How China Will Lead As The West Retreats

From Brexit to Trumpism, here's how a Chinese Communist Party journal views the Western wish for "deglobalization" — and how China will fill the void.

This essay by Yang Guoliang, a professor at the University of International Business and Economics in Beijing, first appeared in Qiushi, a Chinese Communist Party policy journal whose mission is to publicize the party's governing philosophy.

Encumbered by the global financial crisis, the desire of the US and major European countries to advance globalization has waned in recent years, and a trend towards deglobalization has taken shape, the status of which is gradually elevating to become the will of the state and government policy in some countries.

Deglobalization has deep-seated political and economic roots

Economic globalization is a major facet of globalization, whose aim is to realize the global flow and allocation of resources and which is generally conducive to enhancing efficiency and benefits of economic activities, thereby improving the wellbeing of humanity. Following the Industrial Revolution, capital from advanced capitalist countries expanded globally under the impetus of technology, bringing handsome profits to these countries, and when considered objectively this expansion had a progressive effect on human civilization.

History reveals that the modern material and institutional cultures of the West were founded on the basis of the march of economic globalization, and developed countries in the West are the prime beneficiaries of economic globalization. Then why has this trend towards “deglobalization” emerged in Western developed countries? To answer this question, we need to begin by reviewing the history of the global expansion of capital.

Five centuries ago, when the capitalist mode of production came into being, capital began its spread across the globe. After World War II, the US dominated the new round of economic globalization, forming a globalization characterized by US- and US dollar-centricity and global economic integration. During this round of economic globalization, in order to acquire higher profits, transnational corporations from the US and other Western developed countries scoured the globe to find cheap resources and to realize the optimal allocation of factors of production. To minimize production costs, they continually transferred labor intensive industries to developing countries, which however resulted in the “hollowing out” of the West’s domestic industries.

In the process of industrial transfer, capital increasingly shunned the real economy due to its low profit margins and high operational risks, instead making its way into financial speculation which caused the unemployment rate to rise and government revenues to decrease; this served to undermine the foundation of the welfare state. Moreover, loosening control over capital enabled capital to be withdrawn, flee abroad, and become involved in games whereby “money begets money” in global financial markets. As financial and fictitious capital rapidly developed, the polarization between the rich and poor increasingly intensified, which ultimately led to the outbreak of the global financial crisis triggered by the US subprime mortgage crisis.

The spread of the crisis led to intensified unemployment and poverty, while refugee and immigration problems further exacerbated the situation, becoming the proverbial “straw that broke the camel’s back.” In 2016, the British referendum decided that Britain would withdraw from the European Union, the US presidential election voted in Donald Trump, and in the EU populist political parties came to the fore. These political changes in the US and European countries reflect the fact that public support for economic globalization in these countries has undergone profound change.

Due to social stratification and increasingly severe social division within these countries, people have started to question – and in some cases even oppose – globalization, and thus populism, conservatism, and isolationism abound. When this thinking becomes elevated to the will of the state and political action via popular vote, it evolves into a “deglobalizationalist” thinking.

The trend towards “deglobalization” highlights the deep-seated contradictions inherent in economic globalization as dominated by a small number of capitalist countries, and exposes the reality of intensifying social conflicts in Western countries and the defects in Western democratic politics. Some Western political forces opine that objecting to globalization in the abstract is much easier than directly confronting specific policy problems. Thus, some people unfurl the flag of protectionism, loudly decrying globalization, even to the extent of seeking a scapegoat and making baseless accusations against rapidly developing countries; and all this is in an attempt to cover up problems with domestic economic development and benefit distribution by diverting people’s attention from home to abroad.

This change also reflects the unprecedented systematic crisis that has emerged in contemporary capitalist economic and political systems. “Liberal economics” and “democratic politics” were once the two props trusted and revered by the West to push globalization, yet now they are starting to quake. Income distribution inequality and polarization between the rich and poor brought about by “liberal economics” have let down the former middle class; concurrently, “democratic politics,” controlled and exploited by a small group of elites, has made people jaded and distrustful.

Egged on by populism, referenda and general elections are used as means to political ends, revealing the predicament faced by Western democracy and demonstrating that Western democracy that was supposed to be the “end of history” is, at the very least, not the only choice for the development of political civilization.

Economic globalization: an irreversible trend

Economic globalization is the historical trend in the development of human society, and the development of productive forces is the fundamental driver of economic globalization. With the continued development of productive forces, human activity continually increases, and this increase in turn impinges on the restrictions of national and regional boundaries, making the globalization of production possible. Meanwhile, the development of productive forces promotes the expansion and deepening of the international division of labor and exchange, and strengthens the interconnection and interdependence between countries, making economic globalization inevitable. That some countries and scholars in the West simply attribute the many problems besetting today’s world to economic globalization is neither consistent with reality nor conducive to resolving these problems.

A thorough examination of today’s world reveals that, driven by scientific and technological progress, productive forces develop rapidly, which increasingly deepens the interconnectivity and interaction of human society; as such, the trend of globalization is irreversible. This is especially true of the nascent latest round of scientific and technological revolution and industrial transformation, as represented by information technology. It will ineluctably accelerate the pace at which various artificially imposed obstacles and protectionist barriers are broken through, and will spur the formation of a new system for the international division of labor and a new global economic landscape. Meanwhile, the existing close connection and mutual dependence between different countries means deglobalization comes at a high price.

As a result, when actually implementing protectionist policies Western developed countries do so with trepidation and hesitation, as we see in the US. Transnational corporations, especially those from Western developed countries, are the largest beneficiaries of economic globalization and also the most vocal objectors to deglobalization. And outside the bloc of developed capitalist countries, developing countries, especially some emerging economies, have achieved high-speed growth from the process of economic globalization, and they likewise are strong objectors to deglobalization.

Nevertheless, we should also be aware that economic globalization is a double-edged sword; it is not only a process of opening up state sovereignty, but also a process of unequal competition between a minority of developed countries and all developing countries that follows old international rules. In the process of unleashing market forces, the effects of market competition differ for disparate countries and social groups, widening the wealth gap between these countries and groups. This also brings about the accumulation, spread, and even intensification of political conflicts. In fact, Western developed countries have long enjoyed the benefits of economic globalization while neglecting to resolve the abovementioned problems, leading to undercurrents of the anti-globalization campaign in marginalized social sectors.

In 2016, the undercurrents came to the surface in some major Western countries, indicating that the occasional talk of “anti-globalization” has now been substituted by a trend towards “deglobalization,” and has become a major obstacle hindering economic globalization. In this regard, we can draw hard lessons, which should give all countries pause for thought.

The Chinese solution: leading globalization in a new direction

Analyzing the existing problems in the world economy today, we find that the root cause lies in the following three prominent and as yet unresolved issues: insufficient growth impetus in the global economy, flagging global economic governance, and imbalanced global development. In recent years, President Xi Jinping has expounded China’s perspectives on the status quo of the world economy on many occasions, such as at the Asia-Pacific Economic Cooperation (APEC) summits, G20 summits and World Economic Forum, and proposed China’s solution to the problems facing economic globalization, which highlights the need to adapt to and guide economic globalization to make the process more vibrant, inclusive, and sustainable, and enable it to benefit all countries and nations.

Advocating balance and inclusiveness, China’s solution is an effective approach to addressing the problems facing globalization today. Different from the globalization dominated by the West that widens the wealth gap between countries and social groups, the economic globalization China advocates takes the interests of all countries and social groups into consideration; it is a balanced and inclusive globalization. China advocates developing a harmonious world that “shares all that is beautiful,” building a new type of major-country relationship characterized by mutually beneficial cooperation, building a community of shared future for humanity, and avoiding the “Thucydides Trap.”

In this respect, China is both an advocate and a contributor. China continues to promote reform and opening up and to maintain medium-high economic growth, providing sustained and strong impetus for stability and growth of the global economy. Moreover, China forges ahead with poverty-alleviation initiatives and promotes joint development with many other countries, making global economic growth more balanced and inclusive.

China’s Belt and Road Initiative (BRI) is the most practical action for advancing the new type of globalization to date. BRI emphatically drives Belt and Road countries to raise the level of development and bring benefits to people living in these countries. By carrying out in-depth cooperation with more countries, BRI can help Belt and Road countries to develop their economy, improve people’s livelihood, and reduce poverty, thereby guiding the latest round of economic globalization in a more balanced and inclusive direction. BRI stresses the coordination of policies, the linking of transportation infrastructure, the opening up of trade routes, the smooth flow of funds, and the fostering of friendship between the peoples.

By bringing out the comparative advantages of all parties and encouraging all parties to develop new modes of cooperation, BRI strives to foster a new engine for global economic development. Different from the previous economic globalization, which imposed requirements on all participants by making compulsory and unified arrangements and utilizing hard constraints, BRI seeks to establish connections between different countries, cultures, and systems and achieve mutual benefits by adhering to the principle of extensive consultation, joint development, and shared benefits, embodying the philosophy of mutual integration and transformation in Chinese culture.

China’s solution not only has economic value, but also has found an approach to development that can serve as an example for developing countries. It is an approach established according to its own national conditions, an approach that puts the people’s interests first, an approach that upholds reform and innovation, and an approach that seeks common development in opening up. Following this approach, China has made incredible achievements in economic and social development that have garnered worldwide attention, with nearly 1.4 billion Chinese people soon to realize moderate prosperity, serving as an example for developing countries. China participates in economic globalization as a major developing country, which has had and will continue to have far-reaching influence over economic globalization. Hence, China has become an inextricable part of economic globalization.

At a time when economic globalization is confronted by setbacks, China advocates that all countries adapt to and harness economic globalization, allowing it to develop in a more inclusive and mutually beneficial direction by introducing tangible measures and plans. In this way, China is becoming a positive force driving economic globalization. ●

Yang Guoliang is a professor at the University of International Business and Economics.

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