Not surprisingly, much of the world has stopped listening to America over the past few years. Bush-Cheney’s push for primacy achieved its desired effect but on an unintentional scale: Most of the world’s nations neither fear nor respect America as they once did. As such, we face a series of difficult realignments across all major elements of our grand strategy.
So here’s how I’ll organize these five “realignment” chapters (economic, diplomatic, security, networks, and strategic social issues), each time taking you through the same seven-step recalibration process designed to reposition the United States along a grand strategic trajectory that makes more sense for the global challenges that lie ahead:1. The undeniable strategic trajectory. First, in each domain, I’ll cite what I think is the most important long-term global trend concerning an American grand strategy of making globalization truly global in a post-9/11 world.
2. America’s global system perturbed. Then I’ll explore a serious recent disruption that prompted either new thinking on our part or a retrenchment from our grand strategic vision.
3. The new rules that emerge. Next, I’ll give you a sense of the new rules that apparently emerged out of that disruption, either from America itself or in partial reaction to—even rejection of—American policies.
4. The resulting “new normal.” Subsequent to those new rules, I’ll outline the “new normal” into which we started slowly settling as the Bush years wound down.
5. Meanwhile, the global accelerant . . . Jumping back outside the United States, I’ll detail how the trend I spotted in #1 actually hit an inflection point while America was heading off on its own toward its “new normal.”
6. Our inescapable realignment. Which gets me to the major realignment America needs to make to bring it back in line with the world of our creating.
7. The better normal America must seek. Finally, I’ll lay out what I think is that next, best iteration of American grand strategy for each particular domain, meaning the downstream global developments we want to be crafting over the next five to ten years.
In each of these chapters, then, my goal is to make clear to you how the United States has run itself off the rails of its natural grand strategy and how we can get back on track.
So let’s get started with the domain that drives all others—economics.
THE UNDENIABLE TRAJECTORY: DENG CHOSE WISELY
When President Richard Nixon reopened diplomatic ties with Mao Zedong’s Communist China in 1972, he enabled the most profound global economic dynamic of the last half-century: China’s historic re-emergence as a worldwide market force. After constituting roughly one-third of global GDP just as America was starting its climb in the early 1800s, China experienced its “century of humiliation” at the hands of foreign colonial powers that manhandled its economy without ever truly conquering it as a nation. Today’s China ranks a G-8 slot (#4, actually) in GDP and trails only the United States when “parity purchasing power” is factored in. China won’t overtake America in sheer economic weight anytime soon, but even having to discount that possibility tells you how rapid China’s rise has been. Whether you realize it or not, nothing shapes your world today more than China’s economic growth, and nothing will shape our planet’s future more—for good or ill—than China’s ongoing trajectory. China’s decision to rejoin the world constituted globalization’s tipping point, meaning—absent global war—there’s no turning back now.
If Nixon opened the door, then Deng Xiaoping, Mao’s ultimate successor, led one-fifth of humanity through it. Unlike the Soviet Union’s last leader, Mikhail Gorbachev, Deng chose wisely: By tackling economic freedom before political liberalization, Deng kept China stable during its tenuous first years of market reform. Deng’s dream for China in 1979 would have struck Alexander Hamilton as a mirror image of his own for America in 1789: As historian Michael Marti puts it, “Deng’s desire was to create an economic system that would allow China to become a rich and powerful nation by the middle of the twenty-first century.” To do so, Deng would have to politically defeat another “immortal” of the Chinese Communist Party, Chen Yun, who correctly feared that Deng’s path would dramatically emphasize industry over rural development and lead to a huge rise in Western—and particularly American—cultural influences that would encourage factionalism within the party and among the people. In many ways, Chen’s fears for a China that embraced Deng’s ambitious agenda mirrored Thomas Jefferson’s fears were America to follow the aggressive plan set out by Alexander Hamilton. Both Chen and Jefferson had great trepidation that their countries would abandon their agricultural center of gravity and quickly assume the have-versus-have-not, highly urbanized social structure of their economic model—Britain in the case of America, and the United States in the case of China. Whatever you can say about Mao’s bizarre economic campaigns, he did create a society that was quite egalitarian in its lack of development and widespread poverty.
Although Deng is correctly labeled an autocrat, ordering—along with Chen—the bloody suppression of the Tiananmen Square democracy protests in 1989, he’s also correctly identified as a modernizer who unleashed a generation’s immense creativity. Many from that ambitious generation will tell you that, before Tiananmen, they felt freedom was “90 percent political and 10 percent economic,” but after Deng’s crackdown, they concluded—somewhat harshly—that real freedom was “90 percent economic and 10 percent political.” In other words, they decided that markets were the first, best instruments for generating positive change in China. Deng’s objectives have roughly been met to date: to quadruple China’s meager per capita income of roughly $250 in 1981 to approximately $1,000 by the century’s end, and then quadruple it again by 2050, something China is well on its way to achieving, having already doubled to more than $2,000 per capita today. Deng’s ultimate dream, as Marti notes, was that “China would become the center of an East Asian trading bloc similar to the European Community or the North American Free Trade Area,” in effect echoing Henry Clay’s lofty vision for America by placing China at the center of a continental system modeled on itself—a Chinese system for an Asian union.
Following the Tiananmen Massacre, Deng and his grand strategy came under attack by the conservative left wing of the party, but in turn that “Soviet faction” suffered its own loss of face when the Union of Soviet Socialist Republics itself dissolved at the end of 1991. Embarking on his historic “southern tour” in 1992, Deng rallied his two great power bases: the People’s Liberation Army and provincial officials. Striking back at his opponents, Deng commandeered the Fourteenth Party Congress to reshuffle the Politburo in his favor, installing his followers as the next generation to lead the nation. A “grand compromise” was struck inside the party: Deng won military support for further market reforms as long as a lid was kept on political change, and the army was afforded enough budget to modernize. The party would remain supreme, but state involvement in the economy would shrink, and private business would be encouraged along with investment from, and trade with, the outside world. By engineering the acceleration of market reforms, Deng sought to take advantage of the strategic pause generated by the Cold War’s end. As Marti writes, “With a weak Russia to the north, an American withdrawal from the western Pacific, and the willingness and availability of foreign capital to invest in China, Deng argued that it was now or never. Reform and opening must be pushed to the limit.”
Much as the U.S. military now plays bodyguard to globalization and once did the same for America’s westward expansion across the nineteenth century, Deng enlisted the PLA to play “protector and escort” to China’s economic modernization, the goal of which would become the party’s basic line, replacing class conflict. Externally, China would adopt a foreign policy of avoiding dangerous entanglements, much as George Washington had advocated for a young America upon his retirement. No foreign crises or international issues would be allowed to interrupt China’s focus on internal economic development, which would center on urbanization, i
ndustrialization, attracting foreign capital and maximizing export earnings, and significant trade protectionism to nurture the home market and home companies that would someday dominate global markets. Again, this is basically the American System of the early 1800s, right down to the dominance of a single-party elite and a strong aversion to political factionalism. Even China’s infrastructural build-out mirrors our own: first make “external improvements” to link coastal regions to foreign markets, then tax the booming coastal regions to finance internal improvements that reach increasingly inward and westward.
China has experienced incredible economic growth ever since, increasing its GDP annually by almost 10 percent—as fast as you dare expand. But China is also nowhere near becoming a democracy, and that dubious achievement both scares and excites nations around the world, because it suggests that you can rapidly embrace globalization, achieve great income growth, and remain a single-party state. And that’s the China model. But here’s where the China System must likewise mirror the American System: The bulk of China’s population, as well as most of its abject poverty, lies in its interior west. Those underdeveloped provinces represent the caboose on this train, and no matter how fast the train’s engine may pull, the booming coastal provinces cannot embrace globalization without pulling the rural poor along for the ride; otherwise the train will break apart, just as China has many times in its history.
THE AMERICAN SYSTEM PERTURBED: 3 BILLION NEW CAPITALISTS REGISTER THEIR DEMAND
China’s embrace of markets created the dynamic core of the roughly 3 billion new capitalists who joined globalization over the past quarter-century, expanding the global economy roughly fivefold in terms of population encompassed. This group includes the other members of the “BRIC” quartet (Brazil, Russia, and India), plus all the smaller emerging markets located east and south. As an explosive expansion of the global economy, this influx of new players mirrors America’s westward growth across the 1800s, including the immense challenge of making a previously small, in-family rule set (the reconstructed Union for post-Civil War America, the West today) now suddenly—in historical terms—embrace a far wider economic frontier, in this case replete with dozens of emerging markets whose idiosyncratic mix of political rule sets differs greatly, in most instances, from our own—so many Deadwoods, so little time.
This is the preeminent challenge of our age: the sustainable harmonization of these different models of capitalism, or the integration of mature, high-trust environments (the Old Core West) with immature, lower-trust environments (the New Core East/South and Gap). As global trade continues to grow in volume and complexity, globalization’s Functioning Core is likely to veer back and forth between, on the one hand, the temptation of populism and economic nationalism during times of economic turbulence (e.g., America from 1875 to 1895) and, on the other hand, progressive collective efforts to tame global market fluctuations and their resulting cruelty (resembling more America from 1895 to 1917). Because these competing models represent countries at different stages of development, America is often put in the ironic position of arguing for policy changes—such as the reduction of tariffs and allowing currencies to float—that we embraced only after becoming a supremely competitive global economic power. This is ironic indeed, because we often end up scolding younger versions of ourselves, instructing them to do as we say and not as we once did.
Mostly, what these 3 billion new capitalists did was simply insert themselves and their cheaper inputs (human labor, natural resources, industrial capital) into the West’s existing buyer chains (the Wal-Marts of the world) and producer chains (the Toyotas of the world). Again, globalization tends to integrate trade by disintegrating production. Globalization spreads various segments of production and assembly across those economies that offer the cheapest labor for each particular stage. China has deftly inserted itself into a long list of these chains, becoming the final assembler of note in toys, cell phones, CD players, computers, and auto parts—and just about everything else. By doing so, China has consolidated much of Asia’s previous trade surpluses with America into its own burgeoning bilateral trade with the United States. So when you hear about America’s huge trade deficit with China, bear in mind that it’s the same huge trade deficit we’ve long had with Asia as a whole.
Also be aware that this figure hides a lot of complexity. Foreign corporations control the majority of this production for export (approximately two-thirds). American companies in particular dominate China’s U.S.-export sector, meaning it’s basically our companies renting Chinese labor and keeping much of the profit. The Chinese export that sells for hundreds of dollars in America nets only tens of dollars for the Chinese economy. That’s how Wal-Mart, the single biggest recipient of Chinese goods in the world (indeed, if Wal-Mart was a state, it would constitute China’s fourth-largest export market), keeps its prices so low. So if you think Western companies are exploiting cheap Chinese labor, then understand that you’re a prime beneficiary. But it’s not just the West. Taiwan, for example, dominates certain information-technology hardware sectors, such as motherboards for computers. Ten years ago, most of that manufacturing happened in Taiwan itself. Now, thanks to significant flows of foreign direct investment (FDI) from Taiwan to China, much of that production occurs on the mainland, with Taiwanese companies controlling the great majority of China’s hardware IT exports. China may someday seek to invade Taiwan militarily, but Taiwan has already successfully invaded the mainland economically.
Naturally, China’s deep penetration of the U.S. market has raised product-safety issues. Any economy that is growing as fast as China’s cuts plenty of corners—welcome to The Jungle! But realize that China learns by scandals, just as America did over the past century. Frankly, the best crises are the ones you actually hear about, because that means the international press got ahold of them, and those already affected or at risk will get the information they need to protect themselves. Once the problem is tracked back to China, Beijing is put on public notice that whatever laxness exists simply cannot be tolerated anymore, accompanied with threats of quarantine, bans on exports, cessation of investment flows, and so on. A generation ago, such threats would have elicited yawns from China’s ruling elite, but now, with the Communist Party’s legitimacy riding on economic expansion, they’re taken with the utmost seriousness. In short, China’s government is starting to act more like a business that recognizes that its reputation is often its most important asset, because flat-world competition means that today’s mistake allows somebody else to steal your customers by the start of business tomorrow.
China’s skyrocketing demand for all manner of natural resources, in conjunction with India’s rising demand for foreign energy sources, is altering global commodity and energy markets in ways both profound and perverse. China’s explosive economic growth forces it to suck in resources from all over the world. Oil imports have increased more than sevenfold since 1995, making China the second-biggest importer of oil in the world, after the United States. China’s imports of timber have jumped more than twelvefold over the same time period, meaning certain countries, like neighboring Myanmar, are deforesting themselves at a rapid pace to feed the Chinese economy. Even in coal, which China has plenty of, imports increased fifteenfold from 2001 to 2006. Most global commodity price indices have more than tripled since the late 1990s, and China is the major reason why. (Ditto for when prices drop.)
As a longtime China-watcher, James Kynge notes in his recent book China Shakes the World, “China’s endowments are deeply lopsided,” meaning it tries to act like a “body” economy even though it does not possess the natural resources of one. Blessed with too many people, China is short on just about everything else: arable land, water, energy, and raw materials of all sorts. Thus, the only way China manages to serve as globalization’s “manufacturing floor” is to become a leading global importer of virtually any commodity you can name, from cement and copper to oil and gas. You can easily see the environmental danger: Co
nsumer America doesn’t care where it gets its cheap products from and manufacturer China doesn’t care about who supplies the raw materials. When the resulting environmental degradation from illegal logging helps foster political instability, like a military junta cracking down in Myanmar, everybody in the chain points at everybody else as the villain.
But here’s where the political rubber meets the economic road: America’s insatiable demand for low-cost Chinese goods drives China’s insatiable demand for resources, which in turn drives Beijing to actively court pariah states and “rogue regimes” while the West tries to isolate the same regimes through economic sanctions. Take, for instance, China’s relationship with Iran: While American diplomats work night and day to levy even harsher sanctions to slow down Tehran’s reach for the bomb, China quietly edges out Japan as Iran’s major energy investor, sweetening the deal by reselling it some of that fabulous high-tech military hardware the Chinese military imports from Israel, a portion of which then invariably turns up in southern Lebanon in the hands of Hezbollah as it faces Israeli forces. Talk about a global supply chain! On the face of it, Beijing’s embrace of rogue Tehran constitutes obstructionism on China’s part, as if it’s trying to prevent the global community from cracking down on bad behavior. But the inescapable truth is that China’s scramble to find resources means it has to cut deals with anybody, no matter how disreputable their record. So while Sudan’s government engages in what many Western states consider “ethnic cleansing” and genocide in its Darfur region, China is more than happy to invest heavily in Sudan’s oil industry while supplying the Sudanese government with weapons. Do that long enough and you’ll have Hollywood stars decrying your coming-out party as the “genocide Olympics.”
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