A new sandpit for long side discussions, conspiracy theories, idees fixes and so on.
To be clear, the sandpit is for regular commenters to pursue points that distract from regular discussion, including conspiracy-theoretic takes on the issues at hand. It’s not meant as a forum for visiting conspiracy theorists, or trolls posing as such.
John Quiggin 
The difficult relationship between China and ‘the West’ is the subject of many publications and they span a wide range of topics. There is some indication that both China and the USA wish to be the ‘world leader’ (competition of systems and all that). This line of thinking reminds me of Kings, Kaisers, Emperors competing for ‘greatness’; their actions typically brought misery, death and destruction to almost everybody else.
I’d like to try out an idea, which may be no more than an idle thought bubble, in an attempt to find an alternative way out . But here we go. Let me know why it is a useless idea.
Empirical conditions now: The economies of ‘the West’ and China are enmeshed, primarily via multinational corporations (including supply chains). Both, ‘the West’ and China have used economic power for their geo-political aims, although not necessarily at the same time and at the same locations. Benefits from the economic entanglement are not evenly distributed between ‘the West’ and China nor within the societies in either (wealth concentration, financial system instability), but both share the same natural world and therefore face the same environmental degradation problem (eg ghg emissions and anthropogenic average global warming). Both, the USA and China say they don’t want a military conflict.
Superficial as my knowledge is in this area, I believe both sides have a long cultural history and are therefore not prepared to allow the other to dominate. (I assume it is more than ideology in the narrow sense but it has something to do with common knowledge as to what holds each society together (shared philosophical ideas. For example it struck me that the notion of unity and harmony pop up in the Chinese narratives but is absent in ‘the West’. The maximum unity and harmony is achieved in a society when everybody thinks the same way and their behaviour reflects this. The contrast to the emphasis on the individual and the notion of competition among the members of a society, modified at times by the notion of civil society, is obvious).
Suppose one starts with the assumption that, with the exception of some very learned people, there is an irreconcilable difference in the philosophical base of ‘the West’ and China in the short to medium term (say 50 or 100 years) – long enough to justify thinking about finding a mechanism such that some form of economic relationship is possible, which is beneficial to both sides, and long enough for people to gradually get to know each other and see what happens. That is, there are irreconcilable differences on an everyday business level, which only experts can deal with.
So, my idea is to have all trade between China and any western country or block such as the EU carried out not by ‘private enterprise’ (multinational corporations) but by government owned and controlled institutions, which amounts to trade between governments directly. Yes, this means the Australian Government or the EU Commission or the USA government would be dealing directly with the CCP rather than indirectly via CCP explicitly or implicitly controlled Chinese enterprises. Instead of Andrew Forest popping up at an event involving the Australian Minister of Foreign Affairs or Trade and a Chinese official, a Chinese official would contact their counterpart official in Australia ordering iron ore of grade XYZ and quantity huge. This official would know the current prices at which A. Forest sells to other companies in the rest of the world and they would check with Forest at what price he can deliver and when. There would be no Chinese companies operating in Australia and no Australian companies having subsidiaries in China. The Australian institution would have China experts as well as economists and lawyer on staff.
Why could this not work?
Ernestine Gross,
Very interesting post. Let me enter the discussion via strategics and then get to economics. I won’t reach cut and dried answers. The topic is too difficult and the systems too complex. Nevertheless, we might discern some possibilities of developing basic heuristics (rules of thumb) to guide our actions. At this point, I will quote theorists rather than try to take credit for their ideas.
“The Parable of the Tribes” – By Andrew Schmookler
The new human freedom (from basic want and made possible by technical and civilizational development) made striving for expansion and power possible. Such freedom, when multiplied, creates anarchy. The anarchy among civilized societies meant that the play of power in the system was uncontrollable. In an anarchic situation like that, no one can choose that the struggle for power shall cease. But there is one more element in the picture: no one is free to choose peace, but anyone can impose upon all the necessity for power. This is the lesson of the parable of the tribes.
Imagine a group of tribes living within reach of one another. If all choose the way of peace, then all may live in peace. But what if all but one choose peace, and that one is ambitious for expansion and conquest? What can happen to the others when confronted by an ambitious and potent neighbor? Perhaps one tribe is attacked and defeated, its people destroyed and its lands seized for the use of the victors. Another is defeated, but this one is not exterminated; rather, it is subjugated and transformed to serve the conqueror. A third seeking to avoid such disaster flees from the area into some inaccessible (and undesirable) place, and its former homeland becomes part of the growing empire of the power-seeking tribe. Let us suppose that others observing these developments decide to defend themselves in order to preserve themselves and their autonomy. But the irony is that successful defense against a power-maximizing aggressor requires a society to become more like the society that threatens it. Power can be stopped only by power, and if the threatening society has discovered ways to magnify its power through innovations in organization or technology (or whatever), the defensive society will have to transform itself into something more like its foe in order to resist the external force.
I have just outlined four possible outcomes for the threatened tribes: destruction, absorption and transformation, withdrawal, and imitation. In every one of these outcomes the ways of power are spread throughout the system. This is the parable of the tribes.” – Schmookler.
I will use up my one permitted link on the full article:
https://www.context.org/iclib/ic07/schmoklr/
“Offensive Realism” – John John Mearsheimer.
I will quote excerpts from the Wikipedia article on Offensive Realism.
“In international relations, offensive realism is a structural theory belonging to the neorealist school of thought put forward by political scholar John Mearsheimer[1] in response to defensive realism. Offensive realism holds that the anarchic nature of the international system is responsible for the promotion of aggressive state behavior in international politics. It fundamentally differs from defensive realism by depicting great powers as power-maximizing revisionists privileging buck-passing and self-promotion over balancing strategies in their consistent aim to dominate the international system. The theory brings important alternative contributions for the study and understanding of international relations but remains nonetheless the subject of criticism.
…
The theory is grounded on five central assumptions similar to the ones that lie at the core of Kenneth Waltz’s defensive neorealism. These are:
Great powers are the main actors in world politics and the international system is anarchical
All states possess some offensive military capability
States can never be certain of the intentions of other states
States have survival as their primary goal
States are rational actors, capable of coming up with sound strategies that maximize their prospects for survival
Like defensive neorealism, offensive realism posits an anarchic international system in which rational great powers uncertain of other states’ intentions and capable of military offensive strive to survive. Although initially developed from similar propositions to those of defensive neorealism, Mearsheimer’s offensive neorealism advances drastically different predictions regarding great power behaviour in international politics.
Mainly, it diverges from defensive neorealism in regards to the accumulation of power a state needs to possess to ensure its security and the issuing of strategy states pursue to meet this satisfactory level of security. Ultimately, Mearsheimer’s offensive neorealism draws a much more pessimistic picture of international politics characterised by dangerous inter-state security competition likely leading to conflict and war.” – Wikipedia.
The Thucydides Trap – Graham T. Allison
Again Wikipedia:
“The Thucydides Trap, also referred to as Thucydides’ Trap, is a term popularized by American political scientist Graham T. Allison to describe an apparent tendency towards war when an emerging power threatens to displace an existing great power as a regional or international hegemon.[1] It was coined and is primarily used to describe a potential conflict between the United States and the People’s Republic of China.[2]
The term is based on a quote by ancient Athenian historian and military general Thucydides, which posited that the Peloponnesian War between Athens and Sparta had been inevitable because of Spartan fears of the growth of Athenian power.
The term describes the theory that when a great power’s position as hegemon is threatened by an emerging power, there is a significant likelihood of war between the two powers.[1][2] Or in Graham Allison’s words:
“Thucydides’s Trap refers to the natural, inevitable discombobulation that occurs when a rising power threatens to displace a ruling power…[and] when a rising power threatens to displace a ruling power, the resulting structural stress makes a violent clash the rule, not the exception.
…
To advance his thesis, Allison led a case study by the Harvard University Belfer Center for Science and International Affairs which found that among 16 historical instances of an emerging power rivaling a ruling power, 12 ended in war.” – Wikipedia.
A Quick Commentary.
My quick commentary at this point. (I expect and hope that this Sand pit discussion will continue.) We can see common threads running through these theories. We can see these threads naming and/or implying strong tendencies in the system, namely:
(a) mutually assured suspicion;
(b) mutually assured deterrence as defense and offense.
(b) mutually assured escalation of economic and military competition.
(d) mutually assured destruction by conventional war, nuclear war , biological war and/or natural system disruption.
We can add option (d) in full by adding to the mix our knowledge of the limits to growth, and the likely collapse after growth overshoots the limits, be that collapse caused by internecine competition, climate change or other biosphere disruptions.
Option (d) also offers us our only ray of hope. Only when superpowers decide that “Mother Nature” or natural forces scorned, rather than respected, is a more dangerous enemy (being made into an “enemy” by ignoring “her”) than their prime peer competitor, will it become possible (maybe) to cooperate against the “greater enemy” which is not really Mother Nature but our ignoring of the crucial importance, support and power of natural forces in the biosphere.
This is enough for one post. I will get to economics soon. Let the discussion begin.
Ernestine, I suggest that you can’t reach the point you want to get to if you’re starting from where we are now.
Ikonoclast,
The speed with which you replied suggests to me you knew in advance where to look for.
My, lets call it, thought bubble (at least at this stage) doesn’t aim to solve the world’s problems (at any stage, assuming there will be more than 1). So, the issues you introduced via political theorists is strictly outside my aim (and so is human rights). However, I found your post interesting.
“The Parable of the Tribes” – By Andrew Schmookler. Given the description, the idea is akin to what is known in economics as Gresham’s Law: Bad money drives out good money. In HR related literature the same idea comes up in the context of workplace bullying or mobbing. I recall having read even after a bully has been removed from a workplace, it takes some time before the work culture returns to something close to what it was before – apparently because the bully had changed the behaviour of others.
“Offensive Realism” – John John Mearsheimer. This theory seems to underlie some contemporary political analysts’ writings on China as published in the reputable part of the press.
“The Thucydides Trap” – Graham T. Allison. This theory seems to underlie some contemporary political analysts’ writings on US vs China as published in the reputable part of the press. As for Allison’s finding that among 16 historical instances of an emerging power rivaling a ruling power, 12 ended in war, I hope not too much weight is given to history because nothing will change for the better if decisions are based on the implicit assumption that history repeats itself. (It may well be we live in a deterministic system, however time series ratios would not constitute proof or even credible evidence even if all other conditions at each period would be sufficiently comparable.
J-D, ha, ha. Good one in a sense, but I have two questions:
1. Do you mean my description of where we are now or do you mean where the aggregation of all descriptions of where we are now?
2. What is the point to which you think I want to get to?
Ernestine,
I will try to get into the economics in this post and back to the geostrategic issues in another post. I think the issues are intertwined in any case. I do take your point that “nothing will change for the better if decisions are based on the implicit assumption that history repeats itself”. Your deterministic system or otherwise hypothesis re lack of positive proof from the time series is also well founded. I will get back to those issues.
Australia used to have the Australian Wool Corporation. The history goes back to the Australian Wool Board. That was back when Australia “rode on the sheep’s back” economically speaking. Now, we ride on the mining truck’s back. There is a history to the Wool Reserve Price scheme. This statutory scheme, the Australian Wool Reserve Price Scheme (RPS) was a price floor scheme for wool that operated in Australia between 1970 and 2001. Wikipedia tells me “A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product, good, commodity, or service. A price floor must be higher than the equilibrium price in order to be effective. The equilibrium price, commonly called the “market price”, is the price where economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change, often described as the point at which quantity demanded and quantity supplied are equal (in a perfectly competitive market). Governments use price floors to keep certain prices from going too low.”
The collapse of the RPS is instructive. See,
https://en.wikipedia.org/wiki/Australian_Wool_Reserve_Price_Scheme
Are you suggesting a floor price scheme? It seems to me that floor price schemes are vulnerable to domestic producer-political pressures which cause such schemes to price themselves out of the international market. This is so when alternative supplies or alternative products (synthetics in the case of wool) appear to contest the market.
At the same time, you are right that other nations cannot compete if Chinese businesses use state subsidies and other pressures for production and procurement (procurement of iron ore in Australia’s case). We must remember that the US and EU have historically used lots of agricultural subsidies since WW2 or a little later. I believe they still do to a considerable extent.
I write the above as a person who does not “believe” in markets and prices. I am still struggling with the paradox that is economics. Is it a prescriptive or a descriptive discipline? Are prices really set by supply and demand (a descriptive theory) or are they set by a whole host of political, institutional and power factors which would make it a prescriptive discipline? The answer probably is that economics is wholly unweildy hybrid discipline in its current form. And perhaps this is the only form possible. Note,
when I say I do not “believe” in markets and prices I mean I know they exist but I don’t believe they exist in the form conventional economics ascribes to them.
Then there is the complication of WTO. How would the WTO, corporations and governments view your scheme? I have more questions than answers I must admit. I actually have no answers on this.
If I were to have my “druthers” (my “I’d rathers”), I would rather not see any basically democratic nation or block trade with any outright authoritarian nation or dictatorship. China fits that bill. Russia also. But ceasing trade with them would cause enormous disruption, self-inflicted economic damage and probably precipitate WW3. Yet, the conundrum remains. Australian iron ore right now is being turned into the Chinese navy, Chinese tanks and Chinese high-speed rail (for moving people, goods and troops). We are feeding the dragon that is likely coming to eat us.
The correct strategy, in my opinion, is to slowly but surely disengage from China and Russia while they remain authoritarian, expansionist and revisionist. We have already seen the great need for sovereign manufacturing capacity from the COVID-19 pandemic for all things medical and pharmaceutical). This need for sovereign manufacturing capacity extends into all areas. Large states and blocs should seek to become autarkically independent, albeit with some necessary trading between democratic blocs only. Australia as a middle state or middle power should also seek autarky with more manufacturing but there will be really big stuff we can’t do like super heavy machinery (from Germany say) and advanced computers from the USA (say).
I don’t hold any hopes that trade with authoritarian states leads to peace. it leads to more and more aggression as they build up. That lesson of history I think we cannot ignore.
I don’t think I meant either of those.
What I meant by that was your idea of
Ikon and J-D, thanks for your replies. I really appreciate it.
I agree economic dealings with dictatorships is undesirable (should be avoided) and I agree Australian exporters diversifying away from China is desirable. In this context, the increased trading relationships with the UK might assist quite a bit.
When China was admitted to the WTO, the apparent belief was that China would ‘open up’, companies were keen to sell to China (‘large market’) and then to invest directly (ie build production plants) and outsource production. I recall having read something to the effect that President Nixon was keen to establish better relations with China for the strategic reason of preventing an alliance between the USSR and China (I have no independent knowledge; I take it as a given). Not until relatively recently did China impose severe anti-trade measures against Australia in particular; apparently because of political reasons (they didn’t want to hear what Australia said). The last two sentences acknowledge Ikon’s point about economics not being independent of politics – on both sides.
Is it fair to say at the time China was admitted to the WTO there was the hope or belief in ‘the West’, China would not only open up to international economic relations but also to democratise? Successful democratisation would mean the West’s institutional system would prevail – worldwide. It did not happen. On the contrary, a return to more centralisation and more power to the CCP is becoming apparent (as far as I can tell). There are now lists of concerns regarding China ‘infiltrating’ (take this as a shorthand term for list of concerns) countries in ‘the West’. China on the other hand is using trade as a pressure tool and putting further restrictions on foreign and local headquartered companies. There is the human rights issue, which goes beyond the competition for institutional systems dominance.
While I am aware of the wheatboard, I did not wish to suggest to introduce the price floor regime that was associated with it. I thought of the wheatboard is an example of an alternative institution to corporations.
While economists and others talk about the benefits of international trade, the role of corporations in trade and investment, both direct and financial, is not highlighted. Goods arriving from ‘system A’ to ‘system B’ arrive without politics and vice versa. (This corresponds to international trade models). By contrast, direct foreign investment comes along with people and system specific regulatory measures. Moreover, direct foreign investment and international outsourcing has an impact on local economic conditions, including income and wealth concentration as well as job security and employment in general. To believe opening up international business in ‘the West’ to a country of many millions of workers would not lower the wages in ‘the West’ is naive, IMHO.
So, my ‘thought bubble’ is an attempt to search for a mechanism to disentangle trade from international business to allow benefits from trade (for both sides) while engendering a bit of security regarding system stability on both sides. (Instead of ‘mutually assured destruction’ have something toward ‘mutually assured system stability’).
My view about international trade tensions is partly formed from modern history and partly from economics. I take Ernestine’s point that we must not be prisoners of the past. History may not necessarily repeat itself but it does highlight human behavior. The closest historical match to the current state of USA – CHINA trade tensions seems to be the similar situation in 1913 when Great Britain and Germany faced off over international trade clashes. Like today you had the undisputed economic and military superpower Great Britain feeling that the “new boy” Germany was after their trade supremacy. Both adversaries had powerful navies. Both of them had a manufacturing sector churning out heavy weapons of war. And both were expanding their export base. National income per head doubled in Germany during the reign of Kaiser Wilhelm. By 1913 Germany was producing twice as much steel as Britain. Industrial output accounted for almost two thirds of Germany’s GDP by 1913. On average German factories were bigger and more modernized than British factories.
The political systems could not have been more polarized. The Westminster system of democracy was abhorrent to the German political class. The Kaiser was Emperor for life and his supporters were Barons and owners of large Junker estates and cartels. Britain did have its own empire in India but had only a motherhood role in Canada, Australia, South Africa and New Zealand.
Okay there were major differences as well as some similarities. No historical precedent is ever a perfect match. For example, the clash of wills between the USA and China has a racial element. the USA was one of the world powers that imposed the Opium Wars trade powers on China (even though they pretended to be neutral). This contrasts with Great Britain and Germany that came from common racial ancestors. After all the King of the United Kingdom in 1913 was directly descended from a German royal house.
So yes the mistakes of Great Britain and Germany may not be repeated in our times. But the human nature lesson from World War One is stark. Once two major powers start down the road to war they rarely turn back.
The economics behind international trade is much more compelling. Earnestine is close to the reality of trade deals done on a large scale. When any political leader visits another country they are expected to talk up trade deals. This may not apply to all trade deals but it does occur on a regular basis. International economists use Offer Curve Analysis to explain trade deals. English economists Edgeworth and Marshall did most of the work on this theory. In more modern times Welfare Economists gave a dire warning about International Trade. They claim that motives are directed by “greedy grasping individualists”.
Now the truth may lie elsewhere. But Ernestine may wish to consider these complications to advance her “thought bubble”.
Gregory, thank you for your considered post.
As you say, history does not repeat itself exactly. IMO, you neatly separated out an important difference (racial) between Britain and Germany in 1913 and the US and China now. I am not well versed in history. So I put it as a question: While formally the institutional environment (Westminster vs Kaiser) was categorically different, isn’t it the case that other aspects of social life, including business and how so-called ‘average citizens’ lived, were not categorically different? I am getting at there having been a greater overlap of the philosophical base of Britain and Germany (not only Christmas trees) than between the USA and China at present. Moreover, neither Britain nor Germany looked after the welfare of their population well (Adam Smith was apparently not taken seriously by the political class of whichever colour.)
I am focusing on the role of multinational corporations in international trade because I did my PhD (late 1980s) in this area (extension of the Arrow-Debreu model to the case of a partially segmented economy with multinational producers). In contrast to ‘mainstream’ international trade theory (which represents international trade like the exchange of two people across a fence or offer curves), in this model international trade takes place by multinational producers, which have a have a technological advantage over ‘local producers’ in the sense that they know how to transport stuff across localities (derived from the concept of a commodity in Arrow-Debreu. Like all producers in this framework, they maximise profits. And, to make it really difficult to exclude ‘non-competitive’ (bad) behaviour, in this model all producers, including multinationals, take prices (local) as given (price takers). So, they behave ‘nicely’ in this model. Nevertheless, one of the results is that wealth transfers among the segments of shareholders (owners) cannot be ruled out. I called this ‘unintentional exploitation’. Of course in practice, this form of exploitation can be intentional. For example, I could imagine that ‘a country’ could use direct foreign investment – via formally private corporations – to acquire enough productive capacity in another country to ensure desired supplies, which according to the rules of the game in the other country cannot be stopped from being exported and then ban the import from the remaining producers (causing economic damage). This is not a conspiracy theory but merely a logical possibility.
Very interesting discussion. I agree that it would be great to avoid a war. What I’d really like to know is, has anyone here in the US thought about just asking the Chinese not to export the ingredients in fentanyl? Wouldn’t it be nice if that worked.
I also agree that in many ways, trade with China hasn’t worked out so well. Hardly anyone here even bothers to talk about engagement anymore. What does this say about us? I don’t know, but it probably isn’t good. And of course, we are pretty deep in debt. Hong Kong people are being swallowed up by the boa, 20+ years early. Other than that I admire the courage of their young people, I don’t really know what to think or do about it. What do those people want me to do? Should we be boycotting? Plus, in theory, couldn’t internal topics within China change this discussion? Also, I get the feeling that these thoughts might offend a lot of Chinese people. I am not against them though. I do think they should change their government – for their own sake. Although, democratic life is inarguably kind of a mess, so there’s that whole segue. A long way of saying, I may need several decades to come up with a reaction…
Ernestine that is interesting work you did for your PhD. I have always been fascinated with the trade question. Its hard enough to work out trade justice issues inside a country but international trade takes it to a whole new level. My one relevant thought came from reading from Thomas Piketty’s book CAPITAL and IDEOLOGY (pages 1024 and 1025). He wrote:
“Of course, the most conspicuous contradiction between the way globalization is organized today and ideas of international justice has to do with the free circulation of persons. Under the dominant paradigm, civilized states are required to allow free circulation of goods, services, and capital but are free to block the free movement of people as they see fit. Hence this becomes in a sense the only issue of legitimate political confrontation.”.
Piketty is not having a go at free trade per se but at how it is implemented by governments. If both the USA and China can, in effect, rewrite the rules when conditions don’t favor their producers, then so called “Comprehensive Economic and Trade Agreements” become just pieces of paper and are not binding international contracts.
The free circulation of persons is an interesting issue. I would state this flatly. To permit the free circulation of persons is impossible. The reasons are:
(1 Disease control and quarantine. This is particularly applicable at the moment and in the future with COVID-19. This disease will worsen globally for at least another five years and maybe more. More highly dangerous zoonotic dseases will follow. The experts are all predicting this for the future.
(2) Populous nations could swamp un-populous nations as a strategy for takeover. With free movement, China, India or Indonesia, for example, individually could send more people than Australia’s current population. In China’s case, these could all be secretly enrolled and loyal CCP members. This diaspora could be relied on to vote for an entirely China-friendly government in Australia. We become a satrapy or an exclave province of China. It would also destroy Australis’s fragile environment and reduce its carrying capacity.
(3) No great power and probably no other powers would ever accept it for reasons drawn from the default offensive realism of all powers. I posted early in the thread about offensive realism.
Until recently and maybe even currently , we had (and maybe have the free circulation (pretty much) of the elites. If anything, circulation should be democratized at the realist level. That is, if the poor, diseased cannot in practice circulate much for the practical reasons mentioned above, then free (or too free) circulation should be denied to all.
Realistically, great powers will never trade freely except when they consider the free trade advantages them or when they miscalculate. The USA (Nixon and Kissinger) miscalculated with respect to China. They and many of their successors thought capitalism and belonging to the world system would foster democracy in China. They were wrong. (And they were also greedy.) Thinkers like Noam Chomsky and John Ralston Saul both essentially predicted that they would be wrong by pointing out that neither unfettered capitalism nor state capitalism are inherently democratic. Indeed they are inherently autocratic and oligarchic. China has become even more of a party and and supreme-leader dictatorship under capitalism with “Chinese characteristics”. J.R.S also noted that trade does not prevent wars. There are many instances of trading parties going to war against each other.
Going back to the point, “great powers will never trade freely except when they consider the free trade advantages them or when they miscalculate”, Great powers will always manipulate and game the world system in an attempt to get trade (or other activities) to advantage them. They will attempt to set their rules, not fair rules. The world is “anarchic” in the sense Offensive Realism theory uses the term. There is no global or cosmic power above the great powers (other than the laws of nature) and they will vie with each other to rig and tilt the system their way.
China (meaning the CCP) claims to be benign and that the USA and their allies are malign. From China’s historical and contemporary perspective this is substantially correct, from their point of view. China claims to be benign, wholly benign according to CCP and Supreme Leader stattements. This of course is a nonsense. Tibet, Xinjiang province, Hong Kong, the Taiwan issue, the Line of Actual Control with India, the East China Sea and South China sea claims and militarizing the South China and its trade bullying and debt diplomacy Sea show that China is expansionist and revisionist. It is not to be trusted just as we (if we are honest with ourselves) are not to be trusted.
For sure, attempt to find a relatively fair global trade system for most but I don’t think we can expect is to solve the “Tragedy of great power politics.” Actually the West is in great trouble and may soon be totally eclipsed. Only a coalition of all democratic nations can possibly stand up o China, Russia and their allies. Otherwise, we are done for, but that as I say is another post
erm,
possibly relevant ?
but not arcane.
China whinges about the time of being picked on by money hungry predators when the government of the time was a self inflicted corrupt mess.
any well run country could easily have ejected or controlled the commercial intruders in the self described “humiliation times”.
America goes on and on about how special the “States Rights” civil war is .
as if no one else ever had to go through anything so terrible.
the present rulers of China are the “Cultural Revolution” generation who smashed the reverence for the old that was central to Chinese history.
they are the ones in charge now. and i wonder if they are looking over their shoulders.
in any case the top lot are looking very “Yellow Emperor-ish”.
just thought.
this is the sandpit.
Gregory, thank you for the quote from Piketty’s book Thomas Piketty’s CAPITAL and IDEOLOGY. I have read his Capital in the 21 Century but not Capital and Ideology. The latter is now on my reading list.
The point in the said quote is relevant regarding Brexit. A crucial element in the EU’s agreement is the free movement of goods, services, capital and labour within the EU. The Brexit supporters did not agree with the free movement of labour. As can be deduced from the description of the history of the EU, ‘globalisation’ – as an objective was something that hadn’t been thought through very well.
In terms of my ‘though bubble’, I’d like to distinguish between movement of people (visitors) and movement of people for employment (‘labour’).
As to the second point, namely so-called free trade agreements and in whose favour they are written, nothing seems to have changed for a very long time. (To the best of my knowledge, this also applies for monetary systems.)
As an aside, a word on the teaching of economics. I wish the theoretical material would be taught in a historical context. That is, every bit should be dated. In the applied area of Finance, I noticed the publication date of textbooks is roughly speaking inversely related to the age of the content. Combine this with a university – I should say departmental – management system that promotes (penalties or rewards) new textbooks (identified by date of publication) and one get close to a perfect mechanism for moving backward to the future.
“No great power and probably no other powers would ever accept it for reasons drawn from the default offensive realism of all powers. I posted early in the thread about offensive realism.”
27 ‘small’ powers (28-1) have agreed to free labour movements among them in order to have a common policy regarding trade in goods and services and capital with the rest of the world. 52 ‘small’ powers have agreed to free labour movements among them in order to have a common foreign policy and be a “Great Power”.
Only the first example was achieved without a war (albeit 6 of the current members started the process after a war).
Ernestine,
You certainly refuted my explicit wording there. I will have to word things much more carefully. Let me try again:
To permit the entirely free circulation of persons all over the globe is very likely to prove unworkable and indeed practicably impossible. Where states federate or nation states form a union, it might be possible to permit free circulation of persons within bounds or limits of that jurisdiction. Even there, jurisdictions with any good sense (like Australia) restrict free internal circulation under conditions of dangerous pandemic, to name the current example. Jurisdictions without any good sense, in this matter at least (USA, EU, UK, India, Brazil) permitted an unwise amount of people circulation. We only have to look at how that turned out. The number of unnecessary deaths is already in the millions.
Under the current world system (various examples of mixed economy combined with various examples of democracy and authoritarianism)where people pay to circulate (pay for passports, buy tickets, pay exit-entry taxes or pay people smugglers) most are only free to circulate while they have adequate money to pay the price. Without an income above a certain level, many cannot afford to “circulate”. It comes back to the minimum wealth condition.
To have free circulation as an unconditional right, taking it as an unconditional good in all cases foreseeable and unforeseeable, is not going to be tenable. Just my opinion though and I am a bit of a misanthrope, I guess.
Ikonoclast, I wish I could write as quickly and as well as you. Thanks to your new wording, you brought the topic back to where I wanted to start but failed to articulate it.
You write: “Under the current world system (various examples of mixed economy combined with various examples of democracy and authoritarianism).” This is the crux of the matter of interest to me. What institutions are required to improve the coexistence of these alternative institutional environments in a ‘global economy’? I have acknowledged your and Gregory’s point about the interrelationship between economics and politics in the so-called real world (which at times looks rather unreal – think of the UK’s recently announced plan regarding the coronavirus pandemic, to give only one example). I have also said I don’t even dream of solving the world’s problems. The aim is much more modest. Except for an undergraduate subject on economic anthropology and one on alternative economic systems, which I took during my undergraduate degree, ‘mainstream economics’, with just about all its specialist sub-branches, is what one may label ‘European-centric’, reflecting the West’s history of philosophical thought (as well as lived history). My 1988 GE model of ‘partially segmented economies with multinational producers’ is a prime example (there is only one institutional environment: market prices). Presumably, the intellectual world was never neatly separated into ‘the West’ and ‘the East’ and ‘the South’ and ‘the North’ or some other geographic areas. However, this limited human interaction would not ensure convergence of philosophical ideas and therefore alternative economic systems may be taken as the norm at any time, even though each of the alternative economic systems may evolve over time, some of them seemingly converging a little only to diverge again. Moreover, the natural world is not uniform either and therefore it may be presumed the people living in different regions address the ‘economic’ problems, which arise in their natural environment, which feeds into the formation of cultural norms, customs and laws; the institutional environment. Note, I am using the term ‘economic’ in the general sense of people making a living, given their natural resources and technological know-how. The suggestion that the indigenous people of Australia or elsewhere did not have ‘an economy’ is one I do not accept.
Instead of arguing about what is ‘the best’ economic system and trying to convince the rest of the world of what ‘the best’ is by whatever means possible, one could also ask: What is the best economic institutional response, given the current (and foreseeable) alternative economic systems, such that one’s own preferred system is preserved and that of all others, too, if the people in the other systems want it preserved – or rather all of them evolving along their distinct paths. (I know there are many sub-questions – like where does one draw the line regarding the ‘other A’ harassing the ‘other B’, etc. But my simple mind demands to take only small bites.)
In this context my reference to the USA and China is no more than an example of obviously different institutional environments, which many people are aware of . Since this specific example involves many other countries with an institutional environment similar to that of the USA (some version of democracy), there are no specific theoretical issues arising. Hence I frame the ‘thought bubble’ in terms of ‘the West’ and its relationship with China. So, the specific question is, what can be done to allow mutually beneficial economic interaction between ‘the West’ and China without challenging the system stability of either, setting aside serious human rights issues.
Your post has been most helpful. Thank you.
Ernestine,
In answer to your final question, the answer may be “internationalism” rather than “globalization”. Of course, we need definitions.
(1) The kind of Internationalism I mean here is a political principle that advocates greater political cooperation among states and nations, which political cooperation precedes agreed forms of economic cooperation and trade. It would include a recognition that the world’s nations are an eclectic collection of systems and each has a sovereign right to determine its own internal political and economic system. They ought to be permitted to trade and cooperate, or not, as they wish without coercion.
(2) Globalization, again in my definition, comes with a presumption that economics, trade and commerce will homogenize the world into one system, called “free market capitalism” by its advocates. Globalization seems to be as much driven by oligarchic and corporate interests as it is driven by national interests or the mass interests of peoples in different jurisdictions.
I see the above as a kind of struggle between ordinary people on the one side and oligarchs and corporations on the other. Ordinary people we can take as the poor, the middle class and maybe the upper middle class; the 99% in other words. The oligarchs and controllers of corporations we can take as the 1%. As the Canadian philosopher John Ralston Saul pointed out, under democracy the people get to choose their leaders and through pressure on them may get some decisions which suit them, that is the 99%. If we weaken democracy or permit it to be bought, we hand control of our society over to the oligarchs and leaders of corporations. These people are un-elected (by popular ballot) and thus constitute an autocracy. As JRS asks, why would we weaken democracy, the only power the little people, the 99% have, and hand over the reins of power to the one percent? Yet, this is what happens under corporatization, neoliberalism and the weakening of the democratic state.
It is worth looking at the United States where corporate money has subverted the democratic system through donations, Super Pacs and so on. It is worth looking at what Super Pacs are and how they raise and spend stupendous amounts of money in the US system. In this context it is worth looking at the paper, “Testing Theories of American Politics:Elites, Interest Groups, and Average Citizens” – Martin Gilens and Benjamin I. Page. It basically shows that the elites get most of the policies they want and the average citizens get relatively few policies they want.
All these processes have long historical roots. It is worth looking at the Monthly Review paper entitled
“The Council on Foreign Relations, the Biden Team, and Key Policy Outcomes – Climate and China” by Laurence H. Shoup.
It details the hold the “Boston Brahmins” have on The Council on Foreign Relations and thus on US foreign policy under a Democrat administration plus also the hold they have on the Democrats overall. As Wikipedia puts it, “The Boston Brahmins or Boston elite are members of Boston’s traditional upper class. They are often associated with Harvard University; Anglicanism; upper-class clubs such as the Somerset in Boston, the Knickerbocker in New York City, the Metropolitan in Washington, D.C., and the Pacific-Union Club in San Francisco; and traditional Anglo-American customs and clothing. Descendants of the earliest English colonists are typically considered to be the most representative of the Boston Brahmins. They are considered White Anglo-Saxon Protestants.” Those Boston Brahmin families descended from early Bostonians and still rich and extant form extended wealthy families insinuated into many of the institutions of the USA and they (when in power) tend to enforce the interests of their “extended oligarchy” as their forebears did for hundreds of years. Their early fortunes were often made from the slave trade, the opium trade and smuggling as well as legal commerce and shipping.
Almost as a companion piece you could read “The New Cold War on China” by John Bellamy Foster, also in the Monthly Review. This passage illustrates the thrust of the article in Chinese (spin) terms;
“Yang responded by insisting that China firmly upheld “the United Nations-centered international system and the international order underpinned by international law, not what is advocated by a small number of countries [as] the so-called rules-based international order.” “The Chinese people,” he said, “are wholly rallying around the Communist Party of China. Our values are the same as the common values of humanity. Those are: peace, development, fairness, justice, freedom, and democracy.” He stressed the quite different conceptions of democracy represented by China and the United States. Contrasting Beijing’s foreign policy to that of Washington, both historically and in the present, he stated:
“We do not believe in invading through the use of force, or to topple other regimes through various means, or to massacre the people of other countries.… The United States has exercised long-arm jurisdiction and suppression and overstretched [its] national security through the use of force or financial hegemony, and this has created obstacles for normal trade activities, and the United States has also been persuading some countries to launch attacks on China.… With [respect to] Xinjiang, Tibet and Taiwan, they are [each] an inalienable part of China’s territory. China is firmly opposed to U.S. interference in China’s internal affairs. We have expressed our staunch opposition to such interference, and we will take firm actions in response.”
We can note the difference drawn between “the United Nations-centered international system and the international order underpinned by international law, (and) not what is advocated by a small number of countries (US in particular)[as] the so-called rules-based international order.”
Clearly, the US and China each advocate the system which they think will further their own interests best. China’s criticisms of the US are just in many ways but then China’s claims about its own virtues are not credible in the light of its actions in Tibet, Xinjiang, Hong Kong etc. etc.
Superpowers it seems will always attempt to twist the world order to suit themselves. I have more thoughts and quotes but am short of time at the moment.
Earnestine you make a good point about teaching economics in its historical context. I have studied and taught economics for fifty-one years and seen it change then reform back to the way it was before that change. John Quiggin’s book ZOMBIE ECONOMICS covered this very well. Personally I only fully understood economics when I did a course at university entitled Economic Thought from Marx to Keynes. But again that was all about European and American economic writers. I only really understood Chinese economic thought after I had read a book by Robert Lawrence Kuhn entitled THE MAN WHO CHANGED CHINA. The Life and Legacy of Jiang Zemin. To Western eyes the book makes some startling claims. But that’s the whole point. As Kuhn spells out at the beginning of his book
“Appreciating how Jiang thinks requires understanding Chinese history and culture, an awareness of the milieu in which he was born, grew up, worked, and lived.” (page3)
After reading that book I realized that the above quote relates to all Chinese policy makers. The current president came from the Communist elites. He was taught history from that perspective. So the Japanese occupation of China was stressed. As was the European interference during the Opium Wars. Imagine being taught that foreign powers invaded, oppressed and manipulated your ancestors. Having a lot of Irish ancestors gives me an insight into how this affects one’s personal prejudices. For example, one aspect of English history often overlooked is that in 1916, that is during WWI, England sent a brigade of troops (probably formed to fight the Germans in the trenches) over to Dublin to crush the Irish freedom fighters – called rebels by the British parliament. So I do understand the Chinese not trusting the motives of western powers trying to maintain any international Westernized status quo.
My main study of a non-western country’s economy was that of the Soviet Union. Mother Russia (as it was called for centuries) had been invaded by Napoleon’s France and Hitler’s Germany – two European powers. So the rulers of Russia grew to distrust Western diplomacy. Only when their domestic economy collapsed did Russia make terms with western capitalism. Now under Vladimir Putin, they are again asserting different (non-Western) cultural values. But as Yuval Noah Harari pointed out in his book SAPIENS,
“(In 1989)..the Soviet elite, and the Communist regimes through most of eastern Europe (Romania and Serbia were the exceptions), chose not to use even a tiny fraction of this military power (of the Red Army and the other Warsaw Pact armies). When its members realized that Communism was bankrupt, they renounced force…..Gorbachev and his colleagues gave up without a struggle…”
The Cold war ended not with the nuclear bang expected back in the 1960s, but with a whimper.
Admittedly the USA and NATO were much more united and determined back in 1989 than they seemed to be up until this year. But I put on my economics hat and argue that it was trade that beat down the Soviet Union not military might. Russia tried to set up its own version of the Euro zone. It failed because there was not enough trade to provide hard currencies. This was most notable when the Berlin Wall was removed. The powerful West German economy had to absorb a very much weakened East German economy. Russia had failed to invest in East German infrastructure. Some factories in East Germany were still using 1950s technology that was at least thirty years out of date.
Lesson from past mistakes may be lost on our current world leaders. But harsh lessons must not be forgotten. The resurgence of political strife in Northern Ireland due to Brexit is just one example of a failure to own our past. The same could be said for Afghanistan. And the Middle East continues to suffer from the mistake that was British colonization.
International trade may alleviate world poverty in the short term. But without the political will to avoid wars, large and small, this will count for little. The current pandemic is once more dividing our world and making international trade even more difficult. It is going to take innovative thinking to save our world from chaos both economic and social.
Today, the Fool’s Gold Standard was brought to the fore. Panic, blind panic. At the moment, I am typing this in a pub, thinking how damn lucky I am to be able to do this. Why the Hell are our “federal leaders” waffling, when there is such a clear medical and economic cost to almost random shut downs and re-openings? I am not denying the necessity of crushing transmission of the virus and its variants, but golly, we had more than a year to figure out there were half a dozen good candidates for vaccines, and to gear up for manufacturing them at scale. Here we are, bushfire smoke has dissipated…
Every time one of them says, “we have to live with the virus,” I have to wonder what they really understand that to mean? Are they saying that in their strata of society, they have the very best health care, and can avoid the great unwashed? Or, are they saying that if we have tens of thousands of people dying, with no hope of a vaccine or good hospital resources, that’s just “living with the virus?” Because, it can change really fast.
Do any of them have an appreciation for how this virus could mutate, could go towards lower virulence, or higher virulence, with a longer incubation time? Or some other combination of factors? What works now, today, is not guaranteed to work tomorrow. However, there are reasonable bets we can take, in terms of dealing with the virus. Foremost would be ramping up fit-for-purpose quarantine, and a fit-for-purpose rapid vaccination (and booster) program for the Australian population.
If I look around the world, I see broadly two classes of “living with the virus.” First, attempting to smash it with vaccination rates, but accepting nothing will completely eradicate it—yet. Second version, just let ‘er rip, ignore the statistical models, all the data the medical specialists have in their possession.
If we go down the second path, God help us all. We are so slow at vaccinating the most likely infectives, and the most likely casualties, we would be committing tens of thousands of fathers and mothers and grandparents and uncles and nieces and kids to unnecessary and horrible death. That’s Barren, Man.
Ikonoclast and Gregory [and J-D], thanks for your considered replies. I shall write a separate comment to Gregory.
Yes, Ikonoclast’s reply is an answer to my question in the last paragraph in my predecessor post. It is a broad picture answer, supported with references and quotes, which I find interesting.
I don’t like ‘ism words’. But I can work with Ikonoclast’s definition of “Internationalism”: “…a political principle that advocates greater political cooperation among states and nations, which political cooperation precedes agreed forms of economic cooperation and trade. It would include a recognition that the world’s nations are an eclectic collection of systems and each has a sovereign right to determine its own internal political and economic system. They ought to be permitted to trade and cooperate, or not, as they wish without coercion.”
The World Trade Organisation (WTO) is a ‘global’ institution which reflects the said principle on trade.
https://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm
The USA is a founding member of the WTO and, after Trump lost the election, can be said to continue to support this institution, both in terms of its role and financially.
China joined the WTO in 2001.
The Russian Federation joined in 2012.
These three countries represent major ‘powers’ with markedly different internal political and economic systems.
The EU, the UK, Japan, Australia, Canada, ….., and many countries that are sometimes classified into developing and least developed countries are members. Then there are countries like Iran that have only an observer status. Only a small number of very small countries (eg Tuvalu) and North Korea have chosen not to join or are not on an admission path.
It may not be surprising the WTO, like any institution, doesn’t function perfectly all the time. Addressing issues as they occur is part of everyday management of institutions. To give a couple of examples: The funding of the WTO is bound to be an issue that resurfaces at regular intervals because the economic weight in world trade changes over time and funding is conditional on the weights. The funding mechanism does not take the internal wealth distribution of countries into account. The right to vote in relation to funding contributions is another critical question.
To the best of my knowledge, the WTO promotes multilateral trade, which involves the international monetary system.
To the best of my knowledge, the WTO does not deal with direct foreign investment (ie multinational corporations). So-called Free trade and Investment agreements involve private dispute resolution tribunals.
Where my thought bubble fits in. I suggest here that the theoretical model of a ‘partially segmented economy with multinational producers’ describes the reality of contemporary international trade and investment better than the international trade models, mentioned by Gregory and myself. However, it does not follow that therefore the reality is better than that assumed in the international trade models. (Both set aside the money aspect as well as the transfer pricing and associated tax minimisation aspects.)
So, my intuition/motivation for my ‘thought bubble’ in my first post is to look for an institution to improve the implementation of the objectives of the WTO in the face of major powers clashing over their internal political and economic arrangements.
(To move from the intuition/motivation to something more than a ‘thought bubble’ requires a bit of technical work.)
Gregory,
I appreciate you providing specific references in support of the lived and written history of a people having a long shadow that is reflected in the development of the institutional framework of the society in question, namely China. Since these histories differ in ‘the global economy’, different institutional systems can be expected to be the norm.
I owe my awareness of the influence of socio-political-economic histories on economic theory to Frank Hahn, a general equilibrium theorist, who is also known for his work in monetary economics. I cannot find a nice quote. However, I am sure the following books contained the material, particularly the 1984 book:
Frank Hahn and Robert Solow, A Critical Essy on Modern Macroeconomic Theory, paper back edition 1997.
Frank Hahn, Equilibrium and Macroeconomics, 1984.
In a more general and non-technical sense, an example is the aversion of the German public to government debt (reflected in their Basic Law and often referred to as ‘debt break’), which is often said to be due to their experience of hyperinflations.
I don’t want to defend Putin. However, he inherited a mess with corruption being rampant, a totally failed privatisation program that resulted in oligarchs who pop up in the UK and Cyprus, to name a couple of European locations. There is also the long shadow of the Czars.
Well, yes I agree with the sentiments in your last paragraph. However, the implementation of the expressed objectives is not obvious. As for economics, I do hope theoreticians as well as each applied sub-branch of economists will contribute toward a better – more human and peaceful – world.
Ernestine Gross says:JULY 5, 2021 AT 11:52 PM
“The difficult relationship between China and ‘the West’ is the subject of many publications and they span a wide range of topics. There is some indication that both China and the USA wish to be the ‘world leader’ (competition of systems and all that). This line of thinking reminds me of Kings, Kaisers, Emperors competing for ‘greatness’; their actions typically brought misery, death and destruction to almost everybody else.”
The piece linked below may be of interest. It’s not so much a new war variant on the theme of late comer imperialism vs established empires. It is rather the same old same old, the only war, the class war.
Title Repressing Labor, Empowering China
https://phenomenalworld.org/analysis/repressing-labor
Authors Ho-fung Hung
Date 2021-07-02
Collection Analysis
Filed Under labor inflation trade
snip>Inter-imperial rivalry and its remedy
Since the 1980s, easy money, combined with the epochal disempowerment of labor, has brought financial bubbles and domestic inequality. It has also aggravated geopolitical tensions. Development loans and capital exports from China have allowed Beijing to expand its sphere of influence in the developing world at the expense of Washington. This largesse has swung erstwhile US allies to Beijing’s position on contentious geopolitical issues and offered a lifeline to internationally sanctioned regimes like Iran and Russia. As such, a bloc of authoritarian rivals to the US has become ever stronger on the world stage. The resulting intensification of the great powers rivalry is comparable to the inter-imperial rivalry at the turn of the twentieth century unleashed by the rise of the German Empire, a relatively late-developing capitalist power whose loans and investments to underdeveloped regions of the world brought it into competition with established powers like Britain and France. As in contemporary China, Wilhelmine Germany was marked by deep domestic distributional conflict, as evidenced by the rapid growth of the German Social Democratic Party (SPD). And in 1914, as today, rising global tensions co-existed with a seductive belief that economic interdependence had made major war impossible…
https://phenomenalworld.org/authors/ho-fung-hung
https://www.jainfamilyinstitute.org/phenomenal-world/
per,
https://www.macrobusiness.com.au/2021/07/you-can-read-cheap-china-crap-or-you-can-read-this/
So not looking forward to the next weeks. German corona r is around 1,4 and important politicians sound an awful lot like Johnson. Altmaier (CDU): “We have to and will avoid another lockdown”, “As long as there is no threat of the medical system to be overstretched, there is no reason for new measures”…. (the young and the vaccinated show no symptoms, thus new criteria are needed beyond virus circulation hospital capacity…..)
https://www.faz.net/aktuell/politik/inland/altmaier-muessen-und-werden-lockdown-verhindern-17442976.html
GAAHHH
Oh, also Bavaria’s minister of economics rejects to get vaccinated and claims there is a risk of Apartheid against the unvaccinated….. What a great approach to the election campaign.
The best approach would be to shut down for real right now, including tourism. No chance that is going to happen. Without at least some more serious containment measures, no amount of vaccination seems to be able to stop the virus from spreading like wildfire, see e.g. Malta. German vaccination rates are not that great at this point. In addition, we know vaccine protection against serious illness is good after two doses, but far from 100%. Just how far seems still uncertain, and it is not something that should be tested in a national level experiment.