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America’s Fate Under Chinese Hegemony:  a Review of Eamonn Fingleton’s ‘Jaws of the Dragon’
Trade Policy item by Guest: Ian Fletcher - Apr 30, 2011

The news has recently hit the press that China’s economy, measured on the purchasing-power basis that adjusts for price differences between nations, may surpass the U.S. in only another five years or so. Surprisingly, China has still shown no signs of morphing into the cuddly liberal and democratic nation, devoted to American ways from Coca-Cola to democracy, whose eventual appearance has been assumed by American policy for thirty years now.

Our policy during this period has, after all, enthusiastically cooperated with China’s efforts to build up its economic power—which entails, of course, every other kind of power, including the military kind.  So our assumption of a benign China had better be right, or else we have been abetting the creation of a monster.  A hostile China will be arguably even worse than the USSR, because it will not do us the favor of sabotaging its economy by adhering to a dysfunctional economic ideology.

The above realities are the subject of Eamonn Fingleton’s book In The Jaws of the Dragon: America’s Fate Under Chinese Hegemony.  Fingleton is a Tokyo-based Irish journalist who has lived in East Asia for over 25 years, and he has a long and distinguished record of telling truths about the region’s politics and economics that the establishment (on both sides of the Pacific!) would rather the public did not learn.  This is one of those books that one wishes the President would read.

While it is hardly news that America is facing a Chinese challenge, the seriousness of this challenge is still poorly appreciated.  For example—this was my big takeaway from the book—China is not just another despotism.  It is the implementer of a systematic and sophisticated political philosophy, which Fingleton calls Confucianism, which will almost certainly constitute a serious threat to liberal democracy in the years ahead.

Confucianism, as the reader may recall from a comparative religions class taken long ago, is the political philosophy derived from the ancient Chinese sage Confucius. It was the official ideology of the state in Imperial China for thousands of years.

Now Confucius wasn’t a bad man, but he did base his political philosophy on taking authoritarian government as a given and trying to civilize it.  He did not, as Western political thinkers since the dawn of democracy in Ancient Greece have done, base his political ideology on trying to prevent despotism in the first place.  As a result, he simply wasn’t that interested in concepts like individual freedom or limited government.

The bottom line, after a few thousand years of history and some astonishing ideological twists and turns, is an approach to politics that is systematically opposite to liberal democracy.

It is the velvet glove on the iron fist, and increasingly a very sophisticated one.  It has tamed capitalism and mastered modern media.  It is not headed for collapse or metamorphosis any time soon.  If anything, it is currently more successful at imposing its will on us than we are at the reverse.

To be fair to poor old Confucius, the political system of contemporary China is not a direct extrapolation of any blueprint he drew up, and its flaws should not blind humanity to the genuinely civilizing aspects of his teachings (which are real).  But, as Fingleton shows in considerable detail, a Confucian mentality underlies the politics of not only China, but also, in a soft-authoritarian version that has mastered the surface rituals of democracy, the politics of neighboring nations like Japan, Korea, and Singapore.

Make no mistake: East Asia is on a fundamentally different civilizational track than the U.S., and it isn’t going to get off any time soon.  And why should it, when East Asians are currently watching America decline? 

If the U.S. had not chosen, by its unconditional embrace of economic globalization by means of (one way) free trade, to render itself vulnerable to China, the above might not matter very much.  After all, for most of its long history, China has maintained a civilization upon principles very different from those of the West, and it didn’t do us much harm.

Unfortunately, the U.S. has, in fact, chosen the opposite course, with the result that our own government is increasingly slipping under the control of an ethically alien and geopolitically hostile power.

To take just the most obvious example: because political bribery is, by way of political action committees, essentially legal in the U.S., Beijing can manipulate the U.S. Congress and the presidency almost at will. Why? Because it can manipulate the profits of the Fortune 500 companies that do business in China, and they do its bidding as lobbyists here.  Because they are still headquartered in the U.S., they find welcome on Capitol Hill, but it is Beijing that is calling the shots. 

Americans sometimes puzzle over why their government doesn’t “get” the Chinese threat.  The answer is simple: because it has been bribed not to by China.

The most important issue on which our government has been bribed is, of course, trade.  China runs astronomical trade surpluses with the U.S.  In fact, a majority of our trade deficit is now with China. This is no accident: it is the product of China’s aggressive embrace of predatory mercantilism plus America’s government being bribed not to take defensive measures.

To find an historical parallel, one would probably have to go back to something like the suicide of the old Polish state in the 18th century, carved up by its adversaries after its domestic politics was paralyzed by foreign bribery.

America’s defense against Chinese mercantilism is further sabotaged by the fact that, despite our using similar policies earlier in our own history, mainstream American economists are largely blind to the fact that mercantilism even works. Trapped in the same “free” market thinking that led to the 2008 financial crisis, they don’t believe that China’s policies can possibly be a winning move for that country.  An economy that has gone from peasant agriculture to superpower in 30 years doesn’t seem to persuade them.

Why are China’s economic policies so effective?  The aggressive pursuit of exports is a game other nations, like Germany and Japan, also play well.  But these are both medium-sized high-wage nations that are already developed, not gigantic low-wage nations still on the early stage of their development path. (China is an economic superpower because it has so many workers, but their per capita output still only qualifies China as a middle-income nation globally, behind nations like Jamaica.)

China is unique because it combines standard-issue (if exceptionally cynical) mercantilism with other policies, like forced savings and systematic technology acquisition, made possible by its despotic ex-Marxist political system.  For example, it has, by deliberate state fiat, a savings rate close to 50%, while America’s is close to zero.  This gives China a tidal wave of investment capital to put into everything from factories to freeways.  (It is also enabling China to accumulate ownership of American government securities and private-sector assets.)

Japan never took over the world, so some people dismiss the Chinese threat as yet another big wolf-cry. But China has ten times Japan’s population, nuclear weapons, and a hard-authoritarian rather than soft-authoritarian political system. This time, it’s different.

Beijing is already extending its political tentacles everywhere from the Middle East to Latin America.  Now that Uncle Sam worships democracy (at least in principle) and doesn’t cut dictators the slack he did during the Cold War so long as they were anti-communist, China is the new best friend of despots everywhere.  China’s voracious demand for natural resource imports alone guarantees that this rivalry will not remain trivial forever.

If worst does come to worst, don’t say you weren’t warned.  This is a readable and very important book.

Ian Fletcher is Senior Economist of the Coalition for a Prosperous America, a nationwide grass-roots organization dedicated to fixing America’s trade policies and comprising representatives from business, agriculture, and labor. He was previously Research Fellow at the U.S. Business and Industry Council, a Washington think tank, and before that, an economist in private practice serving mainly hedge funds and private equity firms. Educated at Columbia University and the University of Chicago, he lives in San Francisco. He is the author of Free Trade Doesn’t Work: What Should Replace It and Why.

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