4
. . . governments, especially governments of powerful and prosperous countries, continue to behave as if they have sovereignty over their domestic economies even as the measures they take are increasingly dependent on forces beyond their control.
7
. . . the future of China would be determined by economic openness, not political participation, and that dollars and not democracy would shape society.
8
These old ways of approaching the world, these us-versus-them dyads, are not just benign anachronisms. Clinging to them can and will have serious consequences, most of them negative.
15-6
At the end of the 1970s, few societies were more distinct and distant. China was a predominantly agricultural nation mired in poverty and cut off from the world after the excesses of the dictatorship of Chairman Mao. By the 1970sm trade accounted for only 5% of China’s gross domestic product, an astonishing low figure for a country of China’s sez and scale. In fact, China in the waning years of Mao had become significantly more isolated and detached from the international system that it had been either before the Communist victory in 1419 or during the initial years of the revolution in the 1950s.
The United States . . . was the dominant power in the world in the late 1970s, even though its self-perception was mired in malaise and doubt. The experience of the Vietnam War, the stagflation of the domestic economy, the Watergate imbroglio, and a sense that it was no longer perceived as a champion of freedom all contributed to a crisis of confidence and self-image. The 1970s also saw the beginning of a long and permanent decline in U.S. manufacturing employment, as other parts of world began to produce an ever-larger share of consumer goods for sale in U.S. and European markets. But in both military and economic terms, the United States remained the central force on the globe, even factoring in the military challenge of the Soviet Union and the growing economic strength of Japan and West Germany.
16
The United States and China had a dramatic and surprising rekindling of relations in 1972, when Richard Nixon traveled to Beijing to meet with Mao in the Great Hall of the People off of Tiananmen Square. It was an extraordinary meeting, made possible by the assiduous back-channel diplomacy of National Security Advisor Henry Kissinger, his Chinese interlocutors in general, and Premier Zhou Enlai above all. Of course, there was also Ping-Pong. China extended an invitation to the U.S. table tennis team as a gesture of goodwill in 1971, setting the stage for the political rapprochement a year later.
17
In 1978 Deng Xiaoping consolidated his hold on the party and the country, and he pushed through an agenda of reform and modernization. Too many of China’s people were mired in poverty, and Deng wisely understood that unless that changed, the tenuous compact between the party and the people would disintegrate. Deng was an unlikely visionary. He had survived purges, internecine battles within the Communist Party, bouts of internal exile and disfavor, the animosity of the Red Guards of the Cultural Revolution, and what could best be3 described as an up-and-down relationship with Mao. Already seventy-two years old when Mao died, Deng was at an age when most people look back at their lives. But he had no intention of going gently into the good night, wizened and gnome like that he was. He had the grudging respect of many of the older party cadres and the utter loyalty of a younger generation that venerated his long service to the party and marveled at his ability to escape death, political and actual, for so long.
Deng intended to remake the way that the party governed the economy. To that end, he first undertook agricultural reform and began to abolish the collective farming system. Then he allowed for the creation of a few select special economic zones along the southern coast. These zones were allowed to design their tax regimes to be more hospitable to private industry and foreign business ventures, and to give individuals more latitude to do business separate from the mandate of the state. In spite of the Communist Party’s hostility to the West, the main criteria for the zones were that they were proximate to centers of Western commerce and trade, namely, Hong Kong, Macau, and in related fashion, Taiwan.
18
This limited opening was meant to be a laboratory, but the hunger of people for more autonomy and for raising their standard of living led to a rush of activity. Trade spiked dramatically, as did industry in formerly sleepy regions such as the Pearl River Delta north of Hong Kong. That did not please many in the party, who would not speak out directly against Deng but who could fall back on deep-seated and widely shared am bivalence about trade and too much entanglement with the West. Many old-time party members held fast to the belief that fewer exports were better than more, and that no imports were better than some. There was also resistance to welcoming foreign capital into the closed loop that was China’s economy in the 1970s and early 1980s Many feared, rightly, as it turned out, that once foreign capital began to flow into China, the days of Maoism and even Chinese Communism would be numbered.
19
Some resisted the move toward more openness with the world and fought the very idea that market rules should have a place in China. Others wanted the opening to go faster and extend more broadly throughout Chinese society. Most of the discussions occurred behind a veneer of party unity, but soon the debate began to seep out in public. Intellectuals and poets joined the discussions, while millions in the special economic zones set up small business enterprises and cast off the bland ideological straightjacket that had stifled change and growth for the past decades. Of course, the fact that the government relaxed its restrictions and was less prone to the indiscriminate use of force was a tool of control allowed for the loosening.
Part of the debate was purely about the best path to modernization and economic growth. But with that came the more radical debate about democracy and political openness. Inside the party, there had long been discussions about democracy within the framework of Communist Party rule, but now there were rumblings about democracy as a separate reform that could jeopardize party rule. By and end of the 1980s, some of the defenders of democracy were making their claims in public. While they were assailed as “bourgeois liberals” bent on undermining the revolution, the fact that they were even able to publish and discuss their views in public without being arrested and jailed was more notable than the acrimony they generated. Of course, they did face harassment, and when certain invisible lines were crossed, they could be stripped of their posts, confined, and in other ways silenced. The rising volume of these debates was the direct precursor to the democracy movement that culminated in the Tiananmen Square protest during the spring of 1989.
20
. . . the internal dynamics of Chinese society were watched only by academics and to some extent intelligence agencies. The former did a relatively good job tracking the changes and the debates but tended to see China’s evolution through a prism of “Communism and the party, bad; democracy and the market, good.” Intelligence agencies were mostly focused on counting men in uniform and numbers of missiles, and on predicting whether China would take action against Taiwan.
21
[Deng] knew that something had not gone according to plan, and he was determined to set a future course that would not see a repeat of the protests on the one hand, or the chaos that he saw as endemic in China’s past on the other. China over the previous 150 years had been buffeted by a never-ending series of civil wars, invasions, and self-imposed crises, and Deng was determined not to perpetuate a destructive cycle that had left the country on the sidelines of history.
21-2
Deng’s willingness to embrace a market economy and adopt an open door approach to the world at large was anything but ideological. Years earlier, observing party members anguishing over some proposed policy, Deng had remarked, “Black cat, white cat, what does it matter as long it catches mice?” The ends above all mattered for Deng, and both before and after Tiananmen, the goal was the continuation of the Chinese state led by the party for the betterment of all of China. The material prosperity of the masses was an integral component to that end, and he had the foresight to understand that the rising affluence of neighboring Asian countries such as Japan, Singapore, South Korea, and Thailand was making it impossible for the party to maintain legitimacy unless it delivered on the promise of prosperity.
22
. . . China embarked on a path of economic modernization that managed to transform the country more quickly and more effectively than anyone could have imagined. At each stage along the way, if course, other paths were available, many of which might have led to very different outcomes, including the collapse of the government, much as the ossified government of the Soviet Union fell apart in the early 1990s.
296-7
[There are] strong currents of nationalism and xenophobia in the Chinese military establishment, which views the Pacific Rim as destined to be a Chinese lake and sees the continued independence of Taiwan as well as a strong Japan as challenges to be confronted as China grows more economically powerful and confident in the years ahead.
What these voices don’t recognize is that it’s too late. Whether or not Chimerica is a good thing or a bad thing, it has become so embedded that undoing it would be hugely destructive and disruptive. That is more true after 2008 that it was before. They need us; we need them. The two economies have fused in the past 20 years, and not just in terms of China producing and the U.S. consuming. In fact, now and in the years ahead, the dominant feature will be China consuming and providing finance to the U.S. government and growth to U.S. companies. The only thing that can prevent that is concerted action on the part of either government to stand in the way, and the costs of that are so prohibitive that it is hard to see how that could happen.
Yes, if the economy of the United States were to deteriorate further in the years to come, there could be a wave of isolationism and protectionism. If American self-conception doesn’t adapt to a changed world, if American cling to outdated notions of their own power and self-importance, that too could create serious obstacles to the forward progress of Chimerica in particular and to global commerce in general. And if the benefits of these trends accrue only to the few, then it is inevitable that many will object and do what they can to arrest these developments.
298
The Washington mantra of open markets and less state activity was the orthodoxy until it proved to have some critical flaws, but no other system has proven better. If there were a clear road map to prosperity, everyone would use it. Add to the incomplete data and anachronistic models, and you are left with the recognition that anyone who claims certainty about the outcome of China’s unique path is at best fooling himself.
300
. . . even a United States and a developed world mired in slow growth or no growth are better off than they were a hundred years ago. What has been lost in the United States is a sense that the future is what we make of it; that spirit is everywhere evident in China. It is the single most important ingredient to a thriving society, and it has been the spark that made the fusion of China and America possible. It is what led Deng to renounce the path his country was on and choose another, even though the means were at times brutal. It is what led U.S. corporations to seek opportunities in China long before the odds of success outweighed the likelihood of failure. And it is what allowed Americans for generations to reinvent themselves in the wake of their mistakes. In the end, Chimerica is an idea, a vision of the future no more or less fraught with ambiguity, uncertainty, and complications that any other idea for how the world might look. It is also an idea whose time has come, and as Victor Hugo wrote, such ideas are “greater than the tread of mighty armies.” We can try to turn back the tide. Or we can embrace the world as it is, and work to fashion a future that satisfies our collective yearning for peace and prosperity.
304-5
If the past years have taught anything, it’s to expect the unexpected. The sudden collapse of the Soviet Union came as a profound shock, as did the events of 9/11, to name just two of the black swans that took the world by surprise. While the emergence of China seems relatively certain now, the future may hold some dramatic twists. And while the fusion of the two economies is central to grasping the world today, it may of course wane or succumb to pressures in the years ahead. Other factors, whether environmental or geopolitical, may also alter the trajectory in ways that are impossible to predict but should at least be considered.
To preserve this fusion, and ensure that it provides stability and enhances global prosperity in the future, both societies will need to consider radical innovations. The United States currently deploys part of the 7th Fleet in the Pacific Rim to keep the peace and shield Taiwan. That raises the question of whether Taiwan needs shielding from China, especially given the degree to which both have been moving closer as economic ties deepen. While close financial bonds in no way preclude armed conflict, the price of that for both Taiwan and China has become much higher. As for formerly antagonistic neighbors such as Japan and China, Japan’s fortunes increasingly depend on Chinese demand for its high-end equipment, and while neither bears the other much affection, they too have been drawn into a tighter embrace. In that light, the continued presence of the American fleet may be as anachronistic, and unnecessarily provocative, as the divisions once stationed in post-1945 Germany.
Both the Chinese and American governments continue to set economic policy within their borders, and while they consult one another, they treat things like interest rates, currency values, and budgets as sovereign rights that no one can or should infringe upon. But in a world where much of China’s reserves are held in American assets, and where U.S. budgets are facilitated by Chinese credit, and in a world where capital flows between the two shape the domestic balances of each, it might make more sense if policy were decided in tandem. Yes, there is now an ongoing dialogue, but that is different than officials of the Federal Reserve and the People’s Bank of China sitting down and deciding jointly on interest rates. As unthinkable as that is now, the fusion of the two systems may soon demand it.
307
If the United States is to avoid the fate of Great Britain [loss of empire], if it even can, it must reorient itself away from the military and security challenges of the twentieth century and to the economic challenges of the twenty-first. That will require not just a shift in how Americans think about the world but in how they interact with it, which will in turn demand a fundamental rethinking of the shape of the government and the national security state that emerged to meet the challenge of a Cold War and a Soviet Un ion that ceased to exist at precisely the same time that China began its steady rise.
Since 1989, the Chinese have had two decades to reshape their economy and their government. In those 20 years, the U.S. government changed hardly at all, until the breakdown of the financial system led to intervention in the economy on a scale unknown since the 1930s. But even the bailout of the financial system was managed with the tools of an earlier era, and by bureaucracies that were never designed to handle today’s issues. And so there is a choice: try to regenerate our system with archaic tools, outmoded concepts, and government agencies from an earlier era, or channel our wellsprings of innovation and ingenuity to recasting our institutions and our thinking to fit the world we are now in. It’s either that, or prepare for long evenings watching the sun set and wistfully yearning for a time that lives only in our memories. Let’s hope we choose well.
403-5
If the past years have taught anything, it’s to expect the unexpected. The sudden collapse of the Soviet Union came as a profound shock, as did the events of 9/11, to name just two of the black swans that took the world by surprise. While the emergence of China seems relatively certain now, the future may hold some dramatic twists. And while the fusion of the two economies is central to grasping the world today, it may of course wane or succumb to pressures in the years ahead. Other factors, whether environmental or geopolitical, may also alter the trajectory in ways that are impossible to predict but should at least b e considered.
To preserve this fusion, and ensure that it provides stability and enhances global prosperity in the future, both societies will need to consider radical innovations. The United States currently deploys part of the 7th Fleet in the Pacific Rim to keep the peace and shield Taiwan. That raises the question of whether Taiwan needs shielding from China, especially given the degree to which both have been moving closer as economic ties deepen. While close financial bonds in no way preclude armed conflict, the price of that for both Taiwan and China has become much higher. As for formerly antagonistic neighbors such as Japan and China, Japan’s fortunes increasingly depend on Chinese demand for its high-end equipment, and while neither bears the other much affection, they too have been drawn into a tighter embrace. In that light, the continued presence of the American fleet may be as anachronistic, and unnecessarily provocative, as the divisions once stationed in post-1945 Germany.
Both the Chinese and American government continue to set economic policy within their borders, and while they consult one another, they treat things like interest rates, currency
values, and budgets as sovereign rights that no one can or should infringe upon. But in a world where much of China’s reserves are held in American assets, and where U.S. budgets are facilitated by Chinese credit, and in a world where capital flows between the two, shape the domestic balances of each, it might make more sense if policy were decided in tandem. Yes, there is now an ongoing dialogue, but that is different than officials of the Federal Reserve and the People’s Bank of China sitting down and deciding jointly on interest rates. As unthinkable as that is now, the fusion of the two systems may soon demand it.
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