Ten years af­ter the crash, the US econ­omy has bounced back but its self- con­fi­dence hasn’t. Out­spent and out­smarted by a ruth­less China, FREDDY GRAY says it’s. . .

The Mail on Sunday - - Comment - By FREDDY GRAY

Can we avoid the rule that one su­per­power can­not re­place an­other with­out war?

TEN years ago, the world Amer­ica made col­lapsed when Lehman Broth­ers bank im­ploded, the US- led global fi­nan­cial sys­tem went into melt­down, stock mar­kets plum­meted and ev­ery­body freaked out.

Stock mar­kets al­ways bounce back. In­deed, Wall Street is now thriv­ing again, as Pres­i­dent Don­ald Trump never stops re­mind­ing us. But Amer­ica’s con­fi­dence has never fully re­cov­ered from the great crash of 2008. Its be­lief in lib­eral cap­i­tal­ism as the en­gine of hu­man progress has been un­der­mined.

Also lost was its sense of it­self as the pre-em­i­nent na­tion. Amer­i­cans have had to ac­cept, grudg­ingly, that now China rules the world.

Do the math, as they say. Even be­fore the crash, China had over­taken Amer­ica as the world’s lead­ing man­u­fac­turer. But af­ter 2008, China’s emer­gence as the big­gest eco­nomic su­per­power ac­cel­er­ated as Amer­ica reeled.

Even by 2010 it was do­ing more global trade than Amer­ica, and the gap has grown. Last year its trade with there st of the world was US$390 bil­lion (£298 bil­lion) more than the US. It was China, not Amer­ica, that ef­fec­tively saved the West in the post-crash years by in­vest­ing eye-wa­ter­ing sums into the world’s econ­omy. The China In­vest­ment Cor­po­ra­tion, its sov­er­eign wealth fund, now owns some $941 bil­lion in as­sets, many of them in the US.

A ma­jor sym­bolic mo­ment came in 2014, when the In­ter­na­tional Mon­e­tary Fund an­nounced that, mea­sured by pur­chas­ing power, China was the world’s big­gest econ­omy: China is the world’s big­gest con­sumer of cars, tele­phones, and oil. It doesn’t just make iPhones, it buys more of them than any­one else; two mil­lion more, in fact, than North Amer­ica.

And don’t for­get that In­dia, the world’s sec­ond­most pop­u­lous coun­try af­ter China, has con­tin­ued its own messy as­cent. It is now the world’s third econ­omy, ac­cord­ing to pur­chas­ing power.

This process of ‘ Eastern­i­sa­tion’ – of power shift­ing to­wards Asia – has ac­cel­er­ated in the past decade. It’s not all eco­nomic power, ei­ther: China now spends more on its mil­i­tary than most Euro­pean coun­tries put to­gether.

A lot has been writ­ten about how the eco­nomic mis­ery of the late 2000s has fu­elled re­sent­ment to­wards the elites and the rise of po­lit­i­cal pop­ulism of the 2010s. That’s all true. Cer­tainly, with­out the crash, we never would have had Don­ald Trump. What’s less noted is how ob­sessed Trump is with China and how cru­cial that was to his po­lit­i­cal suc­cess.

ONE of the fun­nier comedy Trump videos on YouTube is a mon­tage, made be­fore he be­came pres­i­dent, of all t he times Trump said China. It’s about three min­utes long and is mes­meris­ingly hi­lar­i­ous. As a can­di­date, he talked about China ‘ raping’ Amer­ica. Fun­nily enough, that was ex­actly what Amer­i­cans wanted to hear.

For mil­lions of them, whose jobs had been out­sourced to Asia in the past two decades and who had had to go through the eco­nomic cri­sis, that’s ex­actly how they felt. Amer­ica is go­ing to the dogs. China is top dog. Trump’s slo­gan – Make Amer­ica Great Again – spoke di­rectly to that anx­i­ety.

As pres­i­dent, Trump has been tougher on China than his pre­de­ces­sors. Obama tried to tackle the rise of China with his so- called ‘Asian pivot’. This in­volved shift­ing Amer­ica’s strate­gic fo­cus away from the At­lantic, Europe and the Mid­dle East, and t owards t he Pa­cific – South East Asia, Ja­pan and, of course, China. Trump has the same ap­proach – as seen on his long tour of Asia last year – only he’s much more ag­gres­sive. Hence the loom­ing trade war be­tween West and East.

Trump re­jects what he calls (in cap­i­tal letters) STUPID TRADE with China. On Fri­day, he re­buked the Wall Street Jour­nal for an ar­ti­cle say­ing that his ad­min­is­tra­tion was cav­ing in to China on trade: ‘We are un­der no pres­sure to make a deal with China, they are un­der pres­sure to make a deal with us. Our mar­kets are surg­ing, theirs are col­laps­ing. We will soon be tak­ing in Bil­lions in Tar­iffs & mak­ing prod­ucts at home.’ Of course, lots of ex­perts say this is eco­nomic sui­cide: ‘Trumpo­nomics’ is pro­tec­tion­ism and will de­stroy Amer­ica’s abil­ity to in­no­vate and cre­ate end­less wealth. Trump doesn’t care. The point is, in his head, Amer­ica has been los­ing and China has been win­ning.

He’s not wrong. China, for its part, has been keen to em­pha­sise its ‘peace­ful rise’.

But the rel­a­tive peace that we’ve all en­joyed has been pred­i­cated on Amer­ica’s un­ques­tioned supremacy, and that is now un­der threat.

China is tact­ful in its deal­ing with the West, but its am­bi­tions are vast and over­pow­er­ing.

The Belt and Road Ini­tia­tive, China’ s enor­mous de­vel­op­ment project, is a jaw-drop­pingly au­da­cious plan to ex­pand Bei­jing’s in­flu­ence and reach by recre­at­ing the Silk Road trade route for the 21st Cen­tury. In what is said to be the big­gest in­fra­struc­ture project in hu­man history, Bei­jing is un­der­writ­ing vast con­struc­tion projects in more than 60 coun­tries across Asia and Africa and into Europe.

It’ll cost about $ 8 tril­lion and in­clude roads in Kaza­khstan, ports in Pak­istan and Sri Lanka, an in­dus­trial park for high-tech busi­ness in Be­larus, en­ergy projects and pipe­lines through Cen­tral Asia and rail­ways in Iran and East Africa and much, much more.

Bei­jing has even an­nounced plans for a Po­lar Silk Road, which aims to build in­fra­struc­ture for ship­ping routes across the Arc­tic.

The ex­tra­or­di­nary Chi­naPak­istan Friend­ship Tun­nels are just one ex­am­ple. They are about much more than warm feel­ing.

Punch­ing huge holes through the moun­tain ranges that sep­a­rate the two states, the tun­nels and the China-backed ren­o­va­tion of the Karako­ram High­way, will al­low jug­ger­naut-loads of Chi­nese goods to rum­ble straight down to Karachi in the south of Pak­istan, then on by sea to the rich mar­kets of the Gulf.

This ex­pan­sion may be a soft kind of im­pe­ri­al­ism, but it is im­pe­ri­al­ism. Just look at what China has done in Africa. In 2014, the US pledged to in­vest $ 14 bil­lion in Africa over the next decade; China promised $ 175 bil­lion, dwarf­ing Amer­ica’s in­ter­ests. The am­bi­tion is to turn 21st Cen­tury Africa into what Asia was for the 20th Cen­tury – the fac­tory of the world.

Amer­ica can con­sole it­self – as the Bri­tish Gov­ern­ment does – that China’s over­seas in­vest­ments will make poor coun­tries richer and trans­form global trade for the good of all.

But there’s no deny­ing the sheer scale of China’s reach is alarm­ing.

Can the world avoid what Amer­i­can schol­ars call the ‘Thucy­dides Trap’ – the rule that one su­per­power can­not re­place an­other with­out war?

China presents a gen­tle face to the world, but it is also highly se­cre­tive – and ruth­less.

It has started to mil­i­tarise parts of the Belt and Road Project, in Pak­istan for in­stance.

In ad­di­tion, China now spe­cialises in ‘debt-trap diplo­macy’, whereby it makes a coun­try eco­nom­i­cally de­pen­dent on its vast in­vest­ments, and then starts to de­mand con­trol. Last year, Sri Lanka was forced to give its largest port, Ham­ban­tota, to China af­ter its debts to Chi­nese com­pa­nies spi­ralled out of con­trol.

In the Congo, China has pro­vided bil­lions in aid, but has now taken con­trol of the coun­try’s cobalt mines, cru­cial for man­u­fac­tur­ing lithium-ion bat­ter­ies used to power elec­tric ve­hi­cles.

In Zam­bia, Bei­jing has seized con­trol of the coun­try’s largest en­ergy provider. China has also bailed out the com­pany that sup­plies 90 per cent of South Africa’s elec­tric­ity to the tune of $2.5 bil­lion, lead­ing to fears about who’ll run it in fu­ture.

But that would not be good news for any­one, least of all be­cause China could be­gin to use its new­found might to en­sure that oth­ers felt the pain.

Pres­i­dent Xi Jin­ping, who has made him­self ruler for life, is grow­ing his mil­i­tary at great speed.

China’s de­fence spend­ing is re­port­edly dou­bling, up from $123 bil­lion in 2010 to $233 bil­lion to 2020. The Amer­i­can mil­i­tary spends more than twice that, and its armed forces are still vastly su­pe­rior to China’s. But for how long?

Maybe Trump isn’t as stupid as he seems – and maybe his sup­port­ers aren’t as stupid as smug lib­er­als as­sume.

FORTY per cent of Amer­i­cans never l eave t heir coun­try, but they can see how it is be­ing eclipsed by China. And US vot­ers know that China doesn’t play by the rules on free trade: it fiercely pro­tects its own econ­omy through tar­iffs and mas­sive sub­si­dies.

Trump says that trade wars are ‘good, and easy to win’ – but even he, deep down, must know that is not quite true, which is why he is care­ful to al­ways mix his tough talk about trade with China with warm words about Pres­i­dent Xi.

China holds some $ 1 tril­lion in Amer­i­can debt, and it could, in the­ory, hold the global econ­omy to ran­som with the threat of sell­ing its US trea­sury hold­ings.

Su­per­pow­ers are al­ways wor­ried about los­ing their sta­tus. We Brits were ob­sessed with it in the 19th Cen­tury and Amer­i­cans have been pre­oc­cu­pied with their own de­cline since at least the 1950s. It’s the para­noia that comes with great power.

The trou­ble is, ten years on from the crash, there is much to fear.

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.