Stefan Halper's "The Beijing Consensus" summarizes how China's ('The People's Republic of China' - PRC) non-confrontational strategies are changing the world order. For decades the U.S. used its military and economic strength to leverage developing countries into economic and government reform. This worked fine, as long as we were the only game in town. The PRC, however, has now entered the arena and provides a welcome non-judgmental alternative to many struggling nations. This new approach to foreign aid, combined with admiration for China's economic success, is boosting its world influence, as well as access to energy and other natural resources. Meanwhile, China's autocratic leadership is now setting the foundation for future economic successes, and shows no sign of liberalizing; ironically, U.S. economic progress seems hindered by its vaunted democratic processes.
Some Americans have fixated on growing PRC expenditures, now second largest in the world, for modernizing its military. Halper believes this should not be a concern. China is avoiding direct confrontation with the U.S., even though it remains committed to re-unification with Taiwan and the U.S. to preservation of Taiwan's defense. The first reason to not worry is that China does not want the budgetary strain of a military arms race with the U.S., nor the foreign policy atmospherics that would result. Halper sees China's modernizing military as simply motivated via 'just-in-case' Americans get too aggressive, and centers on high-tech, close-in defensive weapons. Halper's second reason for discounting a military threat from the PRC is that Taiwan is no longer the flash-point it once was. The is due to China's confidence that re-unification is inevitable, and its willingness to wait. Meanwhile, trade between the two was $108 billion in 2007 (up 16% from 2006), over one million Taiwanese now live and work in the PRC, contacts have increased through regular mail and commercial flights between the two, and China's economic successes have made it more attractive to those living on Taiwan.
Halper, however, is very much concerned about China's growing soft power. Per Harvard's Joseph Nye, when competing for influence "It's not whose Army wins, it's whose story wins." China sees foreign aid as an important part of the contest of stories. Nations clamoring for aid during the latter half of the 20th-century had little choice other than the U.S. led World Bank and the IMF. However, both soon demonstrated a lack of ability to reliably help other nations, sometimes causing more harm than good. Reasons included their numerous ideological 'one-size-fits-all' economic requirements that assumed recipient nations had strong domestic industries, legal systems, and administrative cadres. Despite aid recipient nations often being in recession, IMF and World Bank mandates for cutting government spending worsened the economies of many aid recipients. Directed to eliminate trade barriers, recipients likely found their domestic industries overwhelmed (African food and clothing producers), while corporations in advanced nations enjoyed a windfall. IMF and World Bank-required elimination of barriers to foreign investment often brought inflation, and forced privatization frequently brought fraud as as former state sectors were taken over by political cronies (Russia). Then there was the obvious hypocrisy of our often propping up ruthless oil and anit-Communist dictators while espousing American-style democracy, ignoring Israel;s abuse of Palestinians, and subsidizing American agriculture at the same time the World Bank and IMF prevented developing countries from doing the same. Then came our own problems - the [...] crash, 9/11, our Katrina response, wars in Iraq and Afghanistan, ballooning trade and federal deficits, realization of an inadequate and dated infrastructure, a failing education system, crippling health care and defense costs, inability to aggressively address global warming, deindustrialization, our 2007 Wall Street collapse, and quixotic quests to play the role of world's policeman (Iran, Korea). Each served to undermine America's former soft power aura of competence and success.
Halper attributes recent U.S. economic problems, as well as its ineffectual aid to others, to an inflexible economic ideology that developed in response to problems caused by powerful American labor unions of the 1970s. Faced with both rising unemployment and inflation, Milton Friedman and the 'Chicago school' sold Republicans on the assertion that government involvement didn't solve problems, rather it made them. Deregulation (transportation), reduced regulations, free trade, privatization of state-owned enterprises, and cutting taxes became de rigueur. At first, everything came up roses - American icons such as Coke, Nike, McDonald's, and then Microsoft, sprung up all over the globe, America's 20% inflation was stopped cold, and then the Russian empire collapsed in 1991. We even deluded ourselves into thinking Americans were "special people" with an assignment to evangelize others in democracy and freedom, per God. Reality, however, was that America had reached the peak of its 'soft power,' and was headed downhill.
China, meanwhile, talked little and accomplished much, thanks to its high savings rate, emphasis on and respect for education, flexible economic ideology, protected domestic markets, enormous supply of low-cost labor, and an autocratic government that permitted no 'great debates' - instead taking fast, consistent actions and learning from nearby Hong Kong, Taiwan, Singapore, South Korea, and Japan. On the political side, rather than accept conventional wisdom that economic success required a more democratic government, and sensitive to its revolt-prone past, the PRC government instead concluded that Russia had erred in permitting democratic reforms to outrun economic progress. In addition, China also determined that Russia had suffered from an overly aggressive foreign/satellite policy, a too-large military, a lack of market mechanisms, and a failure to ensure that key industries supported national interests. Incorporating all these lessons, the PRC elected to use strong, intelligent government power to accelerate economic growth; in turn the improved economy would serve as a means of maintaining the Communist Party's power. The new economy offered considerable economic freedom, while retaining government leadership of key industries such as telecommunications, banking, metals (steel, aluminum), and transportation. Pros included fast action, and consistent direction that wasn't subject to reversal every election cycle, continual media-fed industry-led fighting over economic direction, and the ability to immediately link business decision-making with political goals (eg. banning American firms selling arms to Taiwan from selling to the mainland; sometimes slowing the use of mechanization as a means of boosting employment). Cons - local officials' corruption, very limited democracy, and incredible pollution. (China's corruption problem, however, should be evaluated in the context of American business lobbying and 'buying elections.')
Thirty years later, China has accumulated some $2.4 trillion in currency reserves (could reach $13.4 trillion by 2020), increasingly used to fund aid projects on its own and provide a path around the West. Six billion is now committed to funding a media campaign to tell China's story. Chinese 'industrial policy' decisions have also brought the economic benefits of clustering (simplifies marketing and support efforts, intensifies knowledge distribution and competition), minimized contradictions (eg. not buying G.M.'s fuel-wasting Hummer brand in an increasingly resource and pollution-conscious world), and avoided undermining key values (eg. allowing banks to promote credit cards, instead of encouraging savings). Resource-rich nations (eg. OPEC) now emulate China - using their natural resources to avoid levying taxes and the subsequent demands for democracy, while using state capitalism to develop the economy, keep the populace happy, and leverage their own foreign policy etc. goals. (The world's thirteen largest oil companies are owned and run by governments; Saudi Arabia 'invented' political use of economic resources with its 1970s Oil Embargo; Gazprom periodically threatens to freeze large areas of Europe by turning off natural gas supplies.)
The weak U.S. economy is now less able/willing to provide large foreign aid projects, and the Bank of China is 6X the size of the World Bank. Turns out, we're not missed. Halper quotes an African leader comparing the World Bank's slow (five years) contracting and often patronizing support processes, vs. China's three months and few restrictions. In turn, China has lots of new friends supporting its aims in Taiwan, Tibet, and within China itself. Ironically, while Americans have been fighting and dying in Afghanistan for nearly nine years, China is investing $3 billion to gain access to its huge copper reserves - first building roads, a $500 million power plant, a national railway, a coal mine, and eventually creating as many as 10,000 jobs for Afghans. Paradoxically, its investment is protected by American soldiers, and President Karzai is threatening to join the Taliban. Nearby, in Iran, China has $120 billion worth of oil deals - undoubtedly motivation for opposing U.S. goals there, and is busily also helping Iraq develop its oil resources.
China's recognizes that operational effectiveness in the role of offshore producer is not a long-term strategy for either maximizing profits nor full employment within China. Neither is the long-term holding of huge amounts of potentially depreciating American financial assets good for China. In response, the PRC has undertaken its own 'Buy American' campaign - acquiring American and other consumer product companies (Lenovo, Volvo, portions of the Blackstone Group and Morgan Stanley) and starting its own (egl Geely automobiles), using political and economic leverage to acquire American (and others') technological capabilities in tomorrow's industries, acquiring access to raw materials around the world, recruiting skilled science and math expatriates to return, increasing its own R&D capabilities and expenditures, and boosting education expenditures - especially at the university level. Some of these moves also serve to position it for marketing to the less developed world - the projected location of most future economic growth. China is also focusing on expanding internal demand for goods and services, thereby becoming less dependent on exports, less vulnerable to protectionism by other nations, and requiring less resources and generating less pollution/GDP growth than increasing basic industries.
Halper ends with the obligatory section on recommendations. Unfortunately, they lack any likelihood of success (eg. establishing a 'China section' within the National Security Council).
Bottom-Line: China's 'miracle growth' economy has not required emulating American democracy - in fact, China's economy has benefited from government remaining autocratic, and has added autocratic capitalism to its list of exports. Further, it's a mystery why we (or Google) care about developing democracy in China - polls show a preference for social order and economic progress over Western liberal democracy, a finding consistent with Maslow's needs hierarchy. Halper believes "China is set to have a greater impact on the world in the next two decades than any other country" - not because of its increased military spending (much lower than the U.S.) but because it has become a beacon of management/government ideas about making capitalism more effective. Halper also concludes that given China's concern with 'face' (the reason for torpedoing President Obama's request for emissions verification), and U.S. politicians' inability to get beyond media-reinforced rabble-rousing about China, there is little possibility of the PRC and the U.S. becoming a team. Meanwhile, U.S. democracy has become paralyzed, unable to overcome outdated ideological baggage on economic policy (unrestrained free trade, minimal regulation) and foreign policy (dictating and preaching, portraying differences as 'good vs. evil,' preemptive military strikes, unwavering support for Israel) to reverse our weakening economy and international standing.
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