Aug
Here at ChinaFund.com, we have written a fair bit about the fact that yes, China can be considered among the top beneficiaries or even “the” top beneficiary of globalization and for the most part, discussions pertaining to this topic tend to revolve around the narrative that China has been given a proverbial free ride by the West and that thanks to Western generosity, China has been able to not just escape poverty but become the economic powerhouse it is today.
This perspective is, however, quite short-sighted.
Why?
Primarily because it (conveniently) overlooks what China gave the West in return. More specifically and as ironic as it may seem, many of the Westerners who are complaining about China’s alleged free ride by for example publishing social media posts are doing so from their ultra-affordable phones and/or laptops, technology which wouldn’t have been nearly as accessible to the general public (and certainly not at today’s low costs) in the absence of “spoiled children” such as China.
To put it differently, the idea that the globalization-facilitated arrangement is one-sided, with China perpetually on the receiving end of benefits and the overly generous West on the giving end is childish at best and ignorant at worst.
As a bit of a creativity exercise, let us simplify an economic talking point and try to view things from the perspective of someone who believes the exact opposite, that the West is on the receiving end much more so than China. That person would most likely point out that China is getting a most peculiar deal in light of the fact that it exports actual products, whereas the West exports… well, inflation. In other words, China exports tangible products that make the lives of Westerners easier as well as more pleasant and receives pieces of paper or numbers on a screen in return (fiat currency that can be printed out of thin air or even easier yet, made available after a few clicks by central banks such as the Federal Reserve).
Of course, this perspective is just as short-sighted as that of Westerners who complain about China being the spoiled child of globalization. In reality, these “pieces of paper” and “numbers on a screen” enabled China to escape international isolation and tap into a huge worldwide market. Furthermore, this “worthless fiat currency” (that can indeed be created out of thin air but for which, and therein lies the key to understanding the equation, there is incredible demand) enabled China to invest in its modernization, anything from infrastructure to education and fast-forward to the present, China now has financially potent enough consumers so as to embrace an economic growth model that revolves much more so than in the past around internal consumption.
As many of you most likely suspect, the question which constitutes the title of this article is intentionally misleading and provocative. The answer tends to revolve around the idea that picking a “winner” represents an economic thinking mistake right from the beginning and that in reality, the answer is simple: both. China needs the West and the West needs China, with many choosing to paint an adversarial picture where there isn’t one.
Make no mistake, there will most likely never be an ideological love story between China and the West for the simple reason that political values are light years apart. However, love it or hate it, today’s globalization-facilitated economic interconnectedness is most likely the best scenario we have from a wide range of perspectives, from economic growth to geopolitical stability and ultimately world peace.
As mentioned in other articles as well, “Mutually Assured Economic Destruction” can be just as effective when it comes to conflict prevention as the nuclear weaponry-related “Mutually Assured Destruction” principle that governed the Cold War. In other words, just like the devastating effect of nuclear weapons make it clear to all potential combatants that a nuclear war would result in catastrophic outcomes for all parties involved (there are no “winners” in a Mutually Assured Destruction scenario, as the name makes clear), the effects of moving away from today’s economic interconnectedness would be so game-changingly dire that the parties involved have no choice but to act responsibly.
Yes, depending on the political climate/context, one political actor or another will make a negative statement about globalization every now and then. But the political actors in question have economic consultants and a decent enough basic understanding of Mutually Assured Economic Destruction to ensure that leaving political theatrics aside, there is a survival-related commitment across the board when it comes to maintaining the globalization status quo.
Not because there is a globalization love story one could refer to, because there isn’t, but rather because globalization doesn’t have to be perfect to survive: it simply needs to be better than the alternatives and it would be difficult to envision a workable economic model which revolves around completely abandoning globalization.
Of course, this doesn’t mean there will not be changes along the way. For example, it’s quite likely that after the COVID-19 disaster from a supply chain perspective, governments will be far more eager to encourage completely domestic supply chains when it comes to products that are perceived as relevant to national security (for example masks and medical equipment in the context of pandemics, with the same principle being valid when it comes to other threats) but it is extremely difficult to believe that these changes will threaten globalization at its core.
In conclusion, understanding that China and the West need one another is not a matter of generosity but rather one of self-preservation for all (geo)political actors involved. As such, while concessions will need to be made for political reasons whenever the proper context emerges, few decision-makers are truly committed to embracing models that revolve around abandoning the core pillars of globalization and status quo international relations.