Financialization and globalisation have severely eroded the manufacturing base of the United States. Is the world headed for a “hegemonic transition”?
Walden Bello, a columnist for Foreign Policy in Focus, is the author or co-author of 19 books, the latest of which are Capitalism’s Last Stand? (London: Zed, 2013) and State of Fragmentation: the Philippines in Transition (Quezon City: Focus on the Global South and FES, 2014)
Cross-posted from Counterpunch
Xi Jinping, Joe Biden
Recent days have been very memorable when it comes to geopolitics.
The Biden administration issued a National Security Strategy Memorandum that some say was a declaration of enmity against China just short of war. And at the Chinese Communist Party Congress in Beijing, President Xi Jinping warned of “dangerous storms” facing China in the coming years.
This brings up the question: Is the world headed for what is called in international relations jargon as a “hegemonic transition”?
When we assess the situation of the world’s hegemonic power, what is clear is that financialization and globalization combined not only to create severe inequality, but they severely eroded the manufacturing base of the United States. And when we talk about deindustrialization, we are talking not only about the loss of millions of manufacturing jobs, from 17.3 million to around 13 million today, but about the loss of the channels for the generational transmission of skills of the workforce, in semi-skilled and some skilled industries.
Equally important has been the loss of the synergy between manufacturing and technological creativity in the center economies and its emergence in rapidly industrializing economies. Contrary to expectations that the peripheral economies would be limited to providing cheap labor while the center economies would monopolize knowledge intensive activities, high tech offshoring followed manufacturing offshoring.
One important study of eight advanced economies showed that high-tech offshoring increased in less than one decade from 14 percent in the late 1990s to about 18 percent in 2006. As Branko Milanovic has pointed out, “innovation rents, received by the leaders of the new technologies, are being dissipated away from the center.” Aggressively reversing this technological flow was, in fact, the centerpiece of Donald Trump and his economic adviser Peter Navarro’s political economy.
America’s Comprehensive Crisis
But what overdetermines the current crisis of the hegemon is that it is not just economic but also ideological and political.
The British Marxist Paul Mason has argued that with the triumph of neoliberalism and financialization in the global North, solidarity and a sense of community based on economic class and a shared middle class lifestyle among workers was replaced by an individualized identity as consumers, as market players in a society of seemingly shared prosperity but where rising income was increasingly replaced by rising debt as the mechanism of economic pacification.
Having exchanged their class identity for that of consumers in the market, their loss of even the latter owing to the 2008-2009 crisis left them ideologically vulnerable, particularly when it came to their commitment to the liberal democratic belief in universal equality. Even before the financial crisis, many workers had already been feeling psychologically threatened by the gains of the movements for racial and gender justice, and their descent into economic insecurity was the final step in their rightward radicalization.
What the volatile combination of economic crisis, ideological vulnerability, and Donald Trump has done is to make legitimate if not respectable an anti-democratic core belief that has been transmitted generationally, communally, and subversively. This is White Supremacy, which is now informally the ruling ideology of the Republican Party.
Finally, to the political crisis. I don’t think there would be many who would object to our characterizing American liberal democracy as being in crisis. I think the dispute would be over how serious the crisis is. In her book How Civil Wars Start, Barbara Walter writes:
Where is the United States today? We are a factionalized anocracy [a degenerating democracy] that is quickly approaching the open insurgency stage, which means we are closer to civil war than any of us would like to believe. January 6 was a major announcement by at least some groups…that they are moving toward outright violence… In fact, the attack on the Capitol could very well be the first series of organized attacks in an open insurgency stage. It targeted infrastructure. There were plans to assassinate certain politicians and attempts to coordinate activity.
Now Walter’s profile is not that of someone crying wolf. She is not someone speaking from the left. In fact, she’s very establishment, a specialist in comparative civil wars who has used several databases, the most important of which is the CIA’s Political Instability Task Force, of which she is a part.
For Walter and her CIA colleagues, ethnicity has emerged in their global comparative studies as the prime predictor of susceptibility of a society to civil war — and in the U.S., armed white radicals are on the cutting edge. However, ethnicity by itself does not produce conflict. It needs triggers or “accelerants,” and these are the emergence of hegemonic ethnic groupings or “superfactions,” the exacerbation of conflicts by “ethno-nationalist entrepreneurs,” and the frenzied mobilization of ordinary citizens who feel that only the armed ethnic militias stand between them and those who would destroy them and their world.
And to move from A to Z, social media, in particular Facebook, have become a central weapon of radicalization. The angry buzz in white nationalist chat rooms these days is the “Great Replacement Theory,” wherein whites are said to be the victims of an ongoing conspiracy hatched by Jews, blacks, feminists, LGBTQIAs, migrants, and Democrats to make them a minority and eventually destroy them in a race war.
Now the reason we have spent some time detailing the ideological and political dimensions of the crisis of the liberal international order is that when many people talk about hegemonic decline, they consider mainly its economic dimension. Equally important are the political and ideological dimensions. When some analysts speculated about the possible loss of U.S. hegemony to Japan back in the late 1980s, they had in mind only the economic dimension. And while this was the central consideration, their neglect of the political and ideological dimensions of the relationship was one reason their predictions about Japan supplanting the United States went awry.
To repeat, what distinguishes the crisis of the hegemon today from the 1980s is the fatal combination of severe economic dislocation, deep ideological disaffection, and profound political instability. Global hegemony is difficult to exercise if, in addition to falling behind on the economic front, the hegemon is also nearing civil war and a significant sector of the society has lost faith in the liberal democratic ideology that legitimizes its global economic primacy.
That is where the United States is today.
The Chinese Challenge
Let us now turn to the question of whether some other power is moving to replace the United States on center stage. China is, of course, what everyone talks about as the chief candidate, and it is on the economic front that China’s challenge is strongest.
In his book The Great Convergence, Richard Baldwin tries to explain how China was transformed from being not only an industrial non-competitor but an outsider in the global capitalist system in the 1970s to becoming the world’s prime industrial superpower in just over two decades.
China, he says, was smart enough to capitalize on its having joined the capitalist world economy at the time when what he calls globalization’s “second unbundling” was taking place. This was the breaking up of the productive process globally made possible by advances in information technology, resulting in a revolutionary innovation: the corporate global value chain. The key feature of this process has been, as we noted earlier, the dispersal of diffusion of high technology from the knowledge-rich capitalist center economies to the labor surplus peripheral countries.
While Baldwin appears to view this process as inevitable, the fact is, in the case of China, this diffusion was facilitated by policies of forced technology transfer imposed by Beijing. U.S. corporations bristled at this, but compliance was the condition of their access to super-cheap Chinese labor.
By the time Trump and Peter Navarro tried to stop sensitive high tech transfers in 2017, it was too late; China had already moved on from being a passive high-tech recipient to an active high tech innovator. Washington’s recent legislation banning the export of
U.S.-made strategic microchips to China may have made a difference 10 years ago, but will have very little effect now.
In May 2021, Beijing successfully landed a spacecraft on Mars, only the third country to accomplish that after the U.S. and Russia. Nor was this a fluke. Baidu launched a quantum computer that people will be able to access via a smartphone app. Construction is underway on the largest pulsed-power plant in the world, leading specialists to predict that China could achieve nuclear fusion energy by 2028. Beijing is even funding civilian hypersonic transport.
A strong state, it might be noted — one that was far stronger owing to its revolutionary origins than the classic developmental states of the Asia Pacific rim — had made the difference.
In any event, China is now the center of global capital accumulation. In the popular image, it’s the “locomotive of the world economy,” accounting for 28 percent of all growth worldwide in the five years from 2013 to 2018 according to the IMF — more than twice the share of the United States.
A Crisis of Growth vs. A Crisis of Decline
Now, it is certainly true that the Chinese economy is marked by several crises, such as the emergence of vast income inequalities, massive surplus capacity, regional disparities, real estate bubbles, and environmental problems. I look at these, however, as manifestations of the unbalanced growth that the economist Albert Hirschman saw as a necessary feature of rapid industrial development under capitalism.
These are crises of growth, in contrast to crises of decline that mark the U.S. economy.
But let us turn to the political and ideological dimensions of China’s political economy. In contrast to the simplistic view of a population cowed by repression, political protests have been common in China, both on the ground and on the internet, though some say there has been a decline in numbers in the Xi Jinping years.
But few would claim that the ruling regime is undergoing a crisis of legitimacy. Protests have been directed at local problems such land-grabbing, low wages, or environmental pollution, with no protest movement being able to translate itself into a critical mass across the country. Thus there is little challenge to the Communist Party’s political hegemony, except from democracy and human rights activists who, brave and exemplary they may be, are few and far between. Certainly, the kind of polarization one sees in the U.S. is nonexistent.
Now, to the question of ideology. Ideological legitimacy rests on the party’s ability to deliver economically, provide political stability, and convince the population that it is central to achieving what Xi Jinping has called “national rejuvenation.” Corruption, however, is a constant threat, and it cannot really be eliminated since — and here I agree with Milanovic — it is rooted in the system of discretionary decision-making or selective application of the law that, paradoxically, accompanies the technocratic thrust of what he calls “political capitalism.”
Nevertheless, corruption cannot be allowed to spread uncontrolled since this would totally subvert the technocratic rationality that is the centerpiece of the system, militate against economic growth, and erode the legitimacy of the ruling Communist Party elite. Thus, as with Xi Jinping’s now 10-year-long wildly popular campaign against corruption, there must be periodic efforts to contain it, and sacrificing high officials caught with their fingers in the till is often the price paid to stabilize the system.
Corruption is a threat, but it is far from the kind of threat presented by a rival ideology, such as that posed to liberal democracy by the subversive ideology of White Supremacy that has captured the Republican Party in the United States.
Looking at its global political and ideological influence, China has been able to win allies especially in the global South with its economic diplomacy like the Belt and Road Initiative. But even more than the largesse of its trade and aid, what draws governments to China is the model of supple but effective technocratic leadership that appears to promise fast growth in the early stage of development and satisfy the popular desire for higher living standards, even if the cost is rising inequality and the spread of corruption.
This appeal has risen as the perception has grown that the liberal capitalist democracy, with its uncontrolled political conflicts, market failures, and economic stagnation, no longer provides a meaningful alternative for the global South.
Reluctant Beijing, Aggressive Washington
Nevertheless, although it has trumpeted China’s contributions to the developing world, Beijing has been very cautious about presenting China’s path as the one countries of the global South should follow. Neither has it moved to replace the multilateral agencies set up by the West to serve as the canopy of global governance, nor sought to replace the dollar with the renminbi as the world’s reserve currency.
China has, in fact, made painstaking efforts not to be seen as aspiring to step into the place of the United States, not only to avoid provoking the latter but also to avoid being burdened with the tasks that go with global leadership — and, perhaps most critical, because Beijing believes that its development path is not for export. To put it in Deng Xiaoping’s classic phrase, it is “socialism with Chinese characteristics.”
While Chinese reluctance plays a big role, the biggest block to China’s displacing the U.S. and assuming the role of hegemon is Washington’s ability to call on that one resource where it still enjoys absolute superiority — military power — to redress the balance of power, to maintain its increasingly fragile hegemonic status.
We will not go into a detailed comparison between the U.S. and China on the military front. Let us just say that China is not engaged in an arms race with the U.S. and that its strategic posture is defensive. This does not mean that it does not engage in the tactical offensive in areas where it feels it faces an existential threat, like the South China Sea.
With the limited results of Trump and Navarro’s trade and technological squeeze on China, the Biden administration has moved the focus to the military front, its latest move being to bring in North Atlantic Treaty Organization (NATO) naval vessels from Europe to regularly patrol the South China Sea along with ships from Japan, South Korea, the Philippines, and Australia. Critics have rightfully decried the escalation of both aggressive rhetoric and actual deployments as enhancing the possibility of armed conflict, since with no rules of engagement, a ship collision could easily escalate into a higher form of conflict.
Bluntly reminding China to moderate its ambitions or face an existential threat is, however, not the only objective of the Biden administration’s increasingly militarized China policy. Probably more important is the symbolic impact of a show of force — that is, its impact on China’s internal politics.
It is likely that this was the thrust of Nancy Pelosi’s visit to Taiwan, which took place a few days after a U.S. destroyer passed through the Taiwan Straits. It was the deployment of a highly symbolic event implicitly backed by military power to provoke a political crisis in the China — in this case, the destabilization of the Xi’s leading role — by showing that the U.S. could at any time tear up its One-China policy and brazenly support Taiwan without Beijing being able to do anything about it owing to its fear of U.S. power.
The timing could not have been more critical, coming two and a half months before the Party Congress in mid-October, where Xi Jinping was expected to seek consensus for his initiative to abolish the informal 10-year term limit on a president’s tenure. There are said to be reports of significant dissatisfaction with Xi’s relatively mild and largely symbolic response to the Biden-Pelosi provocation in certain quarters of the the party, the military, and the public.
Chillingly, the Pelosi visit follows one of the scenarios laid out for Washington’s response to China by the dean of U.S. security studies, Graham Allison, in his book The Thucydides Trap, which is to accompany building up its military capabilities with aggressively exploiting China’s political vulnerabilities in Taiwan, Hong Kong, Xinjiang, and Tibet to erode the CCP’s legitimacy.
The Pros and Cons of Stalemate
But to come back to our main concern, with an economically strong China very hesitant to assert global leadership and an economically and politically weakened United States seeking desperately to shore up its position by throwing around its absolute military superiority, can we really speak about a hegemonic transition?
Should we not be talking instead about a hegemonic stalemate or a hegemonic vacuum?
Perhaps, for comparison, we should be looking not so much at a hegemonic transition but at the emergence of a hegemonic vacuum akin to but not exactly the same as that which followed the First World War in the 20th Century. Then, the weakened Western European states no longer had the capacity to restore their pre-war global hegemony — while the U.S. failed to follow through on Woodrow Wilson’s push for Washington to assert hegemonic political and ideological leadership.
Within such a vacuum or stalemate, the U.S.-China relationship would continue to be critical. Neither actor is able to decisively manage trends — such as extreme weather events, growing protectionism, the decay of the multilateral system that the United States put in place during its apogee, the resurgence of progressive movements in Latin America, the rise of authoritarian states and the likely emergence of an alliance among them to displace a faltering liberal international order, and increasingly uncontrolled tensions between radical Islamist regimes in the Middle East and Israel and conservative Arab regimes.
Both conservative and liberal policy makers paint this scenario to underline why the world needs a hegemon, with the former advocating a unilateral Goliath who does not hesitate to use threat and force to enforce order and the latter preferring a liberal Goliath who, to slightly revise Teddy Roosevelt’s famous saying, speaks sweetly but carries a big stick.
There are, however, those of us who view the current crisis of U.S. hegemony as offering not so much anarchy but opportunity.
While there are risks involved, a hegemonic stalemate or vacuum opens up the path to a world where power could be more decentralized, where there could be greater freedom of political and economic maneuvering for smaller, traditionally less privileged actors from the global South, and where a truly multilateral order could be constructed through cooperation rather than imposed through either unilateral or liberal hegemony.
Yes, crisis may lead to an even deeper crisis — but it may also lead to opportunity.
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