Walter Russell Mead has not been the biggest fan of the current president, so it's worth quoting at length what he said in a recent blog post about Obama's Pacific Rim trip:
The cascade of statements, deployments, agreements and announcements from the United States and its regional associates in the last week has to be one of the most unpleasant shocks for China’s leadership — ever. The US is moving forces to Australia, Australia is selling uranium to India, Japan is stepping up military actions and coordinating more closely with the Philippines and Vietnam in the South China Sea, Myanmar is slipping out of China’s column and seeking to reintegrate itself into the region, Indonesia and the Philippines are deepening military ties with the the US: and all that in just one week. If that wasn’t enough, a critical mass of the region’s countries have agreed to work out a new trade group that does not include China, while the US, to applause, has proposed that China’s territorial disputes with its neighbors be settled at a forum like the East Asia Summit — rather than in the bilateral talks with its smaller, weaker neighbors that China prefers.
Rarely has a great power been so provoked and affronted. Rarely have so many red lines been crossed. Rarely has so much face been lost, so fast. It was a surprise diplomatic attack, aimed at reversing a decade of chit chat about American decline and disinterest in Asia, aimed also at nipping the myth of “China’s inexorable rise” in the bud....
[I]t was as decisive a diplomatic victory as anyone is likely to see. Congratulations should go to President Obama and his national security team. The State Department, the Department of Defense and the White House have clearly been working effectively together on an intensive and complex strategy. They avoided leaks, they coordinated effectively with half a dozen countries, they deployed a range of instruments of power. In the field of foreign policy, this was a coming of age of the Obama administration and it was conceived and executed about as flawlessly as these things ever can be.
You know it was a good foreign policy trip when Politico runs the "Obama will soon miss his foreign policy successes as he returns to the Washington mire" storyline upon his return.
The standard line among the press and expert analysts is that the combination of speeches and actions represents a dramatic foreign policy "pivot" to East Asia. This elides some prior speeches that suggested this was under way for some time, but still -- what does it mean?
I'd suggest three things. First, it's an interesting moment to highlight some macro trends that are relatively favorable to the United States. In comparison to, say, China or Europe, the United States looks to be in decent shape. Over the longer term, trends in both energy and manufacturing suggest that the United States will continue a time-honored tradition and emerge from a crisis of its own making in a stronger relative position than before. If the administration is smart, it will marry its recent successes to these longer-term trends as a way of constructing a more optimistic strategic narrative.
Second, China is likely to pursue a more accommodating posture in the short run. As Mead notes, the official Chinese reaction has been muted. The unofficial reaction has ranged from the hyperbolic to the inscrutable. Still, as I've pointed out repeatedly, China's behavior in 2009 and 2010 was a giant honking invitation for the rest of the Pacific Rim to cozy up to the United States. And that's what should worry Beijing. It's not that the United States is interested in maintaining its presence in East Asia -- that interest has not wavered. What has changed is the eagerness with which the countries in the region, ranging from Australia to Myanmar, have reciprocated.
Third, while the Obama administration deserves credit for this foreign policy swing -- and for some fun, compare and contrast coverage of this trip with Obama's Pac Rim swing from two years ago -- the "pivot" language is badly misplaced. A pivot implies that the United States will stop paying attention to Europe or the Middle East and start paying attention to East Asia. While I'm sure that's what the Obama administration wants to do, it can't. Europe is imploding, as are multiple countries in the Middle East. The United States can't afford to ignore these regions, since uncertainty there eventually translates into both global and domestic problems. A European financial meltdown or an Egyptian political meltdown will have ramifications that simply can't be ignored.
Talking about a United States "pivot" in foreign policy is meaningless. The US, like an overstuffed couch, is simply too big to pivot.
What do you think?
At 8:30 this morning U.S. Secretary of State Hillary Clinton will give "a major address on the role of economics in our foreign policy." This speech is the culmination of a series of Clinton speeches and papers over the past few months, including her July remarks in Hong Kong, her essay on America's Pacific Century in the pages of FP, and her remarks on global leadership earlier this week.
A key precept in Clinton's effort is addressing a kind of cultural lag in the sprawling Washington bureaucracy. Lead policy makers may recognize the pivotal role that economics plays in global diplomacy--but in many ways, the diplomatic bureaucracy needs to catch up. Clinton's planned speech will be in large part a call to her own agency's ambassadors, diplomatic staff and analysts to shift their thinking.
And as Clinton lays out that vision in more detail, she will stress two main bulwarks. First, she will highlight the need to advance relations with the wider world as part of the effort to revive the American domestic economic order. And second, she will stress that State Department diplomats and foreign policy thinkers need to work harder to understand how market forces are driving first-order national security challenges in hot spots such as Afghanistan, Iraq and Iran.
Now, as I noted last week, my full disclosure here is that I've seen multiple draft versions of this speech and might have made a modest suggestion or two (because you, dear readers, know how gentle I am with the red pen). Last week, I was pretty pessimistic about the effect of this kind of initiative:
I fear that the State Department is fighting through hurricane-level winds on this front to make a difference. First, the trade deals just sent to Congress are the last ones we're going to see for a while. Doha is dead, the Trans-Pacific Partnership still hasn't materialized, and all of the momentum on trade policy is to move towards
futile gesturesclosure. The dynamic, growing economy is not looking so dynamic, and those deep capital markets are getting extremely jittery.
And this week? Oddly, I find myself more on the "glass half full" side, for a few reasons. First, Congress finally cleared the decks on the three outstanding trade deals, so that looks a bit less embarrassing. Second, there does appear to be genuine enthusiasm inside the administration for the Trans-Pacific Partnership, and a recognition that this would be a neat-o deliverable for the upcoming APEC summit in Honolulu. Third, my own conversation with State Department officials suggest that they've got a decent read on which geographic regions should be the focus of which initiatives. Fourth , dwindling resources doesn't mean no resources -- the U.S. still has some formidable foreign economic policy arrows in its quiver.
The most important reason I'm more optimistic, however, is that the Secretary will be doing two things with this speech that speeches can actually accomplish. A speech can act as a form of reassurance to other countries that the United States gets it -- economics is a vital component of foreign policy, and Washington is ready to play.
A speech can also signal to the foreign policy bureaucracy that there's a shift in priorities, and they had better get on the train if they want to
get promoted make a difference. If foreign service officers see that a familiarity with economics is a key for advancement, then the United States will develop a diplomatic corps that doesn't run away screaming in terror seem distracted if the words "exchange rates" or "geographic indicators" are uttered.
Watch the speech yourself -- it will be webcast at 8:30 AM -- and let me know what you think in the comments.
As I noted previously, compared to his GOP rivals, Mitt Romney has some actual foreign policy thinking going on. On the other hand, as Dan Trombly points out, doing better than Herman Cain or Rick Perry is a really low bar. So, looked at objectively, what's my assessment of Romney's foreign policy white paper?
I could go through it line by line, but James Joyner already did that for The Atlantic. As it turns out, I'm reaching a course called The Art and Science of Statecraft that will require students to write a grand strategy document. Sooo.... if Mitt Romney was one of my students, how would I grade him? See below:
You and your study team have clearly put a lot of work into "An American Century." It's cogently written and organized. Your basic statement of purpose -- "advance an international system that is congenial to the institutions of open markets, representative government, and respect for human rights (p. 7)" -- fits perfectly within the mainstream of American foreign policy thinking. You've done an excellent job of demonstrating an awareness of the complexity of threats that face the United States in the 21st century. I liked it on p. 6 when you noted that:
In the highly dynamic realm of national security and foreign policy there are seldom easy answers. Discrete circumstances in disparate regions of the world demand different kinds of approaches. There is no silver bullet for the problem of securing the United States and protecting our interests around the world.
You've also demonstrated an appropriate awareness that American power rests on more than a strong military. When you note that a Romney administration would "apply the full spectrum of hard and soft power to influence events before they erupt into conflict (p. 8)," I caught myself nodding along.
Some of the details are intriguing as well. I need to look more into these "Reagan economic zones" that you mention a lot, but applying them to Latin America and the Pacific Rim make a great deal of strategic and economic sense. I'm not fully persuaded that your notion of creating regional envoys to organize all "soft power resources" is all that different from the foreign policy czars or special envoys of administrations past, but this kind of argument fits well with your management background.
That said, there are some logical flaws and major gaps in this draft that will have to be corrected if you want to earn a better grade. The first problem is the style. I recognize that you've written this as a campaign document, so you're never going to completely eliminate the
unadulterated horsheshit allegations about the current president going on an apology tour. Maybe you could do it a bit more subtly in the future, however?
Secondly, there's a lack of historical awareness in some parts of the document. For example, on page 7 the paper says:
[A] Romney foreign policy will proceed with clarity and resolve. The United States will clearly enunciate its interests and values. Our friends and allies will not have doubts about where we stand and what we will do to safeguard our interests and theirs; neither will our rivals, competitors, and adversaries.
Now, reading this, I kept thinking back to the Bush administration and its repeated assetions that that there would be no hypocrisy in foreign affairs. Much like Bush, reality turned out to be trickier. I suspect you know this, from the other excerpts noted earlier. So get rid of this fluff: I'm sure statements like this play well in a management consulting boardroom, but it's not going to cut it in the real world.
Similarly, for someone who says that, the Obama administration is "undermining one’s allies (p. 3)" in contrast to you, who will "reassure our allies (p. 13)", you don't actually talk about America's treaty allies much at all. True, you do talk about expanding America's alliance system to include India and Indonesia. Mexico gets some face time. Israel gets a lot of face time. On the other hand, NATO is not mentioned once in this entire document. Neither is the European Union. Japan and South Korea get perfunctory treamtment at best. Turkey is a major treaty ally but you treat it like a pariah state. For someone who's claiming that the U.S. will reassure its major allies, you didn't seem to give them much attention at all. This is a really important problem, because Japan and Europe have been crucial allies in a lot of major American initiatives -- and they're getting weaker. Even in discussing new possible allies, I'm kind of gobsmacked that Brazil is never mentioned.
Another big problem is that your approach to China is so shot full of contradictions that I don't know where to begin. Do you seriously believe what you wrote on p. 3:
The easiest way... to become embroiled in a clash with China over Taiwan, or because of China’s ambitions in the South or East China Seas, will be to leave Beijing in doubt about the depth of our commitment to longstanding allies in the region.
Really? See, I'd say the easiest way to get embroiled in a clash with China is to write Taiwan a blank check on their defense needs. The second easiest would be to publicly bluster on about Taiwan to a Chinese leadership that feels increasingly insecure and will be tempted to stoke the fires of Chinese nationalism by creating another Quemoy and Matsu crisis.
Furthermore, you talk explicitly about supplying Taiwan with "adequate aircraft and other military platforms (p. 18)" in supposed contrast to the Obama administration. You also talk about strengthening relationships with other countries that neighbor China in an effort to preserve American dominance. Now, this might be a bit provocative, but I get the rationale. Here's the thing, though -- you can't simultaneously do this and assert that you will "work to persuade China to commit to North Korea’s disarmament (p. 29)." Really? How exactly are you gonna persuade them on this point? Do you really think that arming Taiwan to the teeth and blasting its human rights record will do the trick?
If the section on China is contradictory, then your discussion of Pakistan is worse. You state on p. 31-32:
It is in the interests of all three nations to see that Afghanistan and the Afghanistan/ Pakistan border region are rid of the Taliban and other insurgent groups.... Pakistan should understand that any connection between insurgent forces and Pakistan’s security and intelligence forces must be severed. The United States enjoys significant leverage over both of these nations. We should not be shy about using it.
There are at least two assertions in the quoted section that are highly dubious -- I'll let you find them on your own.
One final point, should you choose to revise this draft strategy -- you need to prioritize the threats you discuss in the paper. You list a whole bunch of them -- rising authoritarian states, transnational violence, failing states, and rogue states. If you have to prioritize, which threats merit greater attention? This should actually be pretty easy, since you absurdly overhype the threats posed by some of these countries (Venezuela, Cuba and Russia in particular).
I look forward to reviewing your later work.
Bruce Gilley argues in The National Interest that the next leader of China is going to be trouble for the United States:
It may be time to concede that China’s leader-in-waiting, Xi Jinping, is not the moderate that many have assumed. Indeed, evidence from his past suggests that Xi is going to steer China in a more aggressive direction, both domestically and internationally....
Foreign policy is where new Chinese leaders tend to make their mark quickly, given the small number of people involved compared to domestic policy. Thus it’s also the area where the question of who’s in charge in Beijing really matters, and the fine art of Pekingology remains important. Vice president Joe Biden came away from an August visit praising Xi as “strong” and “pragmatic.” Biden is probably right. But Xi’s strength and pragmatism do not necessarily augur well for those fearful of a rising China.
The first time that Xi’s “strong” dark side emerged publicly was in 2009 when on a visit to Mexico, he told local Chinese, “Well-fed foreigners have nothing better to do but point fingers at China. But China does not export revolution, we do not export poverty and hunger, and we do not interfere in the affairs of others. So what is there to complain about?”
Xi’s “three did nots,” as they have become known, have won plaudits from the country’s nationalists, including the authors of the vitriolic 1996 book The China That Can Say No. These nationalists express hope that Xi will be the first leader since Mao who is willing to stand up to the West. In early September, Xi told students at the Central Party School, the party’s elite training academy in Beijing, that “two overriding objectives—the struggle for both national independence and popular liberation, which is to say the realization of both state power and popular wealth—have always been closely related. The former has always been the basis of the latter.”
Gilley's hypothesis is certainly plausible, but can I suggest an alternative? China is in the middle of a leadership transition -- and when politicians are trying to move on up but ain't there yet, they often have the freedom to make all kinds of crazy, out-there, irresponsible foreign policy statements secure in the knowledge that foreign policy statements are not all that binding once politicians assume power .
Indeed, one could go even further. The phrase "only Nixon could go to China" refers to the idea that only someone who sounded as rabidly anti-communist as Richard Nixon in the past would be able to have the dometic political clout to meet with Mao Zedong and cut a deal with the People's Republic of China. Could it be that Xi is simply buttering up his base before taking power in order to make it easier to do business with the United States?
I don't know the answer, but I suspect even hardcore China-watchers don't know either. China is already experiencing some serious foreign policy blowback that has nothing to do with the United States, however. I'm not sure that Xi will really need the headache of ratcheting up tensions with Washingtgon, unless the global economic downturn is sooooooo bad that scapegoating foreigners is the best option for political survival.
What do you think?
... you have to write a very quick blog post saying "I have arrived safely in Shanghai" because that's the best way to inform friends and family of that fact, because I can't access Facebook, Twitter, and Google+ (intriguingly, LinkedIn is no problem), and Gmail is loading so slowly that I'd expect the Israel-Palestinian peace process to move faster.
That is all.
Your humble blogger will be hitting the road early in the morrow to Shanghai. I'll be attending a conference co-sponsored by the Shanghai Institutes for International Studies, Stanley Foundation and the Munk School of Global Affairs University of Toronto on "Global and Collaborative Asian & Pacific Leadership for the G20."
Note to citizens of the PRC: I too will be toting my own luggage.
I'll certainly try to avoid catching Friedman's Disease during this China trip.* I'll also try to avoid a related management consulting syndrome, which is the belief that a few days in another country somehow endows me with "street cred" when discussing said country. This seems particularly prevalent with respect to China.
Since the topic is the state of the G-20, and I've made my feelings about that forum pretty plain on this blog, I hereby challenge readers to persuade my mind in the 48 hours before I present. The G-20 performed best when the sense of crisis seemed most acute. As the eurozone melts down, and the United States doesn't look much better, is the G-20 capable of jumpstarting a bout of policy coordination that looks more robust than, say, this totally anemic statement?
What do you think?
*If Gwyneth Paltrow is coughing anywhere near me, on the other hand, I'm... I'm.... probably going to be the Index Patient Plus One.
Your humble blogger is near the capital of
Waterworld Pennsylvania at the moment and all conferenced out. Regular blogging will resume after some sleep.
In the meanwhile, however, please check out FP's latest Deep Dive on the future of currencies. I have a contribution on the dollar's future as the world's reserve currency. It's depressing to note that the thing I like best about it is it's title -- which, of course, someone else at FP created.
Remember that global political economy funk I was feeling about ten days ago? I think Felix Salmon caught it, and caught it bad. Riffing off of a George Magnus research note for UBS, Salmon thinks that we're currently experiecing, "the most uncertain outlook, in terms of the global political economy, since World War II ended and the era of the welfare state began."
If you think that's dramatic, consider this paragraph:
Most fundamentally, what I’m seeing as I look around the world is a massive decrease of trust in the institutions of government. Where those institutions are oppressive and totalitarian, the ability of popular uprisings to bring them down is a joyous and welcome sight. But on the other side of the coin, when I look at rioters in England, I see a huge middle finger being waved at basic norms of lawfulness and civilized society, and an enthusiastic embrace of “going on the rob” as some kind of hugely enjoyable participation sport. The glue holding society together is dissolving, whether it’s made of fear or whether it’s made of enlightened self-interest.
Magnus says something similar in his note, lamenting the "malaise in politics and policymaking," albeit conceding that, "While there is plenty of talk about endgames of war and conflict, muddling through and the rediscovery of good politics are just as, if not more likely." Walter Russell Mead nods along sagely, while John Sides is more skeptical.
In part for reasons proffered here, I'm more sympathetic to Sides than Salmon. Another reason is that Salmon's gloominess seems to be swamping the data. Edelman's 2011 Trust Barometer, for example, suggests that Salmon is exaggerating the "massive decrease of trust" across-the-world claim juuust a wee bit. That survey is not perfect (it's targeted at the top 25% of income-earners). It's also not all good news -- the advanced industrialized democracies are not strong reservoirs of trust right now. That said, the increase in trust -- not to mention the continued decrease in crime in kep places -- is broad-based enough to suggest that perception is overwhelming reality.
I'm not without concerns -- the disconnect at the global economic governance level is pretty disconcerting, and even G-20 optimists are starting to sound like me. Furthermore, the longer that sluggish growth and anemic job creation persists in the advanced industrialized democracies, the gloomier things get. If Reinhart and Rogoff are correct, Salmon is just demonstrating rational expectations.
Still, given the general suckiness of the global political economy over the past few years, what's striking is not the signs that the world is falling apart, but rather the dogs that haven't barked.
What do you think?
[WARNING: THE FOLLOWING IS AN OPTIMISTIC GLOBAL POLITICAL ECONOMY POST]
Note: in my last blog post, I might have sounded juuuuust a wee bit pessimistic about the state of the global political economy. That was my intent, but it wasn't necessarily how I actually felt. My aim was to assemble as negative a brief as possible about the state of the global political economy. The aim of this post is to argue that, despite all the recent bad news, the fundamentals of the global political economy are surprisingly sound. I'm not actually as optimistic as the rest of this post suggests, either -- but I do lean more in this direction. The fact that I'm blogging this from a zombie-proof vacation redoubt should in no way affect your evaluation of the following few paragraphs.
So, when we last left off this debate, things were looking grim. My concern in the last post was that the persistence of hard times would cause governments to take actions that would lead to a collapse of the open global economy, a spike in general riots and disturbances, and eerie echoes of the Great Depression. Let's assume that the global economy persists in sputtering for a while, because that's what happens after major financial shocks. Why won't these other bad things happen? Why isn't it 1931?
Let's start with the obvious -- it's not gonna be 1931 because there's some passing familiarity with how 1931 played out. The Chairman of the Federal Reserve has devoted much of his academic career to studying the Great Depression. I'm gonna go out on a limb therefore and assert that if the world plunges into a another severe downturn, it's not gonna be because central bank heads replay the same set of mistakes.
The legacy of the Great Depression has also affected public attitudes and institutions that provide much stronger cement for the current system. In terms of publuc attitudes, compare the results of this mid-2007 poll with this mid-2010 poll about which economic system is best. I'll just reproduce the key charts below:
The headline of the 2010 results is that there's eroding U.S. support for the global economy, but a few other things stand out. U.S. support has declined, but it's declined from a very high level. In contrast, support for free markets has increased in other major powers, such as Germany and China. On the whole, despite the worst global economic crisis since the Great Depression, public attitudes have not changed all that much. While there might be populist demands to "do something," that something is not a return to autarky or anything so drastc.
Another big difference is that multilateral economic institutions are much more robust now than they were in 1931. On trade matters, even if the Doha round is dead, the rest of the World Trade Organization's corpus of trade-liberalizing measures are still working quite well. Even beyond the WTO, the complaint about trade is not the deficit of free-trade agreements but the surfeit of them. The IMF's resources have been strengthened as a result of the 2008 financial crisis. The Basle Committee on Banking Supervision has already promulgated a plan to strengthen capital requirements for banks. True, it's a slow, weak-assed plan, but it would be an improvement over the status quo.
As for the G-20, I've been pretty skeptical about that group's abilities to collectively address serious macroeconomic problems. That is setting the bar rather high, however. One could argue that the G-20's most useful function is reassurance. Even if there are disagreements, communication can prevent them from growing into anything worse.
Finally, a note about the possibility of riots and other general social unrest. The working paper cited in my previous post noted the links between austerity measures and increases in disturbances. However, that paper contains the following important paragraph on page 19:
[I]n countries with better institutions, the responsiveness of unrest to budget cuts is generally lower. Where constraints on the executive are minimal, the coefficient on expenditure changes is strongly negative -- more spending buys a lot of social peace. In countries with Polity-2 scores above zero, the coefficient is about half in size, and less significant. As we limit the sample to ever more democratic countries, the size of the coefficient declines. For full democracies with a complete range of civil rights, the coefficient is still negative, but no longer significant.
This is good news!! The world has a hell of a lot more democratic governments now than it did in 1931. What happened in London, in other words, might prove to be the exception more than the rule.
So yes, the recent economic news might seem grim. Unless political institutions and public attitudes buckle, however, we're unlikely to repeat the mistakes of the 1930's. And, based on the data we've got, that's not going to happen.
[WARNING: THE FOLLOWING IS A VERY PESSIMISTIC GLOBAL POLITICAL ECONOMY POST]
So, just to sum up the past week or so of global political economy events:
1) U.S. government debt got downgraded by Standard & Poor;
2) Global equity markets are freaking out;
London Britain is burning;
This all sounds very 2008, except that it's actually worse for several reasons. First, the governments that bailed out the financial sector are now themselves the object of financial panic and political resentment. Second, the tools used to try and rescue the global economy in 2008 are partially to blame for what's happening right now. Despite all the gnashing of teeth about the Fed twiddling its thumbs, it's far from clear that a QE3 would actually stimulate anything besides a rise in commodity prices.
With both Europe and the United States unable to stimulate their economies, and China seemingly paralyzed into indecision, it's worth asking if we are about to experience a Creditanstalt moment.
The start of the Great Depression is commonly assumed to be the October 1929 stock market crash in the United States. It didn't really become the Great Depression, however, unti 1931, when Austria's Creditanstalt bank desperately needed injections of capital. Essentially, neither France nor England were willing to help unless Germany honored its reparations payments, and the United States refused to help unless France and the UK repaid its World War I debts. Neither of these demands was terribly reasonable, and the result was a wave of bank failures that spread across Europe and the United States.
The particulars of the current sovereign debt crisis are somewhat different from Creditanstalt, and yet it's fascinating how smart people keep referring back to that ignoble moment. The big commonality is that while governments might recognize the virtues of a coordinated response to big crises, they are sufficiently constrained by domestic discontent to not do all that much.
So... is this 1931 all over again?
There are three aspects of the current situation that make me fret about this. The first is the sense that developed country governments have already tapped out all of their politically feasible methods of stimulating their economies. This is the time when both politicians and voters start to ask themselves, "Why not pursue the crazy idea?"
The second is whether the Chinese government will do something to satiate their nationalist constituency. Neither Joe Nye nor James Joyner thinks this is likely, and I tend to agree that any effort at economic coercion will hurt China as much as the United States. When autocrats are up against the wall, however, then they might take risks they otherwise would never consider.
The third is this working paper on what causes societal unrest in developed economies (h/t Henry Farrell). The abstract suggests more trouble on the way:
From the end of the Weimar Republic in Germany in the 1930s to anti-government demonstrations in Greece in 2010-11, austerity has tended to go hand in hand with politically motivated violence and social instability. In this paper, we assemble crosscountry evidence for the period 1919 to the present, and examine the extent to which societies become unstable after budget cuts. The results show a clear positive correlation between fiscal retrenchment and instability. We test if the relationship simply reflects economic downturns, and conclude that this is not the key factor.
So... there are, unfortunately, numerous reasons to think that we're headed down a bad road... which is the pretty much point of this post.
Readers are encouraged in the comments to offer counterarguments for why things aren't as bad as 1931. I'll be offering some thoughts about why 1931 won't happen again later in the week.
After last night's stunningly useless set of speeches, I'd put the odds of the U.S. not raising the debt ceiling by August 2nd at 1 in 2. Like many other observers, I'm finding it increasingly difficult to envision a deal that would get through the Senate while attracting a majority of House Republicans [You meant a majority of the House of Representatives, right?--ed. No, I meant a majority of House Republicans. I'm pretty sure that Boehner and the rest of the House GOP leadership will refuse to pass any debt ceiling plan that relies too much on House Democrats.]
So, it's gonna be a fun few weeks for those of us who study the global political economy. Let's start by thinking the unthinkable -- what will happen if there is a default?
I've expressed my feelings on the matter already, and I'm hardly the only one. That said, I've also
hedged my bets been flummoxed by the lack of market reaction to the DC stalemate. The lack of market reaction to date has emboldened House GOP members to stand fast. Could they be right?
Tom Oatley, who pooh-poohed my fears of the debtpocalypse last week, makes an interesting point about the composition of U.S. debt-holders:
By these figures, about 63% of US government debt is owned by central banks (foreign and domestic) and/sovereign wealth funds. Most of these entities are American friends and allies. Another 4% is owned by US state and local governments. That leaves 33%--about $4.8 trillion--in private hands. Of this, the financial institutions with the most restrictive regulations regarding asset ownership (depository institutions) own only 2% of the total ($290 billion). Mutual Funds, who may or may not have to dump downgraded debt, hold another 9% ($1.35 trillion).
What's the point? The discussion about the impact of US default revolves around the market response to default. Useful to recognize that most of the US government debt is held by public-sector agents who are much less sensitive to balance sheet pressures and regulatory constraints. These public sector agents are also substantially more sensitive to "moral suasion" and direct appeal than private financial institutions. The structure of ownership of US debt might dampen the negative impact of any default that does occur.
This is pretty interesting. Oatley focuses on "moral suasion," but there's also a national-interest motive for many U.S. debtholders. Most of the official holders of U.S. debt have a strong incentive for a) the value of their holdings not to plummet; and b) the United States economy to continue to snap up other their exports. If China, for example, is buying up U.S. debt to sustain its own growth, then neither a technical default nor a ratings downgrade should deter China or other export engines from continuing to buy U.S. debt even if there's a spot of trouble.
So it appears that complex interdependence will force America's rivals to continue to hold U.S. debt even after the debtpocalypse!! The United States in the clear, right?
Not so fast. Here are five "known unknowns" I can think of that might complicate Oatley's analysis:
1) What if the creditors form a cartel? In my 2009 paper, this was the one scenario that gave me the heebie-jeebies, because it's the one scenario under which creditors can wring geopolitical gains from debtor states. Any kind of default can act as a focal point moment in which U.S. creditors decide it's time to apply a haircut to American power and influence.
I don't think this is going to happen, because the national interests of American debtholders remain divergent. That said, if U.S. allies interpret default as a signal of U.S. unreliability in times of crisis, then all bets are off.
2) What about the economic nationalism of China? China is the largest foreign debtholder, which gives it a certain agenda-setting power in moments of crisis. There are a lot of compelling reasons why China would decide to try to minimize the economic disruptions . On the other hand, there's a lot of resentment on Chinese Internet boards already about the Chinese purchases of U.S. debt. During a period in which the CCP is already concerned about domestic instability, one could envision a scenario whereby they try to mollify nationalists at home by acting out against the United States.
3) What would be the effect of a mild market reaction on the House of Representatives? The less the markets react, the less that the House GOP will feel a need to do anything. There will come a point, therefore, when official debtholders might need to signal to the House that, in IPE lingo, "s**t needs to get done." That signal would in and of itself roil markets, not to mention the effects the current uncertainty is already having on the real economy.
4) What is the fiscal shock from a default? There are two causal mechanisms through which a default could affect the global economy. The first is through panic and uncertainty roiling financial markets. The second, however, is from a dramatic fiscal contraction due to limited government spending. Given the lackluster state of the current recovery, it wouldn't take much to tip the United States back into recession.
5) What if there's another AAA bubble? FT Alphaville's Tracy Alloway provided another interesting chart earlier this month on the distribution of AAA securities:
As Alloway warns:
[W]atch what starts happening from 2008 and 2009.
The AAA bubble re-inflates and suddenly sovereign debt becomes the major force driving the world’s triple-A supply. The turmoil of 2008 shunted some investors from ABS into safer sovereign debt, it’s true. But you also had a plethora of incoming bank regulation to purposefully herd investors towards holding more government bonds, plus a glut of central bank liquidity facilities accepting government IOUs as collateral. Where ABS dissipated, sovereign debt stood in to fill the gap. And more.
It’s one reason why the sovereign crisis is well and truly painful.
It’s a global repricing of risk, again, but one that has the potential for a much largerpop, so to speak.
We know that a downgrade of U.S. Treasuries would likely lead to a downgrade of state and municipal bond ratings as well. We also know that the ripple effects from the collapse of asset-backed securities were much larger than anticipated before the 2008 crisis. This is why the possible knock-on effects of downgrade so many AAA asserts makes me itchy. Even if banks and other financial institutions have minimal exposure to U.S. Treasuries, I don't think it's possible for them to have minimal exposure to all U.S.-based AAA sovereign debt.
These are just the five known unknowns that I could think of in the past hour -- there are probably many, many more. Readers are strongly encouraged to add them in the comments.
In the wake of the GOP debate earlier this week, there's been a lot of to-ing and fro-ing and to-ing and fro-ing as to whether Republicans have shifted away from the neoconservatism of George W. Bush and towards offshore balancing or isolationism. I don't think it's a settled question -- I'd conclude that it's partly a genuine realpolitik backlash to the massive costs of Iraq, partly a reflection of public sentiment, and partly a partisan reaction to the fact that it's a Democratic president who's launching
wars kinetic military actions nowadays.
What's more disturbing, however, and uncommented until now, was the total lack of support for freer trade among the GOP field.
This came through loud and clear through what was said and what was not said in New Hampshire. Trade didn't come up all that much during the debate. Tim Pawlenty provided the only comment of substance, and it wasn't a productive one:
[N]umber one, we've got to have fair trade, and what's going on right now is not fair.
I'm for a fair and open trade but I'm not for being stupid and I'm not for being a chump. And we have individuals and organizations and countries around this world who are not following the rules when it comes to fair trade. We need a stronger president and somebody who's going to take on those issues.
In presidential campaigns, this amounts to "don't expect to see any new trade deals anytime soon." As for the other dimensions of globalization, well, peruse the section on immigration
provided you have a green card if you dare. No one said anything about the positive economic and demographic benefits America receives from immigration.
The other thing that was striking was what wasn't said during the debate. All of the candidates focused like sharks with frikkin' laser beams attached to them on the economy. The standard GOP litany of solutions for jump-starting the economy were offered: tax cuts, cutting regulation, tax cuts, cutting government spending, tax cuts, reigning in the Fed, tax cuts, ending Obamacare, tax cuts. Not one of the candidates, however, mentioned trade liberalization as part of their fornmula for getting America moving again.
To be fair, this isn't as bad as when Obama and Clinton were debating over who would eviscerate NAFTA faster in 2008 (and funny, isn't it, how that never happened). And it's not like I was a huge fan of Obama's trade policy. To be just as fair, howeever, at least the current president completed KORUS negotiations and signaled strong interest in the Trans-Pacific Partnership. I get the sense that no one in the GOP field is going to stick their neck out on international trade or investment. For the party that claims to be in favor of lower taxes and regulation, this is a travesty.
My conference in Beijing closed with Le Yucheng -- the Chinese equivalent of the State Department's director of policy planning -- giving a talk and then taking questions from the academics and policy wonks around the table.
Based on what I heard and the consensus reaction of the old China hands around the table, Le's talk was pretty much boilerplate. That's a term of art for policy mandarins -- it translates into "nothing new was said, just a recycling of old talking points and approved language." However, for those of us who are not old China hands, even boilerplate can be somewhat revealing. Here were the talking points that stood out for me:
1) "To be frank, people don't understand China." Le provided a long litany of development problems and challenges facing China. He found it hypocritical that the rest of the world complained about China not buying enough cars or airplanes from the rest of the world, but also about buying too much oil. He provided a long spiel about how hard China is working to promote its economic development and overcome massive poverty. This is code for, "do not expect us to be chipping in all that much for global public goods anytime soon."
2) "China is always a humble, modest nation." This was, easily, the most jarring part of his talk. Le claimed that since the founding of the People's Republic, China had not attacked any of her foreign neighbors. I suspect that diplomats from India, Russia, South Korea, and Vietnam would have some strenuous disagreements with that assertion, but I was told that this is a standard talking point for Chinese diplomats (If you ask me, they'd be better off stating than China has had peaceful relations with the rest of the world in the post-Maoist era and -- unlike some other great powers that will go unmentioned -- has not averaged a military intervention every 18 months or so).
This section was also jarring because it primarily consisted of backdoor brags. Le claimed that China learned much from everyone else, and that he personally works so hard that he never goes on vacation and doesn't leave the office until 10 PM. He then talked about how China had solved the Hong Kong problem, the rural development problem, and so forth.
This sectiion ended with a small rant on how China was very, very different from, just to pick a country out of a hat, Norway. Because Norway has less than 1% of China's population while having 100 times China's resources, Norway should apparently not offer advice to China on, well, anything. Or, as Le put it, Norway is like a mini-car to China's bullet train. Note to Norway: I think China is still touchy about this.
3) "There is no Beijing Consensus." This was a point that Le hammered home repeatedly. He insisted that China had no original development model, and that Beijing certainly wasn't trying to recommend its model to nany other country. As Le put it, "There is no best model in the world." This part of Le's talk was also the most convincing, as the rest of the assembled Chinese academics made a similar point. As one academic pithily noted, "both the Washington Consensus and the Beijing Consensus were invented in Washington!"
4) China will not challenge the global order -- in other words, "we are not the USSR." In a mild contradiction of his first point, Le listed the myriad ways in which China contributed to global order -- promoting domestic economic growth to stabilize the regional economy, contributions to UN peacekeeping, anti-terrorism cooperation, anti-piracy, purchasing European and American debt instruments, and -- an oldie but a goodie -- not devaluing the yuan during the Asian financial crisis. Le stressed how much China benefitted from the existing order, and that while reforms might be needed, a wholesale change was not needed.
5) If you think the PRC government is bad, read our Internet chat boards. This was interesting, as Le tried to stress that China's population was far more nationalist and hawkish on the foreign policy front than the PRC government. He's not eactly wrong on this point, but it should be pointed out that given the various restrictions on what can be said on the Chinese internet, assertive nationalism is the only approved way of venting for the Chinese public.
[Note to readers: we are pleased to report that Dan bout with Friedman's Disease appears to have passed quickly. Due to difficulties with accessing the FP site, however, he has sent us his latest blog post via Gmail. Given recent accusations, we can neither confirm nor deny that this post has been edited or altered in any way, which we print below without alteration. Enjoy the read!--ed.]
I cannot emphasize how hospitable and gracious my Chinese hosts have been at this conference. From the excellent logistics to the delicious food that I have consumed in massive quantities in a perfect demonstration of excessive American consumption, I have been made to feel like an honored guest.
The only annoyance, not surprisingly, is accessing the Internet which is so filled with sedition and lies with respect to the People's Republic of China. It's one thing to read about how ordinary Chinese are blocked from accessing Facebook, YouTube, Twitter, and various Wikipedia pages out of concern than members of U.S. Congress do not use these pernicious social media to send lascivious photos to vulnerable, unsuspecting Chinese women, but it's another thing to confront that fact in person.
The odd thing is the capricious but nevertheless wise nature of the censorship. I can access the Financial Times but not the Economist because the latter is written in a much more condescending, supercilious tone. Even with baseball sites, for several days I could access Baseball Prospectus but not FanGraphs because the latter site's Wins Above Replacement statistic relies on dodgy defensive metrics.
In the end, the irony is that many English-language news-sites are accessible -- it's the social networking sites that are unavailable to encourage our students to pay attention in class unlike their decadent western counterparts.
With China's Internet entrepreneurs being forced to go Red so as to crush all treacherous curs, the Great Fireweall won't be going away anytime soon. Then again, from the Chinese Communist Party's (CCP) perspective, in makes some sense. The repeated outbreaks of social unrest over the past decade -- or the past week -- leaves the CCP with no choice but to continue its censorship policies if it wants to keep its hold on power and guide Chinese citizens towards a peaceful, harmonious world with Chinese characteristics.
It is for this reason that I look forward to returning to the United States so that I might rot my midget brain even further with more blog posts about stupid, bourgeois zombie-themed news.
[Note to readers: Because Dan was upgraded to business class on his trip to Beijing, he was exposed to a serious viral infection in the food called metaphoricus overloadus, known more commonly as Friedman's Disease. Rest assured, it is far from fatal -- it usually passes after 24 hours of no travel. As near as we can determine, all the facts in the blog post below are accurate. While suffering from Friedman's Disease, however, side effects do include rapid-fire, over-the-top metaphors. Remember: You've been warned!! --ed.]
To truly understand the phenomenon that is China, you need to fly into Beijing's airport and then try to get into the city. That's it; that's all you need. Just that adventure alone will tell you all you need to know about the contradictions of the Middle Kingdom.
First you enter a glittering, modern airport, with helpful signs in Mandarin and English. It's sheer scale and modernity telegraphs the ways in which China has already entered modernity. The monorail from my terminal to baggage claim was a pointed reminder of how much the United States lags behind in infrastructure investment in recent years.
And yet, there's the traffic. Summer in Beijing is a confusing miasma of traffic and smog and traffic. As my compatriot and I clambered into our taxi at Beijing's immaculately clean and modern airport, we knew that the ride to the hotel could take anywhere from 30 to 90 minutes depending on the traffic. Just as we Americans don't know when exactly China will catch up, the Chinese are not sure how long it will take to get there.
We might like to think that driving in a New York City taxi is as exciting as a carnival ride, but that's nothing compared with a taxi ride on a Beijing superhighway. In New York, there's always that sense that, in the end, the taxi driver won't risk an actual collision. On the road to Beijing, however, I witnessed at least two last-minute swerves and road rage that would have made Los Angelenos blush. Using an accent that an old-style New York cabbie would have admired in its sheer swarthiness, my cabbie kept honking for at least two minutes after a car viciously cut him off.
It's a fantastical engineering problem, getting so many cars and motorcycles and trucks and buses to merge and move in the same direction. And that's when it hit me like a thunderbolt -- China itself is like this superhighway. It's massive in size, 10 lanes easy. It's filled with an array of vehicles determined to get ahead. The problem is that when you combine all the vehicles together, the real possibility of a two-week-long traffic jam in which everyone wants to go somewhere but nobody gets anywhere is clearly a possibility. Predicting China's future is like predicting the traffic: You know there will be some stop-and-go, but you just don't know how much of it there will be.
When we got to the hotel, I paid my cabbie and he signaled that I owed him four more yuan. I was suffering from ATM disease, so I took out a single U.S. dollar bill and a 100-yuan note, looked at him, and said, "You choose." He paused, and then took the yuan note and made the necessary change. Clearly, all of us participating in this hyperaccelerated, globalized economy are going to have to make the necessary change soon enough.
Your humble blogger is headed to China for the next few days as part of a conference sponsored by the MacArthur Asia Security Initiative and the School of International Studies at Peking University, at which we will be discussing "What roles do power, history, ideas, and other legacies and factors play in shaping the American and Chinese approaches to sovereignty?" and "What is distinctive about the American and Chinese orientations and what are the implications of their preferences for the international order?" and "Could I please have an extra serving of tripe?" OK, that last one will just be a personal quest for yours truly, but you get the idea.
We will also be "Meeting with high-rank officials from the Ministry of Foreign Affairs and the International Liaison Department of the Central Committee of the CPC" -- so with luck, I'll be able to post blog items that will impress Chinese readers more than, say, your average Tom Friedman column. Assuming, that is, that the interwebs are semi-friendly over there.
While I am
praying for an upgrade on my flight to Beijing winging my way to the Middle Kingdom, go and contemplate Gideon Rachman's latest in the Financial Times. He points out that should China supplant the United States during this decade, it will be a very strange superpower indeed:
The ascent of China will change ideas of what it means to be a superpower. Over the course of the American century, the world has got used to the idea that the world’s largest economy was also the world’s most obviously affluent nation. The world’s biggest economy housed the world’s richest people.
As China emerges as an economic superpower, the connection between national and personal affluence is being broken. China is both richer and poorer than the western world. It is sitting on foreign reserves worth $3,000bn. And yet, measured at current exchange rates, the average American is about 10 times as wealthy as the average Chinese....
The power of China – combined with anxiety about the frightening public debts being built up in the US, the EU and Japan – will challenge western ideas about the relationship between democracy and economic success. Ever since the US became the world’s largest economy, towards the end of the 19th century, the most powerful economy in the world has been a democracy. But, if China remains a one-party state over the next decade, that will change. The confident western slogan that “freedom works” will come under challenge as authoritarianism becomes fashionable, once again.
What do you think? More tripe, or go for the chow fun instead?
I'm going to go out on a limb and state unequivocally that I think civil liberties and gender equality are Very Good Things. All else equal, I'd much rather live in a society in which freedom of speech is protected and women have all of the rights and opportunities afforded to men.
I bring this up because a common assumption that guides much of global economic policy is that as developing countries get richer, they will start valuing these qualities as well. There's a belief that regardless of the sequencing, political modernization will not trail too far behind economic modernization. Even in anomalous countries like Singapore, for example, there are trends suggesting that richer societies start demanding all those political and personal freedoms that many in the West take for granted. Crudely and simply put, a guiding assumption behind much Western policymaking (as well as many foes of the West writ large) is that modernization = Westernization.
I bring this up because China and India are, at the present moment, trying to prove this assumption is wrong. China has been getting very rich very fast, and yet the Chinese government seems more repressive than ever. So much for political liberties.
In some ways, India is even more troubling, as the New York Times' Jim Yardley report:
India's increasing wealth and improving literacy are apparently contributing to a national crisis of “missing girls,” with the number of sex-selective abortions up sharply among more affluent, educated families during the past two decades, according to a new study.
The study found the problem of sex-selective abortions of girls has spread steadily across India after once being confined largely to a handful of conservative northern states. Researchers also found that women from higher-income, better-educated families were far more likely than poorer women to abort a girl, especially during a second pregnancy if the firstborn was a girl....
The study, being published in the British medical journal The Lancet, is the latest evidence of India’s worsening imbalance in the ratio of boys to girls. The 2011 Indian census found 914 girls for every 1,000 boys among children 6 six or younger, the lowest ratio of girls since the country gained independence in 1947. The new study estimated that 4 million to 12 million selective abortions of girls have occurred in India in the past three decades....
Dr. Prabhat Jha, a lead author of the study, noted that the use of sex-selective abortions expanded throughout the country as the use of ultrasound equipment became more widespread. Typically, women from wealthier, better-educated families are more likely to undergo an ultrasound, Mr. Jha said, and researchers found that these families are far more likely to abort a girl if the firstborn is a daughter.
“This is really a phenomenon of the educated and the wealthy that we are seeing in India,” said Mr. Jha, director of the Center for Global Health Research at the University of Toronto.
Census data has already confirmed that the problem has accelerated since 2001. The 2011 census found about 7.1 million fewer girls than boys under the age of 6, compared with a gap of roughly 6 million girls a decade earlier (emphasis added).
The steady decline in the ratio is surprising, and counterintuitive, in view of India's progress in recent decades in improving the levels of female literacy and increases in income per person....
the value of the analysis by Jha and colleagues is mainly independent confirmation of two important aspects of the sex ratio in India that have been reported previously with different data. The first is that sex imbalance at birth seems to be particularly concentrated in households with high education and wealth. This pattern suggests that dominance of the son-preference norm is unlikely to be offset, at least in the short term, by socioeconomic development. Second is that the overall problem of sex imbalance seems to arise throughout India, including in Kerala, which has often been characterised as a model state for social development and gender equality. The problem of sex imbalance seems to be a function of socioeconomic status, not geography.
As India gets richer, this problem will only get worse.
Now, this might be one of those "it's always darhest before the dawn" kind of trends, in which after a certain wealth threshhold, trends will shift back towards a more classical liberal direction. Maybe. I don't know, and anyone else who tells you that they know is bulls**tting you. Based on this study, however, the question of whether China and India will ever embrace liberal political and cultural norms is not going to go away anytime soon.
What do you think?
In my last post I mentioned how China was encountering resistance to its rising power. Now, via Kindred Winecoff, I see a whole mess of reportage about China's mounting internal difficulties. In no particular order:
1) Nouriel Roubini has focused his Dr. Doom-O-Vision on the Middle Kingdom, and doesn't like what he sees:
China’s economy is overheating now, but, over time, its current overinvestment will prove deflationary both domestically and globally. Once increasing fixed investment becomes impossible – most likely after 2013 – China is poised for a sharp slowdown. Instead of focusing on securing a soft landing today, Chinese policymakers should be worrying about the brick wall that economic growth may hit in the second half of the quinquennium....
[N]o country can be productive enough to reinvest 50% of GDP in new capital stock without eventually facing immense overcapacity and a staggering non-performing loan problem. China is rife with overinvestment in physical capital, infrastructure, and property. To a visitor, this is evident in sleek but empty airports and bullet trains (which will reduce the need for the 45 planned airports), highways to nowhere, thousands of colossal new central and provincial government buildings, ghost towns, and brand-new aluminum smelters kept closed to prevent global prices from plunging.
Commercial and high-end residential investment has been excessive, automobile capacity has outstripped even the recent surge in sales, and overcapacity in steel, cement, and other manufacturing sectors is increasing further. In the short run, the investment boom will fuel inflation, owing to the highly resource-intensive character of growth. But overcapacity will lead inevitably to serious deflationary pressures, starting with the manufacturing and real-estate sectors.
Eventually, most likely after 2013, China will suffer a hard landing. All historical episodes of excessive investment – including East Asia in the 1990’s – have ended with a financial crisis and/or a long period of slow growth. To avoid this fate, China needs to save less, reduce fixed investment, cut net exports as a share of GDP, and boost the share of consumption.
The trouble is that the reasons the Chinese save so much and consume so little are structural. It will take two decades of reforms to change the incentive to overinvest.
Now, Roubini is enough of a persistent doomsayer that it would be easy to discount this argument -- if it wasn't for the fact that this jibes with the opinion of other China economy-watchers. This coming-bust prophesizing comes on top of arguments made by Barry Eichengreen, Donghyun Park and Kwanho Shin that as China hits middle-income status, it will hit a "middle income trap" of slower growth. (One interesting question is whether, as China encounters rampant inflation, its eventual decision to let the RMB appreciate will help ease some of these pressures).
2) Meanwhile, China's political leadership appears to be engaged in a full-fledged freakout over the Arab revolutions and any whisper of a similar phenomenon happening in China. Rising food prices are leading to price controls and an anxious government monitoring if/when more expensive staple goods lead to political unrest. That said, Chinese authorities seem to be on top of the whole crushing dissent thing:
According to Chinese Human Rights Defenders, an NGO, by April 4th some 30 people had been detained and faced criminal charges relating to the so-called “jasmine revolution”—an inchoate internet campaign to emulate in China recent upheavals in the Middle East and north Africa. Human Rights Watch, another NGO, reports that a further 100-200 people have suffered repressive measures, from police summonses to house arrest. This has been accompanied by tighter censorship of the internet, the ousting of some liberal newspaper editors, and new curbs on foreign reporters in China, some of whom have been roughed up....
Even more worrying, however, is the increasing resort to informal detentions, punishments and disappearances. These are outside the law, offering the victim no protection at all. The government now dismisses the idea that one function of the law is to defend people against the arbitrary exercise of state power. On March 3rd a Chinese foreign-ministry spokeswoman told foreign journalists: “Don’t use the law as a shield.” Some people, she said, want to make trouble in China and “for people with these kinds of motives, I think no law can protect them.”
3) As for China's assessment of its external security situation, the State Council released its 2010 White Paper on defense last month. As this East Asia Forum summary suggests, there's a slight change in tone from the 2008 white paper:
The introductory assessment of the ‘security situation’ section notes that the ‘international balance of power is changing,’ that ‘international strategic competition centring on international order, comprehensive national strength and geopolitics has intensified,’ and that ‘international military competition remains fierce.’ Despite this sense of turbulence, and as was the case in 2008, the 2010 paper assesses that ‘the Asia Pacific security situation is generally stable.’ But the additional observation in the 2008 paper, namely, ‘that China’s security situation has improved steadily’ does not appear in 2010. One possible reason is that the 2010 paper reports that ‘suspicion about China, interference and countering moves against China from the outside are on the increase.’
In light of all these developments, yesterday's Economist editorial should come as no surprise:
The view from Beijing, thus, is different to the view from abroad. Whereas the outside world regards China’s rulers as all-powerful, the rulers themselves detect threats at every turn. The roots of this repression lie not in the leaders’ overweening confidence but in their nervousness. Their response to threats is to threaten others.
Now, as someone who's pointed out these problems on occasion on this blog, you might think I'm pleased as punch about these developments. Nope. First, from an economic standpoint, a recessionary China eliminates a vital engine of global economic growth. Second, as I wrote back in January:
Exaggerating Chinese power has consequences. Inside the Beltway, attitudes about American hegemony have shifted from complacency to panic. Fearful politicians representing scared voters have an incentive to scapegoat or lash out against a rising power -- to the detriment of all. Hysteria about Chinese power also provokes confusion and anger in China as Beijing is being asked to accept a burden it is not yet prepared to shoulder. China, after all, ranks 89th in the 2010 U.N. Human Development Index, just behind Turkmenistan and the Dominican Republic (the United States is fourth). Treating Beijing as more powerful than it is feeds Chinese bravado and insecurity at the same time. That is almost as dangerous a political cocktail as fear and panic.
Developing.... in very disturbing ways.
In response to my critical post from last week, I see that Ted Galen Carpenter has doubled down on his thesis that, "China benefits from U.S. policy blunders." Let's go through his main points, shall we?
America’s global popularity is still at anemic levels—and the initial euphoria about Barack Obama has faded noticeably. And as shown in the Pew Research Center’s 2010 survey of global attitudes, America’s reputation in the Muslim world is not just anemic, it is hideous. That’s 2010, Dan, not 2006.
Two responses. First, the poll data Carpenter cites reflects attitudes about Barack Obama in particular and not the United States in general. Since what we're both concerned with is America's soft power rather than Obama's, let's take a look at the BBC's latest World Service Country Rating Poll, since that asks the more appropriate survey question:
Views of the US continued their overall improvement in 2011, according to the annual BBC World Service Country Rating Poll of 27 countries around the world.
Of the countries surveyed, 18 hold predominantly positive views of the US, seven hold negative views and two are divided. On average , 49 per cent of people have positive views of US influence in the world--up four points from 2010--and 31 per cent hold negative views. The poll, conducted by GlobeScan/PIPA, asked a total of 28,619 people to rate the influence in the world of 16 major nations, plus the European Union.
In 2007 a slight majority (54%) had a negative view of the United States and only close to three in ten (28%) had a positive view; America was among the countries with the lowest ratings. Views began to rise in 2008, with positive views rising to 32% on average, and now the USA is in a middle tier position, ranking substantially higher than China (emphases added)
Oh, and that's 2011 data, Ted.
Carpernter emphasizes the Middle East, and it's certainly true that U.S. favorability there remains quite low. Even in that region, however, the latest data suggests things aren't getting worse, except in the country where the data is OBE:
As views of the USA continue to improve globally, the upwards trend is also apparent in Muslim countries. For the first time, a majority of Indonesians are now positive about the USA's role in the world (58%, a rise of 22 points over the last year). Negative views of the USA in Turkey have dropped sharply from 70 per cent to 49 per cent, while negative views in Pakistan of the USA have also fallen slightly, from 52 per cent to 46 per cent. Conversely, Egypt, after a lift in 2009 and 2010, has reverted to a predominantly negative view of the USA, with 50 per cent of Egyptians considering that the USA's role in the world is mostly negative.
As for China's ability to exploit the current situation, here's Carpenter's response:
China has shown recent signs of dialing back some of the more objectionable features of its policy. That stands in marked contrast to the U.S. military escalation in Afghanistan, Washington’s transparent efforts to maintain an outsized presence in Iraq after the scheduled withdrawal of its military forces, and the new intervention in Libya. In terms of intrusive policies, China doesn’t begin to compete with the United States....
[China's] weaknesses do not include running $1.5 trillion annual budget deficits (much less having much of that debt funded by one’s principal geopolitical competitor). Nor do China’s weaknesses include overstretching its military forces in Middle Eastern and South-Central Asian snake pits. Those are actions that the United States has taken, and it is naïve in the extreme to assume that China does not benefit strategically and financially from such folly. Yet, oddly, Drezner addresses none of those points contained in my TNI piece.
Carpenter's point about U.S. military overextension is a good one, and is a concern I share. Our disagreement is on the magnitude of the policy externalities that flow from this overextension. Carpenter thinks it's disastrous; I think it's regrettable but not at the root of imminent U.S. decline to China.
First, it's worth noting that while defense spending plays a supporting role in the worsening U.S. fiscal situation, tax cuts and domestic expenditures are far more culpable. Second, I have looked at whether China's holdings of U.S. debt lead to geopolitical weakness -- and concluded that this concern has been vastly exaggerated.
Third, again, looking at global public opinion, there's evidence that China's economic rise has provoked far more anxiety than Carpenter realizes. As Chinese power continues to grow (and that's going to happen regardless of U.S. strategy), more and more countries will be willing to balance with the United States regardless of past military errors. Indeed, the "nationalistic swagger" that Carpenter references among Chinese policy circles is going to exacerbate and not retard this trend.
I agree with Carpenter that it would be better for the U.S. to reduce its overseas military posture, particularly in Iraq and Afghanistan. That said, China has profited surprisingly little from these missteps, and will experience greater geopolitical pushhback over time. I'm also disappointed that Carpenter failed to address the question of how democratizing nations in the Middle East will view a China that continues to act in an authoritarian manner -- particularly towards its own Muslim population in Xinjiang. It's not a coincidence that Iranian protestors started chanting "Death to China!" back in 2009.
The bottom line is that Carpenter's analysis exhibits far too much of the doomsaying and pessimistic thinking that plagues American realists and their cheerleaders.
Over at The National Interest, Ted Galen Carpenter blogs that America's militarized focus on the Middle East is providing a huge strategic opening for China:
Members of China’s political elite who are eager for the Middle Kingdom to displace the United States as the world’s leading power probably can’t believe their good fortune. America has so many natural advantages that such a displacement would normally take several generations, if it occurred at all. Yet clumsy, counterproductive U.S. policies may be shortening that time frame dramatically....
Global meddling is also damaging the American brand with respect to political values and even popular culture. That is especially apparent in the Muslim world, where public opinion surveys reveal that positive views of the United States now sometimes languish in the single digits. But America’s popularity has waned even in Europe and other formerly very friendly regions. Even as Washington’s aggressive behavior alienates populations, especially in Asia, Africa, and Latin America, China is cultivating countries in those regions, portraying itself as a less intrusive, more cooperative political and economic partner.
Um, Ted? 2006 called, and it wants the hackneyed geopolitical analysis back.... and sent via MySpace.
Seriously, this blog post reads like it's five years old. It either ignores or elides the following facts:
2) Contrary to Carpenter's claims, the Libya intervention has gone down rather well on the Arab street.
3) China committed a series of foreign policy blunders in 2009 and 2010 that increased regional and global wariness about the Middle Kingdom and (according to China experts who talk to me) forced Beijing to rethink its grand strategy.
4) Chinese authorities are currently occupied with trying to censor news about the Arab revolutions, play hide and seek with its dissidents, get a grip on its real estate bubble, and avoid populist blowback for its Africa investments. I'm not seeing a lot of successful efforts by Beijing to push the "less intrusive" line elsewhere in the globe.
These are pretty important facts that get in the way of Carpenter's analysis. Now, there is a glimmer of truth to this kind of realpolitik argument. Saudi Arabia, for example, is less than thrilled with how the Obama administration is handling the Arab revolutions, and it might cozy up more to Beijing as a result. That said, if we're really witnessing a fouth wave of democratization in the Middle East, does Carpenter seriously think that these regimes will automatically be more sympathetic to China than the United States? That would be the realist argument, but I think this is one of those situaions when realists don't sound terribly grounded in reality.
There are a lot of good critiques that can be levied against American grand strategy and the Obama administration's foreign policy in the Middle East. The notion that China has gained a strategic advantage in recent months ain't one of them.
I held out as long as I could on the Charlie Sheen fiasco -- but damn Will Winecoff and the IR-relevant horse he rode in on!!
From yesterday's Global Times, Hao Leifeng provides a peculiarly... Chinese take on the whole brouhaha:
Actor Charlie Sheen is a classic example of the difference in Western and Eastern values and norms.
Ignoring public pleas from his father, Sheen has continued a weeklong media blitz, exhibiting obvious signs of mania. With no firm hand to guide them, Western media has deliberately goaded him into making increasingly delusional statements, more concerned about "winning" higher ratings than Sheen's own sense of pride, or the negative example his brash public admissions about his private sex life and unverifiable international conspiracies could be setting for society.
How many young people have been led astray by Sheen's boasts about his substance abuse and freewheeling sex life? And that was when he was in character on national television, as a randy bachelor in Two and a Half Men.
Sheen attracted 1 million Twitter followers in just 24 hours, yet more evidence that microblogs spread the most unhealthy contagions in society like a disease. Chinese family, coworkers, or the authorities would have taken firm steps to make sure someone like Sheen did not make a public spectacle of himself.
It's true: the Obama administration has been ridiculously slow on getting a handle on the Charlie Sheen issue. I mean, you know that if Hillary Clinton got Sheen in a room for an hour, this whole problem would go away. This just reinforces the administration's slowness on handling matters of serious popular culture.
OK, seriously, as I understand it, Global Times is not the same kind of official mouthpiece as, say, China Daily or People's Daily, so I wouldn't take this as the official Chinese Communist Party position. Hell, it might be a parody. Still, a few revealing things from this. There's the swipe against Twitter, and the emphasis on familial loyalties.
I see two other interesting reveals, however. The first is the proposed "Chinese" solution to this problem:
His employers are unhappy that he was distracted with prostitutes and drugs, and didn't show up to work on time. Why not take a tip from the Chinese business community, and make visits to a KTV parlor part of Sheen's workday?
And instead of epic parties at his home with porn stars, why not keep Sheen occupied with business banquets?
Sheen goes on television and boasts that he has two girlfriends, who both sleep in the same bedroom. Is he too poor to set up his wives and mistresses in different houses?
In Chinese society, these problems are dealt with delicately and privately. Sheen is like a typical Westerner throwing fuel on the fire with each interview and tweet. It is almost as if he feels no shame and is loving the attention.
Racism, spousal abuse, addiction, politics, mental illness, boasting about mistresses, - these are all subjects best dealt with behind closed doors.
Er... as near as I can determine, Sheen's bosses have been using this playbook for the entire run of Two and a Half Men. It's only when Sheen thoroughly rejected all outaside intervention that everything blew up. In other words, the Chinese solution to this was exactly the same as the American solution to this -- well, minus the massage parlors. This continued right up until the moment when Sheen decided that the "Charlie Sheen" drug could defeat all comers. And then he was suspended and subsequently fired. Perhaps the fact that the government decided not to send him to the countryside and instead just got his children out of his orbit is peculiarly "western."
Second -- and this is a genuine question to readers -- is Charlie Sheen actually a folk hero to anyone other than substance abusers at this point? I see the attention he's getting now as in the category of, "Wow, look at that massive 12-car pileup on the other side of the road!!! It's horrific, but I can't look away!" Granted, he's now a prime candidate for his own reality show -- but I'm not really sure that's winning the future.
This is the only time I will ask this about Charlie Sheen: what do you think?
[I]t's way easier to slip a humour piece disguised as a bizarre anti-US rant past the Chinese censor than it is to get a serious piece that is even vaguely critical of CCP policy published.
According to the Associated Press, Secretary of State Hillary Clinton dropped many pretenses and bluntly explained the birds, the bees, and the bombs with respect to the Sino-American relationship:
The U.S. risks falling behind China in the competition for global influence as Beijing woos leaders in the resource-rich Pacific, Secretary of State Hillary Rodham Clinton said Wednesday.
Her unusually strong comments before the Senate Foreign Relations Committee are certain to anger the communist power, especially in light of Chinese President Hu Jintao's recent high-profile visit to Washington, seen as boosting trust and trade between the world's two largest economies....
[S]he told senators, "We are a competition for influence with China. Let's put aside the humanitarian, do-good side of what we believe in. Let's just talk straight realpolitik. We are in competition with China."
She noted a "huge energy find" in Papua New Guinea by U.S. company Exxon Mobil Corp., which has begun drilling for natural gas there. Clinton said China was jockeying for influence in the region and seeing how it could "come in behind us and come in under us."....
Clinton also said China had brought all the leaders of small Pacific nations to Beijing and "wined them and dined them."...
Charles Freeman, a China expert at the Center for Strategic and International Studies in Washington, said the U.S. was "unquestionably" involved in a "soft power competition with China. But this isn't a hard power, Cold War exercise." (emphasis added)
So this is how soft power works! I can picture the scene......
[Setting: a small banquet hall. Violin music is playing in the background. A sumptuous feast is on a table, as are two large, empty wine glasses.]
CHINA: Say, we sure would love to get exclusive drilling rights to your offshore oil discoveries.
PAPUA NEW GUINEA: I'm not sure I should even be here. I mean, we've been in a long relationship with the United States. So many memories....
CHINA: Well, where is the United States right now? I don't see them paying as much attention to you as they should be.
PAPUA NEW GUINEA: America is a little short on cash now. Washington keeps saying that it will change, but... I've heard that song too many times before. The USA keeps saying, "it's not you, it's me." (grimaces)
CHINA: Say, have you tried the 1960 cheval blanc? It really is heavenly. (pours wine)
PAPUA NEW GUINEA: Oh. Oh my. Well, who would be hurt by an exploratory agreement? (lights dim)
OK, somewhat more seriously, Clinton's comments need to be put into perspective:
Clinton railed against cuts sought by Republican to the U.S. foreign aid program....
America's top diplomat accused China of supporting a dictatorial government in Fiji, where plans to reopen an office of the U.S. Agency for International Development would be shelved under a resolution passed last month by the Republican-led House. That measure proposes sharp cuts to foreign assistance, including a $21 million program to help Pacific islands vulnerable to rising sea levels, as part of efforts to rein in government spending....
She said foreign assistance was important on humanitarian and moral grounds, but also strategically essential for America's global influence.
"I mean, if anybody thinks that our retreating on these issues is somehow going to be irrelevant to the maintenance of our leadership in a world where we are competing with China, where we are competing with Iran, that is a mistaken notion," Clinton said.
Clinton is correct in the short term. If I was the foreign policy budget czar, I'd be transferring at least $100 billion from DoD to State on the premise that problem prevention is always more cost-effective than problem-solving.
The "China is going to eat our lunch" meme is a popular one in Washington for domestic reasons -- it's a great argument to motivate policy. The Obama administration is going to this well an awful lot, however. My concern is that this rhetorical device doesn't lead to any genuine policy change but does lead to blowback - i.e., it scares the crap out of everyone in DC. That's the worst of both worlds.
What do you think?
Last week Reuters' Emily Flitter filed quite the story, entitled "China flexed its muscles using U.S. Treasuries ," about China's financial power over the United States. Here's the opening:
Confidential diplomatic cables from the U.S. embassies in Beijing and Hong Kong lay bare China's growing influence as America's largest creditor.
As the U.S. Federal Reserve grappled with the aftershocks of financial crisis, the Chinese, like many others, suffered huge losses from their investments in American financial firms -- from Lehman Brothers to the Primary Reserve Fund, the money market fund that broke the buck.
The cables, obtained by WikiLeaks, show that escalating Chinese pressure prompted a procession of soothing visits from the U.S.Treasury Department. In one striking instance, a top Chinese money manager directly asked U.S. Treasury Secretary Timothy Geithner for a favor.
This story generated a lot of interest across the mediasphere. FT Alphaville called it "Diplomacy by US Treasuries." AFP reports that the "sensitive cables show just how much influence Beijing has and how keen Washington is to address its rival's concerns."
As someone who's published on this question, you'd think I'd be very happy at the attention this issue is receiving. And Flitter deserves kudos for going through the cables to find clear efforts by Chinese officials to use its financial muscle to get what it wanted from the United States.
The thing is, the reportage is framed to suggest that China not only asked for concessions, but the United States granted them. And Flitter's own story suggests that very little in the way of concessions actually happened.
Here are the portions of Flitter's story that discusses U.S. responses to Chinese pressure:
On Chinese requests to halt/restrict arms sales to Taiwan: Flitter records no response. These concerns were voiced in late 2008 and the arms sales went ahead in early 2010, so there doesn't appear to be much influence here. AFP suggests that this pressure led the U.S. to not sell F-16's to Taiwan, but I don't think that option was ever in the cards.
On Chinese demands that they be provided guarantees for Chinese re-entry into the U.S. repo market:
The U.S. government does not appear to have offered the Chinese a special setup guaranteeing U.S. banks. Instead, the cables show, American diplomats reassured the Chinese by pointing out that Washington had infused banks' balance sheets with $700 billion in fresh capital, effectively propping up the banking system.
On Chinese demands for providing explicit U.S. government guarantees of Fannie Mae and Freddie Mac debt:
To defuse the situation, the Treasury Department sent Undersecretary for International Affairs David McCormick to Beijing for two days in October 2008. The gesture went over well.
"All of Undersecretary McCormick's counterparts appeared to appreciate his willingness to come to Beijing in the midst of a financial crisis," Piccuta wrote in a cable dated October 29, 2008. "Interlocutors stressed that unless leaders' concerns about the viability of banks and U.S. government-sponsored enterprises (GSEs) are assuaged, lower-level officials will be constrained from taking on greater counter-party risks."
The cables show McCormick trying to reassure the Chinese. "In each meeting, Undersecretary McCormick emphasized that even though the U.S. government did not explicitly guarantee GSE debt, it effectively did so by committing to inject up to $100 billion of equity in each institution to avoid insolvency and that this contractual commitment would remain for the life of these institutions," [Deputy Chief of Mission at the U.S. Embassy in Beijing Dan] Piccuta wrote.
On Chinese protests regarding Federal Reserve purchases of Treasuries and agencies in March 2009: Flitter has no response, though the fact that the Fed went ahead with QE2 suggersts that Chinese pressure didn't deter the Federal Reserve.
On responses to Chinese requests that CIC be allowed to participate in bidding on Morgan Stanley's new equity issuance:
There's no record in the cable of how Geithner responded, but it was only a day later, on June 3, that CIC announced plans to purchase $1.2 billion in Morgan Stanley shares.
A spokesperson for the Fed said in the instance of the June 3 CIC investment, no application for an exemption was made to the Federal Reserve Board.
On the general dynamic of Chinese financial pressure:
The cables also indicate a high level of confidence among the Americans that China can't entirely stop buying U.S. debt, a sentiment shared by most economists who describe the dynamic as a form of mutually assured financial destruction.
So, to sum up, the Chinese maybe got a small break on being able to particupate in the Morgan Stanley auction. Beyond that, all of these efforts led to the dilomatiic equivalent of hand-holding and not much else. And, hey, what do you know, that's pretty much consistent with what I wrote about this back in late 2009. So, contrary to some deep-seated fears of mine, the Wikiliaks cables appears to buttress rather than contradict prior scholarship.
Flitter deserves credit for making explicit what had only been inferred, but I'm worried that commentators are drawing the wrong lessons from her article. The big reveal here is not that China tried to exercise its financial muscle. The big reveal is that these efforts generated next to nothing in the way of U.S. concessions. China's financial might does give it the ability to deter U.S. pressure -- but to China's growing frustration, it doesn't yield much else.
Earlier this week Treasury Secretary Timothy Geithner went to Brazil as part of a long-running effort to get that country to pressure China on its exchange-rate policy. This effort had yielded some marginal successes in the past, but it had also yielded comments like Brazilian Foreign Minister saying: "I believe that this idea of putting pressure on a country is not the right way for finding solutions. We have good co-ordination with China and we've been talking to them. We can't forget that China is currently our main customer (emphasis added)."
The mild surprise is that Geithner's plea appeared to find a receptive audience in Brasilia. From the Financial Times' Joe Leahy:
Any alignment with the US on the issue of China’s currency would mark a fundamental shift for Brazil. Luiz Inácio Lula da Silva, Brazil’s previous president, had pursued a trade policy that was partially dictated by his vision of a grand “south-south” alliance among developing countries.
His pragmatic successor, Dilma Rousseff, is more concerned that Brazil exports primarily commodities to China while its domestic manufacturing industry is being undermined by a strong exchange rate and cheap imports.
Ms Rousseff has also toned down her predecessor’s criticism of US monetary policy, which Mr Lula da Silva’s administration blamed for exacerbating global capital flows....
One person familiar with the government’s stance said Brazil was considering a public declaration on global imbalances and China’s undervalued currency during Mr Obama’s visit.
“The idea is we might issue a communiqué in which maybe we can work in common language to try to stress this matter,” the person said.
What's going on? A few things. First, it's probably true that this shift won't amount to all that much in terms of affecting China's policies. Second, this is an effective way for Rousseff to distinguish herself from Lula, and she's backing up the rhetorical shift with action items. Third, Lula's foreign policy on this point was always based more on old-fashioned third world solidarity than anything approximating Brazil's national interest. Not that Lula's foreign policy was all that bad, mind you, but this seems more like a return to Brazil's equilibrium set of interests.
If the Obama administration was smart, they would capitalize on this newfound friendship with Latin America's largest country with some big, meaningful and yet highly symbolic foreign policy initiative. If only there was some moribund-yet-highly-useful foreign policy initiative that would cement the relationship. But that's just crazy talk.…
Your humble blogger likes to occasionally check the interwebs to make sure that no one is abusing Thucydides in making an argument about modern-day international relations. In descending order of offensiveness, examples of Thucydides Abuse include:
1) Blatantly making up what Thucydides actually said in History of the Peloponnesian War;
2) Exaggerating how Thucydides can contribute to understanding world politics today;
3) Writing the truth, but not the whole truth, about Thucydides' history.
Yesterday David Sanger invoked Thucydides in his New York Times Week in Review essay on a rising China and a fading United States. Let's see how he did:
For a superpower, dealing with the fast rise of a rich, brash competitor has always been an iffy thing....
[A]sk Thucydides, the Athenian historian whose tome on the Peloponnesian War has ruined many a college freshman's weekend. The line they had to remember for the test was his conclusion: "What made war inevitable was the growth of Athenian power and the fear which this caused in Sparta."
So while no official would dare say so publicly as President Hu Jintao bounced from the White House to meetings with business leaders to factories in Chicago last week, his visit, from both sides' points of view, was all about managing China's rise and defusing the fears that it triggers. Both Mr. Hu and President Obama seemed desperate to avoid what Graham Allison of Harvard University has labeled "the Thucydides Trap" - that deadly combination of calculation and emotion that, over the years, can turn healthy rivalry into antagonism or worse....
[I]n both capitals, fear makes for good business: It's a proven way to sell weapons systems.
Meanwhile, Thucydides might be appalled at the nationalistic talk that resounds in both countries. In Chinese newspapers these days, it's hard to avoid accounts of "American decline." Meanwhile, some new members of Congress talk lightly of cutting off Chinese access to the American market - as if that could happen in today's global economy.
In both languages, that's fear talking.
You know what? Given the space constraints, Sanger does pretty well. He manages to nail the subtle point about how fear leads to the worst sort of policy decisions. It is telling that, as the war progresses, Athenian decision-making devolves. Initially, the country's leaders understand that "fear, honor and interest" guide foreign policy. By the time the invasion of Sicily comes around, however, the Athenian leadership has reduced this to fear. Sanger actually quotes Thucydides rather than paraphrasing him. By modern journalistic standards, that's pretty extraordinary.
Nonetheless, Sanger commits the misdemeanor of omitting the whole truth of Thucydides. This is important, because the omission gets at how the historical analogy doesn't really hold up.
First, Sparta was never the hegemonic power prior to the war -- at best, they were a co-equal of Athens. That's not the current situation.
Second, Sparta was scolded by its allies -- and implicitly, by Thucydides himself -- for excessive caution when confronted with a rising power. Throughout the History of the Peloponnesian War, Thucydides contrasts Athenian energy and dynamism with Spartan conservatism and risk-aversion. Spartan fear was triggered by past Spartan inaction and caution.
Now, say what you will about American foreign policy, but conservatism and risk-aversion have not been nouns associated with it for quite some time. Similarly, until about mid-2009, China was not thought of as a source of foreign policy dynamism. Furthermore, when China's foreign policy changed, so did the United States'. Comparing the Obama administration's response to Spartan inaction doesn't hold up.
In the sparest structural sense, there are a few parallels that can be drawn between Greece in the fifth century B.C.E. and the present day. On the whole, however, I think the Athens-Sparta historical analogy obfuscates more than it enlightens.
Readers are warmly encouraged to alert the hard-working staff here at the blog for any further abuses of Thucydides. I mean, you know this is going to crop up on the next Jersey Shore episode.
I see that The Powers That Be at FP are highlighting my
unconventional wisdom about China's rise on their splash page.
Given the Hu-Obama summit and subsequent flurry of China commentary this week, it's worth highlighting the most absurd data point I cited in that article -- Forbes' magazine's decision to name Chinese President Hu Jintao the world's most powerful individual. Their explanation:
Paramount political leader of more people than anyone else on the planet; exercises near dictatorial control over 1.3 billion people, one-fifth of world's population. Unlike Western counterparts, Hu can divert rivers, build cities, jail dissidents and censor Internet without meddling from pesky bureaucrats, courts.
With these two sentences, the editors at Forbes managed to demonstrate an even shallower analysis of domestic politics than their Dinesh D'Souza cover story on Obama, which I didn't think was possible.
Let's review just a smattering of coverage about Hu Jintao's current ability to exercise iron-willed control over the Chinese bureaucracy, shall we? First, Gordon Chang in The New Republic:
Hu is sometimes called the world's most powerful person -- Forbes magazine gave him that accolade in November -- but he is a weak leader back home. Just how weak was revealed in two startling incidents within the past three weeks. On Tuesday, after the state-run Chengdu Aircraft Design and Research Institute performed the first flight test of the J-20 stealth fighter -- an unmistakable slap in the face of Defense Secretary Robert Gates, who was visiting Beijing at the time -- Hu professed not to know that the test had occurred....
If the Chinese leader was telling the truth, the test flight reveals a remarkable defiance of civilian authority by the flag officers of the People's Liberation Army, an obvious attempt to undermine the military cooperation Hu said he wanted to foster. Or if, as is more likely, Hu did in fact know about the timing of the test, he nonetheless said something that made himself appear inept. One has to wonder about a political system that creates incentives for its top leader to publicly imply that he is both ignorant and weak.
Either way, the unmistakable impression is that Hu seems to have much less influence than is often assumed. This could be due to the fact that China is in the middle of a transition to the next generation of political leaders -- led by Xi Jinping -- who are gaining in power as Hu loses his in the long run up to the actual handover.
Next, the Economist:
China's new raw-knuckle diplomacy is partly the consequence of a rowdy debate raging inside China about how the country should exercise its new-found power. The liberal, internationalist wing of the establishment, always small, has been drowned out by a nativist movement, fanned by the internet, which mistrusts an American-led international order.
Then there's Drew Thompson in -- hey, it's FP!!
China's national security decision-making process is opaque, and so this worrisome disconnect -- who knew what when -- is difficult to ascertain with certainty. It is highly improbable that Hu was unaware of the development of this major military advancement. His role as chairman of the Central Military Commission ensures that he is well briefed about major programs, and he doubtlessly approves their large budgets. What is not known is how much oversight and control the central government leadership in Beijing had over the PLA's decision-making process that lead to highly visible tests at the Chengdu air base just as Gates was visiting China.
And, finally, David Sanger and Michael Wines in the New York Times:
China is far wealthier and more influential, but Mr. Hu also may be the weakest leader of the Communist era. He is less able to project authority than his predecessors were -- and perhaps less able to keep relations between the world's two largest economies from becoming more adversarial.
Mr. Hu's strange encounter with Defense Secretary Robert M. Gates here last week -- in which he was apparently unaware that his own air force had just test-flown China's first stealth fighter -- was only the latest case suggesting that he has been boxed in or circumvented by rival power centers....
President Obama's top advisers have concluded that Mr. Hu is often at the mercy of a diffuse ruling party in which generals, ministers and big corporate interests have more clout, and less deference, than they did in the days of Mao or Deng Xiaoping, who commanded basically unquestioned authority....
"There is a remarkable amount of chaos in the system, more than you ever saw dealing with the Chinese 20 years ago," Brent Scowcroft, the former national security adviser and Mr. Gates's mentor, said Saturday. "The military doesn't participate in the system the way it once did. They are more autonomous -- and so are a lot of others."
Now, to be fair, it's possible that China is learning how to play the authoritarian equivalent of the two-level game. Even if that's true, however, China is playing that game very badly -- and they're playing it in policy arenas that are guaranteed to trigger a balancing coalition rather than accommodation.
OK, contest for readers -- name the award that I want to give to writers who vastly exaggerate China's rise!
I'm at the point in my life when there are only three occasions that prompt the watching of cable news:
1) An election night;
2) A real-time breaking news event in which video has a comparative advantage over the web;
3) Being on the treadmill on a slow sports day with nothing good on basic cable.
So yesterday was no. 3, and I caught a report on Fox News about "pre-summit brinkmanship" on the part Hu Jintao. The headline was accurate: "China's President Hu Jintao: Dollar-Based System 'Thing of the Past.'" And I should stress that Fox News was hardly the only news outlet to jump on this turn of phrase.
That said, some perspective might be in order. The statement came from a
series of answers that
a committee of propaganda writers with the
stylistic panache of Andrei Gromyko Hu provided to the Wall
Street Journal and Washington
Let's reprint the question and answer in full, shall we?
Q: What do you think will be the US dollar's future role in the world? How do you see the issue of making the RMB an international currency? Some think that RMB appreciation may curb China's inflation, what's your view on that?
HU: The current international currency system is the product of the past. As a major reserve currency, the US dollar is used in considerable amount of global trade in commodities as well as in most of the investment and financial transactions. The monetary policy of the United States has a major impact on global liquidity and capital flows and therefore, the liquidity of the US dollar should be kept at a reasonable and stable level.
It takes a long time for a country's currency to be widely accepted in the world. China has made important contribution to the world economy in terms of total economic output and trade, and the RMB has played a role in the world economic development. But making the RMB an international currency will be a fairly long process. The on-going pilot programs for RMB settlement of cross-border trade and investment transactions are a concrete step that China has taken to respond to the international financial crisis, with the purpose of promoting trade and investment facilitation. They fit in well with market demand as evidenced by the rapidly expanding scale of these transactions.
China has adopted a package plan to curb inflation, including interest rate adjustment. We have adopted a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies. Changes in exchange rate are a result of multiple factors, including the balance of international payment and market supply and demand. In this sense, inflation can hardly be the main factor in determining the exchange rate policy (emphases added).
Meh. First of all, Hu isn't saying anything here that hasn't been said by other Chinese officials since early 2009.
Second of all, Hu didn't say that the RMB was going to be supplanting the dollar anytime soon. In fact, he pretty much said the opposite of that. China wants a multiple-reserve currency regime, and they're moving veeeerrrrrry slowly to bring their currency into the conversation. And minus the RMB, as I've said before, there ain't much in the way of viable alternatives right now.
If you read the rest of the answers, there's a lot of
"stiffly worded answers" mixed in with "a positive note on
bilateral ties," as Richard MacGregor of the Financial Times notes.
What I don't see is any brinkmanship.
Substantively, however, what about the future? Will a multiple currency reserve system work? It's a vision shared by Barry Eichengreen, Nicolas Sarkozy, and.... well, I'm not sure who else. I have my doubts, but I can't quite convey them in a single blog post.
What do you think?
Theories of International Politics and Zombies is now available for order, not pre-order, but order, at Amazon.com. Right now -- blink and it will change -- TIPZ is in the top 20 ranking among Amazon's international relations books.
To celebrate, and given the ongoing hullabaloo over the Chinese way of parenting, the subsequent claim that the Wall Street Journal Got It Wrong, and the inevitable response by the Jewish mothering clan, let me offer the following zombie perspective:
Why Zombie Moms are Superior
(as told to Daniel W. Drezner behind protective glass)
A lot of people wonder how zombie parents raise such stereotypically ravenous kids. They wonder what these parents do to produce so many biters and gnawers, what it's like inside the family, and whether they could do it too. Well, I can tell them, because I've done it. Here are some things my daughters were never allowed to do:
• attend a sleepover with breathing humans
• have a playdate with humans
• be in a school play, unless the eating of humans was called for
• complain about not being in a school play with humans
• watch TV or play computer games, especially Left 4 Dead
• choose their own extracurricular activities -- zombies have no extracurricular activities
• bite anything less than grade A braaaaaaaaaaaaaiiiiiinns
• not be the No. 1 student in keeping their teeth razor sharp
• play any instrument.
I'm using the term "zombie mother" loosely. I know some members of the Donner Party, West African, Papua New Guinean, Maori, and vampire parents who qualify too. Conversely, I know some mothers, almost always born in Haiti, who are not zombie mothers, by choice of their voodoo master or otherwise. I'm also using the term "human parents" loosely. Human parents come in all varieties and tastes....
Even when human parents think they're being strict, they usually don't come close to being zombies. For example, my human neighbors who consider themselves strict make their children bus their plate to the sink when they've finished dinner. Maybe. For a zombie mother, cleaning the plates is the easy part. It's teaching the children to go forage for live human braaaaaaiiiiiiins, drag them back to the house, and then devour them in full that gets tough. They never like to finish the frontal lobe....
There are all these new books out there portraying zombie mothers as scheming, callous, overdriven people indifferent to their kids' true interests. For their part, many zombies secretly believe that they care more about their children and are willing to sacrifice much more for them than humans, who seem perfectly content to let their children turn out badly. I think it's a misunderstanding on both sides. All decent parents want to do what's best for their children. The zombies just have a totally different idea of how to do that.
Human parents try to respect their children's individuality, encouraging them to pursue their true passions, supporting their choices, and providing positive reinforcement and a nurturing environment. By contrast, the zombies believe that the best way to protect their children is by preparing them for the future, letting them see who they're capable of eating, and arming them with skills, work habits and inner confidence that no breather can ever take away.
And if none of that works, we will always be prepared to have our limbs shot off to secure a tasty braaaaaaiiiiiiin for our children. Would human parents to that for their kids? I didn't think so.
The scary part of this is how little I had to do to adapt the source material for this post.
UPDATE: Chas Homans alerts me to the fact that Chinese mothers might have more incommon with zombie moms than I originally thought:
In [Lac Su's] case, PTSD, which stands for post-traumatic stress disorder, could easily mean "parental trauma stress disorder." His parents, thinking he was "slow," subjected him to hours of supplemental tutoring -- and when he still failed to meet their standards, tried a different kind of intellectual supplement, making him eat an entire cow brain every Saturday until he was eight years old (emphasis added).
Of course, zombie moms are way more unrelenting than Chinese moms. That kid would have had to consume brains every day in a zombie household.
Foreign Policy asked many smart people, and then me, for some nuggets of unconventional wisdom heading into 2011. My contribution is on how China isn't all that and a bag of chips.
My closing paragraph:
Exaggerating Chinese power has consequences. Inside the Beltway, attitudes about American hegemony have shifted from complacency to panic. Fearful politicians representing scared voters have an incentive to scapegoat or lash out against a rising power -- to the detriment of all. Hysteria about Chinese power also provokes confusion and anger in China as Beijing is being asked to accept a burden it is not yet prepared to shoulder. China, after all, ranks 89th in the 2010 U.N. Human Development Index, just behind Turkmenistan and the Dominican Republic (the United States is fourth). Treating Beijing as more powerful than it is feeds Chinese bravado and insecurity at the same time. That is almost as dangerous a political cocktail as fear and panic.
Be sure to read the rest of them -- really, the other contributors are all smarter than me.
Earlier this week I speculated as to why North Korea did not respond to a series of South Korean military drills. In the list of possibilities I provided, I was somewhat skeptical that Chinese pressure was the answer.
In today's New York Times, however, Mark Landler quotes some Obama administration sources suggesting that Chinese (and Russian) pressure was a determining factor:
after a tense week, when the threat of war hung over the Korean Peninsula, the Obama administration and Beijing seem finally to be on the same page.
Administration officials said the Chinese government had embraced an American plan to press the North to reconcile with the South after its deadly attacks on a South Korean island and a warship. The United States believes the Chinese also worked successfully to curb North Korea’s belligerent behavior.
China’s pressure, several senior officials said this week, might help explain why North Korea did not respond militarily to live-fire drills conducted this week by the South Korean military, when a previous drill drew an artillery barrage from the North that killed two South Korean civilians and two soldiers.
As evidence of the policy shift, officials pointed to recent remarks by China’s foreign minister, Yang Jiechi, in which he urged the North and South “to carry out dialogue and contact.” Previously, Beijing’s response had been to propose an emergency meeting of the six-party group that negotiates with North Korea over its nuclear program, a step the United States opposed as rewarding the North’s aggression....
China swiftly dispatched a senior diplomat to Pyongyang, the North Korean capital, and officials said he conveyed a strong message about “the unacceptability of attacks and killings of South Koreans,” said a senior American official, who spoke on condition of anonymity in order to discuss sensitive diplomatic matters.
“The idea that there could be these one-off provocations without expectation of a military response, as the North had behaved in the past, the Chinese now understand that this is no longer the reality, no longer acceptable,” he said.
John Pomfret hits similar notes in his Washington Post story. Actually, it's an even more optimistic assessment :
The United States and China are closing out the year on a positive note on many fronts - including trade, military ties, climate change and global security - as both sides prepare for their presidents' second summit, set for next month.
After a tense year during which U.S. officials, including President Obama, openly criticized China, and their Chinese counterparts returned the favor, there is a sudden switch in tone from the Commerce Department to the National Security Council. Instead of portraying China as protectionist or as an "enabler" of North Korea's provocations, administration officials are praising China, referring to it again as a responsible partner....
The most remarkable about-face has occurred in the administration's attitude toward China over the Korean Peninsula. Two weeks ago, a senior administration official accused China of creating the conditions that allowed North Korea to start a uranium-enrichment program and launch two deadly attacks on South Korea. The tensions on the peninsula threatened to dominate the summit.
But in recent days, senior administration officials have praised China for pressing North Korea not to react to a South Korean military drill Monday. Officials referred specifically to a visit by China's top diplomat, Dai Bingguo, to North Korea on Dec. 9. After the meeting, China's state-run Xinhua News Agency reported that China and North Korea had reached a "consensus" on the situation on the peninsula - which many analysts interpreted as meaning North Korea had agreed not to provoke South Korea in the short term.
Administration officials also commended China for soft-pedaling a proposal to hold emergency talks between South and North Korea, China, Russia, Japan and the United States as part of a way to calm the situation. Instead, the officials said that China had accepted a U.S. plan that put improving ties between the South and the North ahead of any multilateral talks on North Korea's nuclear weapons program.
Administration officials portrayed the United States and China as working in lockstep in dealing with the crisis, which many thought had reached the brink of war last weekend. China continued to urge restraint on North Korea, they said, while the United States worked with Seoul to ensure that its exercises were "firm" but also "non-confrontational and non-escalatory," a senior administration said, speaking on the condition of anonymity because of the sensitivity of the topic.
Nonetheless, it is not clear whether China's pressure has worked. On Thursday, North Korea threatened to launch a "sacred" nuclear war that would "wipe out" South Korea and the United States if they started a conflict.
Chinese President Hu Jintao is scheduled to make a state visit to Washington on Jan. 19. Obama visited China in November 2009.
China's approach on the Korean peninsula is certainly interesting, but what I find really interesting is the Obama administration's conscious decision to talk about this to the Times and Post. Part of this might be the warming up of relations that traditionally precedes a great power summit. Part of it, however, might be the administration's effort to signal to their Chinese counterparts that they understand that Beijing has engaged in a policy shift -- and the Obama administraion genuinely appreciates that shift.
This point is likely
banal obvious to longtime foreign policy hands, but I bring it up in the context of the Wikileaks cables. The attention paid to these diplomatic cables can lead to the impression that all diplomacy that matters is conducted in secret corridors. This kind of coordinated official leaking, however, is the bread and butter of 20th and 21st century statecraft -- and it's not going away anytime soon.
Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.