maintained by the rise of China as the biggest foreign holder of U.S. dollar-dominated assets, mainly in the form of U.S. Treasury bonds. To understand this dynamic, we must first look to the historical trajectory of the dollars rise to its status as a hegemonic currency and why this hegemonic status was not destabilized by successive economic challenges to the United States from Germany and Japan. The post-World War II global hegemonic role of the dollar was sealed in the Bretton Woods Conference of 1944, which established the dollars gold convertibility under the promised rate of thirty-five dollars for one ounce of gold. It also established the pegs of major currencies to the dollar in the capitalist world. The dollar standard was further facilitated by the postwar Marshall Plan, which vastly elevated the dollars liquidity in the world economy. This arrangement enabled the dollar to complete its replacement of British sterling as the dominant currency in foreign-exchange reserves and international trade around the globe. The stability of the resulting global monetary order in the 1950s and 1960s was warranted by Americas enormous gold reserve (two-thirds of the world total), current-account surpluses, and unparalleled competitiveness in the world economy as well as by the rise of Londons Eurodollar market, where the abundant offshore dollars in the world economy, including the dollars held by Soviet bloc countries, began to be traded and invested. The dollar standard was not only a reflection of American prowess but also a means through which the United States provided leadership to the capitalist world, securing a stable monetary environment for growth. The collapse of the Bretton Woods system in 1971 can be traced back to the rising productivity of Europe, West Germany in particular, and of Japan in the 1960s following their full recovery from World War II. Increasing international ·competition, coupled with the rising wage demand of domestic organized labor and the escalating fiscal and current-account deficits incurred by the troubled U.S. involvement in Vietnam, led to a ru;11 on the dollar and the outflow of gold reserves from the 120 GLOBAL EFFECTS, COMING DEMISE United States. Nixon was left with few choices but to suspend the gold convertibility of the dollar in 1971, forcing other major capitalist economies to undo their currencies peg from the dollar. The abolition of gold convertibility allowed the United States to attempt to reduce its current-account deficit and to revive its economic competitiveness through dollar devaluation. Upon the collapse of the Bretton Woods system, many predicted the end of the dollars hegemony and the rise of a multipolar global economic order grounded on more or less even domination by multiple major currencies such as the yen and the Deutsche mark. Attempts abounded to forecast the trajectory of the dollars decline by drawing parallels to sterlings decline in the early twentieth century (e.g., Strange 1971). What is puzzling is that this predicted multipolar moment never came, and the dollars hegemony continued for four more decades, up until today. Even · with the formation of the euro as a competitor, the dollar remains the most widely used reserve currency in the world (see figure 5.2). 90 80 C Ol -~ :2 0 - - U.S. dollar - - Japanese yen --- Pound sterling --- Deutsche mark +- 0 ·u a, ••••• Euro 70 5 ·- .c .:i::.., 60 o.~ - +- 0 Q) (/) 50 Q) > ~ Q) ~ (/) .c Q) ~ (/) Q) Q) Ol Ol C >< 40 30 .., .c C 0 Q) 0 Q) 20 cii 0.. 10 ----; ,, ~~~,~--~,-~~/ -- ~- r•.., ,,_,-~~~- ········ ....:········ ----,- ------,-- ------ 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 Year FIGURE 5.2 Shares of currencies in identified official holdings of foreign exchange in the world, 1976-2012. Source: International Monetary Fund n.d.c. 121 A POST-AMERICAN WORLD? TABLE 5.1 Currency Distribution of Global Foreign-Exchange Market Turnover (Percentage out of 200) 1998 2001 2004 2007 2010 2013 86.8 89.9 88.0 85.6 84.9 87.0 Pound sterling 11.0 13.0 16.5 14.9 12.9 11.8 Deutsche mark 30.5 U.S. dollar French franc 5.0 Japanese yen 21.7 Euro 23.5 20.8 17.2 19.0 23.0 37.9 37.4 37.0 39.1 33.4 Mexican peso 0.5 0.8 1.1 1.3 1.3 2.5 Chinese yuan/ RMB 0.0 0.0 0.1 0.5 0.9 2.2 Source: Bank for International Settlement 2014. The same can be said regarding the use of the dollar in international transactions (see table 5.1). The euro did not in fact gain much ground in comparison to the global use of Europes national currencies combined before its llJ,unch. Although the dollars hegemony under the Bretton Woods system was a manifestation of overwhelming U.S. economic might, its lingering hegemony after the Bretton Woods collapse was the most significant lifeline that the United States relied on to slow its economic decline. The hegemony of the dollar, as a fiat money since 1971, lasted even loriger after Bretton Woods than under Bretton Woods. The dollars lasting prowess was first made possible by the exchange between the United States and its military allies during the Cold War period, when the former provided a security umbrella and weapons in exchange for the latters support of the use of dollars in trade and foreign-exchange reserves. Numerous episodes at the height of the Cold War illustrate well the role of U.S. global military domination in warranting the dollar standard, when the governments of Americas European allies were requested to support the dollar by increasing their purchase of dollar instruments and U.S. military supplies, paid for in dollars, under the explicit threat of a reduction of U.S. troops stationed in their countries. Such reduction could have immediately generated a security crisis, forcing those governments to increase military spending 122 GLOBAL EFFECTS, COMING DEMISE. to pick up the slack (Gavin 2004; see also Eichengreen 2011: 71). Susan Strange (1980) notes that West Germany has always been the obedient ally that pays significant contribution to the maintenance of the dollar standard, which it did even after U.S. gold convertibility was suspended in 1971 (see also Eichengreen 2011: 71). Regarding other countries dependent on U.S. military protection, some analysts even find a positive correlation, which extends far into the post-Cold War era, between the number of U.S. troops deployed in a country and that countrys use of dollars (Posen 2008). As shown in column one of table 5.2, before the 1990s countries that purchased the most U.S. Treasury bonds as part of their foreig ... Purchase answer to see full attachment