The Post-American World - Fareed Zakaria [62]
Everyone agrees the status quo is unsustainable. “There can be no return to business as usual,” Wolf wrote after the financial collapse. But in the short term, we seem destined for more of the same. President Obama has warned of the prospect of “trillion-dollar deficits for years to come,” as his administration boosts spending on everything from green technology to health care; most of that money will have to be borrowed from China. The Chinese also have their own economic problems to sort through, and they are spending $600 billion—a whopping 15 percent of their GDP—to combat them. We are, in effect, asking China to simultaneously finance the two largest fiscal expansions in human history: ours and its own. And the country has every incentive to continue its T-bill shopping spree. Without it, China’s exports will suffer, and its lofty growth rates will fall to earth.
The Chinese do, however, have options. Joseph Stiglitz, the Nobel Prize–winning economist, explains that “they will certainly try to keep American consumption going, but if it becomes clear that it isn’t working, they do have a Plan B.” Plan B would be to focus on boosting China’s own consumption through government spending and increasing credit to its people. As the historian Niall Ferguson writes, “the big question today is whether Chimerica [China plus America] stays together or comes apart because of this crisis. If it stays together, you can see a path out of the woods. If it splits up, say goodbye to globalization.”
For now, the forces of integration have triumphed, in both Beijing and Washington. The Chinese-American economic relationship is one of mutual dependence. China needs the American market to sell its goods; the United States needs China to finance its debt. It’s globalization’s equivalent of the nuclear age’s Mutual Assured Destruction. (And to add to the forces of stability, the Chinese and American nuclear arsenals also act as deterrents.) The best scenario would be for China and the United States to work together to slowly unwind their suicide pact. China would benefit by having more money to reinvest in its domestic economy. The United States would benefit from being forced to make some hard economic decisions that will ultimately make it better off. Since at least the 1980s, America has recognized that it could spend with abandon, forever delaying the date of repayment. This has not been good for its foreign or domestic policy. It has made Washington arrogant, lazy, and careless. If the free ride comes to an end, U.S. leaders will find it far more difficult to put off painful but necessary reforms.
Stopping the China-U.S. lend-and-spend cycle would also give Washington more freedom in its international dealings. The Bush administration was strikingly accommodating to Beijing over Taiwan. George W. Bush was probably the most ideologically hostile president ever to handle U.S.-China relations. He spent his entire term in office praising democracy, denouncing dictatorship, and promising to use American power to further his goals. But despite all of this, Bush repeatedly sided with Beijing over Taiwan and warned Taiwan not to attempt secession, a more anti-Taiwanese statement than any ever made by an American president. That’s why, despite Bush’s speeches on liberty and his meeting with the Dalai Lama, Beijing was largely content with his administration. On the issue it cares about, Bush was an ally.
This is not to say that the United States should cease borrowing Chinese money and adopt a belligerent attitude on matters like Taiwan; far from it. Beijing and Washington are wise to try to cooperate. Great-power conflict is something the world has not seen since the Cold War. If it were to return, all the troubles we worry about now—terrorism, Iran, North Korea—would pale in comparison. It would mean arms races, border troubles, rivalries among allies and client-states, local conflicts, and perhaps more. The onward movement of economic and political modernization worldwide