For the Global Economy, Us-china Rivalry Does Not Have to Mean Destruction

there are still ways to avoid the worst outcomes.

The wrenching changes to the post-second World War liberal international order were well on the horizon before Covid-19 struck earlier this year.

But given the way the global health crisis has sharpened the rivalry between the US and China, the way the pandemic is playing out brings to the fore a number of issues essential to understanding the emerging changes in the international order.

Conflict between the US and China, however, is not inevitable, writes Yves Tiberghien. There are still ways to avoid the worst outcomes. to future HISTORIANS, the great covid-19 crisis of spring 2020 ought to appear extremely puzzling. Why is a global pandemic of relatively limited mortality — compared to the spanish flu of 1918-20 or even the Asian flu of 1957 and Hong Kong flu of 1968 — triggering the greatest economic recession since the Great depression and the most dangerous geopolitical confrontation since the end of the cold War? Why were major powers able to co-operate and solve the 2008 financial crisis or the 2009 H1N1 and 2015 Ebola pandemics but are failing to act together in 2020? How can humanity reach the highest levels of prosperity, technological progress and integration in history only to risk a brutal unraveling in the midst of a solvable health crisis? Why is the most scientifically advanced country losing trust in science and data? And why is economic interdependence, the very engine of global prosperity, turning into an acute security threat?

Public opinion in Asia, North America and much of the world seems caught in a paradoxical period of cognitive dissonance: the more people globalize economically, the more they seem to turn to political nationalism and oppose beneficial global co-operation. In spring 2020, global discourse seems to focus more on trading accusations and unproven assertions between the united states and china than on the crucial need for G20 co-operation to sustain the very system upon which everyone depends.

the stakes are high indeed. the field of international political economy has taught us that while the world has been engaged in a massive endeavor of global economic integration since the 19th cen

that project never fully solidified the necessary systems to solve recurring instabilities and shocks. When important countries work together to manage shocks, as in 2008, they save their common system and themselves. When they fail to cooperate and turn to nationalistic approaches, the resulting tit-for-tat actions can bring down the system and all of us with it. Why is such crucial cooperation proving so hard in 2020?

clearly, the scale and speed of the pandemic, uncertainty about the origins of the virus, and the early lack of transparent actions by chinese authorities in Wuhan from at least december 31 to January 20 (and especially January 14-20) played a role in generating international tensions. However, the start of other recent pandemics all involved significant surprises and uncertainty and yet they did not degenerate into full-scale global crises. unlike during the sars epidemic in 2003, chinese scientists shared the full genome of the new virus as early as January 11, allowing the whole world to prepare tests and start work on a vaccine.

this essay argues that the clues to this systemic failure lie in social interactions at a time of great change. Had the crisis happened in 2008 or 2000, covid-19 would not have led to the current global conflagration. the key factors explaining this failure of global governance are a combination of prior global disruptions, shifts in the global balance of power and misunderstandings about china’s approach to the liberal international order. unpacking these forces and misperceptions leads us to possible solutions to the current crisis.

In particular, I argue that the speed and level of worsening china-us relations is following a selfaccelerating process of strategic interactions that are amplified in each country by domestic narratives, a process that was avoidable. seen from the us, china is a revisionist and authoritarian power bent on uprooting the 70-year-old liberal international order and ready to lie to sustain the rule of the chinese communist Party (ccp). seen from china, the us is an increasingly warlike superpower bent on breaking the global system when other powers are rising rather than giving them their due voice in the system. sadly, china and the us continue to share large mutual interests and the strategic escalation is at least partly an unnecessary construct.

Clues to unravelling the Current global impasse

Many scholars and policymakers take the uschina confrontation as a given and see covid-19 through that prism. some argue that the crisis marks a great loss of soft power and influence for the us, due to its initial poor response, as well as its unproven threats and refusal to support a globally co-ordinated response. Instead, they see china scoring points with its massive and effective response to covid-19 after January 23, its socalled mask diplomacy around the world, and its continued forward posture in the south china sea, East china sea, southern Europe, and in the Belt and Road countries.

Others argue the opposite and point to rising anger at china in North America, Europe, southeast Asia and beyond, for proving unable to nip the new virus in the Wuhan bud and for taking an aggressive diplomatic posture around the globe. these leaders argue that china’s Belt and Road will be deeply affected by this loss in soft power.

these types of arguments miss the essential. they all assume a realist framework of unavoidable tensions and possible conflict between two great powers strategically bent on building influence around the world and pushing back the other side. they focus on secondary actions. Instead, what matters is to understand the roots of the current strategic escalation and the approaches that could abate it. I offer five essentury,

tial clues to unpack the myth of the unavoidable us-china conflict and the involvement of other countries in the conflagration.

first, we are living through a historic period of high-level disruptions that have combined to generate rising volatility and have taken citizens and policymakers around the world by surprise. the post-cold War period since 1990 has unleashed unprecedented levels of prosperity, connectivity and human progress overall. Globalization went beyond the initial triad (North America, Europe, Japan) and started to benefit the vast middle class in emerging countries such as china, India, Indonesia and turkey. By the 2000s, it was reaching most of southeast Asia, south Asia, central Asia, much of Africa and many parts of south America. the chinese Belt and Road Initiative after 2013 continued the advancement of this era of globalization to hitherto isolated regions. New norms were developed around the sustainable development Goals, agreed by all countries at the un General Assembly in september 2015, promising inclusivity, sustainability and empowerment to all. formerly silent voices in the former colonial world reappeared, with a new sense of pride in great cultures.

But this massive wave of globalization carried the seeds of great disruption. Because it is poorly institutionalized at the global level and often poorly managed by domestic policymakers in most countries, it led to great inequalities between winners and losers. As shown by Branko Milanovic, the middle class in emerging countries benefited, but the working class in developed countries suffered.1 this led to social and identity crises when not counteracted by smart social policy. cities became hubs of globalization and rural areas declined. Baby boomers benefited from the rise in their assets, but young people around the planet lost access to property and saw risks accumulating. these massive imbalances led to Brexit, the election of donald trump and the rise of populism around the world.

furthermore, interdependence led to greater complexity and fast transmission channels, ensuring that economic, financial, energy, or health crises in one part of the world would rapidly spread to the rest of the planet. the global governance system was not ready for these shocks. systemic risks in global finance, technology, health and the environment accumulated. two systemic risks now tower over all others. the first is climate change, which is still on course to wreak environmental, social, economic and political havoc around the world as soon as the early 2030s, when we pass the threshold of a 1.5ºc increase of average global temperatures compared to the preindustrial age. climate change will destroy modern life in countless places within decades unless we fully shift to a green, sustainable economy by 2050. that shift has great consequences for distribution and potential conflict. the second great risk is the ongoing fourth industrial revolution, highlighted by digitalization, Big data and artificial intelligence. this revolution has the potential to transform daily human life, reshuffle the distribution of winners and losers and generate tremendous inequalities if not governed properly domestically and globally.

the combination of these internal and external systemic risks to a globally interdependent system has generated enormous uncertainty, volatility and danger. It puzzles citizens and policymakers alike, who are fascinated by the upsides but not fully able to map and manage the downsides. And the pace of change has accelerated across the board.

second, we have been going through a massive human transformation as the result of digitalization: the social media revolution. In 2020, social media is prevalent around the world and countries such as south Korea, china, and Indonesia