Whose world is it anyway?

Every now and again, people think that they detect shifts in the world's centre of gravity and make bold predictions of change that they eventually wish they hadn’t. Bearing this in mind, how should we think about the global axis that exists today between the US and China (along with Asia more broadly)?

People get things wrong. As dawn broke on the 20th century, Germany was meant to be seeking “a place in the sun.” In 1941 the US publisher Henry Luce proclaimed the American century had arrived. By the 1980s, US imperial over-stretch was diagnosed in Paul Kennedy’s book The Rise and Fall of the Great Powers, and Japan, where the Emperor’s gardens in Tokyo were valued more highly than all the real estate in California, was going to buy up America and claim global leadership.

When the USSR and communist regimes in Eastern Europe had collapsed and Japan’s bubble burst, a new model emerged. In 1992 Francis Fukuyama famously wrote The End of History, but three years earlier had already claimed, as deputy director of the US State Department's policy planning staff, that there had been an “exhaustion of viable systematic alternatives to Western liberalism.” One almighty financial crisis later, this view doesn’t hold up so well.

For others, though, it was Japan's neighbours in East Asia, including China, who were poised to pick up the baton. At a meeting between Deng Xiaoping and then Indian Prime Minister Rajiv Ghandi in 1988, Deng is reported to have said the next century would be the century of Asia and the Pacific.

Deng wasn’t the first to think that Asia, with China at its heart, would evolve this way. Its geopolitical significance had been articulated back in 1944, as the tide in the Pacific War turned in favour of the United States. In The Geography of Peace Nicholas John Spykman, a geographer and strategist, emphasised the strategic and maritime significance to the US of what he called the “rimland,” or the countries and islands on the rim of the continental powers of the US, Europe, and the then-USSR. The geography of the rim ran from Southern Europe and the Maghreb, east through the Persian Gulf, into the Indian Ocean, across to the South China Sea and up to Japan and the north-west of China. Spykman said that whoever controlled this rimland would rule Eurasia and the destiny of the world—a judgement embedded in US military, foreign and international economic policies to this day.

President Obama’s support for the Trans Pacific Partnership trade deal, the fate of which is now dependent on the US election, and the military’s view about future strategic challenges in the Pacific region and the littorals of the Indian Ocean are testament to Spykman’s judgement. It is also increasingly part of a more assertive China’s Weltanschauung, as demonstrated economically via the One Belt One Road strategy, and militarily and politically through China’s naval military build-up and its assertion of maritime rights in the South and East China Seas.

Now that the economic, political and military rivalries between the two regions are undoubtedly real, there are those who subscribe, especially in the wake of the Western financial crisis of 2007-09, to the thesis of a book published by Singaporean Professor Kishore Mahbubani in 2008, The New Asian Hemisphere: the irresistible shift in global power to the East. Mahbubani argued that Sino-centric Asia was blessed with a superior economic model to the broken and debt-ridden free-market, liberal-capitalist variety. There might no longer be such strong ideological differences between the West and the Orient when it comes to economics. Nevertheless there were, and remain, strong differences in their economic and social models, and approaches to foreign trade and investment centered around the role of the state and state institutions. Put simply, Asia was better suited to pursuing economic and social goals in the modern era.

And to top it all off, Martin Jacques wrote the voluminous When China Rules The World in 2009, in which he brought the sense of a Chinese civilisation with strong elements of continuity to life, in comparison to the achievements of relatively young nation states. Note that the title didn't say why it might rule the world or what the challenges might be, but simply “when,” as if it were pre-ordained.

But take a step back, and the idea of extrapolating China’s and Asia’s future success from their situation in 2008-09 now looks like hubris. In 2011, China’s economic growth peaked, and it has been heading downhill ever since. In fact, this slowdown looks increasingly structural: misallocation of resources is rife, a debt burden is rising that is unparalleled for a country with China’s per capita income, and it is unique among emerging countries in having to confront the consequences of a rapidly ageing population this early. President Xi Jinping has amassed more power than any leader since Mao, put the Communist Party at the centre of decision-making and usurping the function of government ministries, and presided over the development of what some analysts describe as a “controlocracy.” No one pretends China won’t continue to be hugely important, dominating Asia, but its pretensions to global leadership, let alone ruling the world, now ring rather hollow.

We have been warned before about these extrapolations that go awry.

In 1994 the renowned economist Paul Krugman wrote in the magazine Foreign Affairs about the “Myth of Asia’s Miracle.” He asserted there was nothing special about Asia’s economic advance in the 1980s and 1990s that couldn’t be explained by the mechanical relationship between inputs and output. It was, in his view, more about perspiration than inspiration. Though he was vilified at the time across the region, the Asian crisis in 1997-98 didn’t do his credibility any harm.

In 2013 I wrote an essay, later published at length by the Centre for European Reform, called “Asia’s Fading Miracle.” I made arguments that the miracle was catching up with other developed nations, and arguments about commodities and globalisation. We had now arrived at the end of extrapolation, and China itself faced a rising threat of financial instability over the medium-term and of slipping into the “middle income trap.”

This week Tyler Cowen, Professor at George Mason University, wrote an opinion piece in which he dismisses the idea there is any such thing as an economic miracle. He asserts that most of the world’s wealthiest and best governed countries owe their status to slow, steady growth and good governance, or put another way, robust inclusive institutions. “Miracle growth” is mostly about catch-up that utilises borrowed and adapted technologies.

A look around the contemporary world certainly supports this view. The Asian growth model suddenly looks rather lacklustre. Growth there is faster than it is in the West, as it should be, but a pale shadow of the go-go years in the 2000s. Investment and exports are under a cloud, consumption is restrained, social security systems are immature, and political and corruption problems are common.

Few people enthuse about the US right now. No one can really understand how Donald Trump came to be a candidate for the highest office on the planet, productivity growth and business start-ups are weak, and there is a social and middle class angst that hasn't been there in our lifetimes. But, as I suggested at the outset of this piece, history has before made fools of those who thought they could see clearly shifts in global power. There are trenchant questions to be asked about the balance between substance and hype in China ruling the world, the BRICS in the world economy, and the Asian Century. One contrarian worth noting is the US political scientist and Harvard professor, Joseph Nye, who wrote in his 2015 book Is the American Century Over? that the US role in the global system rested on the exercise of economic, military and soft power, as well as its unique geography (which had been admired by Napoleon as the source of power).

America’s economic power will surely diminish relatively as China’s GDP finally exceeds it—though in per capita terms, China will remain far behind for a very long time, and America’s innovative capacity still remains a lot stronger. Its military power is unparalleled and even though China will catch up somewhat, the gap will remain large and China must avoid financial and economic unrest. US soft power and influence, though, will keep the US prominent if not dominant for as far out as we care to think, unless, that is, the November election sees Trump triumph. As Nye says, the American Century should last for some time to come, even though it’ll look different from what Henry Luce had originally imagined.