Economic leadership, rather than military strength may well decide what culture prevails in the new global order. It will likely be a choice between two different sorts of capitalism: authoritarian and democratic. Foreign Policy recently published a brilliant analysis of how America’s stance toward other nations—specifically China—must become aligned with our own plans for economic growth in such a way that the two are interdependent.
There’s just a slight problem. We don’t have an economic plan. To simply keep up with China, let alone take the lead, we need to get our act together—really together—as in a close partnership between Washington and in the private sector. That means developing a long-term vision—by that, the authors mean an inkling of where we want to be decades from now to remain the world’s economic leader. If we don’t, we’ll end up following China’s lead without ever catching up.
The authors of the article point out that China doesn’t distinguish between economic and military advantages. Their ideal is to defeat an opponent without ever firing a shot. “While military power will still matter, the emerging great-power competition between the United States and China will ultimately turn on how effectively each country stewards its national economy and shapes the global economy.”
In their view, America doesn’t fully realize how its foreign policy needs to be fundamentally economic. That doesn’t mean waging a trade war. We need to go far beyond protectionism and tariffs. We are competing, primarily with China, on how to adapt to fundamental changes and innovations that will determine the way people live and work a century from now. They urge policy makers to quit worrying about putting zombie industries on life support and catering to multi-national corporations that manufacture in places like Ireland or headquarter in Luxembourg or the Caymen Islands, where taxes can be avoided.
Instead, America should be creating a new game plan for how to be the first mover in nascent industries that address the biggest challenges the world is soon to face: climate change, artificial intelligence, quality affordable education, and destabilizing disparities in wealth throughout the West.
Trump’s reflexes in response to the new global economic realities are outdated. While he may get concessions and improve the balance of trade with China by forcing them to play fair—through protectionist strong-arming—long-term this won’t enable the U.S. to lead. It isn’t a question of taking the side of free trade vs. tariffs. Free trade and trade deficits aren’t the issue. We have reached an inflection point where we must mobilize our innovative power around national initiatives where breakthroughs will give us a paradigm-shiftingadvantage—as China is attempting to do with AI. Foreign Policy writes:
“Today’s national security experts need to move beyond the prevailing neoliberal economic philosophy of the past 40 years. This philosophy can be summarized as reflexive confidence in competitive markets as the surest route to maximizing both individual liberty and economic growth and a corresponding belief that the role of government is best confined to securing those competitive markets through enforcing property rights . . .”
The authors argue, correctly, that U.S. national security is threatened less by the rising national debt than by a lack of investment in crucial initiatives that will create a foundation for economic leadership: infrastructure, machine learning, and affordable education. While they would like to see increased public expenditures in these areas, the federal government could create an initiative that would solicit matching investments from the private sector for every tax dollar provided—or tax credit—tied to benchmarks for progress.
This all points toward the creation of a national industrial policy designed to steer the economy toward growth in key areas. The development of the policy itself could be the first of many public-private partnerships. This vision for growth would represent a new sort of peaceful cold war, in the sense that NASA’s Apollo program was a way to get to the moon, but also a show of military strength aimed at the Soviet Union in the wake of Sputnik and the threat of advanced missile technology. Economic strength and innovative intellectual property play the role, now and in the future, that military muscle once did.
China is already ahead of us in many areas. Estimates are that China’s subsidies for key industries run into the hundreds of billions, according to Foreign Policy. When it comes to research and development, they are likely ahead of the U.S. in artificial intelligence, solar energy, and 5G. Meanwhile, our private sector is myopically focused on short-term gains, in obedience to shareholder primacy. Most people aren’t aware that China is playing a game that looks toward the next century, in some cases, patiently and gradually gaining small, innocuous-seeming advantages in diverse areas. What it all points toward for America is economic defeat by a thousand cuts. In his book On China, Henry Kissinger quotes a poem in The Art of War to express, in a nutshell, how China strategizes and thus how America should begin to plan for its own future in the new global economy: “Ultimate excellence lies/Not in winning/Every battle/But in defeating the enemy/Without ever fighting.”
Another author, Michael Pillsbury, echoes Kissinger’s view that China is playing the longest geopolitical game ever conceived, far longer and more subtle and comprehensive than any campaign a Western nation has ever undertaken.
China started on a 100-year marathon decades ago to become the global hegemon, with an aim to reshape the world according to Chinese values (which don’t include democracy). Its target is 2049, centenary of Mao Zedong’s seizing power.
Whether or not China will win that race is an open question. Yet the U.S. would be wise to take a lesson from China’s intent to frame a long-term strategy. Even if China weren’t an enormously patient opponent, it would be wise nevertheless for the private sector to align itself, throughout diverse industries, around a mission that sees decades into the future when considering what steps to take in the next financial quarter and the upcoming year. That will require enlisting leadership visions, courage, and most certainly a willingness to break from business as usual.