Keep Calm And Don’t Fear The Red Dragon

On Thursday night I was using my time in one of my most favourite fashions: YouTube zapping, which can easily be defined as jumping from related video to related video until one stumbles upon something remarkable. I don’t remember where I started from, but I remember perfectly where I ended, as that last video has given me much to think about in the last few days: in a fairly recent Talk @Google, Harvard Professor Graham T. Allison discussed his most recent book Destined for War: Can America and China Escape Thucydides’s Trap?. May it be for my profound admiration (if not love) for Thucydides or for my passion for geopolitics, I was glued to the screen for the next hour or so.

The fundamental argument, summed up in one sentence, is that the relationship between China and the United States is not really that different from the relationship between Athens and Sparta before the Peloponnesian War:

just like the rise of Athens challenged Sparta’s predominance, with misunderstandings about each other’s actions and intentions eventually leading them to the Peloponnesian War, so the rise of China challenges the United States’ predominance.

Nothing makes it impossible to conceive that, misunderstanding after misunderstanding, a war between China and the United States may take place. After all, as Thucydides famously wrote:

it was the rise of Athens and the fear that this instilled in Sparta that made war inevitable.

Of course, Thucydides was exaggerating but he was making a point: it’s more probable than not that in this kind of situations a war will break out.

Are we, then, in such a situation? Do we have an established power fearing a rising one? Should the established power fear the rising one? The answer to both question, I feel, is “yes” and no”. My answer is, then, more nuanced than what Professor Allison seemed to give in that talk. Purely in economic terms, China is set to overtake the United States as the largest economy in the world by 2032. This comes with little surprise given that we are, after all, talking about a country whose population is roughly five times the American one and whose GDP has increased, in US dollar terms, roughly thirteen times over the last twenty years. During the last seven years, China has become the largest auto-maker, manufacturer, trader in the world. It also has the largest middle class in the world just like the highest number of billionaires. It’s doing amazing things in technology, being the first country in the world for patent filings and artificial intelligence research, after having already built its fastest supercomputer. Nevertheless, ten years ago, former Premier Wen Jiabao described the nation’s economy with the following, not-much-flattering words: “unstable, unbalanced, uncoordinated, and unsustainable”. His successor, Li Keqiang, in 2015, was equally optimistic “China’s economic growth model remains inefficient; our capacity for innovation is insufficient; overcapacity is a pronounced problem; and the foundation of agriculture is weak.” Shortcomings are, indeed, still plentiful. GDP per capita is still substantially low and only several decades of furious and relentless economic growth will make that figure eventually as large as that of the United States. Economic growth has been slowing down, partly because of the enormous Chinese debt overhang and because it has been previously fuelled by a combination of infrastructure investment and low-wage manufacturing that are becoming less and less easy to do. Financial markets’s workings are obscure and not transparent. Capital control makes it impossible for the renminbi to become what the US dollar has become for the international financial system. Inequalities are increasing at an appreciable pace. Educational attainments are still meagre.

Probably most important of all, there is, essentially, a causal relationship between democracy and becoming a full-fledged developed economy.

Those who have studied Development Economics know that 101 countries, according to estimates by the World Bank, have reached middle-income status since 1960 but only 13 of them have reached high-income status, with all of those 13 being democracies when they made the final leap. Making that final leap revolves around increasing productivity by retraining workers to fit better a service economy, investing in research and innovation and producing more knowledge-intensive goods. To facilitate this, China must have a more modern and stable financial system, make a more efficient use of factor endowments (land, labor, and capital) and, as already mentioned, a more open political system. In other words, China’s Communist Party strong hold on the economy was perfect for this stage of economic development, industrialisation, but less adapt when it comes to create sustained innovation that goes beyond the typical Chinese top-down approach.

Exactly at the wrong time, then, is Xi Jinping, arguably one of the three most important Chinese leaders over the last a hundred years together with Mao (of course) and Deng Xiaoping, consolidating and centralising its power.

In the geopolitical arena, something remarkably curious is happening: it’s not that the rising power is dethroning the incumbent, it’s the incumbent that’s retreating, giving up his power voluntarily.

The Communist party, except from areas extremely close to Chinese borders, has never shown a particularly warlike attitude. The spaces that are opening up for China are not being created by a Chinese push, then, but from an American inordinate international retreat guided by its “very stable genius” sitting in the Oval Office. This is something unheard of in history, a superpower happily walking away from its dominant position under no pressure at all to do so. It’s as if Sparta, all of a sudden, had decided to disband the Peloponnesian League, encourage such ex-allies to join Athens and then proceed to wage war to all of them simultaneously. Few things are more strategically incomprehensible than this in history of geopolitics. The more I think about it, the less I understand what Mr. Trump is aiming to obtain by antagonising every single nation on this planet. Even with the US letting go of his role, we can rest assured that the rest of Asia is not going to sit there and watch as the Chinese army rips them apart. India, Pakistan, South Asia, South Korea and Japan are keeping a watchful eye on their large neighbour, as they have always done and always will do. Expansionary yearnings will adequately been taken care of.

Should fear, honour and self-interest (the two other reasons why wars break out according to Thucydides) permeate the air, anything might blow everything up. The Peloponnesian War is a perfect example of this: what was to become the longest, most destructive war in Greek history, fought on half of the world then known, didn’t originate from a direct, resolute attack by Sparta on Athens. It was, instead, an insignificant, local, quintessentially Greek mess that originated in God-forgotten place like Epidamnus (now in modern Albania), between democrats and oligarchs that started dragging in Corcyra, then Corinth, then Athens and finally the Peloponnesian League into the conflict. The geopolitical importance of Epidamnus in Greece was as close to 0 as it can get. Yet, the Peloponnesian War originated there. North Korea, instead, is comparatively much more important than Epidamnus: when a unstable individual like Kim Jong Un can fire a rocket carrying a nuclear warhead toward anything within an 8000 kms radius from North Korea, the matter is a lot more significant and dangerous than whether Epidamnus landing his non-existent troops onto the shores of Attica was going to be a problem for Athens. Therefore, while I do consider this double comparison overblown, if anything at all can make a war happen, it will probably be how things end up to be in the Korean Peninsula. How things are going to play out there are it’s anyone guess.

Professor Allison makes an interesting point that gives much to think about. The idea that China could mean to the United States what Athens meant to Sparta has decent merits but that I feel that it overestimates China’s effective and current strength, giving to China a status it doesn’t deserve (yet). It implies that its economic and military power, first, is as large as Athens’ was and, second, its imperial aims are as lofty as Athens’ were. I don’t see that. Oh, and Athens lost that war. So there is that.

Marco Canal
Aspirante economista, lettore, amante dei dibattiti intellettuali e gin&tonic, alpinista, film il pane, viaggio il vino e i Pink Floyd come religione. Pecca di insaziabile curiosità, battuta facile, smodata ambizione e decisione. Alea iacta est.

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