Globalization Has Created a Chinese Monster

On Sunday, the Chinese Communist Party Central Committee recommended ending the two-term limit on the presidency, paving the way for President Xi Jinping to stay in office indefinitely. This surely marks the end of an era — and not just for China, but also for the West.

For the West, the era in question started with the end of the Cold War, as old enemies became “emerging markets.” China had already started opening its markets to foreign investment since 1978 under Deng Xiaoping’s reforms. But only in the 1990s did the private sector take off there, and Western firms promptly rushed in to profit from the breakneck speed of Chinese economic growth.

The beauty of the post-Cold War emerging market story was that it was apolitical. Recall the famous identification of the leading emerging markets by Jim O’Neill in 2001 as the “BRICs” (Brazil, Russia, India, China) — four states from different groupings during the Cold War now viewed together as the leading protagonists in a new era of peaceful globalization under the Pax Americana. Some called it the end of history.

But this apolitical approach was premised on the assumption, inherited from the Cold War, that democracy and capitalism go hand in hand, and that the extension of free markets would bring global convergence to the Western economic model, as the Washington Consensus predicted.

Confidence in globalization saw massive amounts of Western capital and intellectual property flow to emerging markets, above all to China. But few in the West registered the geopolitical significance of this at the time. Instead, they praised the economic growth story. And not without good reason: the integration of China into global markets lifted a billion people out of poverty. It remains a testament to the material benefits of removing geopolitical obstructions from the development of global business.

But this story of global cosmopolitan peace has been on the rocks for some time. Russian privatization in the 1990s ultimately produced a mafia state controlled by an oligarchy. More broadly — with a few exceptions, mainly in Eastern Europe, where democracy did take hold (current problems notwithstanding) — capitalism has expanded since the end of the Cold War in spite of democracy, not alongside it.

And nowhere is this more evident than in China. It’s now abundantly clear that despite the pious neoliberal belief in the transformative power of free markets to encourage “reform,” China is headed toward more, not less autocracy. Indeed, it might not be an exaggeration to say that China has broken a path toward a new form of totalitarianism in which one man will sit atop a police state with access to ubiquitous data gathered about citizens by social media and online shopping platforms and a vast human and electronic surveillance apparatus to track their every move. Look no further than the ghastly “social credit score” system that Beijing wants to roll out by 2020 to get a sense of how wrong the idea has proven to be that free markets will bring about democratic change, or even minor liberalizing reform in China. A billion people may have been lifted out of poverty, but only to find themselves living under cyber-totalitarianism.

The geopolitical consequences of this realization could be very profound indeed. In the Cold War, the West faced totalitarian communist regimes whose economic model and political system were both alien to what the “free world” claimed to stand for. Of course, the link between capitalism and democracy was always tenuous, not least given the reality that many of the West’s allies were not democratic. But now, if it was ever in doubt, we know for sure that capitalism and democracy don’t have to go together: Capitalism is up for grabs, and you don’t even need to support the Pax Americana to plug into it.

How does this end? We don’t yet know, but the question may well come to be the defining feature of a new geopolitical phase the world seems to have entered. Note how far removed from the happy story of liberal globalization is the language of the Trump administration’s December 2017 National Security Strategy: “China and Russia challenge American power, influence, and interests, attempting to erode American security and prosperity.”

Admittedly, this comes in the context of a presidency that bizarrely refuses to carry out U.S. congressional sanctions on Russia for interference in the U.S. 2016 elections. But the more important point is that Western states and their citizens are becoming increasingly alert to the need fundamentally to reappraise the value of the integrated global capitalism they have more or less promoted since the early 1990s. I am not talking about a reappraisal in light of the inequality that economic growth has produced, or the massive outsourcing of manufacturing jobs that created rust belts on both sides of the Atlantic, which is a separate discussion. Rather, this reappraisal concerns the inconvenient truth, which surely now is undeniable, that the West’s own economic policy has encouraged, if unwittingly, the rise of deeply illiberal regimes in much of the former communist world.

What practical effect this produces in the foreign and economic policies of the West depends, on the one hand, on the extent to which the West is prepared to sacrifice material wealth in support of its public values; and, on the other hand, on the extent to which authoritarian states, above all Russia and China, attempt to export their values abroad. One could list any number of areas where this dilemma will play out, but the most important near-term litmus test will be whether the West responds to China’s Belt and Road Initiative as a benign economic project, or as a geopolitical threat.

Beauty is in the eye of the beholder. The apolitical image of the emerging market that underpinned an era of rapid globalization since the end of the Cold War certainly had its attractions, not least the potential to alleviate poverty at a large scale. But today it looks ugly, as it turns out that many of them were not emerging toward anything like the democratic values of most developed markets.

The dogmatic claim that economic freedom leads to political freedom, which underpinned much of the laissez-faire approach behind post-Cold War economic policy between the West and authoritarian regimes, now looks naive. China has proven there is no necessary relationship between them. Only true believers can still hang on to the idea that capitalism will eventually nudge China to a more liberal place, just not yet.