by Andrew Korybko
“ Black Monday’s ” stock shock sent waves through the global economy, with all of Asia and most of the West experiencing some degree of market decline. The drop raised fears that the world is on the verge of yet another global recession, this time caused by China’s “ new normal ” phase of moderate growth and currency correction . The transition of the world’s largest economy from a starburst of runaway development to a stable supergiant in its own right is one of the most important processes of the coming decade, and the force that the Chinese economy exerts on the rest of the world is incontestable by this point. The US isn’t taking this sitting down, however, since it’s actively working to counter China’s catalytic creation of a new economic world order through the TPP and TTIP projects , and its decision makers, despite their noticeable losses stemming from “Black Monday”, most surely comforted themselves with the schadenfreude of hearing about China’s far worse stock market slump. This global rivalry between two superpowers is actually a global cold war, and it thus leads one to considering the topic of economic bipolarity and how it’s impacting the rest of the world.
The first part of the article begins by introducing the concept of economic bipolarity and describing its two most defining characteristics. Afterwards, it proceeds to examining the nature of “non-alignment” in this larger competition, and dissecting the three categories that compose this geo-economic concept. Finally, the last part uncovers some of the strategic interests that the US has in exploiting economic disruptions such as “Black Monday” in order to one-up its Chinese rival in the eyes of Europe and the Asia-Pacific.
The Nature Of Economic Bipolarity
The core of this geo-economic concept has many thematic shades of the prior Cold War between the US and the Soviet Union, albeit adjusted for the modern-day rivalry between the US and China. Here are the three legacies that are still in play today:
The US and China have diametrically opposed grand strategies that are heavily influenced by their respective ideologies. The US is the world’s unipolar guard dog, and as such, it’s been viciously defending this state of affairs through a series of preemptive aggressions (The Wars on Iraq, Libya, etc.) and conspiratorial sabotage (Color Revolutions). Its main aim in altering the military-political status of key geostrategic locations is to procure eventual economic gains that can preserve unipolarity and deal a blow to the multipolar forces that have been organizing against it over the past 15 years. The overarching economic vision that the US has is to become the global nerve center in managing East-West trade, using the its prime location as the ‘world island’ to connect the Atlantic with the Pacific, which thus explains its obsessive focus on the TPP and TTIP in recent years. Should these agreements enter into force, and even more so if the US’ Latin American pushback succeeds in recreating a hemisphere of puppet governments, then they’d allow the US to retain and reinforce the existing system. The long-term goal that American decision makers are endeavoring to achieve via the combination of their geopolitical intrigue and global economic blueprints is a reconstructed economic reality that returns the US to its prior position as the world’s most important economy.
China, on the other hand, is adamantly opposed to the US’ plans, and while others such as Russia are too, the Chinese are the only ones capable of opposing this plot on an economic level (whereas the Russians can do so on the geopolitical/military-technical front, ergo their strategic partnership ). China foresees a future where multipolarity wins out over unipolarity, with the lion’s share of credit for this reorientation going to the New Silk Road projects that are expected to circle the globe and deal a progressive, long-term deathblow to the US’ decrepit system. Beijing believes that it and its counterparts’ advances in constructing alternative, non-Western-dominated economic and financial systems (the AIIB, BRICS Bank , and BRICS Contingent Reserve Arrangement ) could provide a suitable and timely replacement for the existing structure, and that the transition could proceed smoothly throughout the coming years so long as the current multipolar trends continue. What China is trying to attain, then, is a complete revision of the global system, a fundamental change which would play out to the detriment of the US, while giving ample opportunity for others to rise.
Mutually Assured Destruction (MAD):
China and the US are both capable of inflicting devastating economic damage to the other, but doing so would result in unacceptable consequences that would crash the initiator’s economy. For example, China could call in all of the US government debt that it holds, for but one example, but the resultant calamity this would unleash would certainly reverberate back to China in an instant. The sudden crash of the dollar and the subsequent collapse of the US economy would devastate the world’s official reserve currency and all those who use it, and it would also eliminate one of China’s largest trading partners and export destinations within an instant. On the other hand, if the US were to engineer a rapid breakdown of China’s economy through stock manipulation and/or social unrest, then it could also bounce back to harm its own economy through the global financial sinkhole that would develop (as hinted at by the “Black Monday” scare) and/or initiating the dreaded Chinese call-in of American government debt, among other blowback scenarios. The reason that neither has decided to make a major move on the other rests in the complex economic interdependence between them that assures the mutual economic destruction of each in the event that this occurs.
That doesn’t mean that it will always be that way, however, as both the US and China are exploring asymmetrical means by which to break the MAD cycle and place themselves in a less adverse position to initiate large-scale economic hostilities. China is mainly doing this through its pursuit of de-dollarization, which if successful in the long run, would greatly mitigate any risk that China would face from a calculated American economic collapse. The US is contrarily trying to deepen the dollar’s role in the global economy by tying it as an inseparable part of trans-Atlantic and trans-Pacific trade, so that in the event that the currency collapses, it would also take down China’s other largest trading partners, too, and thus boomerang back to Beijing. Another thing that the US is trying to do, but one which can allow it to initiate a significant economic offensive against China, is to incentivize American companies to pull out of China and move into the proposed TPP zone instead. Should this happen on a grand enough scale, then it would decrease the direct aftereffects that a Chinese collapse would have on major American businesses. China, in turn, has sought to correct the yuan to make it more competitive in an attempt to counter this move before it gains irreversible momentum.
The Non-Aligned Movement (NAM)
The US and China’s economic cold war also has its fair share of non-aligned members (albeit ones which ultimately identify closer to one pole or the other), and not counting those that are loyally tied to or dominated by one or the other (e.g. North Korea for China, Haiti for the US), they can be categorized into three levels:
Entities such as the Eurasian Union and the EU, as well as large markets such as India and Brazil, hope to become their own centers of economic gravity in a truly multipolar economic world. For the time being, however, economic bipolarity is still the state of affairs, but if China is victorious in its struggle against the US, then it’s expected to cede its ‘unipolar moment’ in favor of the genuine multipolarity which is fundamental to the new economic order that it’s constructing. Thus, the aspiring poles can be seen as ‘regional Chinas’ in this future arrangement, and this is both to their benefit as well as China’s. For the time being, although this category has a sincere self-interest in economic multipolarity, the geopolitical unipolarity of the US is heavily pressuring at least one of its members, the EU, to forgo this path of development and remain tethered to the US via the TTIP.
It’s forecast that other such power plays will be initiated against Brazil and India in the future as well, but it’s not yet possible to speculate on their chances of success until such proposals are first offered. As for the EU, it appears that there is a 50/50 chance that it’ll accede to TTIP, but that’s of course up in the air at the moment as it is. Overall, if China can turn the aspiring poles into supporters of economic multipolarity, then it’ll increase the odds of its grand strategic success; likewise, if the US can co-opt some of these entities or their leaders into mistakenly believing that they could benefit from prolonged economic unipolarity, then it’ll strengthen the existing system and make it more durable in withstanding multipolar disruptions.
The next category is composed of middle power countries that intend to balance between both poles in a semi-equal fashion, hoping to reap the resultant economic dividends from each. Some examples of these states are Indonesia, Vietnam, Iran, Turkey, Egypt, Ethiopia, Nigeria, and perhaps even Mexico one day. On a smaller but related scale, Myanmar and Cuba are also attempting to do this after having reconsidered their former allegiances and opting for what they view to be a more ‘even’ model of development. While the actual middle powers might be able to manage the complex balancing act involved in such a multifaceted policy owing to their relatively larger populations and market potential, Myanmar and Cuba are in less advantageous positions vis-à-vis these stabilizing prerequisites, and thus, could become destabilized as a result of their well-intentioned (but potentially misguided) policies.
Zones Of Competition:
As for the rest of the world, it mostly falls into being part of the zones of competition between both poles, which is specifically highlighted as comprising most of Latin America and Africa. Within this broad swath of territory, the states being competed over by the US and China are also sometimes linked to aspiring poles and intended balancers, thus complicating the situation. For example, Nigeria is an intended balancer that is aligning closer to China nowadays, and it extends its economic influence over to neighboring Niger and Chad. These are two countries that are clearly within the zone of competition are noticeably closer to the EU’s aspiring pole, specifically that of France, which, in both cases of overlap, falls under the US’ unipolar economic umbrella at the moment. The general trend has been for the US and EU’s traditional external markets of Latin America and Africa (the zones of competition) to move closer to China. Related to this category but not entirely within it at this point is the Mideast, especially the energy-exporting-dependent Gulf Monarchies, which may look more to China in the future for real-sector trade and investment as their natural riches continue to dwindle.
China’s Pain, America’s Gain
Whenever news of economic difficulty (“Black Monday”) or perceived controversial developments (yuan correction) emerges from China, the US always stands to gain a relative strategic advantage. Here are the three ways in which it tries to flip China’s challenges into its own opportunities:
Sully China’s Silk Road Reputation:
The US’ information contractors like CNN and Bloomberg have tended to jump on any negative economic news coming out of China in order to provoke larger doubts about the country’s systemic stability. While they have their own vested economic interests in doing so and are also in the business of literally selling news, this also accomplishes an ulterior, even if unwitting to them, objective, which is to sully China’s reputation among its New Silk Road partners. Whether intentionally done or not, this clearly satisfies an objective of the US foreign policy establishment, which is very interested in manipulating public consciousness within the balancer and zone of competition Silk Road-linked states. The more that it can decrease partner confidence in China’s economic fundamentals, the more that the US can increase the doubt that others have over the nature of China’s slowdown and subsequent capacity to finance these megalithic commitments.
The New Silk Road has already become a contentious political issue among the Sri Lankan elite, for example, with the country’s new pro-Western president freezing China’s $1.4 billion port investment in Colombo (while still moving forward with its equivalent in Hambantota). This issue is more closely related to geopolitics than to the US’ information warfare against its bipolar rival’s economic commitments, but if the latter comes into play as an influencing factor (whether actual or marketed as such) and results in further backsliding of Sri Lanka’s Silk Road cooperation with China, then it could function as an interesting case study for how far the confluence of geopolitics, geo-economics, and the US’ information warfare can go in pushing back against the Silk Road. Ideally, the US would like to repeat the proposed Sri Lankan scenario by having its proxies advance their anti-Silk Road agendas and then retroactively ‘justify’ them on the grounds that China’s economic slowdown has caused them to reconsider. It doesn’t matter if this is really the case or not, since the US only cares about the ‘plausibly deniable’ perception that its client state made the controversial decision without American interference.
Scare Investors Away From China:
It’s of course impossible for the US to ever completely succeed with this goal (nor would it want to do so in full), but what would play to its general interests would be using its information mediums to influence foreign investors to pull their capital out of China and transplant it to more ‘stable’ and ‘profitable’ markets such as Vietnam and the other proposed TPP states. At a time when investors and business owners are in a panic, now is the time when they’re most receptive to alternative ‘suggestions’ or inferences proposed by their ‘trusted’ information outlets and advisors to do just that.
There’s no doubt that China is undergoing a slowdown and that the “new normal” is here to stay, but the problem arises when panicked financial speculation takes precedence over level-headed assessment in adjusting a major investor’s economic portfolio in the region, and this is applicable for financial investors just as much as it is for real-sector ones like factory builders/operators.
Along the lines of what was written in the first section, the US would like to see this occur so as to minimize the economic blowback that it and its affiliated partners would endure in the event that the US decides to ‘get tough’ on its economic war against China. It’s not in any way forecasted that a major capital outflow will occur from China as a result of this exploitative information strategy, but it’s the steady exodus that could eventually compound into a larger trend which has some of the most disturbing implications for China and its multipolar economic vision.
Strengthen The US’ Relative Appeal:
The US is banking on its information contractors being skilled enough to simultaneously boost their patron’s appeal as they denigrate China’s. The absolute hypocrisy in this situation is that the same negative traits that they use in their attempt to attack the Chinese economy (“ uncertain ”, “ unregulated ”, “ opaque ”) can also be used to describe the US’, but with skilled enough perception managers at work, this can be mostly ‘explained away’ to the masses (if they’re even cognizant of the comparison, that is). For the US, the most important thing that it stands to gain by strengthening its appeal right now is in applying added pressure to the EU and the Asia-Pacific states to accede to the TTIP and TPP, respectively. Any comparative decline of China (whether real or imagined) plays into the US’ hands at this pivotal moment that it’s trying to ensnare both geographic markets into its fold. Given the enormous consequences at play with both of these initiatives, specifically that both transnational trade blocs would be prohibited from reaching external economic deals without their US ‘partner’s’ prior approval, it’s thus of the highest order of importance to identify how impactful the US’ economic information war against China has become when it comes to these countries’ comparative perceptions of the Chinese and American economies.
The “Black Monday” stock shock, while exaggerated to a certain extent (and taken out of context relative to China’s smaller market capitalization ), succeeded in making most people aware of the impact that the Chinese economy has on the rest of the world. The interlinked nature of economic globalization and China’s historic ascendency to the planet’s top economic spot inevitably meant that developments within its own market would reflect to some degree or another on every other country. Taking a step back and recalling how the last global panic was sparked by the US’ structural shortcomings (and in a lot more factual way than the hype being spread about China’s at the moment), the broad outlines of economic bipolarity begin to emerge, whereby the US and China form the respective anchors of the current order.
As with the previous bipolarity of the Cold War, this also carries with it implicit and high-risks competition, with each side trying to outwit and sabotage the other in pursuit of their ideological vision for the future of the global economy. Those that fall between them are associated more closely with one or the other state, and they can be categorized into a three-tiered hierarchy that more accurately explains their relationship to the large bipolar structure. Being that the US and China are in a heated global competition with one another, whenever Beijing stumbles, the US is there to mock it to its own soft and comparative economic advantage. The current case in point rests with “Black Monday”, which looks to be godsend for those in the American establishment interested in pushing their “Chinese climax” narrative that the country’s best days are now behind it. This self-interested spin is engineered to cast China’s Silk Road dreams as unrealistic and overly ambitious, with the ultimate intent of damaging Europe and the Asia-Pacific’s confidence in the country and consequently pressuring their regional states into acquiescing to the US’ grand TTIP and TPP plans. But what the US and its strategists aren’t considering is that even though this period of bipolarity will perforce end just like its predecessor, it might not be with the American victory that Wall Street is betting on.