A few years ago I read a book about China written by the German journalist Frank Sieren: Der China Schock. Wie Peking sich die Welt gefügig macht (in English: The China Shock. How Beijing makes the world bend to her will). The book begins with a suggestive introduction in which the author takes the reader on a journey through the history of fallen empires: from ancient Rome, to medieval Venice, to imperial Great Britain. It is a tale of rise and decline.
This concept, known in the West ever since ancient Greeks used it to explain the succession of political systems, was expanded and popularized during the Enlightenment, when the Middle Ages first began to be characterized as an era of decline that followed the glory and splendour of the civilizations of Greece and Rome.
Sieren’s implication is clear. All empires are bound to fall sooner or later. And just like the USA overtook Britain a century ago, so now it’s the turn of the American superpower to be overtaken by China.
The idea that economic power means political power is a notion invented in the West during the era of Enlightened Absolutism, when it became clear that more efficient government and economic progress would allow the rivalling European nation-states to outcompete each other. When England became the workshop of the world, quietly extending its might over the globe, this idea turned into an obsession, most especially with the late-comers of the industrial revolution such as Germany. Wars became a matter of technology and logistics. And the United States, with all its power and might, ruled the capitalist, democratic world for 50 years thanks to its huge economic superiority.
We cannot free ourselves from the past. We still live in the past, in that world shaped by cruel Western powers, fighting each other at home, enslaving and exploiting millions of people abroad. We still live in the world of European diplomacy, balance of power, containment, alliances. This was probably the worst and most enduring effect of the long-lasting European supremacy. Europe has created a world order that reflects their perennial state of war and mutual mistrust. Where the only thing that mattered was power.
But why do we need power? Why can’t we be like Sweden or Austria, neutral and peaceful countries? The answer is: we want power. We see threats all around, coming from the non-Western world, which we consider inferior, incompetent. We can’t let go of that power, because we are addicted to it, and we think that we are the only ones entitled to it. Sure, we need power to defend ourselves. But we need no world hegemony.
The real threat which the “rise” of China poses to us is that it might finally prompt us to look into the mirror and see what’s wrong with us. The most astonishing of all things in the last two decades has been the ideologization of the West – both politically and economically.
We should not be afraid of losing power. Power – both in the 19th century European sense and in its Cold War version – is passe’, is gone, is outdated. In today’s world we finally have the chance, and the need, to share power, to live together accepting differences of values and of political systems.
We should rather be afraid of our own incompetence, manifest in the economic woes of the USA as well as Europe. After the end of the New Deal Liberalism in the USA and of the Keynesian consensus in the UK, which both lasted from roughly the 1940’s until the 1980’s, and the rise of a new neo-liberal right, the economic performance of Western countries has been poor, while inequality has steadily been rising. Less government intervention and more power to the capital has not helped us. It has brought us where we are now.
Let’s forget about China for a moment and talk about East Asia as a whole: China, Japan, South Korea, Taiwan, Singapore. These countries have been successful in creating growth and development. The longest and most impressive periods of growth in history have taken place in Asia. From 1960 until now, these countries have been transformed. Compare S.Korea and East Germany, for instance. The neo-liberal “shock therapy” devised to help East Germany bloom, made its economy collapse. As a result, it still lags behind West Germany today. S. Korea, on the contrary, has been experiencing virtually continuous growth despite setbacks such as the 1997 Asian crisis. How did East Asia achieve these remarkable successes?
Against all neo-liberal logic, they succeeded through a combination of market forces, state intervention and coordination. All of these countries have a mixed economic system, which helped them thrive for decades.
Recently I read an old book, published by National Taiwan University in 1989. It’s called “Taiwan – A Newly Industrialized State”. Let’s remember that the Republic of China (Taiwan) was from 1949 until the early 1990’s a dictatorship,a country ruled with an iron fist by Generalissimo Chiang Kai-shek and, after his death in 1975, by his son Chiang Ching-kuo. It was a country under a regime of martial law that lasted from 1949 to 1987, governed by an elite and a bureaucracy consisting of military men, lawyers, scientists and civil servants. No economists had any key position, and ten of the thirteen Ministers of Economic Affairs between 1950 and 1985 were engineers or scientists. According to common neo-liberal assumptions, a country like this was doomed to fail. Instead, Taiwan had growth rates of around 9-10%, it industrialized rapidly and it is now a fast growing, developed economy.
Taiwan even had a large number of big state-owned enterprises (SOE). Free-marketeers argue that SOE’s can never work. In Taiwan, “the average SOE share of total investment […] in the 1970’s, running above 30%, was among the highest in the world, greater than some self-professed socialist states.”
Taiwan exemplifies the path of East Asian countries. The state sets goals for the economy, invests, plans, coordinates, but it also recognizes the vital importance of market forces. Without market, no success. But without government intervention, no results.
The “rise” of China is nothing but the continuation of the development which began in Asia in the 1960’s. Interestingly enough, the West of today is economically more ideological than a Communist dictatorship. The West adheres to untouchable dogmas, instead of searching for practical solutions. And it refuses to consider the economic models of countries such as Singapore, China or Korea as examples to learn from, it despises them and sees them as inexplicable eccentricities. The sole mentioning of government intervention or industrial policy in the West prompts laughter, disbelief or even outrage. For many people, anything else than free-market ideology is Communism!
I’m not arguing that East Asian economies are perfect. They have a poor record in securing equality, for instance. Nevertheless, there are many lessons to be learnt from them. Not only from them. Look at the performance of Scandinavian countries, where a huge welfare state of almost socialist scale has guaranteed social stability, and an excellent public education system has created a top qualified work force.
We shall not be afraid of China’s rise. Only our own incompetence and stubbornness should frighten us. Let’s stop talking about power. Let’s concentrate our efforts in re-inventing ourselves, in re-thinking our economic dogmas, in finding pragmatic solutions for the problems we are facing.