De­cline of the US, Dusk of World Sys­tem 3.0 and New Pos­si­bil­i­ties for World Sys­tem 4.0 *

The glob­al­iza­tion has ex­pe­ri­enced three rounds of­push­ing, or three edi­tions of world sys­tem - re­spec­tively the glob­al­iza­tion of pro­duc­tion and trade, gov­ern­ments busi­ness mech­a­nism and cap­i­tal op­er­a­tion. The end of the Cold War and China re­forms led to th

China Economist - - Articles - Max Zhang In­de­pen­dent scholar

Key­words: glob­al­iza­tion, govern­ment-busi­ness mech­a­nism, cap­i­tal op­er­a­tion JEL clas­si­fi­ca­tion: F02

DOl: 10.19602/j .chi­nae­conomist.20 17.04.04

1. 1st_Round Glob­al­iza­tion: from Prim­i­tive State to the For­ma­tion of Re~ional Trade Sys­tem (Pre­his­toric1St Cen­tury)

Glob­al­iza­tion in gen­eral refers to the glob­al­iza­tion of mar­ket economies. In the pre­his­toric pe­riod, i. e. most of the past one to three mil­lion years of hu­man his­tory, the process of hu­man mi­gra­tion from the birth­place to the pe­riph­eral and newly found lands can be de­scribed as glob­al­iza­tion in the sense of sur­vival. Af­ter pre­his­toric hu­man groups changed their habi­tats from trees to the ground, they started to ex­pand their liv­ing ter­ri­to­ries. As in­di­cated by an in­creas­ing num­ber of pre­his­toric stud­ies in re­cent years, pre­his­toric hu­mans were much more ca­pa­ble to seek sur­vival through mi­gra­tion than schol­ars pre­vi­ously ex­pected; the seeds of hu­man civ­i­liza­tion be­gan to sprout and spread in var­i­ous con­ti­nents much ear­lier than pre­vi­ously thought.

With­out writ­ten record, such an ex­tended early hu­man his­tory sug­gests that for a rather long pe­riod of time, we in the con­tem­po­rary world have no idea about the econ­omy and life of our an­ces­tors. Judg­ing by the ob­ser­va­tions of an­thro­pol­o­gists on non- lit­er­ate mar­ginal so­ci­eties, hav­ing no writ­ten lan­guage does not mean that a so­ci­ety has no pro­duc­tion and trade. In fact, from Africa to North Amer­ica and Ocea­nia, re­search on abo­rig­i­nal com­mu­ni­ties found not only prim­i­tive state of pro­duc­tion and trade but much more com­plex trans­ac­tions such as ware­hous­ing, trans­port, quasi -cur­rency, pledge, guar­an­tee and even ar­bi­tra­tion. For in­stance, fur trade among abo­rig­i­nals in North Amer­ica and slave trade among abo­rig­i­nals in sub-Sa­ha­ran Africa emerged much ear­lier than Euro­peans en­tered into their tra­di­tional so­ci­ety.

Like the prim­i­tive state of life and hu­man so­ci­ety, mar­ket econ­omy is likely to emerge in di­verse forms and spon­ta­neously spread and ex­pand. Imag­in­ably, in the prim­i­tive state of mar­ket econ­omy, those tribes or so­ci­eties that first de­vel­oped a writ­ten lan­guage had the op­por­tu­nity to achieve more com­plex eco­nomic life and, through a pos­i­tive feed­back loop, cre­ate a much broader com­mu­nity that char­ac­ter­izes the early form of so­ci­ety. Hence, we may ar­rive at the in­fer­ence that early hu­man civ­i­liza­tions in­clud­ing the "four cra­dles of civ­i­liza­tions, i.e. an­cient Me­sopotamia, an­cient Egypt, an­cient In­dia and an­cient China" may came into ex­is­tence in the above man­ner.

In the long course of early hu­man his­tory, apart from the emer­gence of writ­ten lan­guage and progress in the means of com­mu­ni­ca­tion, other forms of mar­ket econ­omy progress, in­clud­ing progress in trans­port tools, growth of mar­ket mech­a­nisms and re­newal of mar­ket knowl­edge, had been in­cre­men­tal and yet to achieve ex­plo­sive break­throughs across re­gions. Un­til the fif­teenth cen­tury, a com­plete world eco­nomic and trade sys­tem was yet to ap­pear. But if we take a closer look at in­trare­gional econ­omy at that time, es­tab­lished trade net­works be­come clearly vis­i­ble; they were rather so­phis­ti­cated in some coastal ar­eas of East Asia, South Europe and the low­lands of Western Europe. For in­stance, they in­clude Venice, Genoa and Con­stantino­ple in South Europe-Asia Mi­nor re­gion, as well as Quanzhou and Guangzhou in China. In fact, cross-re­gional trade routes had al­ready been connected but their op­er­a­tion was un­sta­ble due to volatile re­gional geopol­i­tics and lo­cal po­lit­i­cal and eco­nomic sit­u­a­tions. These trade routes in­clude:

Europe - West Africa route: trade route from Euro­pean penin­sula to West African coast through Sa­hara Desert for the trans­port of slaves, gold, spice and ivory from south to north and horses, tex­tiles, food and hand­i­crafts the other way around.

Mid­dle East - South Asia - East Africa route: trade route from In­dia- Pak­istan sub­con­ti­nent/ Per­sian Gulf to East Africa, for im­port of the lat­ter's ivory, rhino hom, leop­ard skin, gold and slaves and ex­port of China's porce­lain and In­dia's tex­tiles and other fin­ished prod­ucts.

The At­lantic Ocean - South China Sea route: trade route from Arab Penin­sula, the Per­sian Gulf and In­dia to China's south­east coast, for ex­port of spice, lux­ury goods, medic­i­nal ma­te­ri­als, pre­cious me­tals and rare tim­ber and im­port of tea, porce­lain, silk and other su­pe­rior goods of China.

New con­ti­nent re­gion: trade nodes of the Caribbean and An­dean re­gions, dom­i­nated by the trade of pre­cious me­tals, red brass, ce­ram­ics, or­na­ments, coca and agri­cul­tural pro­duce (sweet potatoes and peanut).

The Silk Road: Cen­tral Asia - In­ner Asia con­nect­ing Ji­ayu Pass and to­day's Xi'an to the east, with ac­cess to China's main­land, and bor­der­ing to­day's Iran and Turkey to the west, with ac­cess to the Euro­pean con­ti­nent. China ex­ported the above-men­tioned tra­di­tional goods and im­ported pre­cious me­tals, rare and exotic items, medic­i­nal ma­te­ri­als and spice. This moun­tain­ous trade route only pros­pered dur­ing Han, Tang and Yuan dy­nas­ties and had been blocked by com­plex ge­o­graph­i­cal bar­ri­ers and geopo­lit­i­cal con­flicts in Cen­tral Asia. Since the sev­enth cen­tury, the Mus­lim world that ge­o­graph­i­cally connected Asia with Europe served as a bridge of the Silk Road and also con­trolled the mar­ket, pre­vent­ing the Euro­peans from prof­i­teer­ing from trade, as ev­i­denced in the ex­or­bi­tant prices of Chi­nese goods that be­came the priv­i­leges of the no­bles. How­ever, this also kin­dled the lat­ter's de­sire and imag­i­na­tion. In fact, the great ge­o­graph­i­cal dis­cov­ery was orig­i­nally in­tended to ex­plore an al­ter­na­tive route to by­pass the Mus­lim world and di­rectly trade with China in the Far East.

Many rel­e­vant new stud­ies also sug­gest that the Euro­peans who were more de­voted to maritime nav­i­ga­tion for ge­o­graph­i­cal rea­sons were the ear­li­est to ac­cept the no­tion that "the Earth is round" and made re­peated at­tempts to ap­proach the East across the oceans in the west­ward di­rec­tion. Ac­cord­ing to his­toric records, many Euro­peans suc­cess­fully sailed across the At­lantic Ocean be­fore Colum­bus landed on the Ba­hamas in 1492. The dif­fer­ence

is that Colum­bus had an eco­nomic man­date of the Span­ish royal fam­ily: his ex­pe­di­tion was ac­tu­ally a ven­ture busi­ness ex­plo­ration of a royal com­pany.

In this sense, the fail­ure of talks be­tween Em­peror Qian­long and Lord Macart­ney was in­evitable - not sim­ply due to mis­un­der­stand­ing. The rea­son is that in the two cen­turies be­fore their meet­ing, Europe al­ready de­vel­oped its busi­ness model of for­eign trade: Spain, Por­tu­gal, the Nether­lands, the UK and France all es­tab­lished cor­po­rate mech­a­nisms with shared risks and prof­its be­tween royal fam­i­lies/ gov­ern­ments and pri­vate in­vestors. This is rather dif­fer­ent from Zheng He's voy­ages spon­sored solely by the Chi­nese Em­peror with­out very spe­cific ob­jec­tives and busi­ness model, although Zheng He also com­pleted ex­tra­or­di­nary ex­pe­di­tions of ge­o­graph­i­cal dis­cov­er­ies with bet­ter ships and stronger teams in the early fif­teenth cen­tury.

State spon­sor­ship, pri­vate ven­ture in­vestors, imag­i­na­tion and dar­ing ad­ven­tur­ers - these fac­tors led to the "great ge­o­graph­i­cal dis­cov­ery" that fu­eled the first round of glob­al­iza­tion of mar­ket economies.

2. 2nd - Round Glob­al­iza­tion: the Rise of In­dus­trial Rev­o­lu­tion un­der the Govern­ment-Busi­ness Mech­a­nism and Global Trade Sys­tem (15th -20th Cen­tury)

Driven by the busi­ness model of royal spon­sor­ship and pri­vate investment, nu­mer­ous waves of Euro­pean ad­ven­tures com­pleted the first in­ter­con­nec­tion of global trade routes in hu­man his­tory through the Great Ge­o­graph­i­cal Dis­cov­ery in the fif­teenth cen­tury. Colonists de­feated the less well-equipped and less wellor­ga­nized na­tive Amer­i­cans, who also died of Euro­pean dis­eases. This gave Euro­pean com­pa­nies un­prece­dented op­por­tu­ni­ties to ex­pand and prof­i­teer in the New World. Mas­sive wealth flowed across the ocean and goods from the new con­ti­nent, rang­ing from pep­pers to potatoes and to­bac­cos, found their way into Europe. Africa's slave trade sup­ported the busi­ness of plan­ta­tions in the new con­ti­nent, en­ter­ing into the global trade sys­tem fol­low­ing the above-men­tioned chan­nel.

In this back­drop, there ap­peared what the anec­dotes de­scribed as "the Bri­tish bor­rowed money from the Dutch, bought tea from the Span­ish, sold tex­tiles to Spain and used the lat­ter's Mex­ico coins or Ghana's gold to pay debts to the Nether­lands". There­after, Euro­pean pow­ers fought for supremacy and Bri­tain as an emerg­ing power at­tempted to con­trol tea busi­ness and di­rectly ex­port com­modi­ties to China.

Mean­while, cor­po­rate sys­tem as a ba­sic el­e­ment of Western mar­ket econ­omy de­vel­oped by leaps and bounds and the Nether­lands was the first to demon­strate its in­sti­tu­tional su­pe­ri­or­ity. Af­ter over a cen­tury, Euro­pean wealth flowed into the Nether­lands, a low­land king­dom that emerged into a maritime hege­mon for its so­phis­ti­cated ship­build­ing and trans­port. A typ­i­cal ex­am­ple is the rise of the Dutch East In­dia Com­pany. Dur­ing this pe­riod of time, pri­vate cap­i­tal was weaned from state spon­sor­ship and gained more and more in­de­pen­dence, an ex­am­ple of which is Bri­tish East In­dia Com­pany.

The wave of un­prece­dented op­por­tu­ni­ties prompted Euro­pean coun­tries to em­bark upon so­cial tran­si­tion. Yet in­stead of re­plac­ing dic­ta­tor­ship with democ­racy as ad­vo­cated by the main­stream so­ci­ety of Bri­tain and the US, the royal fam­i­lies, no­bles and re­li­gious lead­ers in Euro­pean coun­tries reached a com­pro­mise with emerg­ing cap­i­tal­ists, ei­ther proac­tively or pas­sively, to rec­og­nize their pri­vate prop­erty and po­lit­i­cal rights jus­ti­fied by tax pay­ment, re­form so­cial in­sti­tu­tions that im­pede cor­po­rate es­tab­lish­ment, re­duce pro­tec­tion of the un­der­priv­i­leged and step in to sup­port na­tional com­pa­nies in in­ter­na­tional com­pe­ti­tion when nec­es­sary.

As ex­plained by his­to­ri­ans, such a tran­si­tion led by the great pow­ers was contagious in Europe: if you do not change, you will fall be­hind. As a re­sult, many Euro­pean coun­tries in­tro­duced sim­i­lar re­forms that led to a vi­brant so­cial at­mos­phere in coastal coun­tries. Due

to dif­fer­ent lo­cal con­di­tions, what ap­pears to be a com­pro­mise was achieved with more or less blood­shed. In France, such con­flict caused re­peated see­saw­ing be­tween the king­dom and the repub­lic, which cul­mi­nated in the se­vere French Rev­o­lu­tion. In com­par­i­son, Bri­tain was on the peace­ful side of the spec­trum: the in­ter­ests of both the monar­chy and emerg­ing bour­geoisie class were pro­tected un­der the con­sti­tu­tional monar­chy sys­tem. How­ever, Bri­tish farm­ers faced a grim fate as they were forced to toil in fac­to­ries and coalmines. The con­flict spread to the young na­tion of the US, plung­ing it into a civil war. Af­ter the war, the vic­to­ri­ous bour­geoisie class cre­ated a brand­new set of so­cial in­sti­tu­tions and in par­tic­u­lar, "freed" plan­ta­tion slaves into in­dus­trial work­ers. At the same time, mo­dem in­dus­tries com­pris­ing com­pa­nies and sec­tors took shape.

In the con­text of such ex­ten­sive so­cial trans­for­ma­tions, the In­dus­trial Rev­o­lu­tion of the 18th to 19th cen­turies spawned an­other great so­cial trans­for­ma­tion as in­dus­trial cap­i­tal re­placed com­mer­cial cap­i­tal as the en­gine of econ­omy. While steam en­gines, elec­tric mo­tors and ma­chines un­leashed im­mense po­ten­tials of pro­duc­tion, they also sparked a tremen­dous de­mand to ex­plore new re­sources and new mar­kets. In­dus­trial and com­mer­cial groups that used to rely on state spon­sor­ship started a fierce com­pe­ti­tion for raw ma­te­ri­als, la­bor and mar­kets, which led to a wave of col­o­niza­tion sweep­ing across the globe. Trade glob­al­iza­tion that started in the pre­vi­ous his­toric stage be­came a re­al­ity in this stage. Sea routes and rail­roads across the con­ti­nents paved the way for the mer­can­tile ex­pan­sion of cap­i­tal­ism, over­shad­ow­ing the Silk Road trade.

Mean­while, an­other re­lated so­cial trans­for­ma­tion in Europe ex­erted much more com­plex but equally im­por­tant in­flu­ence on glob­al­iza­tion, i.e. the rise and spread of mo­dem na­tion- states. In the in­ter­est of length, this trans­for­ma­tion can be briefly de­scribed as the fierce con­flicts of cap­i­tal­ist groups in var­i­ous in­dus­trial sec­tors sup­ported by the states ( king­doms or re­publics) amid the In­dus­trial Rev­o­lu­tion and trade glob­al­iza­tion, which led to mil­i­tary con­fronta­tions and wars on a broader scale. With clearly de­fined rights and obli­ga­tions of ci­ti­zens, na­tion- states proved much more pow­er­ful than tra­di­tional coun­tries in mo­bi­liz­ing the so­ci­ety. As the first na­tion-state, the French Repub­lic emerged as a ma­jor power by unit­ing the strength of its na­tion­als.

This is an­other so­cial trans­for­ma­tion with a sim­i­lar contagious ef­fect - coun­tries that re­fused to change were more likely to be de­feated in a war ( for in­stance, the Qing Dy­nas­ties lost the Opium War against Bri­tain due to the lack of a sense of in­volve­ment among its peo­ple. Ac­cord­ing to his­toric records, there were more Chi­nese spec­ta­tors than Chi­nese sol­diers on some oc­ca­sions dur­ing the war). As a re­sult, na­tion- states swiftly spread across Europe and those coun­tries that had re­tained the name of king­dom also changed the na­ture of their orig­i­nal in­sti­tu­tions to dif­fer­ent de­grees.

Un­der the na­tion-state sys­tem, the monarch has lim­ited as­sets and power and the royal fam­ily is just a rep­utable mem­ber of the ren­tier class with a con­sid­er­able stipend. Demo­cratic elec­tion be­came re­vi­tal­ized dur­ing the for­ma­tion of na­tion- states. With the right to vote as a ba­sic right for ev­ery adult ci­ti­zen comes the re­spon­si­bil­ity to de­fend his na­tion. For the rul­ing elites of a state, this is a per­fect sys­tem for mo­bi­liz­ing the so­ci­ety. Rather than a tra­di­tional the­ory of the Western cul­ture, democ­racy has been demon­strated by some schol­ars to be merely an ide­o­log­i­cal achieve­ment with prac­ti­cal rel­e­vance.

The abil­ity to mo­bi­lize the so­ci­ety will not only un­leash tremen­dous so­cial vi­tal­ity, in­clud­ing pro­duc­tiv­ity and cre­ativ­ity, but spawn greater risks and dis­as­ters, as ev­i­denced in the two world wars that erupted in Europe. As will be dis­cussed in later sec­tions, this na­tion-state sys­tem em­bed­ded with democ­racy con­sti­tutes the sin­gle great­est bar­rier to the glob­al­iza­tion of mar­ket economies.

3. 3rd -Round Glob­al­iza­tion: Re­al­ity and Dilem­mas of Global Cap­i­tal Flows (21st cen­tury)

The end of the World War II ush­ered in a cli­max in the glob­al­iza­tion of na­tion­state sys­tem. Iron­i­cally, while this war, which wrought un­prece­dented havoc to hu­man so­ci­ety, was launched by Euro­pean na­tion- states, it spurred the glob­al­iza­tion of na­tion-state sys­tem. Anti- colo­nial­ism, na­tional in­de­pen­dence and lib­er­a­tion be­came the trends of the world in the 1940s to 1960s, marked by the mile­stone of the es­tab­lish­ment of the United Na­tions. As its name sug­gests, the United Na­tions is an or­ga­ni­za­tion of "na­tions" com­ing to­gether in unity. At a deeper level, the United Na­tions served as an ad­min­is­tra­tive frame­work for the vic­to­ri­ous pow­ers of the World War II (mainly USA and USSR) to re­shape the world or­der.

The Cold War that de­vel­oped soon af­ter the World War II blocked the path of coun­tries to pur­sue in­de­pen­dent eco­nomic devel­op­ment un­der the UN sys­tem. The ri­valry be­tween USA and USSR per­sisted for many years un­til the col­lapse of East­ern Europe's highly cen­tral­ized sys­tem, which led to the dis­so­lu­tion of the Coun­cil for Mu­tual Eco­nomic As­sis­tance ( Come­con) to­gether with the USSR and the Warsaw Pact. In the sub­se­quent wave of freemar­ket econ­omy that swept across the globe, the Gen­eral Agree­ment on Tar­iffs and Trade (GATT, pre­de­ces­sor of the WTO) led by the US, to­gether with the World Bank and In­ter­na­tional Mone­tary Fund ( IMF) cre­ated un­der the UN are the most im­por­tant in­ter­na­tional in­sti­tu­tions that shaped to­day's world eco­nomic and trade or­der and fi­nan­cial or­der. The OECD, G7 and more re­cent G20 serve as aux­il­iary co­or­di­na­tion mech­a­nisms.

The World Bank and IMF linked de­vel­oped coun­tries with devel­op­ing coun­tries through the lever­age of cap­i­tal and in­ter­vened in the lat­ter's devel­op­ment plan­ning and op­er­a­tion to dif­fer­ent de­grees fol­low­ing given con­cepts and pro­ce­dures. Nom­i­nally, the for­mer is­sues loans to im­por­tant com­mer­cial projects with cul­tural sig­nif­i­cance in devel­op­ing coun­tries, while the lat­ter is re­spon­si­ble to su­per­vise the fi­nan­cial sta­tus of devel­op­ing coun­tries, pro­vide tech­ni­cal guid­ance and as­sist in the train­ing of pro­fes­sion­als, as well as of­fer emer­gency res­cue funds to coun­ter­act eco­nomic im­bal­ance when nec­es­sary.

At a deeper level, the World Bank, IMF and the Bank for In­ter­na­tional Set­tle­ments (BIS) as the Bret­ton Woods in­sti­tu­tions cre­ated and main­tained the post- war in­ter­na­tional fi­nan­cial or­der, i.e. a dol­lar- cen­tric eco­nomic sys­tem with US dol­lar as the pri­mary set­tle­ment cur­rency. Af­ter the dol­lar of­fi­cially went off from gold, the US was still able to main­tain the dol­lar's sta­tus as quasi-global cur­rency through these in­sti­tu­tions, helped by its ad­van­tages of petrodol­lar, dom­i­nance of stock, bond, fu­tures and forex mar­kets, as well as eco­nomic and mil­i­tary supremacy, and used these in­sti­tu­tions to serve its own in­ter­ests and ac­com­mo­date or bal­ance the in­ter­ests of other coun­tries. In prac­tice, these in­sti­tu­tions would raise pre­req­ui­sites to re­cip­i­ent coun­tries based on Western con­cepts and val­ues. In most cases, this will af­fect the po­lit­i­cal and eco­nomic devel­op­ment of re­cip­i­ent coun­tries. For al­most all mar­ket economies, their fi­nan­cial poli­cies are more or less in­flu­enced by these three in­sti­tu­tions. His­tory shows that many coun­tries had been dis­rupted by the World Bank and IMP's guide­lines ir­re­spec­tive of their na­tional con­di­tions, which of­ten made their sit­u­a­tion even worse, not to men­tion to achieve ex­pected re­sults. China, how­ever, is a rare ex­cep­tion.

Un­der the pres­sures of the Cold War, the US im­ple­mented the Mar­shall Plan to aid Europe and adopted a sup­port­ive pol­icy to­wards Ja­pan and the Four Asian Tigers, which spurred re­mark­able re­gional eco­nomic devel­op­ment. While coun­tries learned lessons from the two world wars, multi­na­tional firms be­came in­creas­ingly in­ter­locked through joint investment and cross own­er­ship. This is in­deed a progress com­pared with the first half of the cen­tury when ma­jor cor­po­ra­tions re­fused to co­op­er­ate with other coun­tries. Cap­i­tal­ist con­sor­tiums from de­vel­oped coun­tries fur­ther dis­cov­ered that es­tab­lish­ing la­bor- in­ten­sive in­dus­tries in or out­sourc­ing these in­dus­tries to devel­op­ing coun­tries would sig­nif­i­cantly re­duce op­er­at­ing costs, in­crease prof­its, by­pass do­mes­tic en­vi­ron­men­tal reg­u­la­tions and trade

unions and ef­fec­tively mit­i­gate tax bur­den. Thus, in­sti­tu­tions such as the GATT ( which later evolved into the WTO) and the OECD, as well as mar­ket rules and sup­port­ing mea­sures un­der­pin­ning in­ter­na­tional eco­nomic ac­tiv­i­ties proved to be a win-win so­lu­tion.

With these in­sti­tu­tions in place, Western de­vel­oped coun­tries led by the US made their first foray into in­dus­trial re­lo­ca­tion. By in­vest­ing in devel­op­ing coun­tries, cap­i­tal­ists would reap un­prece­dented profit growth as long as they main­tain ef­fec­tive management, pro­tect share­hold­ers' in­ter­ests and en­sure unim­peded flow of in­ter­na­tional cap­i­tal. In­ter­na­tional investment marks the third phase in the glob­al­iza­tion of mar­ket economies, i.e. glob­al­iza­tion of cap­i­tal flows. Af­ter USSR's dis­so­lu­tion and the end of the Cold War in the late 1980s, the pro­po­nents of democ­racy and free mar­ket eco­nomic sys­tem scored a com­plete vic­tory in the­ory and prac­tice. As the world em­braced the ideal of a global vil­lage with the free flow of cap­i­tal across the globe as the ul­ti­mate state and world eco­nomic in­te­gra­tion sped up, China ac­ceded to the WTO.

In the dis­cus­sions and de­ci­sions of the WTO en­try, China was not only in­flu­enced by Western main­stream eco­nomic the­o­ries and pub­lic opin­ion but con­vinced of its late-mover ad­van­tage as well. China's ef­forts to join the WTO also aimed to over­come the diplo­matic dilemma af­ter 1989. Af­ter 15 years of dif­fi­cult ne­go­ti­a­tions, China fi­nally se­cured a con­di­tional ac­ces­sion into the WTO in 2001. China's WTO en­try not only ac­cel­er­ated the glob­al­iza­tion of mar­ket economies and par­tic­u­larly vastly in­creased the weight of global cap­i­tal but fun­da­men­tally trans­formed global in­dus­trial lay­out and mar­ket land­scape as well - the re­sult of these fac­tors in com­bi­na­tion was un­ex­pected by Western econ­o­mists and politi­cians. An ob­vi­ous prob­lem is that na­tion- state po­lit­i­cal sys­tem that used to fuel eco­nomic devel­op­ment clashed from within.

In the Western world, in­dus­trial re­lo­ca­tion and free cap­i­tal flow caused se­ri­ous do­mes­tic in­dus­trial hol­low­ing- up in some coun­tries, which di­rectly and per­sis­tently af­fected the em­ploy­ment and wel­fare of mid­dle and lower class in these coun­tries. Mean­while, big cor­po­ra­tions and "high- net- worth in­di­vid­u­als" evaded tax through cross- bor­der cap­i­tal flow, com­pro­mis­ing na­tional fis­cal health. A side ef­fect is de­clin­ing so­cial mo­bil­ity and the for­ma­tion of a per­ma­nent un­der­class. While the elites in Western coun­tries - ben­e­fi­cia­ries from the third wave of glob­al­iza­tion - paid no re­gard to the con­cerns of the mid­dle and lower classes in their home coun­tries, so­cial dis­par­i­ties be­came so sig­nif­i­cant as to in­flu­ence the votes and change pol­i­tics. Be­fore an an­ti­dote is found, politi­cians in the US and some Euro­pean coun­tries re­sorted to re­vers­ing glob­al­iza­tion and pop­ulist claims.

On the other hand, for many devel­op­ing coun­tries, while the free flow of cap­i­tal brought them the op­por­tu­nity to al­lo­cate re­sources in the in­ter­na­tional mar­ket, the high liq­uid­ity of cap­i­tal and par­tic­u­larly hot money be­came a po­ten­tial trig­ger of great eco­nomic volatil­ity. In a few rounds of global fi­nan­cial mar­ket volatil­ity in this phase, Asia Pa­cific and Latin Amer­ica suf­fered ma­jor blows but China re­mained an ex­cep­tion. Af­ter 15 years of China's WTO en­try, most ex­perts, schol­ars and main­stream me­dia found to their sur­prise that China's rapid emer­gence is in stark con­trast to the stag­na­tion of Western coun­tries. Most econ­o­mists did not ex­pect such an out­come.

With­out doubt, China is a ben­e­fi­ciary from the glob­al­iza­tion of mar­ket economies. How­ever, China did not be­come suc­cess­ful solely by tak­ing a free ride. From 1949 to 2001, it took two gen­er­a­tions and nu­mer­ous tri­als and er­rors be­fore China es­tab­lished a well­func­tion­ing ad­min­is­tra­tive sys­tem af­ter a cen­tury of de­cline and hu­mil­i­a­tion, safe­guarded its sovereign in­tegrity, pre­served its vast ter­ri­to­ries and the world's largest pop­u­la­tion ( largest source of wis­dom, work­force and con­sumer mar­ket) and laid the foun­da­tion for na­tional ed­u­ca­tion and in­fra­struc­ture con­struc­tion nec­es­sary for in­dus­trial devel­op­ment. More­over, China smartly pro­tected its na­tional in­dus­try and fi­nan­cial se­cu­rity in its WTO ne­go­ti­a­tions. China not only suc­cess­fully in­tro­duced for­eign

cap­i­tal and learned cor­po­rate management ex­pe­ri­ences and mar­ket strate­gies but swiftly es­tab­lished the only com­plete in­dus­trial sys­tem in the world, re­sisted the shocks of the Asian Fi­nan­cial Cri­sis in 1997 and the US sub-prime mort­gage cri­sis in 2008, and even as­sisted other de­vel­oped and devel­op­ing coun­tries in seek­ing com­mon devel­op­ment. Now that 15 years have passed since China's WTO en­try, China has in­dis­putably be­come the sec­ond largest econ­omy in the world and is poised to bring new hope to the devel­op­ment of hu­man so­ci­ety with its im­por­tant fine qual­i­ties.

4. World Na­tion-State Sys­tem and Glob­al­iza­tion Process

The ba­sic frame­work ofto­day's in­ter­na­tional po­lit­i­cal or­der re­mains to be the United Na­tions Se­cu­rity Coun­cil con­sisted of five per­ma­nent mem­bers with veto rights. This in­ter­na­tional ad­min­is­tra­tive sys­tem is deeply mis­matched with world eco­nomic and fi­nan­cial or­der. As a re­sult, world eco­nomic or­der is still de­pen­dent on geopo­lit­i­cal or­der. The glob­al­iza­tion of mar­ket economies in the the­o­ret­i­cal sense has never been unim­peded glob­ally. This brings ques­tion to a highly doubt­ful so­cial struc­ture, i.e. the so-called na­tion-state sys­tem that emerged in Europe.

The ba­sic be­lief of na­tion- state that sovereignty be­longs to the peo­ple shook the le­git­i­macy of tra­di­tional monar­chy or theoc­racy to its foun­da­tion. As such, it re­ceived tremen­dous sup­port from peo­ple. In mod­ern na­tion states, no mat­ter king­doms, re­publics or demo­cratic fed­er­a­tions, the head of state (no mat­ter kings or pres­i­dents) must act ac­cord­ing to peo­ple's will ir­re­spec­tive of their sym­bolic or real power and ir­re­spec­tive of their length of ten­ure or in­ten­tion to in­herit power to their fam­ily mem­bers. In mod­ern na­tion states, no one, in­clud­ing heads of states and their re­la­tions, may oc­cupy all as­sets within na­tional ter­ri­to­ries with­out lim­i­ta­tion. Of course, such change was pro­pelled by the rise of cap­i­tal­ist class.

Na­tion- state sys­tem clearly de­fines the re­spon­si­bil­i­ties, pow­ers, obli­ga­tions and in­ter­ests of each and ev­ery adult ci­ti­zen in writ­ten or un­writ­ten forms - some­thing no pre­vi­ous so­cial sys­tem ever achieved. There­fore, it is also be­lieved to be a highly mod­ernistic so­cial sys­tem. In par­tic­u­lar, demo­cratic na­tion states based on mar­ket econ­omy boast tremen­dous so­cial ini­tia­tive. Dur­ing spe­cial times such as war and nat­u­ral disaster, this so­cial ini­tia­tive has ir­re­place­able value, which is em­bod­ied in the cre­ativ­ity and co­he­sion of peo­ple.

How­ever, the core con­cept of na­tion states is an ex­clu­sive one - na­tion state is an ide­o­log­i­cal and so­cial mech­a­nism that links a per­son's so­cial rights and re­spon­si­bil­i­ties with his birth­place. This is a highly ques­tion­able ide­o­log­i­cal con­cept and also has great risks in re­al­ity. The con­cept of na­tion di­vides peo­ple by the coun­tries in which they were born, en­dow­ing them with dif­fer­ent phys­i­cal, phys­i­o­log­i­cal, eth­i­cal, so­cial psy­cho­log­i­cal, eco­nomic and le­gal def­i­ni­tions and plans. This is a rather ridicu­lous ap­proach of so­cial de­sign, a mis­take that ought to be aban­doned in a peace­ful en­vi­ron­ment. The two world wars that erupted in Europe and swept across the world and ex­trem­ist ide­ol­ogy that gave rise to mil­i­tarism, fas­cism and racism al­most share the same ide­o­log­i­cal ori­gin and struc­ture although by dif­fer­ent de­grees.

In his­tory, we have seen rav­aging wars and con­flicts be­tween Bri­tain and France, Bri­tain and Ger­many, and France and Ger­many dur­ing the in­cep­tion of na­tion states, as well as be­tween other na­tion states on the Euro­pean con­ti­nent in more re­cent times such as UkrainePoland- Rus­sia and the Balkan con­flicts af­ter the dis­so­lu­tion of the Fed­eral Repub­lic of Yu­goslavia. These set­backs and blood­shed caused deep re­flec­tions among peo­ple in the Euro­pean con­ti­nent af­ter the war, de­spite the ex­is­tence of var­i­ous schools of thought with ul­te­rior mo­tives and par­tic­u­larly vested in­ter­ests that cap­i­tal­ized on wel­fare sys­tem. Draw­ing lessons from the two world wars, the Euro­peans led by some elites at­tempted to re­verse na­tion­al­ism in or­der to pro­mote in­te­gra­tion among na­tions and ul­ti­mately elim­i­nate na­tional bor­ders for peace­ful co­ex­is­tence. This is the back­ground for the emer­gence of the Euro­pean

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