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With the US Faltering, China Has Come Into its Own

With The US Faltering, China Has Come Into Its Own

China’s swift recovery from the coronavirus pandemic is stunning considering the size of the population and the urban density of Chinese cities. Shanghai, with a population of over 24 million people, suffered only a few dozen cases of the disease. Wuhan, where the outbreak began, is almost completely free of new cases. The country has avoided many of the dire predictions of social collapse that had been levied by its detractors on the world stage just a few months ago and surpassed many of the most optimistic predictions for its recovery. Though we should definitely take the numbers coming out of China with a grain of salt, it appears as if after a brief period of economic standstill, factories are back online, ports are reopening, cargo planes are moving, and the entire global supply chain that depends on China is back up and running. 

In contrast, the United States of America continues to flounder. The rate of new cases per day is falling in some places but accelerating in others such that the overall growth number of deaths is projected to pass 100,000 in a matter of days. With no clear leadership at the federal level, states have been left to their own devices to address the twin crises of disease and economic collapse even as state budgets fail. The United States of America has utterly failed to respond to the pandemic, and the rest of the world has noticed.

What has so far remained a series of economic and geopolitical skirmishes between China and the United States over the past two decades may now enter a new phase of the direct civilization-level competition. Just as the US and the USSR clashed during the Cold War, each vying for technological and political superiority, so too will the US and China now compete, vying for not only technological and political superiority but for the future of capitalism itself. Whereas the USSR was explicitly anti-capitalist, the Chinese model of authoritarian capitalism is in some ways more truly capitalist than the democratic capitalism represented by the US and its allies. The evidence for this can be seen in some of the issues that have characterized the skirmishes of the past 20 years. The US and China have clashed over tariffs and intellectual property rights, corporate governance, and human rights. Wherever centralized authority and unprotected labor sources have given China an upper hand, the US has suffered geopolitical losses. 

However, so far, China has always been dependent on US markets for consumer demand and military security to protect trade routes. There has been an enduring sense of symbiosis between the two countries, a mutual dependence in which the US holds the upper hand on the world stage because of its military and the sheer scale of wealth the US enjoys. This dynamic began to shift after the 2008 recession as China’s middle class expanded and the US middle class lost ground. In the decade since the recession, inequality within the US has expanded while global inequality shrank overall. That is due in part to the fact that the Chinese middle class has surged, boosted by their nearly complete monopoly on cheap labor and certain industrial materials like steel and rare earth metals. Despite China’s advantages, the US still had its reputation as the global leader in most spheres of modern life, including the military, trade, law, culture, finances, etc. Trump effectively discredited the US on environmental issues by withdrawing from the Paris Climate Accord, severely damaged the US in the Middle East via a series of missteps across Syria, Iraq, Iran, and Afghanistan, and ceded power over Pacific trade routes to China by pulling out of the Trans-Pacific Partnership. Nevertheless, America was still seen as the “adult in the room” when it comes to effective responses to global problems.

The coronavirus pandemic disrupts that narrative.

China has come into its own and is no longer clearly the subordinate partner in the global power duopoly. If anything, the US needs China more than China needs the US. The breakdown of global supply chains and Chinese manufacturing threatened the American economy, but there has been no collapse in US demand to threaten China. Moreover, the US and the world are dependent on China for the production of medical supplies and PPE that are desperately needed to fight the pandemic. Meanwhile, the inability of the US federal government to affect a strong response to stem the pandemic has demonstrated the vulnerabilities of a system that cannot control its economy and political infrastructure via a central government the way China can. The benefits of a capitalist authoritarian state government are clear, and the world is taking note.

The dynamics of the coming contest can already be outlined. Each side has its advantages and disadvantages. China’s centralized political system allows it to exert influence all the way down to the local level in a highly efficient manner. That’s not to say that local officials do not have wide latitude in decision making so long as their decisions support the goals of the central state. In addition, Chinese manufacturers and businesses are subject to the authority of the central government, but a surprisingly large number of companies are no longer publicly owned nationalized corporations. Instead, they are privately owned, and the power the Chinese government exerts through them mirrors in some sense the power the central state exerts through local governments, namely that private Chinese corporations have wide latitude in decision making so long as they support the aims of the central government. Significantly, China has been able to leverage access to its labor pool and market to force US companies into a similarly subservient posture. This dynamic was on full display last Fall when dozens of US multinational corporations bent the knee to the Chinese state by refusing to criticize it’s clearly anti-democratic treatment of the pro-democracy protests in Hong Kong. Western companies do not appreciate China’s new sensitivity to criticism, and in this regard, Xi Jinping may have overplayed his hand for the moment. But clearly, the centralized authoritarian capitalism that China represents is a possible future model for global capitalism if democratic forms of capitalism fail. The fact that China has been able to manage the coronavirus pandemic so much better than the West could be a fluke (after all, Asia writ large took a huge hit from SARS in the 2000s and was better prepared for Covid-19), but it could serve as what the economist Branko Milanovic has called China’s Sputnik moment: the moment when it became clear that the US had to reassert the superiority of the American model in the face of a growing geopolitical threat.

The US has many advantages over China, nevertheless. For one thing, the coronavirus has exposed the benefits of the decentralized federal system. In the absence of strong leadership at the federal level, the powers devolved to the states have allowed the US to mount a response without enduring political and social collapse. This flexibility is not a feature of the Chinese system, where local and regional governments are incentivized to withhold information and cover up problems in order to avoid provoking the ire of the central government. Without central control, the Chinese political economy would fragment. The United States, however, can do without central control at least for some time, albeit with mixed results. And as always, America has its military power and vast hordes of wealth. Both will likely be needed to win the coming contest.

If the coronavirus and ensuing economic crash do cause a dissolution of geopolitical power away from the West, however, it is not clear that China would be able to turn staunch US allies, such as the EU and Australia. There are certainly rumblings of discontent in the EU, with Germany facing a judicial and financial clash with the EU central bank and EU courts. China’s investments in Italy and Eastern Europe are also meant to exert influence on Germany and EU powers. It is conceivable that the EU and Germany, in particular, will begin to accept more economic and political partnerships with China as this pressure mounts, but that can only really happen if the US continues to cede geopolitical authority as it has under Trump. The next 10 years of European development will likely serve as a major battleground for the contest between China and America.

Whatever happens, it is clear that America’s reputation on the world stage has suffered greatly under Trump. The administration's failure to respond to climate change, the failure to cultivate close relationships with allies, the failures in the Middle East, and now the greatest failure of them all - failed response to the coronavirus - have put America on the back foot. There is no clear leader in geopolitics anymore, for the moment. The locus of power is now shifting away from the West and into the nebulous center where China and other countries (an ascendent India perhaps? Africa in a few decades?) can potentially stake a claim to the future. How America responds now will define the world in the same way our response to the USSR defined the world. Let the games begin.